The 4 and 9 percent rates are approximations of the actual rates, which change monthly. The U.S. Department of Treasury publishes exact credit rates each month to reflect changes in interest rates. At the option of the owner, each project locks in a rate at the time the credit agency makes a binding commitment or the project is placed in service. The first layer of affordable housing development financing is a first mortgage, usually from a private lender. The total of private mortgages and equity that a project can obtain is often less than what is necessary to complete it, creating a financing gap.
HOME can fill the gap with either a loan or a grant.
HOME program administrators determine the amount of the gap and the type of assistance needed to make the project feasible. Then, they determine that a reasonable chance exists that the project will be successful if HOME fills the gap and, if applicable, that the sponsor can repay the loan. Provided at or above the applicable Federal rate, these funds are not treated as a Federal subsidy. The project would qualify for the 9 percent credit. Below Market Rate Loan with 9 Percent Credit.