Monday, 

March 15, 2010 

Part IV 

Department of the 

Treasury 

Community Development Financial 

Institutions Fund 

12 CFR Part 1807 

Capital Magnet Fund; Proposed Rule; 

Notice of Funds Availability; Notice 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
12408 Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

Community Development Financial 

Institutions Fund 

12 CFR Part 1807 

RIN 1559–AA00 

Capital Magnet Fund 

AGENCY: Community Development 

Financial Institutions Fund, Department 

of the Treasury. 

ACTION: Notice of proposed rulemaking 

with request for public comment. 

SUMMARY: The Department of the 

Treasury is issuing this proposed 

rulemaking, and requesting comment on 

this proposed rule, for the 

implementation of the Capital Magnet 

Fund (CMF), administered by the 

Community Development Financial 

Institutions Fund (CDFI Fund), U.S. 

Department of the Treasury. 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 CMF was established through the 

Housing and Economic Recovery Act of 

2008, which added section 1339 to the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992. 

DATES: Comment due date: Comments 

on this proposed rulemaking must be 

received in the offices of the CDFI Fund 

on or before May 14, 2010. 

ADDRESSES: All comments concerning 

this proposed rule should be addressed 

to the Capital Magnet Fund Manager, 

Community Development Financial 

Institutions Fund, Department of the 

Treasury, 601 13th Street, NW., Suite 

200 South, Washington, DC 20005; by email to cdfihelp@cdfi.treas.gov; or by 

facsimile at (202) 622–7754. Comments 

will be made available for public review 

on the CDFI Fund’s Web site at http:// 

www.cdfifund.gov. 

Comments may also be submitted and 

viewed through the Federal eRulemaking Portal, http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Jeffrey C. Berg, Legal Counsel, 

Community Development Financial 

Institutions Fund, at (202) 622–8662 

(This is not a toll free number). 

Information regarding the CDFI Fund 

and the CMF may be downloaded from 

the CDFI Fund’s Web site at http:// 

www.cdfifund.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Capital Magnet Fund (CMF) was 

established through the Housing and 

Economic Recovery Act of 2008 (the 

Act), Public Law 110–289, section 1131, 

as a trust fund whose appropriation will 

be used to carry out a competitive grant 

program administered by the CDFI 

Fund. Through the CMF, the CDFI Fund 

is authorized to make financial 

assistance grants to certified Community 

Development Financial Institutions 

(CDFIs) and Nonprofit Organizations (if 

one of their principal purposes is the 

Development or management of 

Affordable Housing). CMF grants must 

be used to attract financing for and 

increase investment in: (i) The 

Development, Preservation, 

Rehabilitation, and Purchase of 

Affordable Housing for primarily 

Extremely Low-, Very Low-, and LowIncome Families; and (ii) Economic 

Development Activities or Community 

Service Facilities (such as day care 

centers, workforce development centers, 

and health care clinics) which In 

Conjunction With Affordable Housing 

Activities will implement a Concerted 

Strategy to stabilize or revitalize a LowIncome Area or Underserved Rural 

Area. This proposed rulemaking creates 

the requirements and parameters for 

CMF implementation and 

administration including, among others, 

application eligibility, application 

review, award selection, Assistance 

Agreements, eligible uses of award 

dollars and related funds, Awardee 

reporting, and compliance monitoring. 

On March 6, 2009, the CDFI Fund 

published in the Federal Register a 

Request for Public Comment, 74 FR 

9869, seeking responses to specific 

questions regarding CMF design, 

implementation, and administration. 

The CDFI Fund seeks public comment 

on this entire proposed rule and the 

specific questions below. All capitalized 

terms are defined in the definition 

section of the proposed rule, as set forth 

in 12 CFR 1807.104. 

1. This proposed rule currently 

defines Economic Development 

Activities as ‘the Development, 

Preservation, Rehabilitation, or 

Purchase of Community Service 

Facilities and/or other physical 

structures in which neighborhood-based 

businesses operate which, In 

Conjunction With Affordable Housing 

Activities, implements a Concerted 

Strategy to stabilize or revitalize a LowIncome Area or Underserved Rural 

Area’. Is this an appropriate definition? 

Should it be expanded to include 

working capital loans to businesses? 

Should refinancing of existing loans be 

a permissible activity? 

2. Should physical proximity be 

necessary to meet the requirement that 

Economic Development Activities or 

Community Service Facilities financed 

In Conjunction with Affordable Housing 

Activities implement a Concerted 

Strategy to stabilize or revitalize a LowIncome Area or Underserved Rural 

Area? If physical proximity is necessary, 

what is the best measure of being 

‘‘physically proximate’’ with respect to 

projects undertaken in urban areas, and 

with respect to projects undertaken in 

rural areas? 

3. The eligibility requirements for 

Applicants are set forth in 12 CFR 

1807.200. Is an eligibility requirement 

that 33 percent of the Applicant’s 

resources (measured by staff time and/ 

or budget) be dedicated to Affordable 

Housing appropriate (12 CFR 

1807.200(a)(2)(iii))? If not, what is the 

appropriate percentage of activities, and 

how should this be measured? 

4. The proposed rule in 12 CFR 

1807.302 sets forth a number of 

restrictions on use of CMF award funds. 

Are there suggested restrictions that will 

prevent the CMF from financing 

predatory lending practices that should 

be included in this section? Is the use 

restriction that no more than 30% of an 

Awardee’s CMF award can be used for 

Economic Development Activities and 

Community Service Facilities 

appropriate (12 CFR 1807.302(d))? If 

not, what is the appropriate percentage? 

5. Is the Affordable Housing 

qualification that requires a minimum of 

20 percent of units in multi-family 

rental housing projects financed with a 

CMF award be occupied by LowIncome, Very Low-Income, or Extremely 

Low-Income Families appropriate (12 

CFR 1807.401)? If not, what is the 

appropriate percentage? 

6. As set forth in 12 CFR 1807.400 et 

seq., Affordable Housing is subject to a 

10-year affordability requirement that 

begins at Project Completion? Is this 10- 

year affordability requirement 

appropriate? How should this be 

measured with respect to funds that are 

deployed, returned to the Awardee, and 

reinvested during the life of the 

Assistant Agreement (e.g., in the case of 

CMF awards that are used to establish 

a revolving loan fund)? 

7. The proposed rule sets forth record 

data collection and record retention 

requirements in 12 CFR 1807.902. What 

documentation should Awardees be 

required to retain to demonstrate 

compliance with (i) the affordability 

qualification requirements in 12 CFR 

1807.400 et seq. and (ii) the leveraging, 

commitment and Project Completion 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 12409 

requirements in 12 CFR 1807.500 et 

seq.? 

Simultaneously published with this 

proposed rule is the Notice of Funds 

Availability (NOFA) inviting 

applications for the FY 2010 funding 

round of the CMF. 

II. Responses to the Request for Public 

Comment (March 6, 2009) 

The CDFI Fund received comments 

from 22 organizations in response to the 

Request for Public Comment (RPC) that 

was published in the Federal Register 

on March 6, 2009 (74 FR 9869). The 

following discussion summarizes the 

comments and the CDFI Fund’s 

responses, many of which have been 

incorporated in the proposed rule. 

Discussion is generally in the order in 

which the questions were posed in the 

RPC. 

A. Eligible Use of Funds 

(1) What definition should the CDFI 

Fund use to assess what constitutes 

‘‘affordable housing?’’ What affordability 

thresholds or restrictions (if any) should 

the CDFI Fund require, and for how 

long a period should these be in place? 

The majority of the commentators 

supported the imposition of 

affordability thresholds and restrictions 

compatible with the Low Income 

Housing Tax Credit (LIHTC) Program, 

authorized under the Tax Reform Act of 

1986, I.R.C. section 42, and the HOME 

Investment Partnership Program (HOME 

Program), authorized under title II of the 

Cranston-Gonzalez National Affordable 

Housing Act, as amended, 42 U.S.C. 

12701 et seq., administered by the U.S. 

Department of Housing and Urban 

Development (HUD). Some 

commentators suggested that the CDFI 

Fund allow a percentage of CMF funds 

to be used under a modified version of 

these affordability thresholds in order to 

support workforce housing for 

moderate-income families. 

Commentators suggested that the 

affordability requirements should be 

imposed for a duration ranging from 10 

to 50 years. 

CDFI Fund response: The income 

requirements for the CMF are set forth 

in the Definitions section of the 

proposed rule at 12 CFR 1807.104(v), 

(hh), and (ddd); the CMF affordability 

requirements (12 CFR 1807.400 et seq.) 

are based generally on the affordability 

qualifications for rental and 

homeownership properties under the 

HOME Program regulations set forth at 

24 CFR 92.252–92.255. The affordability 

requirements for CMF-funded housing 

units apply without regard to the term 

of any loan or mortgage or the transfer 

of ownership; they must be imposed by 

deed restrictions, covenants running 

with the land, or other recordable 

mechanisms approved, in writing and in 

advance, by the CDFI Fund (12 CFR 

1807.401(d) and 1807.402(a)(5)). CMFfunded housing units must meet the 

affordability requirements for a period 

of not less than 10 years, beginning after 

completion of project construction and 

at initial occupancy (12 CFR 

1807.401(d) and 1807.402). 

(2) Section 1131 of the Act, 

referencing section 1339(c) of the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992, 

requires that CMF grants must be used 

to attract private capital for and increase 

investment in ‘‘the development, 

preservation, rehabilitation, or purchase 

of affordable housing for primarily 

extremely low-, very low-, and lowincome families.’’ How should 

‘‘primarily’’ be defined? What are the 

appropriate minimum levels of targeting 

that each project should be required to 

achieve? 

Several commentators proposed that 

‘‘primarily’’ should mean: (i) At least 50 

percent of units in a housing project that 

is funded, in whole or in part, with CMF 

funding, or (ii) 50 percent of costs 

directly traced to CMF funding in a 

given project. Several commentators 

suggested deeper income targeting. 

CDFI Fund Response: The proposed 

rule adopts the comment that 

‘‘primarily’’ means, with respect to 

Affordable Housing Activities financed 

with CMF funding, that greater than 50 

percent of the Eligible Project Costs 

must be attributable to the support of 

housing units that meet the affordability 

standards (12 CFR 1807.400). 

(3) How should ‘‘preservation’’ be 

defined, as such term is used in section 

1131 of the Act, referencing section 

1339(c)(1) of the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992? Should it 

include the re-financing of single- or 

multi-family mortgages as eligible 

activities? 

Many commentators suggested broad 

and inclusive definitions of these terms. 

Commentators suggested definitions of 

preservation that included restoration of 

deteriorated properties, preventing 

troubled properties from default, 

refinancing of single-family and multifamily mortgages, and preservation of 

expiring-use properties with restrictions 

on tenant income and affordability 

under other federal programs that are 

coming to an end. Some commentators 

proposed using existing LIHTC or HUD 

definitions of preservation. 

CDFI Fund Response: The CDFI Fund 

has adopted the definition of 

Preservation that is set forth in the 

proposed rule at 12 CFR 1807.104(rr). 

(4) How should ‘‘rehabilitation’’ be 

defined, as such term is used in section 

1131 of the Act, referencing section 

1339(c)(1) of the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992? 

Commentators suggested that 

‘‘rehabilitation’’ be broadly defined to 

include promoting habitability, energy 

efficiency, and building code 

compliance of housing units. 

Commentators also suggested a 

minimum rehabilitation cost of 

approximately $6,000 per unit. 

CDFI Fund Response: The CDFI Fund 

has adopted the definition of 

Rehabilitation that is set forth in the 

proposed rule at 12 CFR 1807.104(uu). 

(5) CMF grants may be used to finance 

economic development activities or 

community service facilities, such as 

daycare centers, workforce development 

centers, and health care clinics which, 

in conjunction with affordable housing 

activities, implement a concerted 

strategy to stabilize or revitalize a lowincome area or underserved rural area. 

(a) What restrictions (if any) should 

the CDFI Fund place on the percentage 

of award dollars that an awardee may 

apply towards economic development 

activities and/or community service 

facilities? 

Many commentators proposed that 

the CDFI Fund place no restrictions on 

the amount of CMF funding provided 

for economic development activities 

and/or community service facilities in 

conjunction with affordable housing 

activities. Others suggested that CMF 

grantees be allowed to apply 25 to 30 

percent of their award to this use. 

CDFI Fund Response: To ensure that 

the limited CMF funding is most 

efficiently targeted to Affordable 

Housing Activities, an Awardee may use 

no more than 30 percent of CMF 

funding for Economic Development 

Activities and/or Community Service 

Facilities, as set forth in the proposed 

rule, 12 CFR 1807.302(d). 

(b) Should the CDFI Fund support 

economic development activities/ 

community service facilities in 

conjunction with affordable housing 

activities financed by sources other than 

CMF grants or solely in conjunction 

with CMF grants? 

Many commentators proposed that 

economic development activities and/or 

community service facilities should be 

allowed to be undertaken in conjunction 

with affordable housing activities that 

are financed with or without CMF 

funding. 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
12410 Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 

CDFI Fund Response: The proposed 

rule adopts this suggestion at 12 CFR 

1807.300. 

(c) How should the CDFI Fund define 

‘‘in conjunction with’’? 

Several commentators suggested that 

‘‘in conjunction with’’ should be defined 

as including activities that are on the 

same site as or adjacent to the site of 

affordable housing. Others suggested a 

broader definition, to allow for 

proximate activities that are not 

physically adjacent to the affordable 

housing activities. 

CDFI Fund Response: The proposed 

rule defines In Conjunction With to 

require that Economic Development 

Activities and/or Community Service 

Facilities must be physically proximate 

to Affordable Housing, and reasonably 

available to residents of Affordable 

Housing (12 CFR 1807.104(aa)). 

(d) How should the CDFI Fund define 

‘‘concerted strategy’’? 

Most commentators suggested that 

applicants identify some type of formal 

planning document to illustrate the 

connection between the affordable 

housing and proposed economic 

development activities or community 

service facilities, such as a local 

government’s comprehensive housing 

development plan or a HUD-approved 

HOPE VI Program redevelopment plan, 

pursuant to section 803 of the National 

Affordable Housing Act, 42 U.S.C. 8012. 

CDFI Fund Response: The proposed 

rule definition of Concerted Strategy (12 

CFR 1807.104(p)) adopts this 

suggestion, requiring that, if the 

Economic Development Activity or 

Community Service Facility is not 

located on the same premises or 

immediately adjacent to the Affordable 

Housing, the Economic Development 

Activities/Community Service Facilities 

and the Affordable Housing must be 

included together in a planning 

document describing the community 

revitalization strategy for the area. Such 

documents may include, but are not 

limited to, a comprehensive, 

consolidated, or redevelopment plan, or 

some other local or regional planning 

document adopted or approved by the 

jurisdiction. 

B. Eligible Grantees 

Section 1131 of the Act, referencing 

section 1339(e) of the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992 states that a 

CMF grant may only be made to: (i) A 

CDFI that has been certified by the CDFI 

Fund; or (ii) a nonprofit organization 

having as one of its principal purposes 

the development or management of 

affordable housing. How should the 

CDFI Fund define ‘‘principal purpose,’’ 

with respect to determining whether 

one of an entity’s principal purposes is 

the development or management of 

affordable housing? 

For purposes of defining ‘‘nonprofit 

organization’’ in section 1339(e) of the 

Act, several commentators suggested 

automatic eligibility for certain types of 

organizations, such as community 

housing development organizations 

(CHDOs) as defined by HUD under the 

HOME Program, 24 CFR 92.2, and rural 

housing developers under the U.S. 

Department of Agriculture (USDA) 

section 523 Program, 7 CFR part 3551. 

For purposes of defining ‘‘principal 

purpose,’’ a number of commentators 

proposed that 20 percent of the 

applicant’s financial resources should 

be dedicated to affordable housing. 

Several commentators suggested a 

mission test, based on the applicant’s 

bylaws or recognition by the Internal 

Revenue Service (IRS) that the applicant 

meets a tax-exempt purpose under I.R.C. 

section 501(c)(3); others recommended a 

track record test. Some suggested that a 

track record test could prevent desired 

activities in traditionally underserved 

areas. 

CDFI Fund Response: For purposes of 

CMF applicant eligibility, the proposed 

rule at 12 CFR 1807.200(a) states that 

affordable housing development and/or 

management requirements will be set 

forth in the applicable NOFA that is 

published for each CMF funding round, 

and will comprise track record and 

resource dedication criteria. 

C. Applications 

(1) Are there other competitive award 

programs, federal or otherwise, upon 

which the CDFI Fund should model the 

CMF’s application scoring and review 

protocols? 

A few commentators suggested model 

programs such as the CDFI Program and 

HUD’s Community Development Block 

Grant (CDBG) Program, authorized 

under the Housing and Community 

Development Act of 1974, 42 U.S.C. 

5301 et seq. 

CDFI Fund Response: The CMF 

application evaluation and selection 

protocols described in the proposed rule 

(12 CFR 1807.800 et seq.), are generally 

modeled on existing CDFI Fund award 

programs. 

(2) Should the CDFI Fund divide 

applicants among different pools so that 

they compete only among organizations 

that have the same capacity level? 

Most commentators recommended 

that CMF applications should not be 

divided into different pools based upon 

applicant capacity levels. 

CDFI Fund Response: The proposed 

rule adopts this recommendation (12 

CFR 1807.800 et seq.), thereby 

maintaining a single applicant pool in 

order to ensure that the highest 

qualified organizations receive funding 

and to ensure the efficiency of the 

application process. 

(3) Should the CDFI Fund accept 

applications on an annual basis or more 

often (e.g., twice a year)? 

Commentators recommended an 

annual CMF application round. 

CDFI Fund Response: Given the 

anticipated cycle of annual 

appropriation of CMF funding, the CDFI 

Fund will implement an annual funding 

round, subject to funding availability. 

Application requirements will be set 

forth in the NOFA that will be 

published for each funding round. 

(4) Section 1131 of the Act, 

referencing section 1339(j)(2)(D)(ii) of 

the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 requires ‘‘a prioritization of 

funding based upon: (I) The ability to 

use such funds to generate additional 

investments; (II) affordable housing 

need (taking into account the distinct 

needs of different regions of the 

country); and (III) ability to obligate 

amounts and undertake activities so 

funded in a timely manner.’’ How 

should the CDFI Fund quantify each of 

the three priority factors? For each of 

the three factors, what should 

applicants be required to present and/or 

address as part of their application 

materials? Should this prioritization be 

incorporated into the standard scoring 

of the application (e.g., by weighting 

certain questions more heavily) or 

should there be separate ‘‘priority 

points’’ specific to each of the three 

criteria? 

Many commentators provided specific 

suggestions on priority points, including 

deeper affordability targeting, targeting 

disaster areas, projects with guaranteed 

financing, workforce housing, 

rehabilitation or repair projects, projects 

in strong job areas or near good schools, 

manufactured housing, projects 

involving partnerships with state and 

local agencies, and rural projects, among 

others. 

CDFI Fund Response: For the three 

priority factors specified in the Act, the 

CDFI Fund will not create separate 

priority points to be assigned for each. 

Rather, specific questions will be asked 

in the application to illustrate the 

applicant’s strengths in each of the three 

areas, which will then be given weight 

in the application review process. 

D. Geographic Diversity 

Section 1131 of the Act, referencing 

section 1339(h)(2)(A) of the Federal 

Housing Enterprises Financial Safety 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 12411 

and Soundness Act of 1992 states: ‘‘The 

Secretary of the Treasury shall seek to 

fund activities in geographically diverse 

areas of economic distress, including 

metropolitan and undeserved rural areas 

in every State.’’ Section 1339(h)(2)(B) 

provides a list of characteristics that 

objective criteria of economic distress 

may include: 

(1) What objective criteria of 

economic distress should the CDFI 

Fund adopt based upon the language in 

section 1339(h)(2)(B)? 

Many commentators proposed both 

place- and person-based indicators to 

allow for funding to projects that seek 

to de-concentrate poverty. Some 

commentators suggested utilizing 

existing CDFI Fund indicators. 

CDFI Fund Response: In the CMF 

funding application, the CDFI Fund will 

set forth distress indicators that are the 

same or similar to those used in other 

CDFI Fund programs: Low-Income 

communities (less than 80 percent of 

area median income); high-poverty 

communities (poverty rate of 20 percent 

or greater); high unemployment rate (1.5 

times the national average). In addition, 

the CMF application design will be 

sensitive to varying housing need in 

different communities, such as rural 

areas, high cost areas, and areas of 

revitalization or housing displacement 

by allowing for the use of readily 

available housing-specific measures 

such as housing vacancy rates, 

proportion of sub-standard or 

demolished housing, concentration of 

foreclosures, or changes in property 

values. As suggested by commentators, 

in measuring distressed communities, 

the CDFI Fund will allow consideration 

of the level of need in the population 

served. 

(2) How should the CDFI Fund define 

‘‘rural areas’’? For example, is a rural 

area any census tract that is not located 

in a metropolitan statistical area (MSA)? 

For purposes of defining rural, several 

commentators suggested using the 

USDA Rural Housing definition set forth 

in Section 520 of the Housing Act of 

1949, 42 U.S.C. 1441. 

CDFI Fund Response: The proposed 

rule adopts a definition of NonMetropolitan Area, which includes rural 

areas, at 12 CFR 1807.104(mm) and a 

definition of Underserved Rural Area at 

12 CFR 1807.104(ccc). 

(3) Should the CDFI Fund ensure that, 

in any given award round, there is a 

CMF-funded project located in every 

state? Should the CDFI Fund ‘‘skip over’’ 

otherwise higher rated applicants to 

ensure that this geographic diversity 

goal is met? Section 1131 of the Act, 

referencing section 1339(j)(2)(D)(i) of the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 

requires that ‘‘funds be fairly distributed 

to urban, suburban, and rural areas.’’ 

How can the CDFI Fund best achieve 

this outcome? 

Generally, commentators did not 

support skipping highly rated 

applicants to achieve geographic 

diversity. Some commentators suggested 

giving preferences to areas or even states 

with particularly high levels of 

economic distress. 

CDFI Fund Response: As suggested by 

commentators, due in part to funding 

limitations and the unforeseeability of 

the applicant pool, the CDFI Fund will 

not likely be able to ensure that there is 

a CMF-funded project in every state. 

However, the CMF application will 

require applicants with national service 

areas to indicate the states in which 

they are most likely to provide 

Affordable Housing financing with CMF 

funding. The CDFI Fund reserves the 

right to adjust award decisions to ensure 

that the goal of geographic diversity is 

met. 

Regarding urban, suburban, and rural 

distribution of awards, the CDFI Fund 

will incorporate an approach similar to 

the New Markets Tax Credit (NMTC) 

Program, requiring CMF applicants to 

indicate minimum and maximum 

commitments to invest in rural areas. 

Based on this information, the CDFI 

Fund will attempt to ensure that at least 

20 percent of CMF funding is invested 

in rural communities. 

E. Leverage of Funds 

(1) Section 1131 of the Act, 

referencing section 1339(h)(3) of the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 

states: ‘‘Each grant from the Capital 

Magnet Fund awarded under this 

section shall be reasonably expected to 

result in eligible housing, or economic 

and community development projects 

that support or sustain an affordable 

housing project funded by a grant under 

this section whose aggregate costs total 

at least 10 times the grant amount.’’ 

What documentation should be required 

to demonstrate a leveraging ratio of 10:1 

of ‘‘total aggregate costs’’? 

Most commentators suggested that the 

leveraging requirement is a reporting 

requirement, not an application or 

award requirement. As such, they 

proposed that the application should 

not require any documentation, but 

should instead utilize projections. One 

commentator proposed requiring 

conditional letters of commitment to 

help ensure that leveraging will be met. 

CDFI Fund Response: In the CMF 

application, the CDFI Fund will require 

projections of leveraging, but will not 

require documentation. Once CMF 

funds have been committed to projects, 

information will be self-reported by the 

awardee through a standard system 

developed and managed by the CDFI 

Fund. Awardees will be required to 

retain appropriate documentation, such 

as audited financial statements, wire 

transfer documents, pro-formas, etc., 

and will be subject to periodic CDFI 

Fund audits to support their reports 

under the proposed rule, 12 CFR 

1807.902. 

(2) How should this 10:1 standard be 

measured (e.g., on a project-by-project 

basis for each project funded, or on a 

collective basis for all projects 

financed)? 

Many commentators proposed that 

leverage should be measured on a 

portfolio or collective basis; one 

commentator proposed that the 

requirement should be measured for 

each project. 

CDFI Fund Response: The CDFI Fund 

notes that the statutory requirement is 

that CMF funds shall be reasonably 

expected to result in eligible housing or 

economic and community development 

projects that support or sustain an 

affordable housing project funded by a 

CMF grant whose aggregate costs total at 

least 10 times the CMF grant amount. 

The proposed rule adopts a 10 

multiplier standard or some other 

standard set forth in an Awardee’s 

Assistance Agreement that must be 

measured as Leveraged Costs on a 

collective basis for all projects financed 

(12 CFR part 1807.500). 

(3) Is there a timing consideration as 

to when the CDFI Fund should release 

CMF award dollars (e.g., not until all 

other sources of financing have been 

secured)? 

Most commentators proposed that, 

since the CMF funding will constitute a 

small portion of overall project costs, 

the funding should be released upon 

closing of the assistance agreement. 

CDFI Fund Response: The CDFI Fund 

has adopted this suggestion at 12 CFR 

1807.901, with CMF funding released as 

a lump sum payment, or in another 

manner determined appropriate by the 

CDFI Fund, after the Assistance 

Agreement is executed. 

F. Commitment for Use Deadline 

Section 1131 of the Act, referencing 

section 1339(h)(4) of the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992 states: 

‘‘Amounts made available for grants 

under this section shall be committed 

for use within 2 years of the date of such 

allocation.’’ How should the term 

‘‘committed’’ be defined, and how it can 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
12412 Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 

be verified, for the purposes of this 

requirement? 

Several commentators suggested using 

HUD’s HOME Program regulations, 24 

CFR 92.2, to define the term 

‘‘committed.’’ Others suggested that a 

legally binding agreement should 

constitute commitment for use. 

CDFI Fund Response: As described in 

the proposed rule at 12 CFR part 1807, 

subpart C (Use of Funds/Eligible 

Activities), the CDFI Fund will require 

all Awardees to allocate CMF funding 

for a specific eligible purpose, and to be 

able to demonstrate that these funds are 

so designated. Similar to HUD’s HOME 

Program regulations at 24 CFR 92.2, 

CMF funds for Affordable Housing 

Activities, Economic Development 

Activities or Community Service 

Facilities must be Committed for use 

within two years of the effective date of 

an Awardee’s Assistance Agreement. 

The proposed rule adopts a definition of 

Committed as set forth in 12 CFR 

1807.104(m). 

G. Prohibited Uses 

Section 1131 of the Act, referencing 

section 1339(h)(5)–(6)) of the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992 lists 

prohibited uses with respect to grants 

awarded under this program. Are there 

any additional prohibitions or 

limitations that should be applied? 

Commentators did not propose 

additional specific prohibitions of CMF 

funding. Some commentators suggested 

that the CDFI Fund place a limitation of 

10 to 15 percent on the amount of a 

CMF award that could be used for the 

awardee’s operation costs. 

CDFI Fund Response: The proposed 

rule states that the applicable NOFA 

will set forth the limitation on the 

amount of a CMF award that can be 

used for Operations (12 CFR 

1807.302(b)) as well as other limitations, 

including a 30 percent limitation on use 

of an Awardee’s CMF funding for 

Economic Development Activities and 

Community Service Facilities (12 CFR 

1807.302(d)); and a requirement that 

100 percent of Eligible Project Costs 

must be attributable to housing units 

that meet the affordability qualifications 

set forth in 12 CFR 1807.400 for families 

whose annual income does not exceed 

120 percent of the median income for 

the area, as determined by HUD. 

H. Accountability of Recipients and 

Grantees 

(1) What requirements should be 

imposed to implement Section 1131 of 

the Act, referencing section 1339(h)(8)) 

of the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 which provides for accountability 

standards with respect to tracking the 

use of award dollars, as well as 

remedies in the event that an awardee 

misuses funds? 

Commentators proposed various 

forms of documentation to illustrate 

completion of projects and satisfaction 

of affordability requirements and 

restrictions, including certificates of 

occupancy, closing documentation, and 

deeds and covenants. 

CDFI Fund Response: The CDFI Fund 

has adopted a definition of Project 

Completion at 12 CFR 1807.104(ss) that 

applies when (i) All necessary title 

transfer requirements and construction 

work have been performed; (ii) the 

project complies with specified property 

standards; and (iii) the final drawdown 

has been disbursed for the project. 

Awardees will be required to report 

their compliance with CMF affordability 

requirements and to maintain adequate 

records to demonstrate compliance to 

the CDFI Fund during any audits that 

are undertaken by the CDFI Fund (12 

CFR 1807.902). 

(2) What specific industry standards 

for impact measures (units produced, 

percentage of units affordable to lowincome persons; time to complete; etc.) 

should the CDFI Fund adopt for 

evaluating and monitoring projects 

funded under the CMF? 

Commentators proposed various 

standards for impact measurements, 

including using the CDFI Fund’s 

existing Community Investment Impact 

System (CIIS) and measures applied 

under USDA’s Guaranteed Rural Rental 

Housing Program, 42 U.S.C. 1490p–2, as 

well as individual measurements such 

as affordable units produced, energy 

efficiency, cost per unit, length of time 

for development, project location, and 

others. 

CDFI Fund Response: CMF awardees 

will be required to report on the impacts 

of their use of CMF funds and any 

Leverage Costs as set forth in 12 CFR 

1807.902(e). The specific impact 

measures will be incorporated into the 

Assistance Agreement as described at 12 

CFR 1807.900, and may include metrics 

such as the number of Affordable 

Housing units produced (including how 

many are affordable to Low-, Very Lowand Extremely Low-Income families), 

the ratio of leverage produced by the 

CMF award, and the deployment rate of 

CMF awards, among other measures. 

III. Rulemaking Analysis 

Executive Order (E.O.) 12866 

It has been determined that this 

proposed rule is not a significant 

regulatory action under Executive Order 

12866. Accordingly, a regulatory impact 

assessment is not required. 

Regulatory Flexibility Act 

This proposed rule has been reviewed 

with regard to the requirements of the 

Regulatory Flexibility Act, 5 U.S.C. 601– 

612. The undersigned has determined 

and certified by signature of this 

document that this proposed rule will 

not have a significant economic impact 

on a substantial number of small 

entities. The CDFI Fund anticipates that 

a large number of applicants under this 

proposed rule will be certified CDFIs 

that have received funding under the 

CDFI Fund’s programs or other similar 

federal government programs. Thus, 

awardees will be familiar with the types 

of reporting requirements that the CMF 

will require and most will have the 

necessary processes in place to 

participate in the CMF, regardless of 

their size. Many, if not all, applicants 

will be reporting on information and 

activities for which they report for other 

federal or state programs. Thus, this 

proposed rule will not impose a 

significant increase in reporting, 

recordkeeping, or other compliance 

burdens on a substantial number of 

small entities that would have a 

negative impact on either small or large 

entities in an economic way. 

Paperwork Reduction Act 

The collection of information 

contained in this proposed rule has 

been previously reviewed and approved 

by the Office of Management and 

Budget (OMB) in accordance with the 

Paperwork Reduction Act of 1995 and 

assigned OMB Control Number 1559– 

0036. 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. 

National Environmental Policy Act 

This proposed rule has been reviewed 

in accordance with 12 CFR part 1815. 

The CDFI Fund’s Environmental 

Regulations under the National 

Environmental Protection Act of 1969 

(NEPA) require that the CDFI Fund 

adequately consider the cumulative 

impact proposed activities have upon 

the human environment. It is the 

determination of the CDFI Fund that the 

proposed rule does not constitute a 

major Federal action significantly 

affecting the quality of the human 

environment and, in accordance with 

the NEPA and the CDFI Fund 

Environmental Quality Regulations, 12 

CFR part 1815, neither an 

Environmental Assessment nor an 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 12413 

Environmental Impact Statement is 

required. 

Administrative Procedure Act 

Because this proposed rule relates to 

loans and grants, notice and public 

procedure and a delayed effective date 

are not required pursuant to the 

Administrative Procedure Act, 5 U.S.C. 

553(a)(2). 

Catalogue of Federal Domestic 

Assistance Number 

Capital Magnet Fund—21.011. 

List of Subjects in 12 CFR Part 1807 

Community development, Grant 

programs—housing and community 

development, Reporting and record 

keeping requirements. 

For the reasons set forth in the 

preamble, 12 CFR chapter XVIII is 

proposed to be amended by adding part 

1807 to read as follows: 

PART 1807—CAPITAL MAGNET FUND 

Subpart A—General Provisions 

Sec. 

1807.100 Purpose. 

1807.101 Summary. 

1807.102 Relationship to other CDFI Fund 

programs. 

1807.103 Awardee not instrumentality. 

1807.104 Definitions. 

1807.105 Waiver authority. 

1807.106 OMB control number. 

Subpart B—Eligibility 

1807.200 Applicant eligibility. 

Subpart C—Use of Funds/Eligible Activities 

1807.300 Purposes of grants. 

1807.301 Eligible activities. 

1807.302 Restrictions on use of assistance. 

Subpart D—Qualification as Affordable 

Housing 

1807.400 Affordable Housing—General. 

1807.401 Affordable Housing—Rental 

Housing. 

1807.402 Affordable Housing— 

Homeownership. 

Subpart E—Leveraging and Commitment 

Requirement. 

1807.500 Leveraging costs—general. 

1807.501 Commitment for use. 

1807.502 Assistance limits. 

1807.503 Projection completion. 

Subpart F—Tracking Requirements 

1807.600 Tracking funds—general. 

1807.601 Nature of funds. 

Subpart G—Applications for Assistance 

1807.700 Notice of Funds Availability. 

1807.701 Application contents. 

Subpart H—Evaluation and Selection of 

Applications 

1807.800 Evaluation and selection— 

general. 

1807.801 Evaluation of Applications. 

Subpart I—Terms and Conditions of 

Assistance 

1807.900 Assistance Agreement. 

1807.901 Disbursement of funds. 

1807.902 Data collection and reporting. 

1807.903 Compliance with government 

requirements. 

1807.904 Lobbying restrictions. 

1807.905 Criminal provisions. 

1807.906 CDFI Fund deemed not to control. 

1807.907 Limitation on liability. 

1807.908 Fraud, waste and abuse. 

Authority: Housing and Economic 

Recovery Act of 2008, Pub. L. 110–289, 

section 1131 

Subpart A—General Provisions 

§ 1807.100 Purpose. 

The purpose of the Capital Magnet 

Fund (CMF) is to attract private capital 

for and increase investment in 

Affordable Housing Activities and 

related Economic Development 

Activities and Community Service 

Facilities. 

§ 1807.101 Summary. 

(a) Through the CMF, the CDFI Fund 

will competitively award grants to 

CDFIs and qualified Nonprofit 

Organizations to leverage dollars for: 

(1) The Development, Preservation, 

Rehabilitation or Purchase of Affordable 

Housing primarily for Low-Income 

Families; and 

(2) Financing Economic Development 

Activities or Community Service 

Facilities. 

(b) The CDFI Fund will select 

Awardees to receive financial assistance 

grants through a merit-based, 

competitive application process. 

Financial assistance grants that are 

awarded through the CMF may only be 

used for eligible uses set forth in 

Subpart C. Each Awardee will enter into 

an Assistance Agreement which will 

require it to leverage the CMF grant 

amount and abide by other terms and 

conditions pertinent to any assistance 

received under this part. 

§ 1807.102 Relationship to other CDFI 

Fund programs. 

A Certified CDFI will automatically be 

deemed to meet the eligible entity 

requirements, provided that it has been 

in business as an operating entity for a 

period of at least three years prior to the 

application deadline. 

§ 1807.103 Awardee not instrumentality. 

No Awardee shall be deemed to be an 

agency, department, or instrumentality 

of the United States. 

§ 1807.104 Definitions. 

For the purpose of this part: 

(a) Act means the Housing and 

Economic Recovery Act of 2008, as 

amended, Pub. L. No. 110–289, section 

1131; 

(b) Affiliate means, any entity that 

Controls, is Controlled by, or is under 

common Control with, an entity; 

(c) Affordable Housing means rental 

or for-sale single-family or multi-family 

housing that meets the requirements set 

forth in Subpart D of this part; 

(d) Affordable Housing Activities 

means the Development, Preservation, 

Rehabilitation, or Purchase of 

Affordable Housing; 

(e) Affordable Housing Fund means a 

loan fund, managed by the Awardee, 

whose capital is used to finance 

Affordable Housing Activities; 

(f) Appropriate Federal Banking 

Agency has the same meaning as in 

section 3 of the Federal Deposit 

Insurance Act, 12 U.S.C. 1813(q), and 

includes, with respect to Insured Credit 

Unions, the National Credit Union 

Administration; 

(g) Applicant means any entity 

submitting an application for assistance 

under this part; 

(h) Appropriate State Agency means 

an agency or instrumentality of a State 

that regulates and/or insures the 

member accounts of a State-Insured 

Credit Union; 

(i) Assistance Agreement means a 

formal, written agreement between the 

CDFI Fund and an Awardee which 

specifies the terms and conditions of 

assistance under this part; 

(j) Awardee means an Applicant 

selected by the CDFI Fund to receive 

assistance pursuant to this part; 

(k) Capital Magnet Fund (or CMF) 

means the program authorized by 

section 1131 of the Act, Public Law No. 

110–289, and implemented under this 

part; 

(l) Certified Community Development 

Financial Institution (or Certified CDFI) 

means an entity that has been 

determined by the CDFI Fund to meet 

the eligibility requirements set forth in 

12 CFR Part 1805.201; 

(m) Committed means that the 

Awardee is able to demonstrate, in 

written form and substance that is 

acceptable to the CDFI Fund, a 

Commitment for Use pursuant to 

§ 1807.501; 

(n) Community Development 

Financial Institutions Fund (or CDFI 

Fund) means the Community 

Development Financial Institutions 

Fund, an office of the U.S. Department 

of Treasury, established under the 

Community Development Banking and 

Financial Institutions Act of 1994, as 

amended, 12 U.S.C. 4701 et seq.; 

(o) Community Service Facility means 

the physical structure in which 

community-based programs (including, 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
12414 Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 

but not limited to, health care, 

childcare, educational, cultural, and/or 

social services) operate which, In 

Conjunction With Affordable Housing 

Activities, implements a Concerted 

Strategy to stabilize or revitalize a LowIncome Area or Underserved Rural 

Area; 

(p) Concerted Strategy means a formal 

planning document that evidences the 

connection between Affordable Housing 

Activities and Economic Development 

Activities or Community Service 

Facilities. Such documents include, but 

are not limited to, a comprehensive, 

consolidated, or redevelopment plan, or 

some other local or regional planning 

document adopted or approved by the 

jurisdiction; 

(q) Control means: 

(1) Ownership, control, or power to 

vote 25 percent or more of the 

outstanding shares of any class of 

Voting Securities of any company, 

directly or indirectly or acting through 

one or more other persons; 

(2) Control in any manner over the 

election of a majority of the directors, 

trustees, or general partners (or 

individuals exercising similar functions) 

of any company; or 

(3) The power to exercise, directly or 

indirectly, a controlling influence over 

the management, credit or investment 

decisions, or policies of any company; 

(r) Depository Institution Holding 

Company means a bank holding 

company or a savings and loan holding 

company as defined in section 3 of the 

Federal Deposit Insurance Act, 12 

U.S.C. 1813(w)(1); 

(s) Development means land 

acquisition, demolition of existing 

facilities, and construction of new 

facilities, which may include site 

improvement, utilities development and 

rehabilitation of utilities, necessary 

infrastructure, utility services, 

conversion, and other related activities; 

(t) Economic Development Activity 

means the Development, Preservation, 

Rehabilitation, or Purchase of 

Community Service Facilities and/or 

other physical structures in which 

neighborhood-based businesses operate 

which, In Conjunction With Affordable 

Housing Activities, implements a 

Concerted Strategy to stabilize or 

revitalize a Low-Income Area or 

Underserved Rural Area; 

(u) Eligible Project Costs means 

Leverage Costs plus those costs funded 

directly by a CMF award, exclusive of 

Operations; 

(v) Extremely Low-Income means 

(1) In the case of owner-occupied 

housing units, income not in excess of 

30 percent of the area median income 

and 

(2) In the case of rental housing units, 

income not in excess of 30 percent of 

the area median income, with 

adjustments for smaller and larger 

families, as determined by HUD; 

(w) HOME Program means the HOME 

Investment Partnership Program set 

forth in the HOME Investment 

Partnerships Act under title II of the 

Cranston-Gonzalez National Affordable 

Housing Act, as amended, 42 U.S.C. 

12701 et seq.; 

(x) Homeownership means ownership 

in fee simple title or a 99-year leasehold 

interest in a one- to four-unit dwelling 

or in a condominium unit, or equivalent 

form of ownership (which shall include 

cooperative housing and mutual 

housing project). For purposes of 

housing located on trust or restricted 

Indian lands, homeownership includes 

leases of 50 years. The ownership 

interest may be subject only to the 

following: 

(1) Restrictions on resale permitted 

under the Assistance Agreement; 

(2) Mortgages, deeds of trust, or other 

liens or instruments securing debt on 

the property; or 

(3) Any other restrictions or 

encumbrances that do not impair the 

good and marketable nature of title to 

the ownership interest. 

(y) Housing means single- and multifamily residential units, including, but 

not limited to, manufactured housing 

and manufactured housing lots, 

permanent housing for disabled and/or 

homeless persons, transitional housing, 

single-room occupancy housing, and 

group homes. Housing also includes 

elder cottage housing opportunity 

(ECHO), 24 CFR 92.258; 

(z) HUD means the Department of 

Housing and Urban Development 

established under the Department of 

Housing and Urban Development Act of 

1965, 42 U.S.C. 3532–3537; 

(aa) In Conjunction With means 

physically proximate to Affordable 

Housing and reasonably available to 

residents of Affordable Housing. For a 

Metropolitan Area, In Conjunction With 

means located within the same census 

tract. For a Non-Metropolitan Area, In 

Conjunction With means located within 

the same county, township, or village; 

(bb) Insured CDFI means a Certified 

CDFI that is an Insured Depository 

Institution or an Insured Credit Union; 

(cc) Insured Credit Union means any 

credit union, the member accounts of 

which are insured by the National 

Credit Union Share Insurance Fund by 

the National Credit Union 

Administration pursuant to authority 

granted in 12 U.S.C. 1783 et seq.; 

(dd) Insured Depository Institution 

means any bank or thrift, the deposits of 

which are insured by the Federal 

Deposit Insurance Corporation, 12 

U.S.C. 1813(c)(2); 

(ee) Leveraged Costs means those 

costs as described in 12 CFR 1807.500; 

(ff) Loan Guarantee means an 

agreement to indemnify the holder of a 

loan all or a portion of the unpaid 

principal balance in case of default by 

the borrower; 

(gg) Loan Loss Reserves means funds 

that the Applicant or Awardee will set 

aside in the form of cash reserves, or 

through accounting-based accrual 

reserves, to cover losses on loans, 

accounts, and notes receivable, or for 

related purposes that the CDFI Fund 

deems appropriate; 

(hh) Low-Income means 

(1) In the case of owner-occupied 

housing units, income not in excess of 

80 percent of area median income and 

(2) In the case of rental housing units, 

income not in excess of 80 percent of 

area median income, with adjustments 

for smaller and larger families, as 

determined by HUD; 

(ii) Low-Income Area (LIA) means a 

census tract or block numbering area in 

which the median income does not 

exceed 80 percent of the median income 

for the area in which such census tract 

or block numbering area is located. With 

respect to a census tract or block 

numbering area located within a 

Metropolitan Area, the median family 

income shall be at or below 80 percent 

of the Metropolitan Area median family 

income or the national Metropolitan 

Area median family income, whichever 

is greater. In the case of a census tract 

or block numbering area located outside 

of a Metropolitan Area, the median 

family income shall be at or below 80 

percent of the statewide NonMetropolitan Area median family 

income or the national NonMetropolitan Area median family 

income, whichever is greater; 

(jj) Low-Income Families means those 

households that reside within the 

boundaries of the United Sates (which 

shall encompass any State of the United 

States, the District of Columbia or any 

territory of the United States, Puerto 

Rico, Guam, American Samoa, the 

Virgin Islands, and the Northern 

Mariana Islands) meeting the criteria as 

set forth in § 1807.104(hh); 

(kk) Low Income Housing Tax Credit 

Program or LIHTC Program means the 

program as set forth under Title I of the 

U.S. Housing Act of 1937, as amended, 

42 U.S.C. 1437 et seq.; 

(ll) Metropolitan Area means an area 

designated as such by the Office of 

Management and Budget pursuant to 44 

U.S.C. 3504(e) and 31 U.S.C. 1104(d) 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 12415 

and Executive Order 10253 (3 CFR, 

1949–1953 Comp., p. 758), as amended; 

(mm) Non-Metropolitan Area means a 

county or adjacent counties not 

contained within either a Consolidated 

Metropolitan Statistical Area (CMSA) or 

a Primary Metropolitan Statistical Area 

(PMSA), as such areas are defined in 

OMB Bulletin No. 99–04, with respect 

to the most recent decennial census. 

Non-Metropolitan Counties can be 

identified in the CDFI Fund’s mapping 

system (CIMS), and are also listed on 

the CDFI Fund’s Web site; 

(nn) Nonprofit Organization means 

any corporation, trust, association, 

cooperative, or other organization that is 

(1) Designated as a nonprofit or notfor-profit entity under the laws of the 

organization’s State of formation and 

(2) Exempt from Federal income 

taxation pursuant to the Internal 

Revenue Code of 1986; 

(oo) Non-Regulated CDFI means any 

entity meeting the eligibility 

requirements described in 12 CFR 

1805.200 which is not a Depository 

Institution Holding Company, Insured 

Depository Institution, or Insured Credit 

Union; 

(pp) Operations means all allowable 

expenses as defined by Office of 

Management and Budget (OMB) 

Circular A–122, ‘‘Cost Principles For 

Non-Profit Organizations,’’ and OMB 

Circular A–87, ‘‘Cost Principles for 

State, Local, and Indian Tribal 

Governments,’’ incurred by the Awardee 

in the administration, operation, and 

implementation of a CMF award; 

(qq) Participating Jurisdiction means a 

jurisdiction designated by HUD, as a 

participating jurisdiction under the 

HOME Program in accordance with the 

requirements of 24 CFR 92.105; 

(rr) Preservation means: 

(1) Activities to refinance, with or 

without Rehabilitation, single-family or 

multi-family rental property mortgages 

that, at the time of refinancing, are 

subject to affordability and use 

restrictions under State or federal 

affordable housing programs, including 

but not limited to, the HOME Program, 

the LIHTC Program, the Section 8 

Tenant-Based Assistance and the 

Section 8 Rental Voucher programs (24 

CFR part 982), or the Section 515 Rural 

Rental Housing program (7 CFR Part 

3560), hereinafter referred to as ‘‘similar 

State or federal affordable housing 

programs,’’ where such refinancing has 

the effect of extending the term of any 

affordability and use restrictions on the 

properties; 

(2) Activities to refinance and acquire 

single-family or multi-family properties 

that, at the time of refinancing or 

acquisition, were subject to affordability 

and use restrictions under similar State 

or Federal affordable housing programs, 

by the former tenants of such properties, 

where such refinancing has the effect of 

extending the term of any affordability 

and use restrictions on the properties; or 

(3) Activities to refinance the 

mortgages of single-family, owneroccupied housing that at the time of 

refinancing are subject to affordability 

and use restrictions under similar State 

or Federal affordable housing programs, 

where such refinancing has the effect of 

extending the term of any affordability 

and use restrictions on the properties; 

(ss) Project Completion means that all 

of the requirements set forth at 12 CFR 

1807.503 for a project supported by a 

CMF award have been met; 

(tt) Purchase means to acquire 

ownership in fee simple title or a 99- 

year leasehold interest in a one-to-four 

unit dwelling or in a condominium unit, 

through an exchange of money; 

(uu) Rehabilitation means any repairs 

and/or capital improvements that 

contribute to the long-term preservation, 

current building code compliance, 

habitability, sustainability, energy 

efficiency of affordable housing; 

(vv) Revolving Loan Fund means a 

pool of funds managed by the Applicant 

or Awardee wherein repayments on 

Affordable Housing Activities loans, 

Economic Development Activities loans 

and/or Community Services Facilities 

loans are used to finance additional 

loans; 

(ww) Risk-Sharing Loan means loans 

for Affordable Housing Activities and/or 

Economic Development Activities in 

which the risk of borrower default is 

shared by the Applicant or Awardee 

with other lenders (e.g., participation 

loans); 

(xx) Service Area means the 

geographic area in which the Applicant 

proposes to use CMF funding, and the 

geographic area approved by the CDFI 

Fund in which the Awardee shall use 

CMF funding as set forth in its 

Assistance Agreement; 

(yy) Single-family housing means a 

one- to four-family residence, 

condominium unit, cooperative unit, 

combination of manufactured housing 

and lot, or manufactured housing lot; 

(zz) State means the States of the 

United States, the District of Columbia, 

the Commonwealth of Puerto Rico, the 

Commonwealth of the Northern Mariana 

Island, Guam, the Virgin Islands, 

American Samoa, the Trust Territory of 

the Pacific Islands, and any other 

territory of the United States; 

(aaa) State-Insured Credit Union 

means any credit union that is regulated 

by, and/or the member accounts of 

which are insured by, a State agency or 

instrumentality; 

(bbb) Subsidiary means any company 

which is owned or Controlled directly 

or indirectly by another company; 

(ccc) Underserved Rural Area means 

a Non-Metropolitan Area that: 

(1) Qualifies as a Low-Income Area; 

(2) Is experiencing housing stress 

evidenced by 30 percent or more of 

resident households with one or more of 

these housing conditions in the last 

decennial census: 

(i) Lacked complete plumbing, 

(ii) Lacked complete kitchen, 

(iii) Paid 30 percent or more of 

income for owner costs or rent, or (D) 

had more than 1 person per room; or 

(3) Is remote-rural county consisting 

of a Non-Metropolitan Area that is also 

not adjacent to a Metropolitan Area; 

(ddd) Very Low-Income means 

(1) In the case of owner-occupied 

housing units, income not greater than 

50 percent of the area median income; 

and 

(2) In the case of rental housing units, 

income not greater than 50 percent of 

the area median income, with 

adjustments for smaller and larger 

families, as determined by HUD. 

§ 1807.105 Waiver authority. 

The CDFI Fund may waive any 

requirement of this part that is not 

required by law upon a determination of 

good cause. Each such waiver shall be 

in writing and supported by a statement 

of the facts and the grounds forming the 

basis of the waiver. For a waiver in an 

individual case, the CDFI 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 CDFI Fund 

will publish notification of granted 

waivers in the Federal Register. 

§ 1807.106 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 1559–0036. 

Subpart B—Eligibility 

§ 1807.200 Applicant eligibility. 

(a) General requirements. An 

Applicant will be deemed eligible for a 

CMF award if it is: 

(1) A Certified or certifiable CDFI. An 

entity may meet the requirements 

described in this paragraph (a)(1) if it is: 

(i) A Certified CDFI, as set forth in 12 

CFR Part 1805.201, that has been in 

existence as a legally formed entity as 

set forth in the Notice of Funds 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
12416 Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 

Availability (NOFA) for the applicable 

funding round; or 

(ii) A certifiable CDFI that has been in 

existence as a legally formed entity as 

set forth in the NOFA for the applicable 

round and, although not yet certified as 

a CDFI, has submitted a complete CDFI 

certification application as of the date 

set forth in the applicable NOFA; or 

(2) A Nonprofit Organization having 

as one of its principal purposes the 

development or management of 

affordable housing. An entity may meet 

the requirements described in this 

paragraph (a)(2) if it: 

(i) Has been in existence as a legally 

formed entity as set forth in the 

applicable NOFA; 

(ii) Demonstrates, through articles of 

incorporation, by-laws, or other boardapproved documents, that the 

development or management of 

affordable housing are among its 

principal purposes; and 

(iii) Can demonstrate that at least onethird of the Applicant’s resources (either 

as a portion of total staffing or as a 

portion of total assets) are dedicated to 

the development or management of 

affordable housing. 

(b) Eligibility verification. An 

Applicant shall demonstrate that it 

meets the eligibility requirements 

described in § 1807.200(a)(2) above by 

providing information described in the 

application, NOFA, and/or 

supplemental information, as may be 

requested by the CDFI Fund. For an 

Applicant seeking eligibility under 

subsection 1 of this Subpart, the CDFI 

Fund will verify that the Applicant is a 

Certified CDFI during the application 

eligibility review. For an Applicant 

seeking eligibility under subsection 2 of 

this Subpart, the CDFI Fund, in its sole 

discretion, shall determine whether the 

Applicant has satisfied said 

requirements. 

Subpart C—Use of Funds/Eligible 

Activities 

§ 1807.300 Purposes of grants. 

The CDFI Fund may provide financial 

assistance grants to organizations 

described under Subpart B of this part 

for the purpose of attracting private 

capital for and increase investment in: 

(a) The Development, Preservation, 

Rehabilitation, or Purchase of 

Affordable Housing for primarily 

Extremely Low-Income, Very LowIncome; and Low-Income families; and 

(b) Economic Development Activities 

or Community Services Facilities. With 

respect to an Economic Development 

Activity or Community Service Facility 

funded with a CMF grant, the 

Affordable Housing that it is In 

Conjunction With may be financed by 

sources other than the CMF grant. 

§ 1807.301 Eligible activities. 

Grants awarded under this part shall 

be used by an Awardee to support 

Affordable Housing Activities, 

Economic Development Activities or 

Community Service Facilities, including 

the following eligible uses: 

(a) To provide Loan Loss Reserves; 

(b) To capitalize a Revolving Loan 

Fund; 

(c) To capitalize an Affordable 

Housing Fund; 

(d) To capitalize a fund to support 

Economic Development Activities or 

Community Service Facilities; 

(e) For Risk-Sharing Loans; 

(f) For Loan Guarantees; and 

(g) For the Awardee’s Operations. 

§ 1807.302 Restrictions on use of 

assistance. 

(a) An Awardee’s activities under Part 

1807.301 shall not include the use of 

CMF for the following: 

(1) Political activities; 

(2) Advocacy; 

(3) Lobbying, whether directly or 

through other parties; 

(4) Counseling services (including 

homebuyer or financial counseling); 

(5) Travel expenses; 

(6) Preparing or providing advice on 

tax returns; 

(7) emergency shelters (including 

shelters for disaster victims); 

(8) Nursing homes; 

(9) Convalescent homes; 

(10) Residential treatment facilities; 

(11) Correctional facilities; or 

(12) Student dormitories. 

(b) An Awardee may use up to a 

percentage of CMF award for Operations 

as specified in the applicable NOFA. 

(c) An Awardee shall not use CMF 

award to support projects that: 

(1) Consist of the operation of any 

private or commercial golf course, 

country club, massage parlor, hot tub 

facility, suntan facility, racetrack or 

other facility used for gambling, or any 

store the principal business of which is 

the sale of alcoholic beverages for 

consumption off premises; 

(2) Consist of farming (within the 

meaning of I.R.C. section 2032A(e)(5)(A) 

or (B)) if, as of the close of the taxable 

year of the taxpayer conducting such 

trade or business, the sum of the 

aggregate unadjusted bases (or, if 

greater, the fair market value) of the 

assets owned by the taxpayer that are 

used in such a trade or business, and the 

aggregate value of the assets leased by 

the taxpayer that are used in such a 

trade or business, exceeds $500,000. 

(d) In any given funding round, no 

more than 30 percent of an Awardee’s 

CMF award may be used for purposes 

described in § 1807.300(b). 

Subpart D—Qualification as Affordable 

Housing 

§ 1807.400 Affordable Housing—general. 

Each Awardee that uses CMF funding 

to support Affordable Housing 

Activities shall ensure that 100 percent 

of Eligible Project Costs are attributable 

to housing units that meet the 

affordability qualifications set forth 

below for families whose annual income 

does not exceed 120 percent of the 

median income for the area, as 

determined by HUD. In addition, greater 

than 50 percent of the Eligible Project 

Costs must be attributable to housing 

units that meet the affordability 

qualifications set forth below for either 

Low-Income, Very Low-Income, or 

Extremely Low-Income Families. 

§ 1807.401 Affordable Housing—Rental 

Housing. 

To qualify as Affordable Housing, a 

multi-family rental housing project 

financed with a CMF award must have 

at least 20 percent of the housing units 

occupied by Low-Income, Very LowIncome, or Extremely Low-Income 

Families and must comply with the rent 

limits set forth herein. 

(a) Rent limitation. The maximum 

rent that is deemed to be affordable 

under the CMF is a rent that does not 

exceed 30 percent of the family’s annual 

income. 

(b) Nondiscrimination against rental 

assistance subsidy holders. The 

Awardee shall require that the owner of 

a rental unit cannot refuse to lease the 

unit to a Section 8 Program certificate or 

voucher holder (24 CFR Part 982, 

Section 8 Tenant-Based Assistance: 

Unified Rule for Tenant-Based 

Assistance under the Section 8 Rental 

Certificate Program and the Section 8 

Rental Voucher Program) or to the 

holder of a comparable document 

evidencing participation in a HOME 

tenant-based rental assistance program 

because of the status of the prospective 

tenant as a holder of such certificate, 

voucher, or comparable HOME tenantbased assistance document. 

(c) Initial rent schedule and utility 

allowances. The Awardee shall ensure 

that the housing adheres to the 

applicable Participating Jurisdiction’s 

maximum monthly allowances for 

utilities and services (excluding 

telephone). If the Participating 

Jurisdiction’s allowances have not been 

determined or are otherwise 

unavailable, the Awardee shall rely 

upon the utility and services allowances 

established by the applicable city, 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 12417 

county or State public housing 

authority. 

(d) Periods of Affordability. Housing 

under § 1807.401 must meet the 

affordability requirements for not less 

than 10 years, beginning after Project 

Completion and at initial occupancy. 

The affordability requirements apply 

without regard to the term of any loan 

or mortgage or the transfer of ownership 

and must be imposed by deed 

restrictions, covenants running with the 

land, or other recordable mechanisms, 

except that the affordability restrictions 

may terminate upon foreclosure or 

transfer in lieu of foreclosure. Other 

recordable mechanisms must be 

approved in writing and in advance by 

the CDFI Fund. The affordability 

restrictions shall be revived according to 

the original terms if, during the original 

affordability period, the owner of record 

before the foreclosure, or deed in lieu of 

foreclosure, or any entity that includes 

the former owner or those with whom 

the former owner has or had family or 

business ties, obtains an ownership 

interest in the project or property. 

(e) Subsequent rents during the 

affordability period. Any increase in 

rent for a CMF-funded unit requires that 

tenants of those units be given at least 

30 days prior written notice before the 

implementation of the rent increase. 

(f) Tenant income determination. (1) 

Each year during the period of 

affordability the tenant’s income shall 

be re-examined; tenant income 

examination is the responsibility of the 

Awardee. Annual income shall include 

income from all household members. 

(2) One of the following two 

definitions of ‘‘annual income’’ must be 

used to determine whether a family is 

income eligible: 

(i) Annual income as reported under 

the Census long-form for the most recent 

available decennial Census. This 

definition includes: 

(A) Wages, salaries, tips, 

commissions, etc.; 

(B) Self-employment income from 

owned non-farm business, including 

proprietorships and partnerships; 

(C) Farm self-employment income; 

(D) interest, dividends, net rental 

income, or income from estates or trusts; 

(E) Social Security or railroad 

retirement; 

(F) Supplemental Security Income, 

Aid to Families with Dependent 

Children, or other public assistance or 

public welfare programs; 

(G) Retirement, survivor, or disability 

pensions; 

(H) Any other sources of income 

received regularly, including Veterans’ 

(VA) payments, unemployment 

compensation, and alimony; and 

(I) Any other sources of income the 

CDFI Fund may deem appropriate; or 

(ii) Adjusted gross income as defined 

for purposes of reporting under Internal 

Revenue Service (IRS) Form 1040 series 

for individual Federal annual income 

tax purposes. 

(3) The CDFI Fund reserves the right 

to deem certain government programs, 

under which a Low-Income family is a 

recipient, as income eligible for 

purposes of meeting the tenant income 

requirements under this subsection. 

(g) Over-income tenants. (1) CMFfunded units continue to qualify as 

Affordable Housing despite a temporary 

noncompliance caused by increases in 

the incomes of existing tenants if 

actions satisfactory to the CDFI Fund are 

being taken to ensure that all vacancies 

are filled in accordance with this 

section until the noncompliance is 

corrected. 

(2) Tenants whose incomes no longer 

qualify must pay rent equal to the lesser 

of the amount payable by the tenant 

under State or local law or 30 percent 

of the family’s annual income, except 

that tenants of units that have been 

allocated low-income housing tax 

credits by a housing credit agency 

pursuant to section 42 of the Internal 

Revenue Code of 1986, I.R.C. section 42, 

must pay rent governed by section 42. 

Tenants who no longer qualify as LowIncome are not required to pay as rent 

an amount that exceeds the market rent 

for comparable, unassisted units in the 

neighborhood. 

§ 1807.402 Affordable Housing— 

Homeownership. 

(a) Acquisition with or without 

rehabilitation. Housing that is for 

Homeownership purchase must meet 

the affordability requirements of this 

subsection. 

(1) The housing must be Single-family 

housing; 

(2) The housing must meet the 

following standards: 

(i) Housing costs should fall within a 

front-end ratio of 28 percent of 

household income and a back-end ratio 

of 36 percent of household income. The 

front-end ratio is a percentage 

comparing a Low-Income borrower’s 

total monthly cost to buy a property 

(mortgage principal and interest, 

insurance, and real estate taxes) to the 

borrower’s monthly income before 

deductions. The back-end ratio is a 

percentage comparing a Low-Income 

borrower’s total monthly debt payments 

(mortgage, real estate taxes and 

insurance, car loans, and other 

consumer loans) to the borrower’s gross 

monthly income; or 

(ii) Housing price does not exceed 95 

percent of the median purchase price for 

the area as used in the HOME Program 

and as determined by the applicable 

Participating Jurisdiction. 

(3) The housing must be purchased by 

a qualifying family as set forth in 

§ 1807.400. The housing must be the 

principal residence of the family 

throughout the period described in 

paragraph (a)(4) of this section. 

(4) Periods of Affordability. Housing 

under this subsection must meet the 

affordability requirements for at least 10 

years at the time of purchase by the 

homeowner. 

(5) Resale. To ensure affordability, 

resale requirements must be imposed by 

the owner of the housing. Resale 

requirements must ensure that, if the 

housing does not continue to be the 

principal residence of the original 

qualifying family for the duration of the 

period of affordability, the housing is 

made available for subsequent purchase 

only to a buyer whose family meets the 

requirements in § 1807.400 and who 

will use the property as their principal 

residence. The resale requirement must 

also ensure that the price at resale 

provides the original CMF-funded 

owner a fair return on investment 

(including the homeowner’s investment 

and any capital improvement) and 

ensure that the housing will remain 

affordable to a reasonable range of 

qualifying families. Deed restrictions, 

covenants running with the land, or 

other similar mechanisms must be used 

as the mechanism to impose the resale 

requirements. The affordability 

restrictions may terminate upon 

occurrence of any of the following 

termination events: foreclosure, transfer 

in lieu of foreclosure or assignment of 

an FHA-insured mortgage to HUD. The 

Awardee may use purchase options, 

rights of first refusal or other preemptive 

rights to purchase the housing before 

foreclosure to preserve affordability. 

The affordability restrictions shall be 

revived according to the original terms 

if, during the original affordability 

period, the owner of record before the 

termination event, obtains an ownership 

interest in the housing. 

(b) Rehabilitation not involving 

acquisition. Housing that is currently 

owned by a qualifying family, as set 

forth in § 1807.400, qualifies as 

Affordable Housing if it meets the 

requirements of this subsection. 

(1) The housing is as follows: 

(i) The estimated value of the housing, 

after Rehabilitation, does not exceed 95 

percent of the median purchase price for 

the area, as used in the HOME Program 

and as determined by the applicable 

Participating Jurisdiction; or 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
12418 Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 

(ii) Housing costs should fall within a 

front-end ratio of 28 percent of 

household income and a back-end ratio 

of 36 percent of household income. The 

front-end ratio is a percentage 

comparing a Low-Income borrower’s 

total monthly cost to buy a property 

(mortgage principal and interest, 

insurance, and real estate taxes) to the 

borrower’s monthly income before 

deductions. The back-end ratio is a 

percentage comparing the Low-Income 

borrower’s total monthly debt payments 

(mortgage, real estate taxes and 

insurance, car loans, and other 

consumer loans) to the borrower’s gross 

monthly income. 

(2) The housing is the principal 

residence of a qualifying family as set 

forth in § 1807.400, at the time that CMF 

funding is Committed to the housing. 

(3) Housing under this subsection 

must meet the affordability 

requirements for at least 10 years after 

Rehabilitation is completed. 

(c) Ownership interest. The ownership 

in the housing assisted under this 

section must meet the definition of 

‘‘Homeownership’’ as defined in 

§ 1807.104(x). 

(d) New construction without 

acquisition. Newly constructed housing 

that is built on property currently 

owned by a family which will occupy 

the housing upon completion, qualifies 

as Affordable Housing if it meets the 

requirements under paragraph (a) of this 

section. 

(e) Converting rental units to 

Homeownership units for existing 

tenants. CMF-funded rental units may 

be converted to Homeownership units 

by selling, donating, or otherwise 

conveying the units to the existing 

tenants to enable the tenants to become 

homeowners in accordance with the 

requirements of § 1807.402. The 

Homeownership units are subject to a 

minimum period of affordability equal 

to the remaining affordability period. 

Subpart E—Leveraging and 

Commitment Requirement 

1807.500 Leveraged costs—general. 

(a) Each CMF grant is expected to 

result in Eligible Project Costs that total 

at least 10 times the grant amount. Such 

costs may be for activities that include 

Affordable Housing Activities, 

Economic Development Activities, or 

Community Service Facilities. Thus, an 

Awardee shall demonstrate that it 

leveraged its CMF award at least 10 

times the CMF grant amount or some 

other standard established by the CDFI 

Fund in the Awardee’s Assistance 

Agreement. Leveraged Costs are costs 

that exceed the dollar amount of the 

Awardee’s CMF contribution to each 

CMF-funded activity. However, the 

applicable NOFA may set forth a 

required percentage of Leveraged Costs 

that must be attributable to nongovernmental sources. An Awardee may 

report to the CDFI Fund all Leveraged 

Costs, with the following limitations: 

(1) No costs attributable to Operations 

may be reported as Leveraged Costs. 

(2) No costs attributable to prohibited 

uses as identified in § 1807.302(a) and 

(c) may be reported as Leveraged Costs. 

(3) All costs attributable to Affordable 

Housing Activities reported as 

Leveraged Costs must be for housing 

units that qualify as Affordable Housing 

under § 1807.401 or § 1807.402 for 

families whose annual income does not 

exceed 120 percent of the median 

income for the area, as determined by 

HUD. 

(b) Awardees shall self-report 

leveraging information through forms or 

electronic systems developed by the 

CDFI Fund, subject to audit 

requirements set forth herein. 

Consequently, Awardees shall maintain 

appropriate documentation, such as 

audited financial statements, wire 

transfers documents, pro-formas, and 

other relevant records, to support its 

reports. 

§ 1807.501 Commitment for use. 

(a) CMF awards shall be Committed 

for use within two years of the effective 

date of the Awardee’s Assistance 

Agreement. An Awardee shall 

demonstrate that its CMF award is 

Committed by having executed a 

written, legally binding agreement 

under which CMF assistance will be 

provided to the developer or project 

sponsor for an identifiable project under 

which: 

(1) Construction can reasonably be 

expected to start within 12 months of 

the agreement date; or 

(2) Property title will be transferred 

within six months of the agreement 

date. 

(b) An Awardee shall make an initial 

disbursement of its CMF award for 

Affordable Housing Activities, 

Economic Development Activities or 

Community Service Facilities within 

three years of the effective date of its 

Assistance Agreement. 

§ 1807.502 Assistance limits. 

An eligible Applicant and its 

Subsidiaries and Affiliates may not be 

awarded more than 15 percent of the 

aggregate funds available for CMF grants 

during any funding year. 

§ 1807.503 Project completion. 

Once a CMF-funded project has been 

completed, it must be placed into 

service within five years of the effective 

date of an Awardee’s Assistance 

Agreement. Project Completion occurs, 

as determined by the CDFI Fund, when: 

(a) All necessary title transfer 

requirements and construction work 

have been performed; 

(b) The project complies with the 

requirements of this part, including the 

following property standards (these 

property standards must be complied 

with at the time of Project Completion 

and maintained for a period of at least 

10 years thereafter): 

(1) Housing that is constructed or 

rehabilitated with CMF funding must 

meet all applicable local codes, 

rehabilitation standards, ordinances, 

and zoning ordinances at the time of 

project completion. In the absence of a 

local code for new construction or 

rehabilitation, such housing must meet, 

as applicable: One of three model codes 

(Uniform Building Code (ICBO), 

National Building Code (BOCA), 

Standard (Southern) Building Code 

(SBCCI)); or the Council of American 

Building Officials (CABO) one or two 

family code; or the Minimum Property 

Standards (MPS) in 24 CFR 200.925 or 

200.926. Newly constructed housing 

must meet the current edition of the 

Model Energy Code published by the 

Council of American Building Officials. 

(2) The housing must meet the 

accessibility requirements at 24 CFR 

part 8, which implement Section 504 of 

the Rehabilitation Act of 1973 (29 U.S.C. 

794) and covered multifamily dwellings, 

as defined at 24 CFR 100.201, must also 

meet the design and construction 

requirements at 24 CFR 100.205, which 

implement the Fair Housing Act (42 

U.S.C. 3601–3619). 

(3) Construction of all manufactured 

housing must meet the Manufactured 

Home Construction and Safety 

Standards established in 24 CFR Part 

3280. These standards pre-empt State 

and local codes covering the same 

aspects of performance for such 

housing. The installation of all 

manufactured housing units must 

comply with applicable State and local 

laws or codes. In the absence of such 

laws or codes, the installation must 

comply with the manufacturer’s written 

instructions for installation of 

manufactured housing units. 

Manufactured housing that is 

rehabilitated using CMF funds must 

meet the requirements set out in 

paragraph (b)(1) of this section; and 

(c) The final drawdown has been 

disbursed for the project. 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 12419 

Subpart F—Tracking Requirements 

§ 1807.600 Tracking funds—general. 

An Awardee receiving a CMF award 

shall develop and maintain a system to 

ensure that its CMF award is used in 

accordance with this part, the Act, its 

Assistance Agreement, and any 

requirements or conditions under which 

such amounts were awarded. Thus, an 

Awardee may create a separate account 

or accounting code for CMF activities. 

§ 1807.601 Nature of funds. 

A CMF award shall be considered 

Federal financial assistance in regards to 

applying Federal civil rights laws. 

Subpart G—Applications for 

Assistance 

§ 1807.700 Notice of Funds Availability. 

Each Applicant shall submit an 

application for funding under this part 

in accordance with the regulations in 

this Subpart. The applicable NOFA will 

advise potential Applicants on how to 

obtain and complete an application and 

will establish deadlines and other 

requirements. The NOFA will specify 

any limitations, special rules, 

procedures, and restrictions for a 

particular funding round. After receipt 

of an application, the CDFI Fund may 

request clarifying or technical 

information on the materials submitted 

as part of such application. 

Subpart H—Evaluation and Selection 

of Applications 

§ 1807.800 Evaluation and selection— 

general. 

Applicants will be evaluated and 

selected, at the sole discretion of the 

CDFI Fund, to receive assistance based 

on a review process that may include an 

interview(s) and/or site visit(s) intended 

to: 

(a) Ensure that Applicants are 

evaluated on a merit basis and in a fair 

and consistent manner; 

(b) Ensure that each Awardee can 

successfully meet its leveraging goals 

and achieve Affordable Housing 

Activity, Community Service Facility 

and/or Economic Development Activity 

impacts; 

(c) Ensure that Awardees represent a 

geographically diverse group of 

Applicants serving Metropolitan Areas 

and Underserved Rural Areas across the 

United States that meet criteria of 

economic distress, which may include: 

(1) The percentage of Low-Income 

Families or the extent of poverty; 

(2) The rate of unemployment or 

underemployment; 

(3) The extent of blight and 

disinvestment; 

(4) Economic Development Activities 

or Community Service Facilities that 

target Extremely Low-Income, Very 

Low-Income, and Low-Income families 

within the Awardee’s Service Area; or 

(5) Any other criteria the CDFI Fund 

shall set forth in the applicable NOFA; 

and 

(d) Take into consideration other 

factors as described in the applicable 

NOFA. 

§ 1807.801 Evaluation of applications. 

(a) Eligibility and completeness. An 

Applicant will not be eligible to receive 

a CMF award if it fails to meet the 

eligibility requirements described in 

§ 1807.200 and in the applicable NOFA, 

or if the Applicant has not submitted 

complete application materials. For the 

purposes of this paragraph (a), the CDFI 

Fund reserves the right to request 

additional information from the 

Applicant, if the CDFI Fund deems it 

appropriate. 

(b) Substantive review. In evaluating 

and selecting applications to receive 

assistance, the CDFI Fund will evaluate 

the Applicant’s likelihood of success in 

meeting the factors set forth in the 

applicable NOFA, including but not 

limited to: 

(1) The Applicant’s ability to use CMF 

funding to generate additional 

investments; 

(2) The need for affordable housing in 

the Applicant’s market; and 

(3) The ability of the Applicant to 

obligate amounts and undertake 

activities in a timely manner. In the case 

of an Applicant that has previously 

received assistance under any CDFI 

Fund program, the CDFI Fund will also 

consider the Applicant’s level of success 

in meeting its performance goals, 

reporting requirements, and other 

requirements contained in the 

previously negotiated and executed 

assistance, allocation or award 

agreement(s) with the CDFI Fund, any 

undisbursed balance of assistance, and 

compliance with applicable federal 

laws. The CDFI Fund may consider any 

other factors, as it deems appropriate, in 

reviewing an application, as set forth in 

the applicable NOFA. 

(c) Consultation with appropriate 

regulatory agencies. In the case of an 

Applicant that is a federally regulated 

financial institution, the CDFI Fund 

may consult with the Appropriate 

Federal Banking Agency or Appropriate 

State Agency prior to making a final 

award decision and prior to entering 

into an Assistance Agreement. 

(d) Awardee selection. The CDFI Fund 

will select CMF Awardees based on the 

criteria described in paragraph (b) of 

this section and any other criteria set 

forth in this part or the applicable 

NOFA. 

Subpart I—Terms and Conditions of 

Assistance 

§ 1807.900 Assistance Agreement. 

(a) Each Applicant that is selected to 

receive a CMF award must enter into an 

Assistance Agreement with the CDFI 

Fund. The Assistance Agreement will 

set forth certain required terms and 

conditions of the Assistance Agreement 

which may include, but are not limited 

to, the following: 

(1) The amount of the award; 

(2) The approved uses of the award; 

(3) The approved Service Area in 

which the award may be used; (4) the 

time period by which the award 

proceeds must be Committed; 

(5) The required documentation to 

evidence Project Completion; and 

(6) Performance goals that have been 

established by the CDFI Fund based 

upon the Awardee’s application. 

(b) The Assistance Agreement shall 

provide that in the event of fraud, 

mismanagement, noncompliance with 

the Act or the CDFI Fund’s regulations; 

or noncompliance with the terms and 

conditions of the Assistance Agreement 

on the part of the Awardee; the CDFI 

Fund, in its discretion, may: 

(1) Require changes in the 

performance goals set forth in the 

Assistance Agreement; 

(2) Revoke approval of the Awardee’s 

Application; 

(3) Reduce or terminate the Awardee’s 

assistance; 

(4) Require repayment of any 

assistance that has been distributed to 

the Awardee; 

(5) Bar the Awardee from reapplying 

for any assistance from the CDFI Fund; 

or 

(6) Take such other actions as the 

CDFI Fund deems appropriate or as set 

forth in the Assistance Agreement. 

(c) Prior to imposing any sanctions 

pursuant to this section or an Assistance 

Agreement, the CDFI Fund shall, to the 

maximum extent practicable, provide 

the Awardee with written notice of the 

proposed sanction and an opportunity 

to comment. Nothing in this section, 

however, shall provide an Awardee the 

right to any formal or informal hearing 

or comparable proceeding not otherwise 

required by law. 

§ 1807.901 Disbursement of funds. 

Assistance provided pursuant to this 

part may be provided in a lump sum or 

in some other manner, as determined 

appropriate by the CDFI Fund. The 

CDFI Fund shall not provide any 

assistance under this part until an 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
12420 Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 

Awardee has satisfied all conditions set 

forth in the applicable NOFA and 

Assistance Agreement. 

§ 1807.902 Data collection and reporting. 

(a) Data—General. An Awardee shall 

maintain such records as may be 

prescribed by the CDFI Fund that are 

necessary to: 

(1) Disclose the manner in which 

CMF funding is used, including 

providing documentation to 

demonstrate Project Completion; 

(2) Demonstrate compliance with the 

requirements of this part and the 

Assistance Agreement; and 

(3) Evaluate the impact of CMF 

funding. 

(b) Customer profiles. An Awardee 

shall compile such data on the gender, 

race, ethnicity, national origin, or other 

information on individuals that utilize 

its products and services as the CDFI 

Fund shall prescribe in an Assistance 

Agreement. Such data will be used to 

determine whether residents of the 

Awardee’s Service Area are adequately 

served and to evaluate the impact of 

CMF funding. 

(c) Access to records. An Awardee 

must submit such financial and activity 

reports, records, statements, and 

documents at such times, in such forms, 

and accompanied by such reporting 

data, as required by the CDFI Fund or 

the U.S. Department of Treasury to 

ensure compliance with the 

requirements of this part and to evaluate 

the impact of CMF funding. The United 

States Government, including the U.S. 

Department of Treasury, the 

Comptroller General, and their duly 

authorized representatives, shall have 

full and free access to the Awardee’s 

offices and facilities and all books, 

documents, records, and financial 

statements relating to use of Federal 

funds and may copy such documents as 

they deem appropriate and audit or 

provide for an audit at least annually. 

The CDFI Fund, if it deems appropriate, 

may prescribe access to record 

requirements for entities that are 

borrowers of, or that receive 

investments from, an Awardee. 

(d) Retention of records. An Awardee 

shall comply with all record retention 

requirements as set forth in OMB 

Circular A–110 (as applicable). 

(e) Data collection and reporting. (1) 

Financial Reporting: (i) All Non-Profit 

Awardees (excluding Insured CDFIs and 

State-Insured Credit Unions) must 

submit to the CDFI Fund financial 

statements that have been reviewed by 

an independent certified public 

accountant in accordance with 

Statements on Standards for Accounting 

and Review Services, issued by the 

American Institute of Certified Public 

Accountants by a time set forth in the 

applicable Notice of Funding 

Availability or Assistance Agreement 

(audited financial statements can be 

provided by the due date in lieu of 

reviewed statements, if available). NonProfit Awardees (excluding Insured 

CDFIs and State-Insured Credit Unions) 

that are required to have their financial 

statements audited pursuant to OMB 

Circular A–133 Audits of States, Local 

Governments and Non-Profit 

Organizations, must also submit their 

A–133 audited financial statements by a 

time set forth in the applicable NOFA or 

Assistance Agreement. Non-Profit 

Awardees (excluding Insured CDFIs and 

State-Insured Credit Unions) that are not 

required to have financial statements 

audited pursuant to OMB Circular A– 

133, Audits of States, Local 

Governments and Non-Profit 

Organizations, must submit to the CDFI 

Fund a statement signed by the 

Awardee’s authorized representative or 

certified public accountant, asserting 

that the Awardee is not required to have 

a single audit pursuant OMB Circular 

A–133. 

(ii) For-profit Awardees (excluding 

Insured CDFIs and State-Insured Credit 

Unions) must submit to the CDFI Fund 

financial statements audited in 

conformity with generally accepted 

auditing standards as promulgated by 

the American Institute of Certified 

Public by a time set forth in the 

applicable NOFA or Assistance 

Agreement. 

(iii) Insured CDFIs are not required to 

submit financial statements to the CDFI 

Fund. The CDFI Fund will obtain the 

necessary information from publicly 

available sources. State-Insured Credit 

Unions must submit to the CDFI Fund 

copies of the financial statements that 

they submit to the Appropriate State 

Agency. 

(2) Performance Goal Reporting: 

Performance goals and measures that are 

specific to the Awardee’s application for 

funding shall be met as set forth in its 

Assistance Agreement. Awardees shall 

submit data and information to the CDFI 

Fund regarding achievement of these 

Performance Goals as described in the 

Assistance Agreement. 

(f) Availability of referenced 

publications. The publications 

referenced in this section are available 

as follows: 

(1) OMB Circulars may be obtained 

from the Office of Administration, 

Publications Office, 725 17th Street, 

NW., Room 2200, New Executive Office 

Building, Washington, DC 20503 or on 

the Internet (http:// 

www.whitehouse.gov/omb/ 

grants_circulars/); and 

(2) General Accounting Office 

materials may be obtained from GAO 

Distribution, 700 4th Street, NW., Suite 

1100, Washington, DC 20548. 

§ 1807.903 Compliance with government 

requirements. 

In carrying out its responsibilities 

pursuant to an Assistance Agreement, 

the Awardee shall comply with all 

applicable Federal, State, and local 

laws, regulations, and ordinances, OMB 

Circulars, and Executive Orders. 

1807.904 Lobbying restrictions. 

No assistance made available under 

this part may be expended by an 

Awardee to pay any person to influence 

or attempt to influence any agency, 

elected official, officer or employee of a 

State or local government in connection 

with the making, award, extension, 

continuation, renewal, amendment, or 

modification of any State or local 

government contract, grant, loan or 

cooperative agreement as such terms are 

defined in 31 U.S.C. 1352. 

1807.905 Criminal provisions. 

The criminal provisions of 18 U.S.C. 

657 regarding embezzlement or 

misappropriation of funds is applicable 

to all Awardees and Insiders. 

§ 1807.906 CDFI Fund deemed not to 

control. 

The CDFI Fund shall not be deemed 

to control an Awardee by reason of any 

assistance provided under the Act for 

the purpose of any applicable law. 

1807.907 Limitation on liability. 

The liability of the CDFI Fund and the 

United States Government arising out of 

any assistance to an Awardee in 

accordance with this part shall be 

limited to the amount of the investment 

in the Awardee. The CDFI Fund shall be 

exempt from any assessments and other 

liabilities that may be imposed on 

controlling or principal shareholders by 

any Federal law or the law of any State. 

Nothing in this section shall affect the 

application of any Federal tax law. 

§ 1807.908 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. 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 49 / Monday, March 15, 2010 / Proposed Rules 12421 

Dated: March 4, 2010. 

Donna J. Gambrell, 

Director, Community Development Financial 

Institutions Fund. 

[FR Doc. 2010–5026 Filed 3–12–10; 8:45 am] 

BILLING CODE 4810–70–P 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3