Very few state agencies responsible for Emergency Preparedness and are providing HUD CDBG-DR grants to assist homeowners with reconstruction and repairs are aware of the rule and policy changes that Louisiana GOP Congressman Graves set in motion back in 2018.
HUD training provided to your state reminded state managers of the fact that the DRRA, CPD-15-07 and the 2019 DOB Notice program used to payoff SBA loans for all SBA loan recipients with incomes below 120% AMI.
It's not too late, but you'll have to really push your state managers to provide the HUD required documentation of CPD-15-07 to make it happen. You should also find groups in your state that know about these internal policy changes.
As of today's post, you still have the following policies in place until October 5, 2023.
I will highlight the sections directly copied from HUD 2023 CDBG-DR Problem Solving Clinic.
Private Loans (never a DOB) These loans are neither provided nor backed by a governmental entity. CDBG–DR applicants, or borrowers, are obligated to repay the entire loan amount (including principal and interest) according to standard commercial lending terms. In contrast to forgivable loans, these loans do not have forgiveness provisions.
Subsidized Loans (might be a DOB – it depends) Subsidized loans, which encompass forgivable loans, differ from private loans. Both SBA and FEMA offer subsidized loan options.
Declined Loans (Never a DOB – documentation might be required) Declined loan amounts refer to the sums approved or proposed by a lender in response to an application, but were rejected by the applicant. This indicates that the applicant did not proceed to sign the loan documents to obtain the funds.
Cancelled Loans (Cancelled Amount is Never a DOB – must document) The applicant entered into a loan agreement, but either all or a portion of the approved amount was not distributed and is now unavailable to them. This situation must be properly documented. The cancellation of the loan can occur due to various reasons, including borrower default, mutual agreement to cancel the undistributed portion, expiration of the disbursement term, or other factors.
2018 Statutory Changes
First of two statutory provisions addressing loans - only Congress can extend.
Contact Congressman Graves who was the author of the modification to Section 1210(c), 1210(b) in H.R. 302 FAA Reauthorization Act of 2018 that changed the DOB for DRRA 2018 overall.
FEMA: Section 1210(b) of the Disaster Recovery Reform Act (DRRA) of 2018 provides that FEMA may use Hazard Mitigation Grant Program (HMGP) funds (Section 404 of the Stafford Act) to fund mitigation construction activities within the scope of a United States Army Corp of Engineers (USACE) federally authorized water resources development project. (FEMA information)
CRS: R46776 April 27, 2021 The Disaster Recovery Reform Act of 2018 (DRRA): Implementation Updates for Select Provisions
H.R.302 - FAA Reauthorization Act of 2018 > Sec. 1210. Duplication of benefits.
Section 1210 of the Disaster Recovery Reform Act of 2018 (PL 115- 254, Division D) (“DRRA”) “(C) PROHIBITION ON DETERMINATION THAT LOAN IS A DUPLICATION. Notwithstanding subsection (c), in carrying out subparagraph (A), the President may not determine that a loan is a duplication of assistance, provided that all Federal assistance is used toward a loss suffered as a result of the major disaster or emergency.” This provision is limited to 2016 – 2021 disasters and SUNSETS on October 5, 2023.
HUD Federal Register Publication: Updates to Duplication of Benefits Requirements Under the Stafford Act for Community Development Block Grant (CDBG) Disaster Recovery Grantees.
Second statutory provisions – no Congressional action needed to extend.
Declined Loans - CDBG-DR appropriation approved Feb. 9, 2018 (H.R.1892 - Bipartisan Budget Act of 2018 Public Law 115-123)
"Provided further, That with respect to any such duplication of benefits, the Secretary and any grantee under this section shall not take into consideration or reduce the amount provided to any applicant for assistance from the grantee where such applicant applied for and was approved, but declined assistance related to such major declared disasters that occurred in 2014, 2015, 2016, and 2017 from the Small Business Administration under section 7(b) of the Small Business Act (15 U.S.C. 636(b)): "
Under the 2019 DOB Notice.
A subsidized loan is not a DOB IF:
- It is a short-term loan for costs that will be reimbursed with CDBG-DR funds
- It is a declined or cancelled loan or
- The DRRA exception applies - Loans are not a DOB for years covered by DRRA (2016 – 2021 disasters).
Can a grantee provide CDBG-DR assistance as a subsidized loan for an activity without causing a DOB? Yes, if:
- The grantee makes a final subsidized loan award for a DRRA qualified disaster before October 5, 2023
- The grantee determines that all federal assistance is used toward a loss suffered as a result of a major disaster or emergency and
- The subsidized loan is a bona fide loan (i.e., not a form of assistance that is really a grant).
Sunset of the DRRA
- The DRRA amendment currently sunsets on October 5, 2023.
- Subsidized loans are not a DOB for DRRA-covered disasters if:
- The grantee makes a final award of subsidized loan assistance for a DRRA qualified disaster before the DRRA sunsets on October 5, 2023
- Note, it is okay for construction to happen after the deadline and for grantees to make progress payments
Subsidized Loans after the DRRA Sunsets
What exceptions for subsidized loans could apply after the DRRA sunsets?
- Short Term Loans for costs that will be reimbursed by CDBG-DR funds (sometimes called bridge loans).
- PRO TIP: Loan documents must indicate that the loan is short term. The file must show that when the loan is made, the intent was that the cost will be reimbursed with CDBG-DR funds once they become available.
- Cancelled Loans – document undisbursed portion of an accepted subsidized loan is cancelled and no longer available, either through communication from lender or legally binding agreement with applicant.
- Declined Loans – document declined if data available to the grantee/subrecipient shows the applicant applied for the loan but doesn’t show it was declined.
This information will be void except for HUD Notice 2019 regarding the Declined or Cancelled SBA loans.
This information covers disasters between 2015 and 2021.
This is not applicable to any 2022 or 2023 disaster. Please contact your Congressional Representatives for extensions.