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Loan Guarantee Program
Statement of Purpose
The primary purpose of the Unitarian Universalist (UUA) Loan Guarantee Program is to facilitate the continued growth, in the broadest sense of the term, of member societies. The program is designed to encourage congregations engaged in acquiring ownership of a piece of land and/or building. The program will also encourage congregations to expand or renovate their existing facilities. And finally, the program will assist congregations in making their facilities more accessible to persons with physical disabilities.
Loan Guarantee Guidelines
The UUA Loan Guarantee Program is designed to encourage local lenders to make available larger mortgage loans by the participation of the UUA as a guarantor of a portion of the loan. Loan guarantees are available to individual congregations under the following guidelines:
- The standard guarantee liability is fifty percent of the original amount of the loan, up to a maximum guarantee of $450,000. The minimum loan on which a guarantee will be approved is $50,000.
- The guarantee will cease to be in effect once the unpaid principal amount falls below fifty percent of the original amount of the loan or ten years after the date of the loan, whichever comes first.
- There will be a $250 application fee plus a one-time fee of $900 (plus disbursements) for the loan guarantee. There will be no additional costs throughout the time the guarantee is in effect.
- The $250 application fee is due when the application is submitted. The $900 fee (plus disbursements) will be payable upon approval.
- If a congregation finds it feasible to refinance their mortgage in the future, the loan guarantee will be transferable to the new loan, providing the loan amount is not increased and the congregation has continued to contribute to the Annual Program Fund (APF) at the Fair Share level.
- Application: The congregation must submit a loan guarantee application which will include a detailed membership growth plan describing its commitment to and capacity for growth, in the broadest sense of the term.
- Capital Campaign: The congregation must complete a capital campaign. This special fund drive raises money for a capital project, and is in addition to money raised to support the annual operating budget. Most capital campaign pledges are payable over two to five years. A letter is required from the congregation's governing body stating that the amount pledged is equivalent to at least three times the congregational pledges to the most recent annual canvass.
- Debt Service: The congregation's debt service on all its debt must not exceed twenty-five percent of its annual operating budget in the financial projections of all future years.
- Annual Program Fund Fair Share Status: The congregation must be a Fair Share member of the APF and must agree to remain so, for the life of its loan.
- Lien Position: The congregation will be entering into a Reimbursement agreement with the UUA that will be secured by a second mortgage (or deed of trust) on the property. The mortgage to the UUA can only be subordinate to the first mortgage given to the local lender.
- Reversionary Agreement: The congregation must provide in its bylaws or certificate of incorporation a clause that calls for reversion of all its property to the UUA in the event that the congregation shall cease to legally exist. (see below for necessary language)
- Congregational Vote: The congregation must vote to approve receipt of a UUA loan guarantee.
- Insurance Coverage: The congregation must adopt the minimum recommended limits of property and liability insurance coverage required of all applicants. These limits are defined on the last page of the loan guarantee application. The UUA must be named as loss payee and mortgagee on the insurance policy, subject only to the prior rights of the local lender.
Steps in the Review Process
- The program receives the completed loan guarantee application. The application is checked for completeness and each section is reviewed for accuracy and consistency. The congregation is contacted if any information is missing or if further documentation is needed.
- The application is sent to the office of the UUA treasurer who reviews the application. The treasurer makes a decision for action. The decision may be to approve, approve with contingencies, or decline the application.
- If approved, the congregation is contacted. The application, including the name of the congregation's attorney, is forwarded to the UUA attorney who then contacts the congregation's attorney to work out the final legal documentation.
The Application Process
Each loan guarantee application requires a certain amount of time to review and process. This time may vary, depending upon a number of factors, but usually ranges from one to two months.
A congregation may facilitate this process by taking the following steps:
- Complete all parts of the application form.
- Include a copy of the congregation's by-laws or certificate of incorporation with the application.
- Include a copy of the congregational vote authorizing the loan guarantee from the UUA (see below for sample text).
- Use the Cash Flow Projection template (located on page 4 of the application) to list all financial projections. These projections cannot be accepted in any other format.
- Indicate specific plans for an intentional, sustained program of growth.
- Include a copy of the mortgage commitment letter.
Tips to Ensure a Smooth Closing
There are several proactive steps a congregation can take to ensure a timely and smooth closing:
- Contact your attorney. As part of the loan guarantee program, the congregation is required to provide a draft second mortgage (or deed of trust) for review by the UUA's attorney. This second mortgage will need to be prepared by an attorney licensed in your state. In addition, your attorney will need to prepare an opinion letter to the UUA certifying that the mortgage is enforceable in your state, that the mortgage was duly authorized, and that the congregation owns the property. Copies of the form of opinion letter are available upon request. The attorney that assisted the congregation with acquiring the property or with negotiating the terms of the loan with the local lending institution is typically the attorney who would draft the second mortgage and opinion letter. If you do not have an attorney currently advising you, you will need to retain one. It is unlikely that the lender's attorney will be willing to assist you with these documents.
- Please make sure that the local lender is aware of the terms of the UUA loan guarantee before the lender approves your loan. These terms are required to be part of any guarantee executed by the UUA and cannot be varied except in extraordinary circumstances. The UUA recommends that the congregation provide the lender with a copy of the form of guarantee for the lender's review during the underwriting process. Please contact the UUA to obtain a copy of the form of guarantee.
Have the congregation adopt a vote prior to submitting the application. The congregation needs to adopt a vote authorizing the loan guarantee. A vote in the following form is acceptable to the UUA:
"At its meeting on __________, the congregation, by a vote of ____ to _____, approved the following resolutions:
To apply for and receive from the Unitarian Universalist Association (the "Association") a loan guaranty in an amount of fifty percent (50%) of the original amount of the loan, up to a maximum guaranty of $450,000, and to execute a Reimbursement Agreement with the UUA in connection therewith, the Reimbursement Agreement to be secured by a second mortgage on the Congregation's property and/or such other security interests as the Association may require in connection with said guaranty; and
To authorize the ___________ and ___________ [INSERT NAMES OF INDIVIDUALS AUTHORIZED TO SIGN AND THEIR TITLES (E.G. PRESIDENT, SECRETARY, TREASURER, TRUSTEE)] of the Congregation to sign, acknowledge and deliver on behalf of the Congregation any and all documents deemed necessary by them, in their sole discretion, to complete the guarantee, including, but not limited to a reimbursement agreement and second mortgage (or deed of trust), and, if the by-laws do not already contain such a provision, to add a provision to the Congregation's by-laws providing that all property of the Congregation be granted to the Association in the event of a dissolution."
Sample language for a reversionary clause:
"In the event of the dissolution of the congregation [or society/church/fellowship] all outstanding debts shall be paid. The remaining assets, both real and personal, and including all property heretofore and hereinafter donated to said congregation, shall become the property of the Unitarian Universalist Association, 24 Farnsworth Street, Boston, Massachusetts, or its successor, subject to all applicable laws."
With the prior written approval of the UUA Board of Trustees, the congregation has the option of naming a UUA affiliate organization (such as a district, camp, conference center, or other congregation) as the recipient of the congregation's assets.