HUD Section 108 Loan

Found this story in the Republican Herald in Pennsylvania. It is about a larger retailer in Pennsylvania, Boscov's, looking for two counties to help them out with 35 million in guaranteed HUD Section 108 loans.

Although the two counties want to help out the retailer and keep them in business, they were concerned as to what would happen if Boscov's was unable to pay back the 35 million themselves. The State of Pennsylvania's Department of Community and Economic Development wrote a letter to the two counties and I quote:

“...in the event of a default by Boscov’s NEWCO in repaying the 108 Loan, the Department will make the necessary payments on the 108 Loan so that the Community Development Block Grant funds otherwise available to Schuylkill County will not be seized by HUD (Housing and Urban Development) as permitted under the 108 Contract for repayment of the 108 Loan."

Even though the state of Pennsylvania is saying that they will cover the loan in the event Boscov's defaults and their CDBG funds will not be lost, they still would not do it. Why?

“How can you guarantee a loan by the state if we’re already $2.6 billion in debt?” Butler County Commissioner James L. Kennedy said in a telephone interview Friday.

In Worcester, we took out a guaranteed 5.8 million Section 108 HUD loan without, as far as I can tell, without any idea how we would pay it back other then the hope of additional Federal monies to make the annual payment.