Building Loan Program
Statement of Purpose
The primary purpose of the Unitarian Universalist Association (UUA) Building Loan Program is to facilitate the continued growth of member congregations. The program provides affordable financing for three types of building projects:
- Building or buying a new spiritual home
- Repairing or renovating existing facilities where substantial construction is not required
- Expanding current facilities where substantial construction is required, especially to make facilities more accessible
Because the program is not intended to replace local financing options, congregations are encouraged to meet with local bankers and seek the most competitive financing for their project. For guidance on how to negotiate with bankers, see Beyond Fundraising, written by Wayne Clark. Chapter nine is titled “Debt is More Than a Four-Letter Word” and speaks to the issue of obtaining financing.
The UUA makes commitments for market rate loans from $50,000 to $900,000. The interest rate is set at the time of closing and will be the greater of (i) 5.00% or (ii) the five-year Treasuries plus three-percent. All loans will have a five-year term.
Congregations are required to be Annual Program Fund (APF) Fair-Share members at the time of application. They must also retain Fair-Share status throughout the life of the loan. Fair-Share records are reviewed annually. If a congregation fails to pay its full Fair-Share to their district and to the UUA, the interest rate is increased by two-percent for the following fiscal year. This is not to be viewed as a payment in lieu of APF dues. The interest rate drops back down by two-percent in the fiscal year following their return to Fair-Share status.
Any late payments will bear interest at the rate of the lesser of (i) the interest rate set forth in the loan documents plus five percent (5%) per annum or (ii) the maximum rate of interest allowed by law, from the due date until paid, plus a late charge equal to five percent (5%) of the overdue amount.
In addition, additional prepayment fees and/or consideration may be due if the loan is prepaid by the congregation prior to the maturity date.
There is a $250 application fee, payable when submitting an application. The congregation is charged $2,900 (plus disbursements) for the legal fees incurred by the UUA in preparing the loan documents. The congregation is also charged one point at the time of closing.
While loans will have a five-year term, principal and interest installment payments will be calculated based on one of the following three amortization schedules:
- Congregations building or buying a new spiritual home are offered a 25-year amortization.
- Congregations repairing or renovating an existing facility that does not require substantial construction are offered a 15-year amortization.
- Congregations constructing new facilities or expanding existing facilities that require substantial construction, especially to make facilities more accessible are offered a 20-year amortization.
Since the amortization schedules are longer than the term of the loan, a balloon payment will be due at the maturity date.
- Membership Growth Plan. Submit a loan application that includes a detailed membership growth plan.
- Capital Campaign. Complete a capital campaign in which total financial commitments are equal to at least three times the congregational financial commitments (pledges) to the most recent annual budget drive.
- Debt Service. Keep total annual debt service within twenty-five-percent of the annual operating budget in the financial projections of each future year.
- Lien Position. Secure the loan with a lien in the first position (i.e. a first mortgage). The loan cannot be subordinated to any other lien holder except in extraordinary circumstances approved by the Congregational Properties and Loan Commission.
- Reversionary Agreement. Include a reversionary clause in the bylaws or certificate of incorporation that indicates reversion of all congregational property (after all debts have been paid) to the UUA in the event that the congregation shall cease to legally exist. (See example below.)
- Congregational Vote. Vote to approve receipt of a building loan from the UUA. (see example below)
- Phase I Environmental Study. Complete a Phase I Environmental Study when construction will alter the existing foot print on currently owned facilities, when purchasing a piece of land, and when purchasing new facilities. A Phase II Environmental Study is required if the Phase I Study indicates the possibility of any environmental hazard. To streamline the lending process, please ensure that the consultant who prepares the Phase I Environmental Study includes language in the report indicating that the Unitarian Universalist Association may rely on the contents of the report.
Title Insurance Policy. Prior to Closing, a lender’s title insurance policy naming the UUA as first insured mortgagee must be provided, at the congregation’s cost, for the full amount of the loan.
Mortgagee’s Plot Plan or Survey. Provide a Mortgagee’s Plot Plan or Survey with applicable zoning and flood hazard certifications.
Insurance Coverage. Maintain minimum limits of property and liability insurance coverage. These limits are defined on the last page of the loan application. Two insurance quotes are required, one of which must be from Church Mutual Insurance Company (800.554.2642).
- Closing. Close the loan within six-months of UUA approval.
Sample language for a congregational vote:
The Congregation hereby votes to borrow from the Unitarian Universalist Association (the “Association”) a sum not to exceed _____[INSERT DOLLAR AMOUNT] to be paid in or within five (5) years, said loan to be secured by a right of reverter in the Congregation’s property, a mortgage, and/or other such security interests as the Association may require in connection with said loan, and shall be upon such other terms and conditions as required by the Association; and
To authorize the President and _____[INSERT TITLE OF ADDITIONAL AUTHORIZED OFFICER] 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 loan, including, but not limited to a promissory note and a mortgage or deed of trust
Application Processing Time
The application processing time varies depending upon a number of factors, but each loan is usually processed within 4 to 6 weeks.
Steps in the Review Process
- Submit the completed application to the UUA Building Loan Program. The congregation is contacted if any information is missing or if further documentation is needed.
- The program reviews the application, contacts the congregation with any questions, and, if all issues are resolved, recommends approval to the UUA Treasurer and Chief Financial Officer.
- The Treasurer and Chief Financial Officer reviews the application and, if everything is in order, approves the application.
- The congregation is informed of the decision.
- The UUA's attorney contacts the congregation's attorney to work out the final legal documentation.
Sample language for a reversionary clause:
"In the event of congregational dissolution, 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.
The Unitarian Universalist Veatch Program at Shelter Rock
The UUA Building Loan Program is made possible in part as a result of generous grants from the Unitarian Universalist Veatch Program at Shelter Rock and gifts from individual donors. The Veatch Program promotes the growth of Unitarian Universalist congregations through its support of this UUA program. Please join us in expressing gratitude for their commitment and generosity. Please acknowledge them wherever appropriate in all printed materials.