Industry Glossary

Need a reminder about certain housing industry terms? Our industry glossary aims to provide you a one-stop shop for all the important ones you need to know. From bond terms to relevant government agencies and what they do, you’ll find this to be a valuable resources as you navigate the industry. This tool can also help you in review of NALHFA’s Policy Agenda and its priorities.


Bond Terms

Basis Point (BPS)
Basis point (BPS) refer to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001), and is used to denote the percentage change in a financial instrument. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point. In the bond market, a basis point is used to refer to the yield that a bond pays to the investor. For example, if a bond yield moves from 7.45% to 7.65%, it is said to have risen 20 basis points.

A debt instrument, also considered a loan, that an investor makes to a corporation, government, federal agency or other organization (known as an issuer) in which the issuer typically agrees to pay the owner the amount of the face value of the bond on a future date, and to pay interest at a specified rate at regular intervals.

Owner of a bond; may be an individual or institution such as a corporation, bank, insurance company or mutual fund. A bondholder is typically entitled to regular interest payments as due and return of principal when the bond matures.

Bond rating
A method of evaluating the quality and safety of a bond. This rating is based on an examination of the issuer's financial strength and the likelihood that it will be able to meet scheduled repayments. Ratings range from AAA (best) to D (worst). Bonds receiving a rating of BB or below are not considered investment grade because of the relative potential for issuer default.

Mortgage-backed security
A security that is secured by home and other real estate loans.

Mortgage Revenue Bonds (MRBs)
Mortgage Revenue Bonds (MRBs) are tax-exempt bonds that state and local governments issue through housing finance agencies (HFAs) to help fund below-market-interest-rate mortgages for first-time qualifying homebuyers. Eligible borrowers are first-time homebuyers with low to moderate incomes below 115 percent of median family income.

Multi-family housing revenue bonds
Bonds issued to finance construction or rehabilitation of multi-family housing projects where a specified proportion of the units will be rented to moderate- and low-income families, in some cases specifically targeted toward elderly residents. These securities may provide financing either directly or through a loans-to-lenders program, and may be secured, in whole or in part, by federal agency guarantees or subsidies. 

Municipal bond
A bond issued by states, cities, counties and towns to fund public capital projects like roads and schools, as well as operating budgets. These bonds are typically exempt from federal taxation and, for investors who reside in the state where the bond is issued, from state and local taxes, too.

Private Activity Bond (PAB)
A municipal security of which the proceeds are used by one or more private entities. A municipal security is considered a private activity bond if it meets two sets of conditions set out in Section 141 of the Internal Revenue Code. A municipal security is a private activity bond if, with certain exceptions, more than 10 percent of the proceeds of the issue are used for any private business use (the “private business use test”) and the payment of the principal of or interest on more than 10 percent of the proceeds of such issue is secured by or payable from property used for a private business use (the “private security or payment test”). A municipal security also is a private activity bond if, with certain exceptions, the amount of proceeds of the issue used to make loans to non-governmental borrowers exceeds the lesser of 5 percent of the proceeds or $5 million (the “private loan financing test”). Interest on private activity bonds is not excluded from gross income for federal income tax purposes unless the bonds fall within certain defined categories (“qualified bonds” or “qualified private activity bonds”), as described below. Most categories of qualified private activity bonds are subject to the alternative minimum tax.

Single family mortgage revenue bonds
Bonds issued to finance mortgage loans on single-family homes, either directly by purchasing newly originated or existing mortgage loans or indirectly by allowing lenders to purchase mortgage loans using bond proceeds. Such mortgage loans generally are targeted to first-time homeowners meeting certain income and purchase price requirements. Repayment of the mortgages may be further secured by federal programs or through private mortgage insurance.

*Sources: Financial Industry Regulatory Authority, Investopedia, Municipal Securities Rulemaking Board

Government Agencies

Federal Agencies and Housing Finance Programs

Consumer Financial Protection Bureau (CFPB)
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. They aim to make consumer financial markets work for consumers, responsible providers, and the economy as a whole. Protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law. Educate people with the information, steps, and tools that they need to make smart financial decisions.

Community Development Financial Institutions Fund (CDFI Fund)
The Community Development Financial Institutions Fund (CDFI Fund) plays an important role in generating economic growth and opportunity in some of our nation’s most distressed communities. By offering tailored resources and innovative programs that invest federal dollars alongside private sector capital, the CDFI Fund serves mission-driven financial institutions that take a market-based approach to supporting economically disadvantaged communities. These mission-driven organizations are encouraged to apply for CDFI Certification and participate in CDFI Fund programs that inject new sources of capital into neighborhoods that lack access to financing.

Federal Housing Administration (FHA)
The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Loans must meet certain requirements established by FHA to qualify for insurance.

The Federal Housing Finance Agency (FHFA) 
The FHFA was established by the Housing and Economic Recovery Act of 2008 (HERA) and is responsible for the effective supervision, regulation, and housing mission oversight of Fannie Mae, Freddie Mac (the Enterprises) and the Federal Home Loan Bank System, which includes the 11 Federal Home Loan Banks (FHLBanks) and the Office of Finance. Since 2008, FHFA has also served as conservator of Fannie Mae and Freddie Mac. 

Department of Housing and Urban Development (HUD)
The Department of Housing and Urban Development is the principal Federal agency responsible for programs concerned with the Nation's housing needs, fair housing opportunities, and improvement and development of the Nation's communities.

U.S. Department of Housing and Urban Development (HUD) Programs

Rental Assistance Demonstration Program RAD
The Rental Assistance Demonstration was created in order to give public housing authorities (PHAs) a powerful tool to preserve and improve public housing properties and address the $26 billion dollar nationwide backlog of deferred maintenance. RAD also gives owners of three HUD "legacy" program (Rent Supplement, Rental Assistance Payment, and Section 8 Moderate Rehabilitation) the opportunity to enter into long-term contracts that facilitate the financing of improvements.

Moving to Work (MTW)
Moving to Work (MTW) is a demonstration program for public housing authorities (PHAs) that provides them the opportunity to design and test innovative, locally-designed strategies that use Federal dollars more efficiently, help residents find employment and become self-sufficient, and increase housing choices for low-income families. MTW gives PHAs exemptions from many existing public housing and voucher rules and more flexibility with how they use their Federal funds. MTW PHAs are expected to use the opportunities presented by MTW to inform HUD about ways to better address local community needs.

The Office of Public Housing Investments (OPHI), within the Office of Public and Indian Housing (PIH) at HUD headquarters, oversees the MTW Demonstration.

HUD Community Planning and Development (CPD) Programs

Community Development Block Grant (CDBG)
One of the longest-running programs of the U.S. Department of Housing and Urban Development, the CDBG program funds local community development activities such as affordable housing, anti-poverty programs, and infrastructure development. CDBG, like other block grant programs, differ from categorical grants, made for specific purposes, in that they are subject to less federal oversight and are largely used at the discretion of the state and local governments and their subgrantees.

Entitlement Communities
The CDBG entitlement program allocates annual grants to larger cities and urban counties to develop viable communities by providing decent housing, a suitable living environment, and opportunities to expand economic opportunities, principally for low- and moderate-income persons.

State Administered CDBG
Also known as the Small Cities CDBG program, States award grants to smaller units of general local government that carry out community development activities. Annually, each State develops funding priorities and criteria for selecting projects. 

Section 108 Loan Guarantee Program
CDBG entitlement communities are eligible to apply for assistance through the section 108 loan guarantee program. CDBG non-entitlement communities may also apply, provided their State agrees to pledge the CDBG funds necessary to secure the loan. Applicants may receive a loan guarantee directly or designate another public entity, such as an industrial development authority, to carry out their Section 108 assisted project.

Continuum of Care Program (CoC)
The CoC Program is designed to promote communitywide commitment to the goal of ending homelessness; provide funding for efforts by nonprofit providers, and State and local governments to quickly rehouse homeless individuals and families while minimizing the trauma and dislocation caused to homeless individuals, families, and communities by homelessness; promote access to and effect utilization of mainstream programs by homeless individuals and families; and optimize self-sufficiency among individuals and families experiencing homelessness.


The Office of Special Needs Assistance Programs (SNAPS) offers grants through a competitive process for new construction; acquisition, rehabilitation, or leasing of buildings to provide transitional or permanent housing; rental assistance; payment of operating costs; supportive services; re-housing services; payment of administrative costs; and grants for technical assistance.

Emergency Solutions Grant (ESG)
The ESG program provides funding to:
  1. engage homeless individuals and families living on the street;
  2. improve the number and quality of emergency shelters for homeless individuals and families;
  3. help operate these shelters;
  4. provide essential services to shelter residents,
  5. rapidly re-house homeless individuals and families, and
  6. prevent families/individuals from becoming homeless.

HOME Investment Partnerships program (HOME)
The HOME Investment Partnerships Program (HOME) provides formula grants to States and localities that communities use - often in partnership with local nonprofit groups - to fund a wide range of activities including building, buying, and/or rehabilitating affordable housing for rent or homeownership or providing direct rental assistance to low-income people. HOME is the largest Federal block grant to state and local governments designed exclusively to create affordable housing for low-income households.

HOME funds are awarded annually as formula grants to participating jurisdictions (PJs). The program’s flexibility allows States and local governments to use HOME funds for grants, direct loans, loan guarantees or other forms of credit enhancements, or rental assistance or security deposits.

Community Housing Development Organizations (CHDOs)
A Community Housing Development Organization (CHDO) is a private nonprofit, community-based, service organization that has, or intends to obtain, staff with the capacity to develop affordable housing for the community it serves.

The HOME Program guarantees CHDOs funds. At least 15 percent of a HOME participating jurisdiction’s (PJ’s) annual allocation must be set aside for affordable housing activities to be undertaken by CHDOs. These set-aside funds must be invested in eligible housing.

Housing Opportunities for Persons with Aids (HOPWA)
The Housing Opportunities for Persons with AIDS (HOPWA) Program is the only Federal program dedicated to the housing needs of people living with HIV/AIDS. Under the HOPWA Program, HUD makes grants to local communities, States, and nonprofit organizations for projects that benefit low-income persons living with HIV/AIDS and their families. 

Housing Trust Fund (HTF)
The Housing Trust Fund (HTF) provides funding to construct, rehabilitate and preserve permanent rental and homeownership housing, primarily for extremely low-income families. At least 80 percent of the funds must be used for the production, preservation, rehabilitation, or operation of rental housing. Up to 10 percent can be used for the following homeownership activities for first-time homebuyers: production, preservation, and rehabilitation; down payment assistance, closing cost assistance, and assistance for interest rate buy-downs. 

Rural Housing Stability Assistance Program
Provides re-housing and help for individuals moving from emergency or transitional shelters to permanent housing, or improves the housing situations of individuals and families who are homeless or in the worst housing situations in the geographic area; stabilizes the housing of individuals and families who are in imminent danger of losing housing; and improves the ability of the lowest-income residents of the community to afford stable housing.

HUD Federal Housing Administration (FHA) Programs

Emergency Capital Repairs Program
This program provides grants for substantial capital repairs to eligible multifamily projects with elderly tenants that are needed to rehabilitate, modernize, or retrofit aging structures, common areas, or individual dwelling units. The capital repair needs must relate to items that present an immediate threat to the health, safety, and quality of life of the tenants. The intent of these grants is to provide one-time assistance for emergency items that could not be absorbed within the project’s operating budget, and where the tenants’ continued occupancy in the immediate future would be called into question by a delay in initiating the proposed cure.

Mark-to-Market Program
Preserves long-term low-income housing affordability by restructuring FHA-insured or HUD-held mortgages for eligible multifamily housing projects.

Mortgage Insurance for Cooperative Housing (Section 213)
Federal mortgage insurance to finance cooperative housing projects.

Mortgage Insurance for Manufactured Home Parks (Section 207)
Federal mortgage insurance to finance construction or rehabilitation of manufactured home parks.

Mortgage Insurance for Purchase or Refinance of Existing Multifamily Rental Housing (Sections 207 and 223(f))
Federal mortgage insurance under Section 207 of the National Housing Act pursuant to Section 223(f) of the National Housing Act for the purchase or refinancing of existing apartment projects; to refinance an existing cooperative housing project; or for the purchase and conversion of an existing rental project to cooperative housing.

Mortgage Insurance for Rental Housing for the Elderly (Section 231)
Federal mortgage insurance to finance the construction or rehabilitation of multifamily rental housing for the elderly and/or persons with disabilities.

Mortgage Insurance for Rental Housing for Urban Renewal and Concentrated Development Areas (Section 220)
FHA mortgage insurance is issued to finance mortgages for housing in urban renewal areas, areas in which concentrated revitalization activities have been undertaken by local government, or to alter, repair, or improve housing in those areas. 

Mortgage Insurance for Supplemental Loans for Multifamily Projects (Section 241)
Federal mortgage loan insurance to finance improvements and additions to, and equipment for, multifamily rental housing and healthcare facilities.

Multifamily Housing Service Coordinators
Provides assistance to elderly individuals and persons with disabilities living in federally assisted multifamily housing to obtain needed supportive services.

Multifamily Mortgage Risk-Sharing Programs (Sections 542(b) and 542(c))
Two multifamily mortgage credit programs under which Fannie Mae, Freddie Mac, and state and local housing finance agencies share the risk and the mortgage insurance premium on multifamily housing. 

Multifamily Rental Housing for Moderate-Income Families (Section 221(d)(3) and (4))
Mortgage insurance to finance rental or cooperative multifamily housing for moderate-income households, including projects designated for the elderly. Section 221(d)(3) and (4) are HUD’s major insurance programs for new construction or substantially rehabilitated multifamily rental housing.

Single Family Housing Programs
Federal mortgage insurance to finance homeownership and the construction and financing of housing. Homebuyers may obtain FHA-insured mortgages from HUD-approved lenders to purchase homes (including condominium units) with low down payments. By insuring commercial lenders against loss, HUD encourages them to invest capital in the home mortgage market. HUD insures loans made by private financial institutions a portion of the sales price with terms for up to 30 years. The loan may finance homes in both urban and rural areas. The maximum mortgage amounts are at least $271,050 in all areas, with higher limits in areas with higher median house prices up to a maximum of $729,750 for one-unit homes through December 31, 2013. Higher limits also exist for two- to four-family properties. The loan limits change annually, based on home price estimates. The limits are benchmarked to the loan limits of the Government-Sponsored Enterprises, Fannie Mae and Freddie Mac. The mortgagee collects from the borrower an up-front mortgage insurance premium payment, which may be financed, at the time of loan closing, as well as annual premiums that are not financed, but included in the regular mortgage payment.

Supportive Housing for Persons with Disabilities Section 811
Through the Section 811 Supportive Housing for Persons with Disabilities program, HUD provides funding to develop and subsidize rental housing with the availability of supportive services for very low- and extremely low-income adults with disabilities. The newly reformed Section 811 program is authorized to operate in two ways: (1) the traditional way, by providing interest-free capital advances and operating subsidies to nonprofit developers of affordable housing for persons with disabilities; and (2) providing project rental assistance to state housing agencies. The assistance to the state housing agencies can be applied to new or existing multifamily housing complexes funded through different sources, such as Federal Low-Income Housing Tax Credits, Federal HOME funds, and other state, Federal, and local programs.

Supportive Housing for the Elderly Program Section 202
The Section 202 program provides capital advances (no interest loans that are forgiven as long as affordability requirements are met for 40 years) and Project Rental Assistance Contracts (PRACs) for the construction or substantial rehabilitation and operation of residential projects and related facilities for the elderly. Housing financed under this program may include appropriate support services for elderly persons who are frail or at risk of being institutionalized.

HUD Public Housing Programs

Choice Neighborhoods
A competitive grant program to transform neighborhoods of poverty into vibrant, mixed-income neighborhoods.

Homeownership Voucher Program
Public housing agencies (PHAs) may elect to administer the Homeownership Voucher Program as a component of the broader Section 8 Housing Choice Voucher program, where eligible participants use the monthly housing assistance payment (HAP) provided by the voucher to help pay the homeownership expenses for a housing unit that they purchase in accordance with HUD regulations, rather than the traditional application of the voucher toward rent payments.

Section 8 Housing Choice Voucher Program
The housing choice voucher program is the federal government's major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Since housing assistance is provided on behalf of the family or individual, participants are able to find their own housing, including single-family homes, townhouses and apartments.

The participant is free to choose any housing that meets the requirements of the program and is not limited to units located in subsidized housing projects.

Housing choice vouchers are administered locally by public housing agencies (PHAs). The PHAs receive federal funds from the U.S. Department of Housing and Urban Development (HUD) to administer the voucher program. 

Section 8 Project Based Rental Assistance
Rental assistance for eligible families who live in specific housing developments or units. Project-based vouchers are a component of a public housing agencies (PHAs) housing choice voucher program. A PHA can attach up to 20 percent of its voucher assistance to specific housing units if the owner agrees to either rehabilitate or construct the units, or the owner agrees to set-aside a portion of the units in an existing development.

Low Income Housing Tax Credit Terminology

Low Income Housing Tax Credits (LIHTC)
(LIHTC - often pronounced "lie-tech", Housing Credit) is a dollar-for-dollar tax credit in the United States for affordable housing investments. It was created under the Tax Reform Act of 1986 (TRA86) and gives incentives for the utilization of private equity in the development of affordable housing aimed at low-income Americans. LIHTC accounts for the majority (approximately 90%) of all affordable rental housing created in the United States today. As the maximum rent that can be charged is based upon the Area Median Income ("AMI"), LIHTC housing remains unaffordable to many low-income (<30% AMI) renters. The credits are also commonly called Section 42 credits in reference to the applicable section of the Internal Revenue Code. The tax credits are more attractive than tax deductions as the credits provide a dollar-for-dollar reduction in a taxpayer's federal income tax, whereas a tax deduction only provides a reduction in taxable income. The "passive loss rules" and similar tax changes made by TRA86 greatly reduced the value of tax credits and deductions to individual taxpayers. Less than 10% of current credit expenditures are claimed by individual investors

4 Percent Credit 
The 4 percent credit is the credit percentage available for existing housing or for federally subsidized new construction or rehabilitation (30 percent credit).
9 Percent Credit 
The 9 percent credit is the credit percentage available for new construction or rehabilitation (70 percent credit).
20-50 Test
The 20-50 test is a minimum set-aside test used to determine if a building is a qualified low-income housing project. Under the test, a building is generally a qualified low-income building if at least 20 percent of the units are both rent restricted and are occupied by tenants whose income is less than or equal to 50 percent of area median gross income.
25-60 Test
The 25-60 test is a minimum set-aside test used to determine if a building is a qualified low-income housing project. Under the test, a building is generally a qualified low-income building if at least 50 percent of the units are both rent restricted and are occupied by tenants whose income is less than or equal to 60 percent of area median gross income. This test is applicable to New York City only, and is applied in lieu of the 40-60 minimum set-aside test.
30 Percent Credit 
The 30 percent credit is the credit percentage available for existing housing or for federally subsidized new construction or rehabilitation (4 percent credit).
40-60 Test
The 40-60 test is a minimum set-aside test used to determine if a building is a qualified low-income housing project. Under the test, a building is generally a qualified low-income building if at least 40 percent of the units are both rent restricted and are occupied by tenants whose income is less than or equal to 60 percent of area median gross income.
70 Percent Credit 
The 70 percent credit is the credit percentage available for new construction or rehabilitation (9 percent credit).
Acquisition Cost
Acquisition cost is the cost of acquiring an existing building.
Acceleration is a provision included in many of the bond documents requiring the immediate payment of all the bond principal, generally caused by the borrower’s default.
Adjusted Basis
Adjusted basis is the cost basis of a building adjusted for capital improvements minus depreciation allowable.
Adjusted Investor Equity
Adjusted investor equity is the aggregate amount of cash taxpayers invested increased by cost-of-living adjustment.
Applicable Federal Rate (AFR) 
Applicable federal rate is a short term, mid-term and long-term debt rate that is re-determined on a monthly basis.
Applicable Fraction
Applicable fraction is the percentage of a building that is treated as low-income use and generally eligible for the LIHC. The applicable fraction is the lesser of the unit fraction or the floor space fraction.
Applicable Percentage
Applicable percentage describes the technical term for the credit percentage that a qualified low-income housing project is eligible for.
Arbitrage Yield Restriction
Arbitrage occurs when tax-exempt bond proceeds are invested in securities that yield a greater return than the interest charged on the bonds. Restrictions exist on the amount of arbitrage bonds can earn without putting the tax-exempt status of the bonds in peril. In instances where the restriction is violated, exceptions exist that allow for the tax-exempt status of the bonds to remain intact.
Area Median Gross Income (AMGI)
Area median gross income is the gross income level that half the families in an area are below.
At-Risk Rule
The at-risk rule is the rule that limits the ability to include in eligible basis property purchased with nonrecourse financing. An exception exists for nonrecourse financing that meets the definition of Qualified Commercial Financing.
Balloon Payment
A balloon payment is a single future payment of the entire bond principal when the borrower makes periodic interest-only payments.
Basis Point
A basis point is one-one-hundredth of a percentage point (.01%).
Below Market Federal Loan
A below market federal loan is any loan funded by federal funds if the interest rate payable on such loan is less than the applicable federal rate.
Bond Counsel
Bond counsel is the attorney representing the bond issuer and bondholders. The attorney provides an opinion that the interest on the bonds is exempt from federal taxation. He/she is responsible for the bond inducement resolution, bonds, the bond indenture, the financing agreement, the regulatory agreement and the tax opinion.
Bond Issuance Costs
Bond issuance costs are the costs incurred to issue the bonds, including legal fees, underwriting fees, rating agency fees, trustee fees, printing, etc.
Bond Issuer
A bond issuer is the governmental or non-profit entity responsible for issuing bonds.
Bond Purchase Agreement
A bond purchase agreement is an agreement between the borrower, issuer and underwriter allowing the underwriter to sell the bonds, subject to responsibilities, warranties, and agreements agreed to by the issuer.
Bond Trustee
The bond trustee is responsible for collecting the interest and principal payments and forwarding these payments to bondholders. The trustee invests the bond proceeds, as applicable, and administers the indenture agreement.
Call Premium
A call premium is a payment made to the bondholder if the borrower pays off the bonds before they mature.
Call Protection
Call protection describes the provisions in a bond issuance that preclude the borrower from prepaying the bonds for a specified period of time.
Comfort Letter
A comfort letter is a letter provided by a certified public accountant when the bond purchase agreement is executed. This letter confirms that the issuer’s (or borrower’s) financial information included in the official statements is presented in conformity with generally accepted auditing standards and that no changes in the financial position of the borrower since the date of the last audited financial statements, other than those changes disclosed in the comfort letter or in the official statement, have occurred.
Compliance Period
The compliance period is the 15 year period over which a project must continue to satisfy the various LIHC requirements in order to avoid tax credit recapture. The compliance period begins with the first taxable year of the credit period.
Constitutional Home Rule Subdivision
Constitutional home rules subdivision describes a political subdivision with home rule powers under the state constitution. These subdivisions receive special treatment under the LIHC state allocation rules.
Credit Enhancer
The credit enhancer guarantees, for a fee, that the bondholders will receive scheduled bond payments.
Credit Period
The credit period is the 10-year period over which the LIHC is claimed. This period generally begins on the date a property is placed in service, but a taxpayer may elect to start the credit period as of the beginning of the year following the year the LIHC property is placed in service.
Credit Recapture Amount
Credit recapture amount is the amount of credit that is recaptured upon disposition of the LIHC project during the compliance period. The maximum recapture is two-thirds of the previously claimed credit and an interest charge applies.
Deep Rent Skewing Set-Aside
Deep rent skewing set-aside is a special set-aside test that applies for purposes of determining if existing tenants qualify as low-income tenants. This special test is elective and must be met in addition to the general set-aside test (i.e. 20-50, 40-60 and 25-60).
Defeasance describes the retirement of bonds through the issuance of new bonds.
Difficult Development Area 
A difficult development area is any area designated by the U.S. Department of Housing & Urban Development, which has high construction, land or utility costs relative to area median gross income.
Eligible Basis
Eligible basis is a component of the qualified basis of an LIHC project. It is generally equal to the adjusted basis of the building, excluding land but including amenities and common areas.
Existing Building
An existing building is a building that has been previously placed in service.
Extended Low-Income Housing Commitment
An extended low-income housing commitment is any agreement between the taxpayer and the housing credit agency that extends the low-income housing requirements for a full 30 years.
Extended Use Period
The extended use period is the period beginning on the first day that the building is part of a qualified low-income housing project and ending on the date specified by the agency or 15 years after the close of the compliance period.
Federally Assisted Building
A federally assisted building is any building that is substantially assisted, financed or operated under laws in effect the date of enactment of the Tax Reform Act of 1986.
Federally Subsidized
Federally subsidized is a term used to describe a building that is financed with a below-market federal loan or with a loan for which the interest income earned by the holder of the loan is exempt from tax under Internal Revenue Code Section 13.
Financing Agreement
The financing agreement is entered into between the bond issuer, trustee and borrower. The agreement covers how the bonds will be issued, serviced by the trustee and paid for by the borrower.
Float is interest earned on bond payments made to the trustee that have yet to be remitted to the bondholders. The borrower generally makes debt service payments monthly while bondholders are paid semi-annually. The interest reduces the amount the borrower has to pay to service the bonds, effectively reducing the interest rate.
Floor Space Fraction
The floor space fraction is obtained by dividing the total floor space of the low-income units in the building by the total floor space of all residential units in the building (whether or not occupied).
A grant is funds received from a private foundation or charitable group, federal, state or local government that do not have to be repaid.
Gross Income
Gross income is all income from whatever source derived, including the value of property or services as well as cash.
Gross Rent
Gross rent excludes any amounts received from a rental assistance program, utility allowance or fee paid to the owner of the unit owner by any governmental assistance program.
Housing Credit Agency 
The housing credit agency is a state or local housing agency that has the authority to allocate and commit federal low-income housing tax credits to a building.
Imputed Income Limitation
The imputed income limitation would apply to a unit based on an assumed family size that is a function of the number of bedrooms in the unit.
The indenture is an agreement between the bond issuer and the trustee containing the terms and procedures for payment of the bonds.
Inducement Resolution
An inducement resolution is the resolution passed by the bond issuer communicating the intent to issue bonds for a specific activity.
Low-Income Occupancy Percentage
See Applicable Fraction.
Low-Income Unit
A low-income unit is (1) rent restricted and (2) has individuals occupying it who meet the income limitation applicable under the elected minimum set-aside test.
Mandatory Redemption
Mandatory redemption is a provision allowing a borrower to prepay bonds regardless of call provisions, due to special circumstances (e.g. foreclosure or condemnation).
MBS Trustee
The MBS trustee holds the MBS that collateralize the bonds. The MBS trustee remits the proceeds from the MBS to bond trustee, who then pays the bondholders.
Minimum Set-Aside Test
The minimum set-aside test is generally used to determine if a building is a qualified low-income housing project. There are three different minimum set-aside tests with varying applicability. The tests are 20-50 test, the 40-60 test, and the 25-60 test. (See 20-50 test, 40-60 test and 25-60 test).
Mortgage Backed Security (MBS)
Mortgage Backed Security is collateral provided by credit enhancers that is used to guarantee the bonds.
Negative Arbitrage
Negative arbitrage occurs when undisbursed bond proceeds earn a lower interest rate than the bond interest rate.
New Building
A new building is a building whose original use begins with the taxpayer. A new building also includes qualifying substantial rehabilitation costs incurred with respect to existing buildings.
Nonqualified Nonrecourse Financing
Nonqualified nonrecourse financing is nonrecourse financing that is not qualified commercial financing. This definition is used for purposes of low-income housing tax credit at-risk rules.
Nonqualified Substantial Improvement
Nonqualified substantial improvement is a term used to determine if an existing building is eligible for the acquisition credit; is any substantial improvement for which Section 167 (k) was elected or pre- 1986 Tax Reform Act depreciation rules apply.
Official Statement
The official statement is a marketing prospectus used by underwriters to sell the bonds. The official statement summarizes the terms of the bonds and other information relevant to the investment decision.
Placed-In-Service Date
The placed-in-service date generally marks the beginning of the credit period. It is defined as the date the property is ready for occupancy.
The pledge grants a security interest or lien to provide security for the repayment of the bond principal and interest.
Private Placement
Private placement is the sale of bonds directly from a bond issuer to an investor without the use of an underwriter. An investment banker may act as a placement agent in this type of transaction.
Private Placement Memorandum
A private placement memorandum is a document used in connection with a private placement transaction, instead of the official statement,
Qualified Basis
Qualified basis is the base that is multiplied by the credit percentage to determine the annual credit. The qualified basis equals the applicable fraction times the eligible basis.
Qualified Census Tract 
A Qualified Census Tract is any census tract in which 50 percent or more of the households have an income which is less than 60 percent of area median gross income.
Qualified Commercial Financing
Qualified commercial financing is the exception to the at-risk rules. To qualify, financing must generally be nonrecourse, the lender must generally be actively engaged in the business of lending, the lender must not have previously owned the property, and the lender must not earn a fee in connection with the acquisition of the property.
Qualified Contract
A qualified contract is a bona fide contract to acquire a LIHC project for the sum of the existing debt, adjusted investor equity and other capital contributions, less project cash distributions.
Qualified Low-Income Building
A qualified low-income building is part of a qualified low-income housing project throughout the compliance period and for which prior law depreciation rules do not apply.
Qualified Low-Income Housing Project
A qualified low-income housing project is a residential rental project that satisfies the elected minimum set-aside test.
Qualified Non-profit Organization
A qualified non-profit organization, which is described in Section 501 (C)(3) or (4), is exempt from tax under Section 501(a). Its exempt purpose is to foster low-income housing, among other purposes.
Rating Agency
A rating agency determines or "rates" the investment risk of bonds. Examples include Standard & Poor’s and Moody’s Investors Service.
A rebate is payment of the excess arbitrage proceeds to the federal government to retain the tax-exempt status of the bonds. Special rules allow a borrower to avoid a rebate of arbitrage proceeds.
Regulation D
Regulation D is a securities law regulation that explains the rules for three private offering exemptions from the general rules that requires securities registration.
Regulatory Agreement
A regulatory agreement is an agreement entered into between the borrower, bond issuer and trustee specifying the income rent and income restrictions a project owner must comply with for the bonds to retain their tax exempt status.
Rehabilitation Expenditures
Rehabilitation expenditures are amounts incurred in improving or making additions to property in connection with the rehabilitation of an existing building.
Rent-Restricted Unit
A rent-restricted unit is a unit for which the rent charged to tenants is limited to 30 percent of the income limitation applicable under the elected minimum set-aside test.
Scattered Site Project
A scattered site project is a qualified low-income housing project located on multiple sites.
Secondary Market
The secondary market is the subsequent sale of bonds from bondholder, after the original sale of the bonds by the bond issuer.
Section 167(k) Election
Section 167(k) is any election available before the Tax Reform Act of 1986 which allowed building owners to amortize rehabilitation costs over 60 months.
State Housing Credit Ceiling 
The state housing credit ceiling is the maximum LIHC amount a state may allocate in a given year. It is calculated at $1.75 per resident.
Substantial Improvement
Substantial improvement is used in connection with determining the eligibility of an existing building for the LIHC. It is any amount incurred during a 24-month period equal to or exceeding 25 percent of the adjusted basis of the building as of the first day of such period.
Supportive Service
Supportive service is any service provided under a planned program of services designed to enable residents to remain independent and avoid placement in a hospital, nursing home or intermediate care facility.
Tax Shelter Registration
Certain partnerships or other investments with significant tax benefits must register as tax shelters with the Internal Revenue Service and certain state tax agencies.
TEFRA Hearing
The Tax Equity and Fiscal Responsibility Act (TEFRA) Hearing is the bond issuer’s public notice, public hearing and approval by elected officials of a bond issuance.
The underwriter is an investment bank that underwrites and markets the bonds to investors.
Underwriter’s Counsel
Underwriter’s counsel is an attorney who verifies that the documents used to market the bonds comply with the applicable securities regulations.
Unit Fraction
The unit fraction is the fraction obtained by dividing the number of low-income units in a building by the total number of units in the building (whether or not occupies).
Utility Allowance
The utility allowance is the amount, determined by the Secretary of the Department of the Treasury, to be the average cost of tenant utilities.
Volume Cap
The volume cap is the maximum amount of LIHCs and tax-exempt bonds each state is allowed to allocate annually. The tax credit volume cap is $1.75 per state resident. The bond volume cap is $75 per person per state, with a $225 million minimum per state. Beginning in 2003, the volume cap will be indexed to inflation.