CDBG Entitlement FAQ
Q

What does "subsidizing interest rates and mortgage principal amounts" mean in the CDBG program?

Date Published: March 2019

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A

Grantees may provide an interest rate subsidy to make the payments more affordable. For example, a bank may provide a couple with a home loan with a five percent interest rate. The grantee may subsidize it so that the interest rate changes from five percent to three percent, thereby lowering the mortgage payment.

Grantees may also subsidize the mortgage principal amount. For example, another couple acquired a mortgage for $75,000. The grantee awarded them $10,000 as a subsidy, which means that now their mortgage principal amount is now $65,000, resulting in a lower mortgage payment.

If CDBG assistance for either of these activities is awarded as a loan, it may be referred to as a soft second mortgage. Both are designed to make the monthly housing payment more affordable to the low- or moderate-income family.


Tags: CDBG Entitlement Program Homebuyer Assistance

FAQ ID:

3597