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[Federal Register: March 15, 2010 (Volume 75, Number 49)]
[Proposed Rules]               
[Page 12407-12421]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr10-22]                         


[[Page 12407]]

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Part IV





Department of the Treasury





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Community Development Financial Institutions Fund



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12 CFR Part 1807



Capital Magnet Fund; Proposed Rule; Notice of Funds Availability; 
Notice


[[Page 12408]]


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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.

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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 e-mail 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 e-
Rulemaking 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 Low-
Income 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 Low-Income 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 Low-Income 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 Low-Income 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 Low-Income, 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

[[Page 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)). 
CMF-funded 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 low-income 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 multi-family 
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 low-income 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.

[[Page 12410]]

    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

[[Page 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 Non-
Metropolitan 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

[[Page 12412]]

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 low-income 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 
Low- and 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

[[Page 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


Sec.  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.


Sec.  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.


Sec.  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.


Sec.  1807.103  Awardee not instrumentality.

    No Awardee shall be deemed to be an agency, department, or 
instrumentality of the United States.


Sec.  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 Sec.  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,

[[Page 12414]]

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 Low-Income 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 multi-family 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 Non-Metropolitan Area 
median family income or the national Non-Metropolitan 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 
Sec.  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)

[[Page 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 not-for-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, owner-
occupied 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.


Sec.  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.


Sec.  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


Sec.  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

[[Page 12416]]

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 board-approved documents, that the development or management of 
affordable housing are among its principal purposes; and
    (iii) Can demonstrate that at least one-third 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 Sec.  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


Sec.  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 Low-Income; 
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.


Sec.  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.


Sec.  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 Sec.  
1807.300(b).

Subpart D--Qualification as Affordable Housing


Sec.  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.


Sec.  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 Low-Income, 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 
tenant-based 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,

[[Page 12417]]

county or State public housing authority.
    (d) Periods of Affordability. Housing under Sec.  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) CMF-funded 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 Low-Income are not required to pay as 
rent an amount that exceeds the market rent for comparable, unassisted 
units in the neighborhood.


Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 12418]]

    (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 Sec.  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 Sec.  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 Sec.  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 
non-governmental 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 Sec.  
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 Sec.  1807.401 or Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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.

[[Page 12419]]

Subpart F--Tracking Requirements


Sec.  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.


Sec.  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


Sec.  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


Sec.  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.


Sec.  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 Sec.  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


Sec.  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.


Sec.  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

[[Page 12420]]

Awardee has satisfied all conditions set forth in the applicable NOFA 
and Assistance Agreement.


Sec.  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). Non-Profit 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.


Sec.  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.


Sec.  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.


Sec.  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.


[[Page 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]
BILL CODE 4810-70-P
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