`[Federal Register Volume 81, Number 25 (Monday, February 8, 2016)]
[Rules and Regulations]
[Pages 6434-6447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02132]



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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: Interim rule with request for public comment.

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SUMMARY: The Department of the Treasury is issuing an interim rule 
implementing the Capital Magnet Fund (CMF), administered by the 
Community Development Financial Institutions Fund (CDFI Fund). This 
interim rule incorporates updates to the definitions, requirements and 
parameters for CMF implementation and administration. In addition, 
sections of the CMF interim rule regarding certain definitions and 
project level requirements are revised in order to facilitate alignment 
with other federal housing programs and ease of administration. These 
revisions are modeled after the credit requirements for Low Income 
Housing Credits (LIHTCs) under section 42 of the Internal Revenue Code 
of 1986, as amended, and the program requirements of the HOME 
Investment Partnership Program (HOME Program) authorized under Title II 
of the Cranston-Gonzalez National Affordable Housing Act, as amended, 
and the HOME Program final rule published on July 24, 2013.
    This interim rule also reflects requirements set forth in a final 
rule, Uniform Administrative Requirements, Cost Principles and Audit 
Requirements for Federal Awards, adopted by the Department of the 
Treasury on December 19, 2014 (hereafter referred to as the Uniform 
Administrative Requirements). The Uniform Administrative Requirements 
constitute a government-wide framework for grants management codified 
by the Office of Management and Budget (OMB), combining several OMB 
grants management circulars aimed at reducing the administrative burden 
for Recipients, and reducing the risk of waste, fraud and abuse of 
Federal financial assistance. The Uniform Administrative Requirements 
establish financial, administrative, procurement, and program 
management standards with which Federal award-making programs, 
including those administered by the CDFI Fund, and Recipients must 
comply. Accordingly, this interim rule includes revisions necessary to 
implement the Uniform Administrative Requirements, as well as to make 
certain technical corrections and certain programmatic updates, as well 
as provide clarifying language to existing program requirements.

DATES: Effective date: February 8, 2016. All comments must be written 
and must be received in the offices of the CDFI Fund on or before April 
8, 2016. The compliance date requirements for the collection of 
information in Sec.  1807.902 is stayed indefinitely, pending Office of 
Management and Budget approval and assignment of an OMB control number.

ADDRESSES: You may submit comments concerning this interim rule via the 
Federal e-Rulemaking Portal at http://www.regulations.gov (please 
follow the instructions for submitting comments). All submissions must 
include the agency name and Regulatory Information Number (RIN) for 
this rulemaking. Information regarding the CDFI Fund and its programs 
may be obtained through the CDFI Fund's Web site at http://www.cdfifund.gov.

FOR FURTHER INFORMATION CONTACT: Marcia Sigal, CMF Program Manager, 
Community Development Financial Institutions Fund, at 
[email protected].

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, the appropriation to which was used to 
carry out a competitive grant program administered by the CDFI Fund. 
The mission of the CDFI Fund is to increase economic opportunity and 
promote community development investments for underserved populations 
and in distressed communities in the United States. Its long term 
vision is an America in which all people have access to affordable 
credit, capital and financial services.
    The Act requires Fannie Mae and Freddie Mac to set aside an amount 
equal to 4.2 basis points for each dollar of their unpaid principal 
balances of total new business purchases to be allocated to the Housing 
Trust Fund (administered by the Department of Housing and Urban 
Development) and the Capital Magnet Fund. The Act also provides the 
Federal Housing Finance Agency (FHFA) with the authority to temporarily 
suspend these allocations upon certain findings. On November 13, 2008, 
the Director of the FHFA temporarily suspended the allocation of funds. 
On December 11, 2014, the Director of the FHFA terminated the temporary 
suspension of those allocations, directing Fannie Mae and Freddie Mac 
to begin setting aside and allocating funds to the Housing Trust Fund 
and the Capital Magnet Fund. Accordingly, the CDFI Fund is promulgating 
this revised interim rule in anticipation of future Capital Magnet Fund 
application rounds.
    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 Awards must be used to attract private 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 which, In Conjunction With Affordable Housing 
Activities will implement a Concerted Strategy to stabilize or 
revitalize a Low-Income Area or Underserved Rural Area.
    All capitalized terms herein are defined in the definitions section 
of the interim rule, as set forth in 12 CFR 1807.104.

II. Comments on the December 3, 2010, Interim Rule

    The comment period for the December 3, 2010, Interim Rule ended on 
February 1, 2011. The CDFI Fund received one written comment. The 
commenter asserted that the December 3, 2010, Interim Rule did not 
allow market-based Section 8 vouchers to be used to satisfy CMF 
affordability requirements and that the interim rule should make clear 
that, in the event a tenant or a unit in a Multi-family housing project 
receives a Federal or State rental subsidy, the maximum rent that can 
be charged is the amount allowable under such program. The commenter 
suggested that the interim rule should provide for a rent floor of the 
project's initial rents, in the event median incomes decrease. The 
commenter also suggested that the rent limitation should be adjusted by 
the number of bedrooms in the unit.
    In this revised interim rule (at 12 CFR 1807.401(a) and (e)), the 
CDFI Fund incorporates the commenter's suggestions regarding Federal or 
State rental subsidy and the creation of a rent floor for projects. The 
CDFI Fund also adopts the commenter's suggestion that rent limitations 
be adjusted by the

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number of bedrooms in the unit (12 CFR 1807.401(a)).

III. Summary of Changes

    Substantive revisions to the interim rule (meaning, revisions other 
than the insertion of new language that clarifies existing program 
requirements) fall generally into three categories: (i) Adoption of 
policy priorities, programmatic changes/clarifications, and technical 
corrections; (ii) alignment with the Uniform Administrative 
Requirements; and (iii) alignment with HOME Program requirements and 
with requirements to qualify for LIHTCs.
    Recent efforts supported by the White House Rental Housing Policy 
Working Group, which established joint working groups comprised of 
staff from the U.S. Department of Housing and Urban Development (HUD), 
the U.S. Department of Agriculture (USDA), and the U.S. Department of 
the Treasury have highlighted the need for alignment amongst federally 
subsidized affordable housing program requirements. The CDFI Fund has 
determined that Recipients' use of CMF Awards better aligns with LIHTCs 
(as opposed to benefits under the HOME Program) in several key 
respects, specifically with regard to Project-level requirements. Thus, 
this interim rule incorporates some requirements to qualify for LIHTCs 
and removes certain requirements that, in the December 10, 2010, CMF 
Program interim rule, were modeled after the HOME Program.
    A. Section 1807.101, Summary: ``Community Service Facilities'' has 
been stricken as a stand-alone activity; instead, Community Service 
Facilities is embedded in the definition of Economic Development 
Activities. Per the Uniform Administrative Requirements, the use of the 
word ``Awardee'' is replaced with ``Recipient,'' and any reference to a 
CMF grant is replaced with ``CMF Award'' as defined in the definitions 
section, 12 CFR 1807.104.
    B. Section 1807.102, Relationship to other CDFI Programs: The 
requirement for a Certified CDFI to be an operating entity for three 
years prior to the application deadline has been deleted; instead, this 
subsection establishes that restrictions for using CMF Awards in 
conjunction with other CDFI Program awards will be set forth in the 
applicable notices of funds, guarantee, or allocation availability.
    C. Section 1807.104, Definitions: As noted above, the defined term 
``Awardee'' is deleted and replaced with the new defined term 
``Recipient.'' The term ``Applicant'' is now defined. The term ``CMF 
Award'' is now defined. The term ``Development'' is revised to clarify 
that any combination of the listed activities that result in Affordable 
Housing is ``Development.'' The term ``Direct Administrative Expenses'' 
is now defined. The definition of the term ``Economic Development 
Activity'' is revised by striking ``purchase''; the term 
``acquisition'' is used instead. The term ``Effective Date'' is now 
defined. ``Eligible Income'' is revised to provide adjustments for 
Family size. ``Eligible Project Costs'' is revised to strike 
``operations'' as an eligible use of CMF Awards. ``Extremely Low-
Income'' is revised to align with income limits published by HUD, 
including adjustments for Family size in the case of Homeownership. The 
defined term ``Family'' or ``Families'' is revised by removing the 
income categories to describe the household. The defined term 
``Homeownership'' is updated and restructured based on HOME Program 
regulations. The defined term ``Housing'' is also revised to reflect 
HOME Program regulation updates. The defined term ``Housing'' is used 
in several places throughout the regulations to signify the intent of 
the defined term. Some of the structures and facilities excluded from 
the definition of Housing may meet the definition of Community Service 
Facilities. The term ``In Conjunction With Affordable Housing 
Activities'' has been modified in order to be consistent with standards 
in other CDFI Fund Programs that fund projects and activities based on 
proximity to intended beneficiaries and/or assessment of access to 
services for individuals intended to benefit from such programs (e.g., 
Healthy Foods Financing Initiative Financial Assistance under the CDFI 
Program). The term ``Investment Period'' is defined in Sec.  1807.104. 
The term ``Leveraged Costs'' is revised to clarify that such costs are 
limited to Affordable Housing Activities and Economic Development 
Activities that exceed the dollar amount of the CMF Award. ``Loan 
Guarantee'' is revised to clarify that a loan that is guaranteed with 
the CMF Award must be used for Affordable Housing Activities and/or 
Economic Development Activities. ``Loan Loss Reserves'' is revised to 
clarify that cash reserves set aside to cover losses must be for 
Affordable Housing Activities and/or Economic Development Activities. 
The term ``Low-Income'' is revised to align with income limits 
published by HUD, including adjustments for Family size in the case of 
Homeownership. In the case of rental Housing, ``Low-Income'' is revised 
to allow for circumstances in which the qualifying Family occupies a 
unit that has a Federal or State rental subsidy. The term ``Non-
Metropolitan Area'' is revised to align with and accommodate the OMB 
definition, which is periodically updated. The term ``Non-Regulated 
CDFI'' is deleted because it is not used in the interim rule. The term 
``Operations'' is deleted in Sec.  1807.104 since it is no longer an 
eligible activity in Sec.  1807.301; a new term ``Direct Administrative 
Expenses'' is defined in Sec.  1807.104. A new term, ``Payment'' is 
defined to describe the transmission of CMF Award dollars from the CDFI 
Fund to the Recipient. ``Preservation'' is revised to specify that 
refinancing must extend the existing affordability and use restrictions 
on the property by a minimum of 10 years or as otherwise specified in 
the Assistance Agreement. ``Program Income'' is defined to align with 
the Uniform Administrative Requirements. ``Project'' is defined to mean 
the Affordable Housing Activity and/or Economic Development Activity 
that is financed with a CMF Award. The term ``Purchase'' is revised to 
clarify that the purchasing Family and Single-family housing must meet 
the qualifications set forth in subparts D and E. ``Underserved Rural 
Area'' is restructured and revised to serve intended populations per 
the statute and allow the CDFI Fund to set forth an alternative 
definition of ``Underserved Rural Area'' for any given application 
round in the applicable NOFA and/or Assistance Agreement. ``Uniform 
Administrative Requirements'' is defined in Sec.  1807.104 to reflect 
the Department of the Treasury's codification of the Office of 
Management and Budget's government-wide framework for grants 
management. The definition of the term ``Very Low-Income'' is revised 
to align with income limits published by HUD, including adjustments for 
Family size in the case of Homeownership.
    D. Section 1807.107, Applicability of regulations for CMF awards: 
Section 1807.107 was added to address the applicability of this rule to 
the FY 2010 CMF application round and subsequent application rounds. 
The CDFI Fund has determined that this rule applies only to those CMF 
awards made pursuant to Notices of Funds Availability (NOFAs) published 
after the effective date of this interim rule, except for Sec.  
1807.902(e)(1)(i) regarding audited financial statements of Nonprofit 
Organization Recipients. As indicated at 2 CFR 200.110, the Uniform 
Administrative Requirements, subpart F--Audit Requirements applies to 
audits of Nonprofits of fiscal years

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beginning on or after December 26, 2014.
    E. Section 1807.200, Applicant eligibility: In Sec.  
1807.200(a)(1), the eligibility requirement that a certifiable CDFI can 
apply is deleted because the CDFI Fund has determined that most 
Applicants can meet the program's eligibility requirements by being 
either a Certified CDFI or a Nonprofit Organization. The eligibility 
requirements for a Nonprofit Organization are revised in Sec.  
1807.200(a)(2)(iii) to no longer allow an entity to demonstrate its 
principal purpose of development or management of affordable housing 
through its staffing. Section 1807.200(a)(2)(iii) also states that the 
applicable Notice of Funds Availability (NOFA) will indicate the 
percentage of a Nonprofit Organization Applicant's assets that must be 
dedicated to the development or management of affordable housing. 
Section 1807.200(b) is also revised to reflect these eligibility 
modifications.
    F. Subpart C, Use of Funds/Eligible activities: Section 1807.300 is 
revised to clarify that Recipients must use their CMF Awards for the 
financing-related eligible activities set forth in Sec.  1807.301 to 
attract private capital and increase investment in those activities in 
Sec.  1807.300(a) and (b). Revisions to Sec.  1807.300(b) reinforce the 
requirement that when a Recipient undertakes Economic Development 
Activities In Conjunction With Affordable Housing Activities, the 
Recipient must track and report on such Affordable Housing Activities 
if it was financed with a CMF Award. Sections 1807.300 and 1807.301 are 
revised by deleting ``Community Service Facilities'' as a stand-alone 
eligible activity; instead, ``Community Service Facilities'' is 
embedded in the definition of Economic Development Activities. As such, 
this term is deleted as a technical correction throughout the interim 
rule, when appropriate. Sections 1807.301 and 1807.302 are revised to 
eliminate ``operations'' as an eligible activity. The content of former 
Sec.  1807.302(c) is now located in Sec.  1807.302(b); the content of 
Sec.  1807.302(d) is now located in Sec.  1807.302(c). New Sec.  
1807.302(d) and (e) are added to clarify certain tracking and repayment 
requirements for Recipients that use CMF Award for Loan Guarantees or 
Loan Loss Reserves. Section 1807.302(f) states that Recipients may not 
use more than five (5) percent of its CMF Award for Direct 
Administrative Expenses. Section 1807.303 is added to address Program 
Income requirements.
    G. Subpart D, Qualification as Affordable Housing: Section 1807.400 
is revised to indicate that the CDFI Fund may establish greater 
commitments for deeper income targeting attributable to Eligible 
Project Costs in the applicable NOFA and/or Assistance Agreement. 
Section 1807.401 is revised in order to make general program 
clarifications and establish certain program requirements, many of 
which align with the requirements of the LIHTC Program and the HOME 
Program. For example, language was added to Sec.  1807.401 to allow the 
CDFI Fund to set forth in the applicable NOFA requirements for 
successful applicants to serve targeted incomes that exceed the 
requirements of Sec.  1807.401. The rent limitation in Sec.  
1807.401(a) is revised to align with requirements to qualify for LIHTCs 
and to account for rental subsidies in each of the income categories. 
Section 1807.401(c) and (e) are revised to align with requirements to 
qualify for LIHTCs. Section 1807.401(f) is revised to align with the 
HOME Program regulations' elimination of the U.S. Census long form for 
annual income determinations. Thus, the content of the former Sec.  
1807.401(f)(2)(i) is deleted and the content of the former Sec.  
1807.401(f)(2)(ii) is now located in Sec.  1807.401(f)(2)(i). 
Similarly, the content of the former Sec.  1807.401(f)(2)(iii) has 
moved up and is now located in Sec.  1807.401(f)(2)(ii). Section 
1807.401(g)(2) is revised to clarify rent restrictions when rent is 
subject to IRC sections 42(g)(2) and 42(h)(6). Section 1807.401(g)(3) 
is revised to clarify that any replacement unit must meet the 
affordability qualifications for the income category of the unit that 
is being replaced. Section 1807.402(a) and (b) are revised by replacing 
``acquisition'' with ``Purchase'' to reflect the use of the new defined 
term. Section 1807.402(a)(5) is revised to clarify that, in the event 
of resale of CMF-financed Single-family housing to a non-qualifying 
family before the 10-year affordability period ends, the Recipient must 
use an equivalent amount of the CMF Award used for the applicable 
Affordable Housing Activity, whether recouped or not, to finance 
additional Affordable Housing Activities for a qualifying Family in the 
same income category for Homeownership.
    H. Subpart E, Leveraging and Commitment Requirement: Section 
1807.500(b) is revised to include the Assistance Agreement as a source 
for the required percentage of Leveraged Costs that must be funded by 
non-governmental sources. Section 1807.500(a)(1) is deleted because 
``operations'' is no longer an eligible activity and defined term. 
Accordingly, the former Sec.  1807.500(a)(2) is now Sec.  
1807.500(b)(2) and former Sec.  1807.500(a)(3) is now Sec.  
1807.500(b)(2)(ii). Section 1807.500(b)(2)(iii) was added to address 
eligible Leveraged Costs for Economic Development Activities. The 
content of former Sec.  1807.500(b) is deleted. Section 1807.501(a) is 
revised and section 1807.501(b) is added to account for the eligible 
activity ``Purchase'' to a qualifying Family, and Sec.  1807.501(b)(3) 
is added to provide more accountability regarding Project Completion. 
Section 1807.501(c) and (d) are added to align with the Uniform 
Administrative Requirements regarding Payments. Section 1807.503 is 
revised to include property standards necessary to ensure that CMF 
Awards are invested in structures and units that are sound, decent, 
safe and sanitary; such standards are largely adopted from the HOME 
Program and the requirements to qualify for LIHTCs. Section 
1807.503(a)(4) is added to address Project Completion in the case of 
Preservation. The content of the former Sec.  1807.503(b)(2) is now 
located in Sec.  1807.503(b)(2)(i) and a new Sec.  1807.503(b)(2)(ii) 
is added to address disaster mitigation in regards to Project 
Completion. Section 1807.503(b)(2)(iii) is added to address lead-based 
paint. The content of former Sec.  1807.503(b)(3) is now moved to Sec.  
1807.503(b)(4) and incorporates recent HOME Program updates. Thus, 
Sec.  1807.503(b)(3) contains new content regarding Rehabilitation 
standards. The content of former Sec.  1807.503(c) is moved to Sec.  
1807.503(a)(3).
    I. Subpart F, Tracking Requirements: Section 1807.601 is renamed 
and revised to reflect that the Uniform Administrative Requirements 
apply to all CMF Awards and sets forth the CDFI Fund's policy that 
indirect costs are not allowed. Section 1807.602 also establishes the 
circumstances in which a CMF Award loses its so-called ``Federal 
character.'' Section 1807.602 is also revised to clarify that CMF 
Awards are Federal financial assistance for purposes of the 
applicability of Federal civil rights laws.
    J. Subpart H, Evaluation and Selection of Applications: In Sec.  
1807.800(c)(3) ``blight'' is deleted as an ambiguous term.
    K. Subpart I, Terms and Conditions of Assistance: Section 
1807.900(c) is revised to clarify statutory requirements regarding 
notice and hearing. To align with the Uniform Administrative 
Requirements, Sec.  1807.901 ``Disbursement of funds'' is renamed 
``Payment of funds'' to reflect the transmission of CMF Award dollars

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from the CDFI Fund to the Recipient as a ``Payment.'' Section 
1807.902(d) and (e) are revised to accommodate the audit requirements 
of the Uniform Administrative Requirements. Pursuant to revised Sec.  
1807.902(e)(1), Nonprofit Organizations that are not required to have 
their financial statements audited pursuant to the Uniform 
Administrative Requirements may still be subject to additional audit 
requirements, which will be set forth in the applicable NOFA and 
Assistance Agreement. In addition, Sec.  1807.902(e)(2), ``Performance 
Goal Reporting,'' is renamed as ``Annual Report'' and revised to 
clarify and require the submission of performance and financial 
reporting in the form of an annual report, as further specified in the 
Assistance Agreement. Section 1807.902(e)(3) is added to clarify the 
compliance requirements for Insured CDFIs, Depository Institution 
Holding Companies, and State-Insured Credit Unions. Section 
1807.902(e)(4) is added to convey that any reports under Sec.  1807.902 
may be subject to public inspection per the Freedom of Information Act. 
Section 1807.903 is revised to specify that in addition to all other 
Federal, state, and local laws, Recipients shall also comply with all 
applicable Federal environmental requirements.

IV. Rulemaking Analysis

A. Executive Order (E.O.) 12866

    It has been determined that this interim rule is not a significant 
regulatory action under Executive Order 12866. Accordingly, a 
regulatory impact assessment is not required.

B. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required under the 
Administrative Procedure Act (5 U.S.C 553), or any other law, the 
Regulatory Flexibility Act does not apply.

C. Paperwork Reduction Act

    The collections of information contained in this interim rule will 
be reviewed and approved by the Office of Management and Budget (OMB) 
in accordance with the Paperwork Reduction Act of 1995 and assigned the 
applicable, approved OMB Control Numbers associated with the CDFI Fund 
under 1559-XXXX. An agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless it 
displays a valid control number assigned by OMB. This document restates 
the collections of information without substantive change.

D. National Environmental Policy Act

    This interim rule has been reviewed in accordance with the CDFI 
Fund's environmental quality regulations (12 CFR part 1815), 
promulgated pursuant to the National Environmental Protection Act of 
1969 (NEPA), which requires 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 interim 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's environmental quality regulations (12 CFR part 1815), neither an 
Environmental Assessment nor an Environmental Impact Statement is 
required.

E. Administrative Procedure Act

    Because the revisions to this interim rule relate 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).

F. Comment

    Public comment is solicited on all aspects of this interim rule. 
The CDFI Fund will consider all comments made on the substance of this 
interim rule, but it does not intend to hold hearings.

G. 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.


0
For the reasons set forth in the preamble, 12 CFR part 1807 is revised 
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 Recipient not instrumentality.
1807.104 Definitions.
1807.105 Waiver authority.
1807.106 OMB control number.
1807.107 Applicability of regulations for CMF Awards.
Subpart B--Eligibility
1807.200 Applicant eligibility.
Subpart C--Eligible Purposes; Eligible Activities; Restrictions
1807.300 Eligible purposes.
1807.301 Eligible activities.
1807.302 Restrictions on use of CMF Award.
1807.303 Authorized uses of Program Income.
Subpart D--Qualification as Affordable Housing
1807.400 Affordable Housing--general.
1807.401 Affordable Housing--Rental Housing.
1807.402 Affordable Housing--Homeownership.
Subpart E--Leveraged Costs; Eligible Project Costs; Commitment 
Requirements
1807.500 Leveraged Costs; Eligible Project Costs.
1807.501 Commitments; Payments.
1807.502 CMF Award limits.
1807.503 Projection Completion; Property standards.
Subpart F--Tracking Funds; Uniform Administrative Requirements; Nature 
of Funds
1807.600 Tracking funds.
1807.601 Uniform Administrative Requirements.
1807.602 Nature of funds.
Subpart G--Notice of Funds Availability; Applications
1807.700 Notice of funds availability.
Subpart H--Evaluation and Selection of Applications
1807.800 Evaluation and selection--general.
1807.801 Evaluation of applications.
Subpart I--Terms and Conditions of CMF Award
1807.900 Assistance agreement.
1807.901 Payment 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:  12 U.S.C. 4569.

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.


Sec.  1807.101  Summary.

    (a) Through the CMF, the CDFI Fund competitively awards 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

[[Page 6438]]

    (2) Financing Economic Development Activities.
    (b) The CDFI Fund will select Recipients to receive CMF Awards 
through a merit-based, competitive application process. CMF Awards may 
only be used for eligible uses set forth in subpart C of this part. 
Each Recipient will enter into an Assistance Agreement that will 
require it to leverage the CMF Award 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.

    Restrictions on applying for, receiving, and using CMF Awards in 
conjunction with awards under other programs administered by the CDFI 
Fund (including, but not limited to, the Bank Enterprise Award Program, 
the CDFI Program, the CDFI Bond Guarantee Program, the Native American 
CDFI Assistance (NACA) Program, and the New Markets Tax Credit Program) 
are as set forth in the applicable Notice of Funds Availability, Notice 
of Guarantee Availability, or Notice of Allocation Availability.


Sec.  1807.103  Recipient not instrumentality.

    No Recipient shall be deemed to be an agency, department, or 
instrumentality of the United States.


Sec.  1807.104  Definitions.

    For the purpose of this part:
    Act means the Housing and Economic Recovery Act of 2008, as 
amended, Public Law 110-289, section 1131;
    Affiliate means any entity that Controls, is Controlled by, or is 
under common Control with, an entity;
    Affordable Housing means housing that meets the requirements set 
forth in subpart D of this part;
    Affordable Housing Activities means the Development, Preservation, 
Rehabilitation, and/or Purchase of Affordable Housing;
    Affordable Housing Fund means a revolving loan, grant or investment 
fund that is:
    (1) Managed by the Recipient; and
    (2) Uses its capital to finance Affordable Housing Activities;
    Applicant means any entity submitting an application for a CMF 
Award;
    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;
    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;
    Assistance Agreement means a formal, written agreement between the 
CDFI Fund and a Recipient, which agreement specifies the terms and 
conditions of assistance under this part;
    Capital Magnet Fund (or CMF) means the program authorized by the 
Act and implemented under this part;
    CMF Award means the financial assistance in the form of a grant 
made by the CDFI Fund to a Recipient pursuant to this part;
    Certified Community Development Financial Institution (or Certified 
CDFI) means an entity that has been determined by the CDFI Fund to meet 
the certification requirements set forth in 12 CFR 1805.201;
    Committed means that the Recipient is able to demonstrate, in 
written form and substance that is acceptable to the CDFI Fund, a 
commitment for use of CMF Award, as set forth in Sec.  1807.501;
    Community Development Financial Institutions Fund (or CDFI Fund) 
means the Community Development Financial Institutions Fund, the U.S. 
Department of the Treasury, established pursuant to the Community 
Development Banking and Financial Institutions Act of 1994, as amended, 
12 U.S.C. 4701 et seq.;
    Community Service Facility means the physical structure in which 
service programs for residents or service programs for the broader 
community (including, but not limited to, health care, childcare, 
educational programs including literacy and after school programs, job 
training, food and nutrition services, cultural programs, and/or social 
services) operate that, In Conjunction With Affordable Housing 
Activities, implements a Concerted Strategy to stabilize or revitalize 
a Low-Income Area or Underserved Rural Area;
    Concerted Strategy means a formal planning document that evidences 
the connection between Affordable Housing Activities and Economic 
Development Activities. 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;
    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;
    Depository Institution Holding Company means a bank holding company 
or a savings and loan holding company as each are defined in the 
Federal Deposit Insurance Act, 12 U.S.C. 1813(w);
    Development means any combination of the following Project 
activities: 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 resulting in Affordable Housing;
    Direct Administrative Expenses means direct costs incurred by the 
Recipient, related to the financing of the Project as described in 2 
CFR 200.413 of the Uniform Administrative Requirements;
    Economic Development Activity means the development, preservation, 
acquisition and/or rehabilitation 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;
    Effective Date means the date that the Assistance Agreement is 
effective; such date is determined by the CDFI Fund after the Recipient 
has returned an executed, original Assistance Agreement, along with all 
required supporting documentation, including the opinion of counsel, if 
required;
    Eligible-Income means:
    (1) Having, in the case of owner-occupied Housing units, annual 
income not in excess of 120 percent of the area median income adjusted 
for Family size in the same manner as HUD makes these adjustments for 
its other published income limits; and
    (2) Having, in the case of rental Housing units, annual income not 
in excess of 120 percent of the area median income, adjusted for Family 
size in the same manner as HUD makes these adjustments for its 
published income limits;
    Eligible Project Costs means Leveraged Costs plus those costs 
funded directly by a CMF Award;
    Extremely Low-Income means:
    (1) Having, in the case of owner-occupied Housing units, income not 
in excess of 30 percent of the area median

[[Page 6439]]

income, adjusted for Family size, as determined by HUD, except that HUD 
may establish income ceilings higher or lower than 30 percent of the 
median for the area on the basis of HUD findings that such variations 
are necessary because of prevailing levels of construction costs or 
fair market rents, or unusually high or low Family incomes and
    (2) Having, in the case of rental Housing units, income not in 
excess of 30 percent of the area median income, adjusted for Family 
size, as determined by HUD, except that HUD may establish income 
ceilings higher or lower than 30 percent of the median for the area on 
the basis of HUD findings that such variations are necessary because of 
prevailing levels of construction costs or fair market rents, or 
unusually high or low Family incomes;
    Family or Families means 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, including Puerto Rico, Guam, American Samoa, the U. S. Virgin 
Islands, and the Northern Mariana Islands);
    HOME Program means the HOME Investment Partnership Program 
established by 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.;
    Homeownership means ownership in fee simple title interest in one- 
to four-unit Housing or in a condominium unit, or equivalent form of 
ownership approved by the CDFI Fund. The Recipient must determine 
whether ownership or membership in a cooperative or mutual housing 
project constitutes Homeownership under State law. The ownership 
interest is subject to the following additional requirements:
    (1) Except as otherwise provided in paragraphs (1)(i), (ii), and 
(iii) of this definition, the land may be owned in fee simple or the 
homeowner may have a 99-year ground lease;
    (i) For Housing located on Indian trust or restricted Indian lands, 
the ground lease must be for 50 years or more;
    (ii) For Housing located in Guam, the Northern Mariana Islands, the 
U. S. Virgin Islands, and American Samoa, the ground lease must be 40 
years or more;
    (iii) For manufactured housing, the ground lease must be for a 
minimum period of 10 years or such other applicable time period 
regarding location set forth in this definition of Homeownership at the 
time of purchase by the homeowner;
    (2) Ownership interest may not merely consist of a right to 
possession under a contract for deed, installment contract, or land 
contract (pursuant to which the deed is not given until the final 
payment is made);
    (3) Ownership interest may only be subject to the restrictions on 
resale permitted under the Assistance Agreement and this part; 
mortgages, deeds of trust, or other liens or instruments securing debt 
on the property; or any other restrictions or encumbrances that do not 
impair the good and marketable nature of title to the ownership 
interest;
    Housing means Single-family 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) units 
that are small, free- standing, barrier-free, energy-efficient, 
removable, and designed to be installed adjacent to existing single-
family dwellings. Housing does not include emergency shelters 
(including shelters for disaster victims) or facilities such as nursing 
homes, convalescent homes, hospitals, residential treatment facilities, 
correctional facilities, halfway houses, housing for students, or 
dormitories (including farmworker dormitories);
    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 et seq.;
    In Conjunction With Affordable Housing means:
    (1) Physically proximate to; and
    (2) Reasonably available to residents of Affordable Housing that is 
subject to Affordable Housing Activities. For a Metropolitan Area, In 
Conjunction With means located within the same census tract or within 1 
mile of such Affordable Housing. For a Non-Metropolitan Area, In 
Conjunction With means located within the same county, township, or 
village, or within 10 miles of such Affordable Housing;
    Insured CDFI means a Certified CDFI that is an Insured Depository 
Institution or an Insured Credit Union;
    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.;
    Insured Depository Institution means any bank or thrift, the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation as determined in 12 U.S.C. 1813(c)(2);
    Investment Period means the period beginning with the Effective 
Date and ending on the fifth year anniversary of the Effective Date, or 
such other period as may be established by the CDFI Fund in the 
Assistance Agreement;
    Leveraged Costs means costs for Affordable Housing Activities and 
Economic Development Activities that exceed the dollar amount of the 
CMF Award, as further described in Sec.  1807.500;
    Loan Guarantee means the Recipient's use of CMF Award to support 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. The 
proceeds of the loan that is guaranteed with the CMF Award must be used 
for Affordable Housing Activities and/or Economic Development 
Activities;
    Loan Loss Reserves means proceeds from the CMF Award that the 
Recipient will set aside in the form of cash reserves, or through 
accounting-based accrual reserves, to cover losses on loans, accounts, 
and notes receivable for Affordable Housing Activities and/or Economic 
Development Activities, or for related purposes that the CDFI Fund 
deems appropriate;
    Low-Income means:
    (1) Having, in the case of owner-occupied Housing units, income not 
in excess of 80 percent of area median income, adjusted for Family 
size, as determined by HUD, except that HUD may establish income 
ceilings higher or lower than 80 percent of the median for the area on 
the basis of HUD findings that such variations are necessary because of 
prevailing levels of construction costs or fair market rents, or 
unusually high or low Family incomes; and
    (2) Having, in the case of rental Housing units, income not in 
excess of 80 percent of area median income, adjusted for Family size, 
as determined by HUD, except that HUD may establish income ceilings 
higher or lower than 80 percent of the median for the area on the basis 
of HUD findings that such variations are necessary because of 
prevailing levels of construction costs or fair market rents, or 
unusually high or low Family incomes;
    Low-Income Area or 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

[[Page 6440]]

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;
    Low Income Housing Credits (or LIHTCs) means credits against income 
tax under section 42 of the Internal Revenue Code of 1986, as amended, 
26 U.S.C. 42;
    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) and Executive Order 10253 (3 CFR, 1949-1953 Comp., p. 758), as 
amended;
    Multi-family housing means residential properties consisting of 
five or more dwelling units, such as a condominium unit, cooperative 
unit, apartment, or townhouse;
    Non-Metropolitan Area means counties that are designated as Non-
Metropolitan Counties by the Office of Management and Budget (OMB) 
pursuant to 44 U.S.C. 3504(e) and 31 U.S.C. 1104(d) and Executive Order 
10253 (3 CFR, 1949-1953 Comp., p. 758), as amended, and as made 
available by the CDFI Fund for a specific application funding round;
    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;
    Participating Jurisdiction means a jurisdiction designated by HUD 
as such under the HOME Program in accordance with the requirements of 
24 CFR 92.105;
    Payment means the transmission of CMF Award dollars from the CDFI 
Fund to the Recipient;
    Preservation means:
    (1) Activities to refinance, with or without Rehabilitation, 
Single-family housing or Multi-family housing (rental) mortgages that, 
at the time of refinancing, are subject to affordability and use 
restrictions under the LIHTC statute or under State or Federal 
affordable housing programs, including but not limited to, the HOME 
Program, properties with Federal project-based rental assistance, or 
the USDA rental housing programs, hereinafter referred to as ``similar 
State or Federal affordable housing programs,'' where such refinancing 
has the effect of extending the term of any existing affordability and 
use restrictions on the properties by a minimum 10 years or as 
otherwise specified in the Assistance Agreement;
    (2) Activities to refinance and acquire Single-family housing or 
Multi-family housing that, at the time of refinancing or acquisition, 
were subject to affordability and use restrictions under similar State 
or Federal affordable housing programs or under the LIHTC statute, by 
the former tenants of such properties, where such refinancing has the 
effect of extending the term of any existing affordability and use 
restrictions on the properties by a minimum 10 years or as otherwise 
specified in the Assistance Agreement;
    (3) Activities to refinance the mortgages of owner-occupied, 
Single-family 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 existing affordability and use restrictions 
on the properties by a minimum 10 years or as otherwise specified in 
the Assistance Agreement;
    (4) Activities to acquire Single-family housing or Multi-family 
housing, with or without Rehabilitation, with the commitment to subject 
the properties to the affordability qualifications set forth in subpart 
D of this part; or
    (5) Activities to refinance, with or without Rehabilitation, 
Single-family housing or Multi-family housing, with the commitment to 
subject the properties to the affordability qualifications set forth in 
subpart D of this part;
    Program Income means gross income, as further described in 2 CFR 
part 1000;
    Project means the Affordable Housing Activity and/or Economic 
Development Activity that is financed with the CMF Award;
    Project Completion means that all of the requirements set forth at 
Sec.  1807.503 for a Project have been met;
    Purchase means to provide direct financing to a Family for purposes 
of Homeownership. Before the Recipient provides any financing to a 
Family for Homeownership purposes, the Recipient must verify that the 
Family and the Single-family housing meet the qualifications set forth 
in subparts D and E of this part;
    Recipient means an Applicant selected by the CDFI Fund to receive a 
CMF Award pursuant to this part;
    Rehabilitation means any repairs and/or capital improvements that 
contribute to the long-term preservation, current building code 
compliance, habitability, sustainability, or energy efficiency of 
Affordable Housing;
    Revolving Loan Fund means a pool of funds managed by the Applicant 
or the Recipient wherein repayments on loans for Affordable Housing 
Activities or Economic Development Activities are used to refinance 
additional loans;
    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 Recipient with other lenders 
(e.g., participation loans);
    Service Area means the geographic area in which the Applicant 
proposes to use the CMF Award, and the geographic area approved by the 
CDFI Fund in which the Recipient must use the CMF Award as set forth in 
its Assistance Agreement;
    Single-family housing means a one- to four-Family residence, a 
condominium unit, a cooperative unit, a combination of manufactured 
housing and lot, or a manufactured housing lot;
    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 U.S. Virgin Islands, American Samoa, 
the Trust Territory of the Pacific Islands, and any other territory of 
the United States;
    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;
    Subsidiary means any company that is owned or Controlled directly 
or indirectly by another company;
    Underserved Rural Area means:
    (1) A Non-Metropolitan Area that:
    (i) Qualifies as a Low-Income Area; and
    (ii) Is experiencing economic distress evidenced by 30 percent or 
more of resident households with one or more of these four housing 
conditions in the most recent census for which data are available:
    (A) Lacking complete plumbing;
    (B) Lacking complete kitchen;
    (C) Paying 30 percent or more of income for owner costs or tenant 
rent; or
    (D) Having more than 1 person per room;
    (2) An area as specified in the applicable NOFA and/or Assistance 
Agreement;
    Uniform Administrative Requirements means the Uniform 
Administrative

[[Page 6441]]

Requirements, Cost Principles, and Audit Requirements for Federal 
Awards (2 CFR part 1000);
    Very Low-Income means:
    (1) Having, in the case of owner-occupied Housing, income not 
greater than 50 percent of the area median income with adjustments for 
Family size, as determined by HUD, except that HUD may establish income 
ceilings higher or lower than 50 percent of the median for the area on 
the basis of HUD findings that such variations are necessary because of 
prevailing levels of construction costs or fair market rents, or 
unusually high or low Family incomes; and
    (2) Having, in the case of rental Housing, income not greater than 
50 percent of the area median income, with adjustments for Family size, 
as determined by HUD, except that HUD may establish income ceilings 
higher or lower than 50 percent of the median for the area on the basis 
of HUD findings that such variations are necessary because of 
prevailing levels of construction costs or fair market rents, or 
unusually high or low Family incomes.


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 OMB control number for the CMF Award application is 1559-0036. 
The compliance date requirements for the collection of information in 
Sec.  1807.902 is stayed indefinitely, pending Office of Management and 
Budget approval and assignment of an OMB control number.


Sec.  1807.107  Applicability of regulations for CMF Awards.

    As of February 8, 2016, the regulations of this part are applicable 
for CMF Awards made pursuant to Notices of Funds Availability published 
after February 8, 2016.

Subpart B--Eligibility


Sec.  1807.200  Applicant eligibility.

    (a) General requirements. An Applicant will be deemed eligible to 
apply for a CMF Award if it is:
    (1) A Certified 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 1805.201,
    (ii) A Certified CDFI that has been in existence as a legally 
formed entity as set forth in the applicable Notice of Funds 
Availability (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 a certain percentage, set forth in the 
applicable NOFA, of the Applicant's 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 paragraph (a)(2) of 
this section 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 paragraph (a)(1) of 
this section, the CDFI Fund will verify that the Applicant is a 
Certified CDFI during the application eligibility review.

Subpart C--Eligible Purposes; Eligible Activities; Restrictions


Sec.  1807.300  Eligible purposes.

    Each Recipient must use its CMF Award for the eligible activities 
described in Sec.  1807.301 so long as such eligible activities 
increase private capital for and increase investment in:
    (a) Development, Preservation, Rehabilitation, and/or Purchase of 
Affordable Housing for primarily Extremely Low-Income, Very Low-Income, 
and Low-Income Families; and/or
    (b) Economic Development Activities.
    (1) Economic Development Activity must support Affordable Housing;
    (2) The Recipient may undertake Economic Development Activity In 
Conjunction With Affordable Housing Activities that are undertaken by 
parties other than the Recipient;
    (3) If the Recipient uses its CMF Award to fund an Economic 
Development Activity In Conjunction With Affordable Housing Activity, 
it must track the resulting Affordable Housing, as set forth in subpart 
D of this part, to the extent the Affordable Housing was financed by 
the CMF Award. For the purposes of meeting the 10-year affordability 
period requirement, Recipients are not required to track Affordable 
Housing that was financed by sources other than the CMF Award.


Sec.  1807.301  Eligible activities.

    The Recipient must use its CMF Award to finance and support 
Affordable Housing Activities and/or Economic Development Activities 
through the following eligible activities:
    (a) To capitalize 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;
    (e) To make Risk-Sharing Loans; and
    (f) To provide Loan Guarantees.


Sec.  1807.302  Restrictions on use of CMF Award.

    (a) The Recipient may not use its CMF Award 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) The Recipient shall not use the CMF Award to finance or support 
Projects that include:
    (1) 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; or
    (2) Farming activities (within the meaning of Internal Revenue Code 
(IRC) section 2032A(e)(5)(A) or (B)), if, as of the close of the 
taxable year of the

[[Page 6442]]

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.
    (c) In any given application round, no more than 30 percent of a 
CMF Award may be used for Economic Development Activities.
    (d) Any Recipient that uses its CMF Award for a Loan Guarantee or 
Loan Loss Reserves must ensure the underlying loan(s) are made to 
support Affordable Housing Activities and Economic Development 
Activities. The Affordable Housing resulting from the Recipient's Loan 
Guarantee or Loan Loss Reserve shall be tracked for 10 years, as set 
forth in subpart D of this part.
    (e) If loans that are made pursuant to a Loan Guarantee or Loan 
Loss Reserves are repaid during the Investment Period, the Recipient 
must use the repaid funds for Loan Guarantees or Loan Loss Reserves 
targeted to the income population (Extremely Low-Income, Very Low-
Income, Low-Income) set forth in the Recipient's Assistance Agreement, 
for the duration of the Investment Period.
    (f) The Recipient may not use more than five (5) percent of its CMF 
Award for Direct Administrative Expenses.


Sec.  1807.303  Authorized uses of Program Income.

    (a) Program Income earned in the form of principal and equity 
repayments must be used by the Recipient for the approved, eligible CMF 
Award uses as further set forth in the Assistance Agreement for the 
duration of the Investment Period.
    (b) Program Income earned in the form of interest payments, and all 
other forms of Program Income (except for that which is earned as 
described in paragraph (a) of this section, must be used by the 
Recipient as set forth in the Assistance Agreement and in accordance 
with 2 CFR part 1000.

Subpart D--Qualification as Affordable Housing


Sec.  1807.400  Affordable Housing--general.

    Each Recipient that uses its CMF Award for Affordable Housing 
Activities must ensure that 100 percent of Eligible Project Costs are 
attributable to Affordable Housing; meaning, that they comply with the 
affordability qualifications set forth in this subpart for Eligible-
Income Families. Further, as a subset of said 100 percent, greater than 
50 percent of the Eligible Project Costs must be attributable to 
Affordable Housing that comply with the affordability qualifications 
set forth in this subpart for Low-Income, Very Low-Income, or Extremely 
Low-Income Families, or as further set forth in the applicable NOFA 
and/or Assistance Agreement.


Sec.  1807.401  Affordable Housing--Rental Housing.

    To qualify as Affordable Housing, each rental Multi-family housing 
Project financed with CMF Award must have at least 20 percent of the 
units occupied by any combination of Low-Income, Very Low-Income, or 
Extremely Low-Income Families and must comply with the rent limits set 
forth herein. However, the CDFI Fund may require a greater percentage 
of the units per Project to be income-targeted and/or require a 
specific targeted income commitment in any given application round, as 
set forth in the NOFA and Assistance Agreement for that application 
round.
    (a) Rent limitation. The gross rent limits for Affordable Housing 
are determined under the provisions in IRC section 42(g)(2). In this 
determination, if this part imposes an income restriction on a unit 
that is greater than 60 percent of area median income, adjusted for 
Family size, then the provisions of IRC section 42(g)(2) are applied as 
if that income restriction on the unit satisfied IRC section 42(g)(1). 
The maximum rent is a rent that does not exceed:
    (1) For an Eligible-Income Family, 30 percent of the annual income 
of a Family whose annual income equals 120 percent of the area median 
income, with adjustments for number of bedrooms in the unit, as set 
forth in IRC section 42(g)(2).
    (2) For a Low-Income Family, 30 percent of the annual income of a 
Family whose annual income equals 80 percent of the area median income, 
with adjustments for number of bedrooms in the unit, as set forth in 
IRC section 42(g)(2). If the unit or tenant receives Federal or State 
rental subsidy, and the Family pays as a contribution towards rent not 
more than 30 percent of the Family's income, the maximum rent (i.e., 
tenant contribution plus rental subsidy) is the rent allowable under 
the Federal or State rental subsidy program;
    (3) For a Very Low-Income Family, 30 percent of the annual income 
of a Family whose annual income equals 50 percent of the area median 
income, with adjustments for number of bedrooms in the unit as 
described in paragraph (a) of this section. If the unit or tenant 
receives Federal or State rental subsidy, and the Family pays as a 
contribution towards rent not more than 30 percent of the Family's 
income, the maximum rent (i.e., tenant contribution plus rental 
subsidy) is the rent allowable under the Federal or State rental 
subsidy program; or
    (4) For an Extremely Low-Income Family, 30 percent of the annual 
income of a Family whose annual income equals 30 percent of the area 
median income, with adjustments for number of bedrooms in the unit as 
described in paragraph (a) of this section. If the unit or tenant 
receives Federal or State rental subsidy, and the Family pays as a 
contribution toward rent not more than 30 percent of the Family's 
income, the maximum rent (i.e., tenant contribution plus rental 
subsidy) is the rent allowable under the Federal or State rental 
subsidy program.
    (b) Nondiscrimination against rental assistance subsidy holders. 
The Recipient 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 Recipient 
shall ensure that utility allowances and submetering rules are 
consistent with regulations concerning utility allowances and 
submetering in buildings that are subject to gross rent restrictions 
under IRC section 42(g)(2).
    (d) Periods of affordability. Housing under this section 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. Other 
recordable mechanisms must be approved in writing and in advance by the 
CDFI Fund. The affordability restrictions may terminate upon 
foreclosure or transfer in lieu of foreclosure. However, 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

[[Page 6443]]

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.
    (e) Subsequent rents during the affordability period. Any increase 
in rent for a CMF-financed unit requires that tenants of those units be 
given at least 30 days prior written notice before the implementation 
of the rent increase. Regardless of changes in annual rents and in 
median income over time, the CMF rents for a Project are not required 
to be lower than the CMF rent limits for the Project in effect at the 
time when the Project is Committed for use.
    (f) Tenant income determination. (1) Each year during the period of 
affordability, the tenant's income shall be re-examined; tenant income 
examination and verification is ultimately the responsibility of the 
Recipient. Annual income shall include income from all household 
members. The Recipient must require the Project owner to obtain 
information on rents and occupancy of Affordable Housing financed or 
assisted with a CMF Award in order to demonstrate compliance with this 
section.
    (2) One of the following two definitions of ``annual income'' must 
be used to determine whether a Family is income-eligible:
    (i) Adjusted gross income as defined for purposes of reporting 
under Internal Revenue Service (IRS) Form 1040 series for individual 
Federal annual income tax purposes; or
    (ii) ``Annual Income'' as defined at 24 CFR 5.609 (except that when 
determining the income of a homeowner for an owner-occupied 
Rehabilitation Project, the value of the homeowner's principal 
residence may be excluded from the calculation of Net Family Assets, as 
defined in 24 CFR 5.603).
    (3) Although either of the above two definitions of ``annual 
income'' is permitted, in order to calculate adjusted income, 
exclusions from income set forth at 24 CFR 5.611 shall be applied.
    (4) 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 section.
    (g) Over-income tenants. (1) CMF-financed or assisted 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 no 
greater than the lesser of the amount payable by the tenant under State 
or local law or 30 percent of the Family's annual income, except if the 
gross rent of a unit is subject to the restrictions in IRC section 
42(g)(2) or the restrictions in an extended low-income housing 
commitment under IRC section 42(h)(6), then the tenants of that unit 
must pay rent governed by those restrictions. Tenants who no longer 
qualify as Eligible-Income are not required to pay rent in excess of 
the market rent for comparable, unassisted units in the neighborhood.
    (3) If the income of a tenant of a CMF-financed or assisted unit no 
longer qualifies, the Recipient may designate another unit, within the 
CMF-financed or assisted Project, as a replacement unit that meets the 
affordability qualifications for the same income category as the 
original unit, as further set forth in the Recipient's Assistance 
Agreement. If there is not an available replacement unit, the Recipient 
must fill the first available vacancy with a tenant that meets the 
affordability qualifications for the same income category of the 
original unit as necessary to maintain compliance with the CMF 
requirements and the Assistance Agreement.


Sec.  1807.402  Affordable Housing--Homeownership.

    (a) Purchase with or without Rehabilitation. A Recipient that uses 
the CMF Award for the eligible activities set forth in Sec.  1807.301 
for Purchase must ensure the purchasing Family and Housing meets the 
affordability requirements of this subpart.
    (1) The Housing must be Single-family housing.
    (2) The Single-family 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 HUD and the applicable Participating Jurisdiction.
    (3) The Single-family housing must be purchased by a qualifying 
Family as set forth in Sec.  1807.400. The Single-family housing must 
be the principal residence of the Family throughout the period 
described in paragraph (a)(4) of this section.
    (4) Periods of affordability. Single-family housing under this 
section must meet the affordability requirements for at least 10 years 
at the time of purchase by the Family.
    (5) Resale. To ensure that CMF Awards are being used for qualifying 
Families for the entire 10-year affordability period, recoupment and 
redeployment or resale strategies must be imposed by the Recipient. A 
recoupment strategy must ensure that, in the event the qualifying 
homeowner sells the Housing before the end of the 10-year affordability 
period and the new homeowner does not meet the affordability 
qualifications set forth in Sec.  1807.400, an amount equal to the 
amount of the CMF Award investment in the Housing, whether recouped or 
not, is used to finance additional Affordable Housing Activities for a 
qualifying Family in the same income category for Affordable Housing 
Homeownership in the manner set forth in this section, except that the 
Housing must meet the affordability requirements only for the remaining 
duration of the affordability period. The Recipient may design and 
implement its own recoupment strategy. Deed restrictions, covenants 
running with the land, or other similar mechanisms may be used as the 
mechanism to impose a resale strategy. The Recipient shall report to 
the CDFI Fund the event of resale and/or recoupment and redeployment of 
the CMF Award, or an equivalent amount, in the manner described in the 
Assistance Agreement. 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 Recipient 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. If 
there is a sale of Single-family housing funded by a CMF Award prior to 
the completion of the 10-year affordability period, the Recipient must 
demonstrate that it placed into service Single-family housing targeting 
the same income population (i.e., Extremely Low-Income, Very Low-
Income, Low-Income) as the original Single-family housing, as set forth 
in the Assistance Agreement, financed with an equivalent amount to the 
recouped portion of the CMF Award, that will be tracked for the 
duration of the affordability period of the original Single-family 
housing.
    (b) Rehabilitation not involving Purchase. Single-family 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 paragraph (b).
    (1) The estimated value of the Single-family housing, after 
Rehabilitation,

[[Page 6444]]

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
    (2) The Single-family housing is the principal residence of a 
qualifying Family as set forth in Sec.  1807.400, at the time that the 
CMF Award is Committed to the Single-family housing.
    (3) Single-family housing under this paragraph (b) must meet the 
affordability requirements for at least 10 years after Rehabilitation 
is completed or meet the resale provisions of paragraph (a)(5) of this 
section.
    (c) Ownership interest. The ownership in the Single-family housing 
assisted under this section must meet the definition of Homeownership 
as defined in Sec.  1807.104.
    (d) New construction without Purchase. Newly constructed Single-
family housing that is built on property currently owned by a Family 
that will occupy the Single-family 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-financed 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 this section. The Homeownership 
units are subject to a minimum period of affordability equal to the 
remaining affordability period.

Subpart E--Leveraged Costs; Eligible Project Costs; Commitment 
Requirements


Sec.  1807.500  Leveraged Costs; Eligible Project Costs.

    (a) Each CMF Award must result in Eligible Project Costs in an 
amount that equals at least 10 times the amount of the CMF Award or 
some higher standard established by the CDFI Fund in the Recipient's 
Assistance Agreement. Such Eligible Project Costs must be for 
Affordable Housing Activities and Economic Development Activities, as 
set forth in the Assistance Agreement.
    (b) Leveraged Costs. (1) The applicable NOFA and/or the Assistance 
Agreement may set forth a required percentage of Leveraged Costs that 
must be funded by non-governmental sources.
    (2) The Recipient must report to the CDFI Fund all Leveraged Costs, 
with the following limitations:
    (i) No costs attributable to prohibited uses as set forth in Sec.  
1807.302(a) and (b) may be reported as Leveraged Costs;
    (ii) All Leveraged Costs attributable to Affordable Housing 
Activities must be for Affordable Housing, as set forth in Sec.  
1807.401 or Sec.  1807.402, and as further described in the Assistance 
Agreement;
    (iii) All eligible Leveraged Costs attributable to Economic 
Development Activities shall be described in the Assistance Agreement.
    (c) Recipients must report Leveraged Costs information through 
forms or electronic systems provided by the CDFI Fund. Consequently, 
Recipients must maintain appropriate documentation, such as audited 
financial statements, wire transfers documents, pro-formas, and other 
relevant records, to support such reports.


Sec.  1807.501  Commitments; Payments.

    (a) The CMF Award must be Committed by the Recipient for use by the 
date designated in its Assistance Agreement.
    (b) The Recipient must evidence such commitment with a written, 
legally binding agreement to provide CMF Award proceeds to the 
qualifying Family, developer or project sponsor for a Project whose:
    (1) Construction can reasonably be expected to start within 12 
months of the commitment agreement date;
    (2) Property title will be transferred within 6 months of the 
commitment agreement date; or
    (3) Construction schedule ensures Project Completion within 5 years 
of a date specified in the Assistance Agreement.
    (c) The CDFI Fund will make Payment of CMF Award based on a 
deployment schedule contained in the CMF Award application, in addition 
to any other documentation and/or forms that the CDFI Fund may require.
    (d) Upon receipt of CMF Award, the Recipient must make an initial 
disbursement of said CMF Award by the date designated in its Assistance 
Agreement. The CDFI Fund may make Payment of CMF Award in a lump sum or 
other manner, as determined appropriate by the CDFI Fund. The CDFI Fund 
will not provide any Payment until the Recipient has satisfied all 
conditions set forth in the applicable NOFA and Assistance Agreement.


Sec.  1807.502  CMF Award limits.

    An eligible Applicant and its Subsidiaries and Affiliates may not 
be awarded more than 15 percent of the aggregate funds available for 
CMF Awards during any year.


Sec.  1807.503  Project Completion; Property standards.

    (a) Upon Project Completion, the Project must be placed into 
service by the date designated in the Assistance Agreement. Project 
Completion occurs, as determined by the CDFI Fund, when:
    (1) All necessary title transfer requirements and construction work 
have been performed;
    (2) The property standards of paragraph (b) of this section have 
been met; and
    (3) The final drawdown of the CMF Award has been made to the 
project sponsor or developer;
    (4) When a CMF Award is used for Preservation, Project Completion 
occurs when the refinance and/or Rehabilitation is completed in 
addition to the requirements set forth in this paragraph (a).
    (b) By the Project Completion date, the Project must meet the 
requirements of this part, including the following property standards 
(which must be met for a period of at least 10 years after the Project 
Completion date):
    (1) Projects that are constructed or Rehabilitated with a CMF Award 
must meet all applicable State and local codes, Rehabilitation 
standards, ordinances, and zoning requirements at the time of Project 
Completion or, in the absence of a State or local building code, the 
International Residential Code or International Building Code (as 
applicable) of the International Code Council.
    (2) In addition, Projects must meet the following requirements:
    (i) Accessibility. The Project must meet all applicable 
accessibility requirements set forth at 24 CFR part 8, which implements 
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and 
Titles II and III of the Americans with Disabilities Act (42 U.S.C. 
12131-12189) implemented at 28 CFR parts 35 and 36, as applicable. 
Multi-family housing, as defined in 24 CFR 100.201, must also meet all 
applicable design and construction requirements set forth in 24 CFR 
100.205, which implements the Fair Housing Act (42 U.S.C. 3601-3619).
    (ii) Disaster mitigation. The Project must meet all applicable 
State and local codes, ordinances, or other disaster mitigation 
requirements (e.g., earthquake, hurricanes, flooding, wild fires), or 
other requirements as the Department of Housing and Urban Development 
has established in 24 CFR part 93.
    (iii) Lead-based paint. The Project must meet all applicable lead-
based paint requirements, including those set forth in 24 CFR part 35.

[[Page 6445]]

    (3) Rehabilitation standards. In addition, all Rehabilitation that 
is financed with a CMF Award must meet the following requirements:
    (i) For rental Housing, if the remaining useful life of one or more 
major systems is less than the 10-year period of affordability, the 
Recipient must ensure that, at Project Completion, the developer or 
Project sponsor establishes a replacement reserve and that monthly 
payments are made to the reserve that are adequate to repair or replace 
the systems as needed. Major systems include: Structural support; 
roofing; cladding and weatherproofing (e.g., windows, doors, siding, 
gutters); plumbing; electrical; heating, ventilation, and air 
conditioning.
    (ii) For Homeownership Single-family housing, the Recipient must 
ensure that, at Project Completion, the Housing is decent, safe, 
sanitary, and in good repair. The Recipient must ensure that timely 
corrective and remedial actions are taken by the Project owner to 
address identified life threatening deficiencies.
    (4) Manufactured housing. Construction of all manufactured housing 
must meet the Manufactured Home Construction and Safety Standards set 
forth in 24 CFR part 3280. These standards preempt State and local laws 
or codes, which are not identical to the Federal standards for the new 
construction of manufactured 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 a CMF Award must meet the requirements set out 
in paragraph (b)(1) of this section.

Subpart F--Tracking Funds; Uniform Administrative Requirements; 
Nature of Funds


Sec.  1807.600  Tracking funds.

    The Recipient shall develop and maintain an internal tracking and 
reporting system that ensures that the CMF Award is used in accordance 
with this part and the Assistance Agreement.


Sec.  1807.601  Uniform Administrative Requirements.

    The Uniform Administrative Requirements apply to all CMF Awards.


Sec.  1807.602  Nature of funds.

    CMF Awards are Federal financial assistance with regard to the 
application of Federal civil rights laws. CMF Award funds retain their 
Federal character until the end of the Investment Period.

Subpart G--Notice of Funds Availability; Applications


Sec.  1807.700  Notice of funds availability.

    Each Applicant must submit a CMF Award application in accordance 
with the applicable Notice of Funds Availability (NOFA) published in 
the Federal Register. The NOFA will advise prospective Applicants on 
how to obtain and complete an application and will establish deadlines 
and other requirements. The NOFA will specify application evaluation 
factors and any limitations, special rules, procedures, and 
restrictions for a particular application round. After receipt of an 
application, the CDFI Fund may request clarifying or technical 
information on the materials submitted as part of the application.

Subpart H--Evaluation and Selection of Applications


Sec.  1807.800  Evaluation and selection--general.

    Each Applicant will be evaluated and selected, at the sole 
discretion of the CDFI Fund, to receive a CMF Award based on a review 
process that will include a paper or electronic application, and may 
include an interview(s) and/or site visit(s), and that is intended to:
    (a) Ensure that Applicants are evaluated on a merit basis and in a 
fair and consistent manner;
    (b) Ensure that each Recipient can successfully meet its leveraging 
goals and achieve Affordable Housing Activity and Economic Development 
Activity impacts;
    (c) Ensure that Recipients 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 disinvestment;
    (4) Economic Development Activities that target Extremely Low-
Income, Very Low-Income, and Low-Income Families within the Recipient's 
Service Area; and
    (5) Any other criteria the CDFI Fund shall set forth in the 
applicable NOFA; and
    (d) Take into consideration other factors as set forth 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 a CMF Award to generate 
additional investments, including private sources of funding;
    (2) The need for affordable housing in the Applicant's Service 
Area;
    (3) The ability of the Applicant to obligate amounts and undertake 
activities in a timely manner; and
    (4) In the case of an Applicant that has previously received 
assistance under any CDFI Fund program, 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.
    (c) The CDFI Fund may consider any other factors that it deems 
appropriate in reviewing an application, as set forth in the applicable 
NOFA, the application and related guidance materials.
    (d) 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.
    (e) Recipient selection. The CDFI Fund will select Recipients 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 CMF Award


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

[[Page 6446]]

Fund. The Assistance Agreement will set forth certain required terms 
and conditions for the CMF Award that may include, but are not limited 
to, the following:
    (1) The amount of the CMF Award;
    (2) The approved uses of the CMF Award;
    (3) The approved Service Area;
    (4) The time period by which the CMF 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 
pursuant to this part, the NOFA, and the Recipient's application.
    (b) The Assistance Agreement shall provide that, in the event of 
fraud, mismanagement, noncompliance with the Act or these regulations, 
or noncompliance with the terms and conditions of the Assistance 
Agreement, on the part of the Recipient, the CDFI Fund, in its 
discretion, may make a determination to:
    (1) Require changes in the performance goals set forth in the 
Assistance Agreement;
    (2) Revoke approval of the Recipient's application;
    (3) Reduce or terminate the CMF Award;
    (4) Require repayment of any CMF Award that have been paid to the 
Recipient;
    (5) Bar the Recipient from applying 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 making a determination that the Recipient has failed 
to comply substantially with the Act or these regulations or an 
Assistance Agreement, the CDFI Fund shall provide the Recipient with 
reasonable notice and opportunity for hearing.


Sec.  1807.901  Payment of funds.

    CMF Awards provided pursuant to this part may be provided in a lump 
sum payment or in some other manner, as determined appropriate by the 
CDFI Fund. The CDFI Fund shall not provide any Payment under this part 
until a Recipient has satisfied all conditions set forth in the 
applicable NOFA and Assistance Agreement.


Sec.  1807.902  Data collection and reporting.

    (a) Data; General. The Recipient must maintain such records as may 
be prescribed by the CDFI Fund that are necessary to:
    (1) Disclose the manner in which the CMF Award 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 the CMF Award.
    (b) Customer profiles. The Recipient must compile such data on the 
gender, race, ethnicity, national origin, or other information on 
individuals that are benefiting from the CMF Award, as the CDFI Fund 
shall prescribe in the Assistance Agreement. Such data will be used to 
determine whether residents of the Recipient's Service Area are 
adequately served and to evaluate the impact of the CMF Award.
    (c) Access to records. The Recipient 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 the Treasury to ensure compliance 
with the requirements of this part and to evaluate the impact of the 
CMF Award. The United States Government, including the U.S. Department 
of the Treasury, the Comptroller General, and their duly authorized 
representatives, shall have full and free access to the Recipient'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 receive a CMF Award from the 
Recipient.
    (d) Retention of records. The Recipient shall comply with all 
applicable record retention requirements set forth in the Uniform 
Administrative Requirements (as applicable) and the Assistance 
Agreement.
    (e) Data collection and reporting--(1) Financial reporting, (i) All 
Nonprofit Organization Recipients that are required to have their 
financial statements audited pursuant to the Uniform Administrative 
Requirements, must submit their single-audits by a time set forth in 
the applicable NOFA or Assistance Agreement. Nonprofit Organization 
Recipients (excluding Insured CDFIs and State-Insured Credit Unions) 
that are not required to have financial statements audited pursuant to 
the Uniform Administrative Requirements, must submit to the CDFI Fund a 
statement signed by the Recipient's authorized representative or 
certified public accountant, asserting that the Recipient is not 
required to have a single-audit pursuant to the Uniform Administrative 
Requirements as indicated in the Assistance Agreement. In such 
instances, the CDFI Fund may require additional audits to be performed 
and/or submitted to the CDFI Fund as stated in the applicable Notice of 
Funds Availability and Assistance Agreement.
    (ii) For-profit Recipients (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 
Accountants 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) Annual report. (i) The Recipient shall submit a performance and 
financial report that shall be specified in the Assistance Agreement 
(annual report). The annual report consists of several components which 
may include, but are not limited to, a report on performance goals and 
measures, explanation of any Recipient noncompliance, and such other 
information as may be required by the CDFI Fund. The annual report 
components shall be specified and described in the Assistance 
Agreement.
    (ii) The CDFI Fund will use the annual report to collect data to 
assess the Recipient's compliance with its performance goals and the 
impact of the CMF and the CDFI industry.
    (iii) The Recipient is responsible for the timely and complete 
submission of the annual report, even if all or a portion of the 
documents actually are completed by another entity. If such other 
entities are required to provide information for the annual report, or 
such other documentation that the CDFI Fund might require, the 
Recipient is responsible for ensuring that the information is submitted 
timely and complete. The CDFI Fund reserves the right to contact such 
other entities and require that additional information and 
documentation be provided.
    (iv) The CDFI Fund's review of the compliance of an Insured CDFI, a 
Depository Institution Holding Company or a State-Insured Credit Union 
with the terms and conditions of its Assistance Agreement may also 
include information from the Appropriate Federal Banking Agency or

[[Page 6447]]

Appropriate State Agency, as the case may be.
    (f) Public access. The CDFI Fund shall make reports described in 
this section available for public inspection after deleting or 
redacting any materials necessary to protect privacy or proprietary 
interests.


Sec.  1807.903  Compliance with government requirements.

    In carrying out its responsibilities pursuant to an Assistance 
Agreement, the Recipient shall comply with all applicable Federal, 
State, and local laws, regulations, and ordinances, Uniform 
Administrative Requirements, and Executive Orders. Furthermore, 
Recipients must comply with the CDFI Fund's environmental quality 
regulations (12 CFR part 1815) as well as all other Federal 
environmental requirements applicable to Federal awards.


Sec.  1807.904  Lobbying restrictions.

    No CMF Award may be expended by a Recipient 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.


Sec.  1807.905  Criminal provisions.

    The criminal provisions of 18 U.S.C. 657 regarding embezzlement or 
misappropriation of funds are applicable to all Recipients and 
insiders.


Sec.  1807.906  CDFI Fund deemed not to control.

    The CDFI Fund shall not be deemed to control a Recipient by reason 
of any CMF Award provided under the Act for the purpose of any 
applicable law.


Sec.  1807.907  Limitation on liability.

    The liability of the CDFI Fund and the United States Government 
arising out of any CMF Award shall be limited to the amount of the CMF 
Award. 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 a CMF Award should report such incidences 
to the Office of Inspector General of the U.S. Department of the 
Treasury.

Mary Ann Donovan,
Director, Community Development Financial Institutions Fund.
[FR Doc. 2016-02132 Filed 2-3-16; 4:15 pm]
 BILLING CODE 4810-70-P`