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Shelter
February 1985
>> This Is USAID >> USAID Policy Papers >> Shelter
[Download original document] Appendix: Implementation of The Housing Guaranty Program
The Housing Guaranty Program involves collaboration between the USAID Mission and a host country housing institution, such as a government ministry, a national housing bank or housing development corporation, a central savings and loan system, a national cooperative organization, or a similar institution in the private sector acting as borrower.
Following a request from the country and the USAID Mission, the Office of Housing and Urban Programs, working with host country officials, will prepare a shelter sector assessment. Based on this analysis, the office and the borrower determine the type of housing program to be financed and the institutional context within which it will be undertaken.
The major areas of concern to both parties at this stage are: (1) the progress which has been made towards the development of a rational shelter policy; (2) the contribution which the program will make towards the creation or strengthening of institutions needed to meet national shelter needs, especially the needs of the poor; (3) the establishment of roles for public and private sector involvement in shelter programs; (4) the capacity of the construction industry to supply housing over a given period; (5) the effective demand for housing at the agreed upon price level; and (6) the ability of the beneficiaries to repay their loans and the ability of the economy to make the dollar repayment.
When a mutually agreeable project has been developed and authorized by the Regional Bureau, the Office of Housing and Urban Programs and the borrower enter into an Implementation Agreement defining the use of the loan. Disbursements under the loan will be subject to the fulfillment of certain conditions as set forth in this agreement.
At the same time, the borrower seeks the most favorable terms available in the U.S. capital markets for a U.S. Government guaranteed loan. A typical Housing Guaranty loan is a long-term loan for a period of up to 30 years with a 10-year grace period on the repayment of the principal.
The U.S. lender and the borrower then negotiate the terms of the financing including interest rates which reflect the prevailing interest rates for similar maturing U.S. Government debt. These understandings are formalized in a loan agreement between the borrower and the lender, which is subject to USAID approval. In addition, certain provisions with regard to the paying and transfer agent, terms and amortization, prepayment rights of the borrower, and lenders fees and other charges must be included in each loan agreement, or otherwise agreed upon in a manner satisfactory to the Office of Housing and Urban Programs.
The USAID Guaranty
USAID will sign a contract of guaranty upon the signing of a loan agreement, indicating that repayment is guaranteed by the full faith and credit of the U.S. Government. The fees that USAID charges for its guaranty are as follows: 1) a fee of one-half of one percent (1/2%) per annum of the unpaid principal balance of the guaranteed loan; and 2) an initial charge of one percent (1%) of the amount of the loan, which is deducted from the loan disbursements. Additionally, USAID requires that the government of the borrowing country sign a full faith and credit guaranty of repayment of the loan and outstanding interest.
Lenders
A variety of participants in the U.S. capital markets, including investment bankers, commercial bankers, Federal Home Loan Banks, savings institutions, life insurance companies, and pension funds, have lent funds to host country borrowers as part of the Housing Guaranty Program. To be eligible to participate, lenders must be: 1) U.S. citizens; 2) domestic U.S. corporations, partnerships or associates substantially beneficially owned by U.S. citizens; 3) foreign corporations whose share capital is at least 95 percent owned by U.S. citizens; or 4) foreign partnerships or associations wholly owned by U.S. citizens.
Lender Selection
Lenders are selected by host country borrowers. The Office of Housing and Urban Programs encourages maximum contact between borrowers and lenders to facilitate loan arrangements that will best meet project needs, and to establish long-term borrower lender relationships to their mutual advantage. Lenders are typically selected through competitive negotiation process in which the Office of Housing and Urban Programs re quires that lending opportunities be advertise and that borrowers solicit lending proposals
A notice of each USAID guaranteed investment opportunity is published in the Federal Register. Notices are also mailed to interested individuals.
In certain circumstances and with the written consent of the Office of Housing and Urban Programs, lenders may be selected through noncompetitive negotiated process.
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Last Updated on: July 11, 2001 |
