Loan Servicing
Loan Servicing ensures that the County’s investments in affordable housing projects are protected and that those investments result in tangible and equitable income-restricted homes for low-income residents. Funding for loans to affordable housing developers comes from the Montgomery County Housing Initiative Fund (HIF), the Affordable Housing Opportunities Fund (AHOF), and the Nonprofit Preservation Fund (NPF), as well as the federal HOME Investment Partnerships Program (HOME) and the Community Development Block Grant (CDBG) program.
While DHCA strives to standardize loans to the greatest extent possible, variations in terms and repayment provisions are necessary. Several types of loans (amortizing, cashflow, forgivable, deferred, and balloon) may be undertaken and are designed to adapt to the changing needs of borrowers and the market.
Loan Servicing handles the implementation of loan requirements per the executed Deed of Trust or Deed of Trust Note negotiated and finalized by the Multifamily Section at DHCA. Ensuring compliance with loan repayment terms and deadlines includes:
- Completing annual coupon mailings for repayments
- Analyzing annual financial audits
- Reviewing insurance policies
- Processing loan releases, forgiveness, and modifications
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In mid-December each year, DHCA begins the loan repayment process by sending out repayment coupons via email to all payable loan recipients (annual, cashflow, and monthly repayment loans). This email includes a cover letter that specifies the address of the lockbox, provides instructions on what to submit, and includes the repayment coupon(s). Audited financial statements are required for all cashflow loans, whether or not a repayment is due.
Coupons with repayment checks must be mailed promptly to PNC Bank. Montgomery County does not accept digital forms of payment.
PNC Bank Lockbox Address:
MCMG – House Loan Payments
P.O. Box 829466
Philadelphia, PA 19182-9466
Most projects require annual audits. DHCA reviews each annual financial audit, paying particular attention to yearly cash flow and repayment requirements. Cashflow loans differ from other loans in that DHCA staff requires a higher level of financial review. The loan repayment coupon sent by DHCA states the amortizing repayment amount (i.e., the amount that would fully amortize the loan for the given period). If the loan recipient lacks adequate cash flow to make that loan repayment, financial records must be sent to DHCA to substantiate and document the situation.
Once a loan has reached maturity, DHCA contacts the property owner/borrower, requesting the final loan repayment if one is required. After all repayments have been made, the loan can be released. If a loan reaches maturity and does not require a final repayment (i.e., a forgivable loan or a current loan that completes its repayment requirements), it is the responsibility of the loan recipient to submit a written request to DHCA asking that the loan to be discharged and the Promissory Note or Deed of Trust Note to be marked “Cancelled.”
DHCA uses forgivable loans to provide housing and supportive critical services for customers in group homes, transitional housing, or other special needs projects. Most forgiven loans require financial and programmatic reporting during the year.
Once the loan is eligible for forgiveness based on the stipulated terms and maturity date, the borrower must submit a written request to DHCA documenting how they have complied with the forgiveness terms to close out the loan.
If the loan terms have not been completed satisfactorily or the borrower does not conform to or comply with stipulated loan conditions, the loan is not forgiven and becomes due and payable.
DHCA periodically provides loan modifications to eligible current loan recipients who can demonstrate need. Loan modifications typically include Allonges to the Deed of Trust Notes (modifying repayment provisions), loan subordinations (requested when customers refinance a loan in first position), and amendments to the Deed of Trust. Loan modifications require Director approval.