The state Department of Housing said Monday two potential sources of funding to rebuild homes with crumbling foundations pursued by U.S. Rep. Joseph D. Courtney, may not be the magic bullet everyone had hoped.
In a letter to Courtney, D-2nd District, Housing Commissioner Evonne Klein sought to clarify the use of Section 108 of the Community Development Loan Guarantee Program, which Courtney called a “credit line” in a March 9 press release.
Klein said Section 108 “is only a loan guarantee program. It is not a grant program for individual homeowners nor is it a line of credit, a loan, or a new allocation of federal funding.”
The program, she said, enables the state to offer loans to a town or homeowner as a “backstop” when the state borrows money. The homeowner, or town, would have to pay back the state in order for the state to pay back the lender, meaning property owners still would be on the hook for the cost of repairing their foundations.
“Like you, the Department of Housing and the state of Connecticut are working to help impacted homeowners,” Klein wrote to Courtney. “We have been careful not to give false hope to homeowners, but the department is committed to working towards a comprehensive solution and searching for a new federal resource.”
From a homeowner’s perspective, Section 108 would be a loan guarantee only after their town was approved by the Housing Department to develop such a program, and the funds would be backed by a bank and various other requirements, according to the letter.
The homeowner also would be required to secure the loan with property liens or other collateral, the letter states.
Regarding the state, Section 108 is not a new federal allocation of funds nor is it a line of credit, according to Housing Department. It is a loan program that allows the state to borrow and distribute directly to towns or homeowners.
Further, Community Development Block Grant funds can be used only to pay back the loan in the case of default by the state, which would eliminate CDBG funds until the state’s loan was paid back, according to the Housing Department.
Klein’s letter was also sent to Sens. Catherine Osten, D-Sprague, and Timothy D. Larson, D-East Hartford.
