[Federal Register: February 4, 2003 (Volume 68, Number 23)]
[Rules and Regulations]
[Page 5717-5726]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe03-15]
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DEPARTMENT OF THE TREASURY
Community Development Financial Institutions Fund
12 CFR Part 1806
RIN 1505-AA91
Bank Enterprise Award Program
AGENCY: Community Development Financial Institutions Fund, Department
of the Treasury.
ACTION: Revised interim rule with request for comment.
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SUMMARY: The Department of the Treasury is issuing a revised interim
rule implementing the Bank Enterprise Award (BEA) Program administered
by the Community Development Financial Institutions Fund (Fund). The
mission of the CDFI Fund is to increase the capacity of financial
institutions to provide capital, credit and financial services in
underserved markets. Its long-term vision is an America in which all
people have access to affordable credit, capital and financial
services. The purpose of the BEA Program is to provide an incentive to
insured depository institutions to increase their activities in the
form of loans, investments, services, and technical assistance, within
Distressed Communities and provide financial assistance to Community
Development Financial Institutions (CDFIs) through grants, stock
purchases, loans, deposits, and other forms of financial and technical
assistance. This revised interim rule: improves programmatic operating
efficiencies; targets program incentives to encourage the provision of
investment, credit and financial services in Distressed Communities
that demonstrate the most extreme need, to CDFIs that serve such
Distressed Communities, and to smaller, less well capitalized CDFIs;
reduces applicants' documentary and reporting burdens; clarifies and
redefines the requirements of certain Qualified Activities; redefines
and adds new categories of Qualified Activities; changes some
methodologies for calculating BEA Program awards, including the
application of caps to such awards; and simplifies some reporting and
documentation requirements.
DATES: Interim rule effective February 4, 2003; comments must be
received on or before April 7, 2003.
ADDRESSES: You may send hard copy comments concerning this interim rule
to the Deputy Director for Policy and Programs, Community Development
Financial Institutions Fund, Department
[[Page 5718]]
of the Treasury, 601 13th Street, NW., Suite 200 South, Washington, DC
20005. You may also send us comments by e-mail at reg--
comments@cdfit.treas.gov. When sending comments by e-mail, please use
an ASCII file format and provide your full name and mailing address.
Comments may be inspected at the above address weekdays between 9:30
a.m. and 4:30 p.m. Other information regarding the Fund and its
programs may be obtained through the Fund's Web site at http://www.cdfifund.gov
.
FOR FURTHER INFORMATION CONTACT: Margaret Nilson, Depository
Institutions Manager, the Community Development Financial Institutions
Fund, at (202) 622-6355. (This is not a toll free number.)
SUPPLEMENTARY INFORMATION:
I. Background
The Community Development Financial Institutions Fund (Fund) was
established as a wholly owned government corporation by the Community
Development Banking and Financial Institutions Act of 1994. Subsequent
legislation placed the Fund within the Department of the Treasury and
gave the Secretary of the Treasury all powers and rights of the
Administrator of the Fund as set forth in the authorizing statute.
The mission of the Fund is to increase the capacity of financial
institutions to provide capital, credit and financial services in
underserved markets. Its long-term vision is an America in which all
people have access to affordable credit, capital and financial
services. The Fund's programs are designed to facilitate the flow of
lending and investment capital to distressed communities and to
individuals who have been unable to take full advantage of the
financial services industry. Access to credit, investment capital, and
financial services are essential ingredients for creating and retaining
jobs, developing affordable housing, revitalizing neighborhoods,
unleashing the economic potential of small businesses, and empowering
people.
Through the BEA Program, the Fund seeks to: strengthen and expand
the financial and organizational capacity of CDFIs; provide financial
incentives to insured depository institutions to increase their lending
and services in Distressed Communities; and increase the flow of
private capital into Low- and Moderate-Income areas. Applicants
participate in the BEA Program through a competitive process, which
evaluates applications based on the value of their increases in certain
Qualified Activities. Program participants receive BEA Program award
proceeds only after successful completion of the specified Qualified
Activities.
On December 5, 1997, the Fund published in the Federal Register an
interim regulation (62 FR 64439) implementing the BEA Program (the
current rule). The deadline for the submission of comments was April 6,
1998.
II. Comments on the December 5, 1997 Interim Rule
By the close of the April 6, 1998 comment period, the Fund received
no comments on the December 5, 1997 interim rule.
III. Summary of Changes
(1) Purpose: Section 1806.100 of the current rule contains a
description of the purpose of the BEA Program. This interim rule
revises such purpose to more accurately describe the purpose of the BEA
Program.
(2) New Definitions: Section 1806.103 of the revised interim rule
contains a number of new definitions: Community Development Entity
(Sec. 1806.103(m)) which includes entities certified through the New
Markets Tax Credit Program; CDFI Partner (Sec. 1806.103(o)) which
includes CDFIs to which Applicants have provided assistance; and
Deposit Liabilities (Sec. 1806.103(s)) includes savings and other
deposit accounts. In addition, the revised interim rule defines
Electronic Transfer Account (ETA) (Sec. 1806.103(w)), First Account
(Sec. 1806.103(aa)), and Individual Development Account (IDA) (Sec.
1806.103(ff)) (such terms were defined in Notices of Funds Availability
for certain prior BEA Program funding rounds).
(3) Definitions for New Categories of Qualified Activities: The
revised interim rule creates Service Activities (Sec. 1806.103(oo)), a
new category of Qualified Activities (Sec. 1806.103(mm)). The Service
Activities category includes: Community Services (Sec. 1806.103(r));
Deposit Liabilities (Sec. 1806.103(s)); Financial Services (Sec.
1806.103(z)); Targeted Financial Services (Sec. 1806.103(rr)); and
Targeted Retail Savings/Investment Products (Sec. 1806.103(ss)).
Targeted Financial Services is a new category that includes ETAs, First
Accounts, and IDAs. Targeted Retail Savings/Investment Products is a
new sub-category that includes savings and other investment products
targeted to Low- and Moderate-Income Residents of Distressed
Communities.
The revised interim rule eliminates Development Activities (Sec.
1806.201(b)(4) of the current rule), re-designating Development
Activities as Distressed Community Financing Activities (Sec.
1806.103(u)). Distressed Community Financing Activities include:
Affordable Housing Development Loans (Sec. 1806.103(b)); Affordable
Housing Loans (Sec. 1806.103(c)), Home Improvement Loans (Sec.
1806.103(dd)); Education Loans (Sec. 1806.103(v)); Commercial Real
Estate Loans (Sec. 1806.103(l)); and Small Business Loans (Sec.
1806.103(pp)). Affordable Housing Development Loan activities comprise
loans related to the development of residential real property that is
affordable to Low- and Moderate-Income households. Affordable Housing
Loan means origination of a loan to finance the purchase or improvement
of the borrower's primary residence, and that is secured by such
property, where such borrower is a Low- and Moderate-Income individual
(included in the Single Family Loans category of the current rule).
Correspondingly, Single Family Loans have been re-designated as Home
Improvement Loans and mean advances of funds, either unsecured or
secured by a one-to-four family residential property, the proceeds of
which are used to improve the borrower's primary residence. Education
Loan means an advance of funds to a Resident of a Distressed Community
for the purpose of financing a college or vocational education. Small
Business Loan has been modified from focusing on the size of the loan
to the size of the business and means an origination of a loan used for
commercial or industrial activities (other than an Affordable Housing
Finance Loan, Affordable Housing Development Loan, Commercial Real
Estate Loan, Home Improvement Loan) to a business or farm that meets
the size eligibility standards of the Small Business Administration's
Development Company or Small Business Investment Company programs (13
CFR 121.301) or have gross annual revenues of $1 million or less.
(4) Definitions Related to Certain Qualified Activities: Consistent
with the Fund's objective of ensuring that BEA Program awards are
targeted to institutions that provide capital and services to CDFIs and
other enterprises that have significant impact in their communities,
the revised interim rule provides that certain types of CDFI Support
Activities (Sec. 1806.103(q)), Community Services (Sec. 1806.103(r)),
and Financial Services (Sec. 1806.103(z)), must be, among other
requirements, provided to CDFIs or other enterprises, as applicable,
that are Integrally
[[Page 5719]]
Involved in a Distressed Community (Sec. 1806.200). The revised
interim rule defines Integrally Involved (Sec. 1806.103(gg)) as
meaning
(a) for a CDFI Partner, having provided at least five percent of
financial transactions or dollars transacted (e.g., loans or equity
investments as defined in 12 CFR 1805.104(s)), or five percent of
Development Service activities, in the Distressed Community identified
by the Applicant or the CDFI Partner, as applicable, in each of the
three calendar years preceding the date of the applicable NOFA, or
having transacted at least ten percent of financial transactions (e.g.,
loans or equity investments) in said Distressed Community in at least
one of the three calendar years preceding the date of the applicable
NOFA, or demonstrating that it has attained at least five percent of
market share for a particular product in said Distressed Community
(such as at least five percent of home mortgages originated in said
Distressed Community) in at least one of the three calendar years
preceding the date of the applicable NOFA; or
(b) for a non-CDFI, having directed at least five percent of its
business activities (e.g., investments, revenues, expenses, or other
appropriate measures) to serving the Distressed Community identified by
the Applicant in each of the three calendar years preceding the date of
the applicable NOFA, or having provided at least ten percent of its
business activities in said Distressed Community in at least one of the
three calendar years preceding the date of the applicable NOFA.
The revised interim rule also provides that the Fund may qualify
further certain Qualified Activities, for example, through the
application of dollar amount caps, in the applicable NOFA.
(5) Measuring and Reporting Qualified Activities: Much of the
information contained in Sec. 1806.201 of the current rule has been
consolidated in the revised interim rule to remove repetitive material
and to improve readability. In addition, sections concerning the
measurement of Qualified Activities (Sec. 1806.202(a)-(e) of the
current rule) have been incorporated in Sec. 1806.201 of the revised
interim rule. The revised interim rule omits the Priority Factors ( see
Sec. 1806.201(b)(3) of the current rule), and provides in Sec.
1806.103(kk) that such Priority Factors shall be set forth in the
applicable NOFA.
(6) Low-Income Housing Tax Credits; New Markets Tax Credits:
Sections 1806.201(d)(1) and (2) of the revised interim rule provide
that activity by an Applicant shall not be considered a Qualified
Activity if, with respect to such activity, the Applicant has received
an allocation of Low-Income Housing Tax Credits or New Markets Tax
Credits.
(7) Treatment of Renewed/Refinanced Loans: Section 1806.201(e)(1)
of the revised interim rule clarifies the Fund's treatment of renewed
and refinanced loans. The Fund will continue to value refinanced loans
based upon the increase in principal over the original loan. However,
financial assistance provided by an Applicant shall not constitute a
Qualified Activity, as defined in this part, for the purposes of
calculating or receiving an award if, such activity has matured and is
then renewed. This treatment of renewed and refinanced loans is
consistent with the Fund's objective of creating incentives for
providing new capital. The Fund recognizes that while there is value to
borrowers in having loan maturities extended and other terms
renegotiated, such activities, strictly speaking, do not create an
additional flow of funds.
(8) Estimated award amounts: Section 1806.202 of the revised
interim rule provides that the estimated award amounts for all
Qualified Activities (not solely for Development and Service as is the
case under Sec. 1806.203(c) of the current rule) shall be determined
by applying the appropriate:
(a) award percentage (Sec. 1806.202(b)), as such percentages are
set forth in the applicable NOFA, and
(b) Priority Factor, where applicable, as set forth in the
applicable NOFA (Sec. 1806.202(c)).
(9) Selection Process, actual award amounts: Section 1806.203 of
the revised interim rule sets forth the statutorily prescribed first
priority for BEA Program awards for activities that have supported
CDFIs. However, the revised interim rule omits the rankings of
particular Qualified Activities within priority categories (Sec.
1806.204(b) of the current rule). Rather, the revised interim rule
provides that the Fund will set forth the applicable rankings of
particular Qualified Activities within a priority category in the
applicable NOFA. In addition, the interim revised rule incorporates
most of Sec. 1806.205 of the current rule into Sec. 1806.203, and
deletes the ``75 percent rule'' (Sec. 1806.205(b) of the current
rule).
(10) Applications for Bank Enterprise Awards: Section 1806.204 of
the revised interim rule is substantially the same as Sec. 1806.206 of
the current rule. The revised interim rule omits the requirements that
the Applicant submit: a copy of its certificate of insurance (Sec.
1806.206(b)(1) of the current rule); a narrative description of its
Qualified Activities (Sec. 1806.206(b)(3) of the current rule); a
report of its asset size (Sec. 1806.206(b)(4) of the current rule);
and a copy of its most recent annual report (Sec. 1806.206(b)(7) of
the current rule). The Fund believes that this information duplicates
other information that is available to the Fund via other sources,
including appropriate banking agencies.
(11) Award Agreement; Sanctions: Section 1806.300(c) of the revised
interim rule provides that if a BEA Program award recipient, or its
Subsidiary or Affiliate, fails to comply with the terms and conditions
of its BEA Program award agreement, or the terms and conditions of any
other assistance agreement under the CDFI Program, then the Fund may
reject such Applicant's application or withhold any disbursement of
such award funds.
(12) Clarification on Measuring Certificates of Deposits: Section
1806.103(q) of the revised interim rule provides that any certificate
of deposit placed by an Applicant in a CDFI that is a bank, thrift, or
credit union may be either:
(i) Uninsured and committed for a term of at least three years; or
(ii) insured and committed for a term of at least three years, if
it earns a rate of interest that is determined by the Fund to be
materially below market, as set forth in the applicable NOFA.
IV. Rulemaking Analysis
(1) Executive Order (E.O.) 12866
It has been determined that this regulation is not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
Regulatory Assessment is not required.
(2) Regulatory Flexibility Act
Because no notice of proposed rulemaking is required for this
revised interim rule, the provisions of the Regulatory Flexibility Act
(5 U.S.C. 601 et seq.) do not apply.
(3) Paperwork Reduction Act
The collections of information contained in this interim rule have
been previously reviewed and approved by OMB in accordance with the
Paperwork Reduction Act of 1995 and assigned OMB Control Number 1559-
0005. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a valid control number assigned by OMB. This document restates the
collections of information without substantive change.
[[Page 5720]]
Comments concerning suggestions for reducing the burden of
collections of information should be directed to the Deputy Director
for Policy and Programs, Community Development Financial Institutions
Fund, 601 13th Street, NW., Suite 200 South, Washington, DC 20005, and
to the Office of Management and Budget, Attention: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, D.C. 20503.
(4) National Environmental Policy Act
Pursuant to Treasury Directive 75-02 (Department of the Treasury
Environmental Quality Program), the Department has determined that
these revised interim regulations are categorically excluded from the
National Environmental Policy Act and do not require an environmental
review.
(5) Administrative Procedure Act
The Fund is promulgating this revised interim rule without
opportunity for prior public comment pursuant to the Administrative
Procedure Act (APA), 5 U.S.C. 553, because the BEA Program involves
grants and is thereby exempt from the procedural requirements of the
APA pursuant to 5 U.S.C. 553(a)(2). The Fund also believes that an
immediate effective date is necessary for the convenience of the
persons affected. Specifically, an immediate effective date will
minimize the risk of confusion on the affected community by ensuring
that there will be a single and uniform regulation in effect during the
Assessment Period that, as stated in the NOFA published elsewhere in
this issue of the Federal Register, will begin on January 1, 2003.
(6) Comment
Public comment is solicited on all aspects of this interim
regulation. The Fund will consider all comments made on the substance
of this interim regulation, but does not intend to hold hearings.
(7) Catalog of Federal Financial Assistance Number
Bank Enterprise Award Program--21.021.
(8) List of Subjects in 12 CFR Part 1806
Banks, banking, Community development, Grant programs--housing and
community development, Reporting and recordkeeping requirements,
Savings associations.
For the reasons set forth in the preamble, 12 CFR Part 1806 is
revised to read as follows:
PART 1806--BANK ENTERPRISE AWARD PROGRAM
Subpart A--General Provisions
Sec.
1806.100 Purpose.
1806.101 Summary.
1806.102 Relationship to the Community Development Financial
Institutions Program.
1806.103 Definitions.
1806.104 Waiver authority.
1806.105 OMB control number.
Subpart B--Awards
1806.200 Community eligibility and designation.
1806.201 Measuring and Reporting Qualified Activities.
1806.202 Estimated award amounts.
1806.203 Selection process, actual award amounts.
1806.204 Applications for Bank Enterprise Awards.
Subpart C--Terms and Conditions of Assistance
1806.300 Award Agreement; sanctions.
1806.301 Records, reports and audits of Awardees.
1806.302 Compliance with government requirements.
1806.303 Fraud, waste and abuse.
1806.304 Books of account, records and government access.
1806.305 Retention of records.
Authority: 12 U.S.C. 1834a, 4703, 4703 note, 4713, 4717; 31
U.S.C. 321.
Subpart A--General Provisions
Sec. 1806.100 Purpose.
The purpose of the Bank Enterprise Award Program is to provide an
incentive for insured depository institutions to increase their
activities in Distressed Communities, and provide financial assistance
to Community Development Financial Institutions.
Sec. 1806.101 Summary.
(a) Under the Bank Enterprise Award Program, the Fund makes awards
to selected Applicants that:
(1) Increase their investments in or other support of Community
Development Financial Institutions;
(2) Increase lending and investment activities within Distressed
Communities; or
(3) Increase the provision of certain services and assistance.
(b) Distressed Communities must meet minimum poverty and
unemployment criteria.
(c) Applicants are selected to participate in the program through a
competitive application process. Awards are based on increases in
Qualified Activities that are carried out by the Applicant during an
Assessment Period. Bank Enterprise Awards are distributed after
successful completion of projected Qualified Activities. All awards
shall be made subject to the availability of funding.
Sec. 1806.102 Relationship to the Community Development Financial
Institutions Program.
(a) Prohibition against double funding. No CDFI may receive a Bank
Enterprise Award if it has:
(1) An application pending for assistance under the Community
Development Financial Institutions Program (part 1805 of this chapter);
(2) Directly received assistance from the Fund under the Community
Development Financial Institutions Program within the 12-month period
prior to the date the Fund selected the Applicant to receive a Bank
Enterprise Award; or
(3) Ever received assistance under the Community Development
Financial Institutions Program for the same activities for which it is
seeking a Bank Enterprise Award.
(b) Matching funds. Equity Investments and CDFI Support Activities
(except technical assistance) provided to a CDFI under this part can be
used by the CDFI to meet the matching funds requirements of the
Community Development Financial Institutions Program.
Sec. 1806.103 Definitions.
For purposes of this part the following terms shall have the
following definitions:
(a) Act means the Community Development Banking and Financial
Institutions Act of 1994, as amended (12 U.S.C. 4701 et seq.);
(b) Affordable Housing Development Loan means origination of a loan
to finance the acquisition, construction, and/or development of single-
or multi-family residential real property, where at least sixty percent
of the units in such property are affordable, as may be defined in the
applicable NOFA, to Low- and Moderate-Income individuals.
(c) Affordable Housing Loan means origination of a loan to finance
the purchase or improvement of the borrower's primary residence, and
that is secured by such property, where such borrower is a Low- and
Moderate-Income individual. Affordable Housing Loan may also refer to
second (or otherwise subordinated) liens or ``soft second'' mortgages,
and other similar types of downpayment assistance loans but may not
necessarily be secured by such property originated for the purpose of
facilitating the purchase or improvement of the borrower's primary
residence, where such borrower is a Low- and Moderate-Income
individual.
[[Page 5721]]
(d) Applicant means any insured depository institution (as defined
in section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1813)) that is applying for a Bank Enterprise Award;
(e) Appropriate Federal Banking Agency has the same meaning as in
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
(f) Assessment Period means an annual or semi-annual period
specified in the applicable Notice of Funds Availability in which an
Applicant will carry out, or has carried out, Qualified Activities;
(g) Award Agreement means a formal agreement between the Fund and
an Awardee pursuant to Sec. 1806.300;
(h) Awardee means an Applicant selected by the Fund to receive a
Bank Enterprise Award;
(i) Bank Enterprise Award (or BEA Program Award) means an award
made to an Applicant pursuant to this part;
(j) Bank Enterprise Award (or BEA) Program means the program
authorized by section 114 of the Act and implemented under this part;
(k) Baseline Period means an annual or semi-annual period specified
in the applicable NOFA in which an Applicant has previously carried out
Qualified Activities;
(l) Commercial Real Estate Loan means an origination of a loan
(other than an Affordable Housing Loan) that is secured by real estate
and used to finance the acquisition or rehabilitation of a building, or
the acquisition, construction and or development of property, used for
commercial purposes;
(m) Community Development Entity (or CDE) means any Qualified
Community Development Entity that meets the requirements set forth at
Internal Revenue Code (IRC) Sec. 45D(c) and that has been certified as
such by the Fund;
(n) Community Development Financial Institution (or CDFI) means an
entity whose certification as a CDFI under Sec. 1805.201 of this
chapter is in effect as of the end of the applicable Assessment Period
(the Assessment Period in which the Qualified Activity takes place) and
that meets the requirements of Sec. 1805.200 of this chapter at the
time of the Qualified Activity, subject to the rest of this paragraph
(n). If an Applicant is proposing to engage in CDFI Related Activities
with an uncertified CDFI, the uncertified CDFI may apply for
certification by submitting the information described in Sec.
1805.201(b) of this chapter. In order for the Applicant to be eligible
to receive a Bank Enterprise Award for its CDFI Related Activities, the
required information with respect to the uncertified CDFI shall be
submitted to the Fund as specified in the applicable NOFA, and
certification must be completed by the end of the applicable Assessment
Period as specified in the applicable NOFA. Notwithstanding anything in
this paragraph (n) to the contrary, an Applicant may receive an award
pursuant to this part for assistance provided to an uncertified CDFI
that, at the time of the Qualified Activity, does not meet the
requirements of Sec. 1805.200 of this chapter if the uncertified CDFI
is certified by the end of the applicable Assessment Period.
(o) CDFI Partner means a CDFI that has been provided assistance in
the form of CDFI Related Activities by an Applicant;
(p) CDFI Related Activities means Equity Investments, Equity-Like
Loans and CDFI Support Activities;
(q) CDFI Support Activity means assistance provided by an Applicant
or its Subsidiary to a CDFI that meets criteria set forth by the Fund
in the applicable NOFA, that is Integrally Involved in a Distressed
Community, in the form of the origination of a loan, technical
assistance, or deposits if such deposits are:
(1) Uninsured and committed for a term of at least three years; or
(2) Insured, committed for a term of at least three years, and
provided at an interest rate that is materially (in the determination
of the Fund) below market rates;
(r) Community Services means the following forms of assistance
provided by officers, employees or agents (contractual or otherwise) of
the Applicant:
(1) Provision of technical assistance, through consumer education
programs, to Residents regarding managing their personal finances;
(2) Provision of technical assistance and consulting services to
newly formed small businesses located in the Distressed Community;
(3) Provision of technical assistance to, or servicing the loans
of, Low- or Moderate-Income homeowners and homeowners located in the
Distressed Community; and
(4) Other services provided to Low- and Moderate-Income individuals
in a Distressed Community or enterprises Integrally Involved in a
Distressed Community, as deemed appropriate by the Fund;
(s) Deposit Liabilities means time or savings deposits or demand
deposits, accepted from Residents at offices of the Applicant, or a
Subsidiary of the Applicant, located within the Distressed Community.
Depository Liabilities may only include deposits held by individuals in
transaction accounts (i.e., demand deposits, NOW accounts, automated
transfer service accounts and telephone or preauthorized transfer
accounts) or nontransaction accounts (i.e., money market deposit
accounts, other savings deposits and all time deposits), as defined by
the Appropriate Federal Banking Agency;
(t) Distressed Community means a geographic community which meets
the minimum area eligibility requirements specified in Sec. 1806.200,
and such additional criteria as may be set forth in the applicable
NOFA;
(u) Distressed Community Financing Activities means Affordable
Housing Loans, Affordable Housing Development Loans and related Project
Investments; Education Loans; Commercial Real Estate Loans and related
Project Investments; Home Improvement Loans; and Small Business Loans
and related Project Investments;
(v) Education Loan means an advance of funds to a student, who is a
Resident of a Distressed Community, for the purpose of financing a
college or vocational education.
(w) Electronic Transfer Account (or ETA) means an account meeting
the requirements, and with respect to which the Applicant has satisfied
the requirements, set forth in the Federal Register on July 16, 1999 at
64 FR 38510, as such requirements may be amended from time to time;
(x) Equity Investment means financial assistance provided by an
Applicant or its Subsidiary to a CDFI, which CDFI meets such criteria
as set forth in the applicable NOFA, in the form of a grant, a stock
purchase, a purchase of a partnership interest, a purchase of a limited
liability company membership interest, or any other investment deemed
to be an Equity Investment by the Fund;
(y) Equity-Like Loan means a loan provided by an Applicant or its
Subsidiary to a CDFI, and made on such terms that it has
characteristics of an Equity Investment (consistent with requirements
of the Appropriate Federal Banking Agency), as such characteristics may
be specified by the Fund in the applicable NOFA;
(z) Financial Services means check-cashing, providing money orders
and certified checks, automated teller machines, safe deposit boxes,
new branches, and other comparable services as may be specified by the
Fund in the applicable NOFA, that are provided by the Applicant to Low-
and Moderate-Income individuals in the Distressed
[[Page 5722]]
Community or enterprises Integrally Involved in the Distressed
Community;
(aa) First Account means a low-cost account and such other services
designed to expand access to financial services for Low- and Moderate-
Income individuals, provided pursuant to grants made under the
Consolidated Appropriations Act, 2001 (Public Law 106-554, 114 Stat.
2763, 2763A-126), and the Department of Transportation and Related
Agencies Appropriations Act, 2001 (Public Law 106-346, 114 Stat. 1356,
1356A-44);
(bb) Fund means the Community Development Financial Institutions
Fund, established under section 104(a) of the Act (12 U.S.C. 4703(a));
(cc) Geographic Units means counties (or equivalent areas),
incorporated places, minor civil divisions that are units of local
government, census tracts, block numbering areas, block groups, and
American Indian or Alaska Native areas (as each is defined by the U.S.
Bureau of the Census) or other areas deemed appropriate by the Fund;
(dd) Home Improvement Loan means an advance of funds, either
unsecured or secured by a one-to-four family residential property, the
proceeds of which are used to improve the borrower's primary residence;
(ee) Indian Reservation means a geographic area that meets the
requirements of section 4(10) of the Indian Child Welfare Act of 1978
(25 U.S.C. 1903(10)), and shall include land held by incorporated
Native groups, regional corporations, and village corporations, as
defined in and pursuant to the Alaska Native Claims Settlement Act (43
U.S.C. 1601 et seq.), public domain Indian allotments, and former
Indian Reservations in the State of Oklahoma;
(ff) Individual Development Account (or IDA) means an account that
meets the requirements, and with respect to the provision of which
Applicant has satisfied the requirements, set forth in the U.S.
Department of Health and Human Services Program Announcement OCS-2000-
04, published on December 14, 1999 in the Federal Register at 64 FR
69824, as such requirements may be amended from time to time;
(gg) Integrally Involved means (i) for a CDFI Partner, having
provided at least five percent of financial transactions or dollars
transacted (e.g., loans or equity investments as defined in 12 CFR
1805.104(s)), or five percent of Development Service activities, in the
Distressed Community identified by the Applicant or the CDFI Partner,
as applicable, in each of the three calendar years preceding the date
of the applicable NOFA, or having transacted at least ten percent of
financial transactions (e.g., loans or equity investments) in said
Distressed Community in at least one of the three calendar years
preceding the date of the applicable NOFA, or demonstrating that it has
attained at least five percent of market share for a particular product
in said Distressed Community (such as at least five percent of home
mortgages originated in said Distressed Community) in at least one of
the three calendar years preceding the date of the applicable NOFA; or
(ii) for a non-CDFI, having directed at least five percent of its
business activities (e.g., investments, revenues, expenses, or other
appropriate measures) to serving the Distressed Community identified by
the Applicant in each of the three calendar years preceding the date of
the applicable NOFA, or having provided at least ten percent of its
business activities in said Distressed Community in at least one of the
three calendar years preceding the date of the applicable NOFA.
(hh) Low- and Moderate-Income means income that does not exceed 80
percent of the median income of the area involved, as determined by the
Secretary of Housing and Urban Development, with adjustments for
smaller and larger families pursuant to section 102(a)(20) of the
Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(20));
(ii) Metropolitan Area means an area designated as such (as of the
date of the application) by the Office of Management and Budget
pursuant to 44 U.S.C. 3504(d)(3), 31 U.S.C. 1104(d), and Executive
Order 10253 (3 CFR, 1949-1953 Comp., p. 758), as amended;
(jj) Notice of Funds Availability (or NOFA) means the public
notice, published by the Fund in the Federal Register, that announces
the availability of BEA Program funds for a particular funding round
and that advises Applicants with respect to obtaining application
materials, establishes application submission deadlines, and
establishes other requirements or restrictions applicable for the
particular funding round including, for example, application contents,
further qualifications of Qualified Activities, Priority Factors,
related policy directives, and any restrictions on Bank Enterprise
Award amounts;
(kk) Priority Factor means a numeric value assigned to each type of
activity within each category of Qualified Activity, as may be
established by the Fund in the applicable NOFA. A priority factor
represents the Fund's assessment of the degree of difficulty, the
extent of innovation, and the extent of benefits accruing to the
Distressed Community for each type of activity;
(ll) Project Investment means providing financial assistance in the
form of a purchase of stock, limited partnership interest, other
ownership instrument, or a grant to an entity that is Integrally
Involved in a Distressed Community and formed for the sole purpose of
engaging in a project or activity, approved by the Fund, including
Affordable Housing Development Loans, Affordable Housing Loans,
Commercial Real Estate Loans, and Small Business Loans (as defined in
this part);
(mm) Qualified Activities means CDFI Related Activities, Distressed
Community Financing Activities, and Service Activities;
(nn) Resident means an individual domiciled in a Distressed
Community;
(oo) Service Activities means the following activities that are
carried out by the Applicant: Deposit Liabilities; Financial Services;
Community Services; Targeted Financial Services; and Targeted Retail
Savings/Investment Products;
(pp) Small Business Loan means an origination of a loan used for
commercial or industrial activities (other than an Affordable Housing
Loan, Affordable Housing Development Loan, Commercial Real Estate Loan,
Home Improvement Loan) to a business or farm that meets the size
eligibility standards of the Small Business Administration's
Development Company or Small Business Investment Company programs (13
CFR 121.301) or have gross annual revenues of $1 million or less;
(qq) Subsidiary has the same meaning as in section 3 of the Federal
Deposit Insurance Act, except that a CDFI shall not be considered a
subsidiary of any insured depository institution or any depository
institution holding company that controls less than 25 percent of any
class of the voting shares of such corporation and does not otherwise
control, in any manner, the election of a majority of directors of the
corporation;
(rr) Targeted Financial Services means ETAs, First Accounts, IDAs,
and such other similar banking products as maybe specified by the Fund
in the applicable NOFA;
(ss) Targeted Retail Savings/Investment Products means certificates
of deposit, mutual funds, life insurance and other similar savings or
investment vehicles targeted to Low- and Moderate-Income Residents, as
may be specified by the Fund in the applicable NOFA; and
[[Page 5723]]
(tt) Unit of General Local Government means any city, county town,
township, parish, village or other general-purpose political
subdivision of a State or Commonwealth of the United States, or
general-purpose subdivision thereof, and the District of Columbia.
Sec. 1806.104 Waiver authority.
The Fund may waive any requirement of this part that is not
required by law, upon a determination of good cause. Each such waiver
will be in writing and supported by a statement of the facts and
grounds forming the basis of the waiver. For a waiver in any individual
case, the Fund must determine that application of the requirement to be
waived would adversely affect the achievement of the purposes of the
Act. For waivers of general applicability, the Fund will publish
notification of granted waivers in the Federal Register.
Sec. 1806.105 OMB control number.
The collection of information requirements in this part have been
approved by the Office of Management and Budget and assigned OMB
control number 1559-0005.
Subpart B--Awards
Sec. 1806.200 Community eligibility and designation.
(a) General. If an Applicant proposes to carry out Service
Activities, or Distressed Community Financing Activities, the Applicant
shall designate one or more Distressed Communities in which it proposes
to carry out those activities. If an Applicant proposes to carry out
CDFI Support Activities, the Applicant shall provide evidence that the
CDFI it is proposing to support is Integrally Involved in a Distressed
Community. If an Applicant proposes to carry out CDFI Support
Activities, Service Activities, or Distressed Community Financing
Activities, the Applicant may designate different Distressed
Communities for each category of activity.
(b) Minimum area eligibility requirements. A Distressed Community
must meet the following minimum area eligibility requirements:
(1) Geographic requirements. A Distressed Community must be a
geographic area:
(i) That is located within the boundaries of a Unit of General
Local Government;
(ii) The boundaries of which are contiguous; and
(A) The population of which must be at least 4,000 if any portion
of the area is located within a Metropolitan Area with a population of
50,000 or greater;
(B) The population must be at least 1,000 if no portion of the area
is located within such a Metropolitan Area; or
(C) The area is located entirely within an Indian Reservation.
(2) Distress requirements. A Distressed Community must be a
geographic area where:
(i) At least 30 percent of the Residents have incomes which are
less than the national poverty level, as published by the U.S. Bureau
of the Census in the most recent decennial census for which data is
available;
(ii) The unemployment rate is at least 1.5 times greater than the
national average, as determined by the U.S. Bureau of Labor Statistics'
most recent data, including estimates of unemployment developed using
the U.S. Bureau of Labor Statistics' Census Share calculation method;
and
(iii) Such additional requirements as may be specified by the Fund
in the applicable NOFA.
(c) Area designation. An Applicant shall designate an area as a
Distressed Community by:
(1) Selecting Geographic Units which individually meet the minimum
area eligibility requirements set forth in paragraph (b) of this
section; or
(2) Selecting two or more Geographic Units which, in the aggregate,
meet the minimum area eligibility requirements set forth in paragraph
(b) of this section, provided that no Geographic Unit selected by the
Applicant within the area has a poverty rate of less than 20 percent.
(d) Designation and notification process. The Fund will provide a
prospective Applicant with data and other information to help it
identify areas eligible to be designated as a Distressed Community.
Applicants shall submit designation materials as instructed in the
applicable NOFA.
Sec. 1806.201 Measuring and Reporting Qualified Activities.
(a) General. An Applicant may receive a Bank Enterprise Award for
engaging in any of the following categories of Qualified Activities
during an Assessment Period: CDFI Related Activities, Distressed
Community Financing Activities, or Service Activities. The Fund may
further qualify such Qualified Activities in the applicable NOFA,
including such additional geographic and transaction size limitations
as the Fund deems appropriate.
(b) Reporting Qualified Activities. An Applicant should report only
its Qualified Activities for the category in which it is seeking a Bank
Enterprise Award. For example, if an Applicant is seeking a Bank
Enterprise Award for Distressed Community Financing Activities only, it
should report only its activities for the Distressed Community
Financing Activities category.
(1) If an Applicant elects to apply for an award in a either the
CDFI Related Activities category or the Distressed Community Financing
Activities category, it must report on all types of activity within
that category except if an Applicant can provide a reasonable
explanation, acceptable to the Fund in its sole discretion, as to why
it cannot report on such category.
(2) Exception. An Applicant may elect not to report each type of
activity within the Service Activities category.
(c) Area served. Service Activities and Distressed Community
Financing Activities must serve a Distressed Community. An activity is
considered to serve a Distressed Community if it is:
(1) Undertaken in the Distressed Community; or
(2) Provided to Low- and Moderate-Income Residents or enterprises
Integrally Involved in the Distressed Community.
(d) Limitations.
(1) Low-Income Housing Tax Credits. Financial assistance provided
by an Applicant for which the Applicant receives benefits through Low-
Income Housing Tax Credits, authorized pursuant to Section 42 of the
Internal Revenue Code, as amended (26 U.S.C. 42), shall not constitute
an Equity Investment, Project Investment, or other Qualified Activity,
for the purposes of calculating or receiving a Bank Enterprise Award.
(2) New Markets Tax Credits. Financial assistance provided by an
Applicant for which the Applicant receives benefits as an investor in a
Community Development Entity that has received an allocation of New
Markets Tax Credits, authorized pursuant to Section 45D of the Internal
Revenue Code, as amended (26 U.S.C. 45D), shall not constitute an
Equity Investment, Project Investment, or other Qualified Activity, for
the purposes of calculating or receiving a Bank Enterprise Award.
(3) Loan Renewals. Financial assistance provided by an Applicant
shall not constitute a Qualified Activity, as defined in this part, for
the purposes of calculating or receiving an award if, such activity has
matured and is then renewed.
(e) Measuring the Value of Qualified Activities. Subject to such
additional or alternative valuations as the Fund may specify in the
applicable NOFA, the Fund will assess the value of:
[[Page 5724]]
(1) Equity Investments, Equity-Like Loans, loans, grants and
certificates of deposits, at the original amount of such Equity
Investments, Equity-Like Loans, loans, grants or certificates of
deposits. Where a certificate of deposit matures and is then rolled
over during the Baseline Period or the Assessment Period, as
applicable, the Fund will assess the value of the full amount of the
rolled over deposit. Where an existing loan is refinanced (a new loan
is originated to pay off an existing loan, whether or not there is a
change in the applicable loan terms), the Fund will only assess the
value of any increase in the principal amount of the refinanced loan;
(2) Project Investments at the original amount of the purchase of
stock, limited partnership interest, other ownership interest, or
grant;
(3) Deposit Liabilities at the dollar amount deposited as measured
by comparing (i) the net change in the amount of applicable funds on
deposit at the Applicant during the Baseline Period with (ii) the net
change in the amount of applicable funds on deposit at the Applicant
during the Assessment Period, as described below:
(i) The Applicant shall calculate the net change in deposits during
the Baseline Period, by comparing the amount of applicable funds on
deposit at the close of business the day before the beginning of the
Baseline Period and at the close of business on the last day of the
Baseline Period; and
(ii) The Applicant shall calculate the net change in such deposits
during the Assessment Period, by comparing the amount of applicable
funds on deposit at the close of business the day before the beginning
of the Assessment Period and at the close of business on the last day
of the Assessment Period;
(4) Financial Services and Targeted Financial Services based on the
predetermined amounts as may be set forth by the Fund in the applicable
NOFA; and
(5) Financial Services (other than those for which the Fund has
established a predetermined value), Community Services, and CDFI
Support Activities consisting of technical assistance based on the
administrative costs of providing such services.
(f) Closed Transactions. A transaction shall be considered to have
been carried out during the Baseline Period or the Assessment Period if
the documentation evidencing the transaction:
(1) Is executed on a date within the applicable Baseline Period or
Assessment Period, respectively; and
(2) Constitutes a legally binding agreement between the Applicant
and a borrower or investee which specifies the final terms and
conditions of the transaction, except that any contingencies included
in the final agreement must be typical of such transaction and
acceptable (both in the judgment of the Fund); and
(3) An initial cash disbursement of loan or investment proceeds has
occurred in a manner that is consistent with customary business
practices and is reasonable given the nature of the transaction (as
determined by the Fund) unless it is normal business practice to make
no initial disbursement at closing and the Applicant demonstrates that
the borrower has access to the proceeds, subject to reasonable
conditions as may be determined by the Fund.
(g) Reporting Period. An Applicant may only measure the amount of a
Qualified Activity that it reasonably expects to disburse to an
investee, borrower, or other recipient within one year of the end of
the applicable Assessment Period, or such other period as may be set
forth by the Fund in the applicable NOFA.
Sec. 1806.202 Estimated award amounts.
(a) General. An Applicant shall calculate an estimated award amount
that it shall submit to the Fund for consideration for a Bank
Enterprise Award.
(b) Award Percentages. The Fund will establish the award percentage
for each category of Qualified Activities in the applicable NOFA.
Applicable award percentages for activities undertaken by Applicants
that are CDFIs will be equal to three times the award percentages for
activities undertaken by Applicants that are not CDFIs.
(c) Calculating the estimated award amount. The estimated award
amount for each category of Qualified Activities will be equal to the
applicable award percentage of the increase in the weighted value of
such Qualified Activities between the Baseline Period and Assessment
Period. The weighted value of the applicable Qualified Activities shall
be calculated by:
(1) subtracting the Baseline Period value of such Qualified
Activity from the Assessment Period value of such Qualified Activity to
yield a remainder; and
(2) multiplying the remainder by the applicable Priority Factor (as
set forth in the applicable NOFA).
(d) Estimated Award Eligibility Review. The Fund will determine the
eligibility of each transaction for which an Applicant has applied for
a Bank Enterprise Award. Based upon this review, the Fund will
calculate the actual award amount for which such Applicant is eligible.
Sec. 1806.203 Selection Process, actual award amounts.
(a) Sufficient Funds Available to Cover Estimated Awards. All Bank
Enterprise Awards are subject to the availability of funds. If the
amount of funds available during a funding round is sufficient to cover
all estimated award amounts for which Applicants are eligible, in the
Fund's determination, and an Applicant meets all of the program
requirements specified in this part, then such Applicant shall receive
an actual award amount that is calculated by the Fund in the manner
specified in Section 1806.202.
(b) Insufficient Funds Available to Cover Estimated Awards. If the
amount of funds available during a funding round is insufficient to
cover all estimated award amounts for which Applicants are eligible, in
the Fund's determination, then the Fund will select Awardees and
determine actual award amounts based on the process described in this
section.
(c) Priority of Awards. The Fund will rank Applicants in each
category of Qualified Activity according to the priorities described in
this paragraph (c). All Applicants in the first priority category will
be selected for Bank Enterprise Awards before Applicants in the second
priority category. All Applicants in the first and second priority
categories will be selected for Bank Enterprise Awards before
Applicants in the third priority category. Selections within each
priority category will be based on the Applicants' relative rankings
within each such category, subject to the availability of funds.
(1) First priority. If the amount of funds available during a
funding round is insufficient for all estimated award amounts, first
priority will be given to Applicants that propose to engage in CDFI
Related Activities, ranked in the order set forth in the applicable
NOFA.
(2) Second priority. If the amount of funds available during a
funding round is sufficient for all CDFI Related Activities but
insufficient for all estimated award amounts, second priority will be
given to Applicants that propose to engage in Distressed Community
Financing Activities, ranked in the order set forth in the applicable
NOFA.
(3) Third Priority. If the amount of funds available during a
funding round is sufficient for all CDFI Related Activities and all
Distressed Community Financing Activities, but insufficient for all
remaining estimated award amounts,
[[Page 5725]]
third priority will be given to Applicants that propose to engage in
Service Activities, ranked in the order set forth in the applicable
NOFA.
(d) Calculating actual award amounts. The Fund will determine
actual award amounts based upon the availability of funds, increases in
Qualified Activities from the Baseline to the Assessment Period, and an
Applicant's priority ranking. If an Applicant receives an award for
more than one priority category described in this section, the Fund
will combine the award amounts into a single Bank Enterprise Award.
(e) Unobligated or deobligated funds. The Fund, in its sole
discretion, may use any deobligated funds or funds not obligated during
a funding round:
(1) To select Applicants not previously selected, using the
calculation and selection process contained in this part;
(2) To make additional monies available for a subsequent funding
round; or
(3) As otherwise authorized by the Act.
(f) Limitation. The Fund, in its sole discretion, may deny or limit
the amount of an award for any reason.
Sec. 1806.204 Applications for Bank Enterprise Awards.
(a) Notice of Funds Availability; Applications. Applicants shall
submit applications for Bank Enterprise Awards in accordance with this
section and the applicable NOFA. After receipt of an application, the
Fund may request clarifying or technical information related to
materials submitted as part of such application or to verify that
Qualified Activities were carried out in the manner prescribed in this
part.
(b) Application contents. An application for a Bank Enterprise
Award shall contain:
(1) A completed worksheet that reports the increases in Qualified
Activities actually carried out during the Baseline and Assessment
Period. If an Applicant has merged with another institution during the
Assessment Period, it shall submit a separate Baseline Period worksheet
for each subject institution and one Assessment Period worksheet that
reports the activities of the merged institutions. If such a merger is
unexpectedly delayed beyond the Assessment Period, the Fund reserves
the right to withhold distribution of an award until the merger has
been completed;
(2) A report of Qualified Activities that were closed during the
Assessment Period. Such report shall describe the original amount,
census tract served, and the dates of execution, initial disbursement,
and final disbursement of the instrument;
(3) With respect to:
(i) All CDFI Related Activities; and
(ii) Distressed Community Financing Activities where the original
amount of the value of the activity is $250,000 or greater,
documentation that meets the conditions described in Sec. 1806.201(f);
(4) Information necessary for the Fund to complete its
environmental review requirements pursuant to part 1815 of this
chapter;
(5) Certifications that the information provided to the Fund is
true and accurately reflects the Qualified Activities carried out
during an Assessment Period; and that the Applicant will comply with
all relevant provisions of this chapter and all applicable Federal,
State, and local laws, ordinances, regulations, policies, guidelines,
and requirements;
(6) In the case of an Applicant proposing to engage in Service
Activities, Distressed Community Financing Activities, a completed
Distressed Community Designation worksheet, and a map and narrative
description of the Distressed Community;
(7) Information that indicates that each CDFI to which an Applicant
has provided CDFI Support Activities is Integrally Involved in a
Distressed Community, a completed Distressed Community Designation
worksheet, and a map and narrative description of the Distressed
Community; and
(8) Any other information requested by the Fund, or specified by
the Fund in the applicable NOFA or the Bank Enterprise Award
application, in order to document or otherwise assess the validity of
information provided by the Applicant to the Fund.
Subpart C--Terms and Conditions of Assistance
Sec. 1806.300 Award Agreement; Sanctions.
(a) General. After the Fund selects an Awardee, the Fund and the
Awardee will enter into an Award Agreement. The Award Agreement shall
provide that an Awardee shall:
(1) Carry out its Qualified Activities in accordance with
applicable law, the approved application, and all other applicable
requirements;
(2) Comply with such other terms and conditions (including
recordkeeping and reporting requirements) that the Fund may establish;
and
(3) Not receive any monies until the Fund has determined that the
Awardee has fulfilled all applicable requirements.
(b) Sanctions. In the event of any fraud, misrepresentation, or
noncompliance with the terms of the Award Agreement by the Awardee, the
Fund may terminate, reduce, or recapture the award, bar the Awardee
and/or its Affiliates from applying for an award from the Fund for a
period to be decided by the Fund in its sole discretion, and pursue any
other available legal remedies.
(c) Compliance with Other CDFI Fund Awards. In the event that an
Awardee or its Subsidiary or Affiliate is not in compliance, as
determined by the Fund, with the terms and conditions of any other
award under the Bank Enterprise Award Program or any component of the
Community Development Financial Institutions Program, the Fund may, in
its sole discretion, reject an application for or withhold disbursement
(either initial or subsequent) on a Bank Enterprise Award.
(d) Notice. Prior to imposing any sanctions pursuant to this
section or an Award Agreement, the Fund will provide the Awardee with
written notice of the proposed sanction and an opportunity to comment.
Nothing in this section, however, will provide an Awardee with the
right to any formal or informal hearing or comparable proceeding not
otherwise required by law.
Sec. 1806.302 Compliance with government requirements.
In carrying out its responsibilities pursuant to an Award
Agreement, the Awardee shall comply with all applicable Federal, State,
and local laws, regulations and ordinances, OMB Circulars, and
Executive Orders.
Sec. 1806.303 Fraud, waste and abuse.
Any person who becomes aware of the existence or apparent existence
of fraud, waste, or abuse of assistance provided under this part should
report such incidences to the Office of Inspector General of the U.S.
Department of the Treasury.
Sec. 1806.304 Books of account, records and government access.
An Awardee shall submit such financial and activity reports,
records, statements, and documents at such times, in such forms, and
accompanied by such supporting data, as required by the Fund and the
U.S. Department of the Treasury to ensure compliance with the
requirements of this part. The United States Government, including the
U.S. Department of the Treasury, the Comptroller General, and its duly
authorized representatives, shall have full and free access to the
Awardee's offices and facilities, and all books, documents, records,
and financial
[[Page 5726]]
statements relevant to the award of the Federal funds and may copy such
documents as they deem appropriate.
Sec. 1806.305 Retention of records.
An Awardee shall comply with all record retention requirements as
set forth in OMB Circular A-110 (as applicable). This circular may be
obtained from Office of Administration, Publications Office, 725 17th
Street, NW., Room 2200, New Executive Office Building, Washington, DC
20503.
Dated: January 27, 2003.
Tony T. Brown,
Director, Community Development Financial Institutions Fund.
[FR Doc. 03-2336 Filed 2-3-03; 8:45 am]
BILLING CODE 4810-70-P