[House Report 117-352]
[From the U.S. Government Publishing Office]
117th Congress } { Report
HOUSE OF REPRESENTATIVES
2nd Session } { 117-352
======================================================================
CDFI BOND GUARANTEE PROGRAM IMPROVEMENT ACT OF 2022
_______
June 7, 2022.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Ms. Waters, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 7733]
The Committee on Financial Services, to whom was referred
the bill (H.R. 7733) to amend the Community Development Banking
and Financial Institutions Act of 1994 to reauthorize and
improve the community development financial institutions bond
guarantee program, and for other purposes, having considered
the same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Section-by-Section Analysis of the Legislation................... 3
Hearings......................................................... 4
Committee Consideration.......................................... 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 4
Statement of Performance Goals and Objectives.................... 4
New Budget Authority and C.B.O. Cost Estimate.................... 5
Committee Cost Estimate.......................................... 5
Federal Mandates Statement....................................... 5
Advisory Committee Statement..................................... 5
Applicability to Legislative Branch.............................. 5
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits....................................................... 5
Duplicative Federal Programs..................................... 5
Changes to Federal Law........................................... 6
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``CDFI Bond Guarantee Program
Improvement Act of 2022''.
SEC. 2. SENSE OF CONGRESS.
It is the sense of Congress that the authority to guarantee bonds
under section 114A of the Community Development Banking and Financial
Institutions Act of 1994 (12 U.S.C. 4713a) (commonly referred to as the
``CDFI Bond Guarantee Program'') provides community development
financial institutions with a sustainable source of long-term capital
and furthers the mission of the Community Development Financial
Institutions Fund (established under section 104(a) of such Act (12
U.S.C. 4703(a)) to increase economic opportunity and promote community
development investments for underserved populations and distressed
communities in the United States.
SEC. 3. GUARANTEES FOR BONDS AND NOTES ISSUED FOR COMMUNITY OR ECONOMIC
DEVELOPMENT PURPOSES.
Section 114A of the Community Development Banking and Financial
Institutions Act of 1994 (12 U.S.C. 4713a) is amended--
(1) in subsection (c)(2), by striking ``, multiplied by an
amount equal to the outstanding principal balance of issued
notes or bonds'';
(2) in subsection (e)(2)(B), by striking ``$100,000,000'' and
inserting ``$25,000,000''; and
(3) in subsection (k), by striking ``September 30, 2014'' and
inserting ``the date that is 4 years after the date of
enactment of the CDFI Bond Guarantee Program Improvement Act of
2022''.
SEC. 4. REPORT ON THE CDFI BOND GUARANTEE PROGRAM.
Not later than 1 year after the date of enactment of this Act, and
not later than 3 years after such date of enactment, the Secretary of
the Treasury shall issue a report to the Committee on Financial
Services of the House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate on the effectiveness of the
CDFI bond guarantee program established under section 114A of the
Community Development Banking and Financial Institutions Act of 1994
(12 U.S.C. 4713a).
Purpose and Summary
On May 12, 2022, Representative Cleaver introduced H.R.
7733, the ``CDFI Bond Guarantee Program Improvement Act of
2022,'' which would reduce the CDFI Bond Guarantee Program
(BGP) minimum issuance threshold from $100 million to $25
million and make the program permanent. It would also activate
a re-lending account, which allows any amounts remaining after
bonds are repaid for use to fund additional loans.
Background and Need for Legislation
The BGP, authorized by the Small Business Jobs Act of 2010,
is a federal credit program of the U.S. Department of the
Treasury's (Treasury) Community Development Financial
Institutions Fund (CDFI Fund). The program provides CDFIs with
long-term capital at fixed, below-market interest rates through
federally-guaranteed bonds that are issued by approved bond
issuers. Qualified issuers, which may be certified CDFIs or
entities the CDFIs designate to issue bonds on their behalf
approved by the CDFI Fund, apply to the CDFI Fund for
authorization to issue bonds worth a minimum of $100 million,
and the CDFI Fund provides a 100% guarantee on those bonds. The
bond issuers then sell those bonds to the Federal Financing
Bank and use the proceeds to make loans to CDFIs to finance or
refinance new or existing community development projects in
low-income urban, rural, and Native communities throughout the
country. Under the law, Treasury provides a 100% guarantee on
up to 10 bonds annually. Since its inception, the CDFI Fund has
completed nine rounds of the program and guaranteed nearly $1.7
billion in bonds, and 35 CDFIs have deployed about $1.3 billion
in loans to develop small businesses, commercial real estate,
housing units, charter schools, day care or health care
centers, and rural infrastructure.
In January 2022, the Community Reinvestment Fund, USA,
testified before the Senate Banking Committee, noting that the
current threshold ``makes it difficult for small and medium
sized CDFIs to participate in the BGP as they are generally
seeking smaller bond loans, in the $10 million to $25 million
range. Based on data from the CDFI Fund of 35 CDFI Bond Loans,
``[s]ixty-five percent of the loans are for $50 million or
less, 44% of the loans are $25 million or less, and 24% of the
loans to date are for $15 million or less''. While
authorization for BGP lapsed in 2014, the program has been
extended on a year-by-year basis in annual appropriations
bills. CDFI advocates also note that ``[t]he BGP is a sound,
well managed program and to date there have been no
delinquencies or defaults on any payment under this program.''
When Congress created the BGP, it authorized the use of an
account designed to hold any proceeds remaining after bond
repayments have been made, so they may be available for funding
additional loans. According to the CDFI Fund, the account has
never been used in the history of the BGP, in part because of
an unintended term in the formula for calculating the relending
fund amount.
By lowering the minimum bond loan threshold to $25 million,
the H.R. 7733 would allow more eligible CDFIs, especially those
seeking smaller loan bond amounts, to access the capital needed
to spur community and economic development projects in
communities across the nation. It would also make the program
permanent, and correct the formula used for the program's
relending account to allow it to function for the first time,
making any amounts remaining after bonds have been repaid,
available for issuing additional loans.
This bill was considered at the House Financial Services
Committee hearing on February 16, 2022, and a previous version
of the bill was included in Section 5 of the ``Promoting and
Advancing Communities of Color Through Inclusive Lending Act,''
introduced by Chairwoman Waters and Representative Meeks in
August 2020. This bill is the House companion to a bipartisan
bill in the Senate, S. 3411, which is sponsored by Senators
Smith (D-MN) and Rounds (R-SD) and was introduced on January 5,
2022.
Section-by-Section Analysis
Section 1. Short title
This section establishes the short title of the
bill as the ``CDFI Bond Guarantee Program Improvement Act of
2022.''
Section 2. Sense of Congress
This section provides that it is the sense of
Congress that the CDFI Bond Guarantee Program provides CDFIs
with a sustainable source of long-term capital and furthers the
mission of the CDFI Fund to increase economic opportunity and
promote community development investments for underserved
populations and distressed communities.
Section 3. Guarantees for bonds and notes issued for community or
economic development purposes
This section would amend Section 114A of the
Community Development Banking and Financial Institutions Act of
1994, to remove certain restrictions on the amount of bonds or
notes that may be made available for new eligible community or
economic development purposes, and sets the minimum guarantee
amount to $25 million. This section would also make the program
permanent four years after the bill's enactment.
Section 4. Report on the CDFI Bond Guarantee Program
This section would require that Secretary of the
Treasury submit two reports to Congress on the effectiveness of
the CDFI Bond Guarantee Program, with the first within 1 year
after the enactment of this bill, and the second within the 3rd
year of the bill's enactment.
Hearings
For the purposes of section 3(c)(6) of House rule XIII, the
Committee on Financial Services' Full Committee a hearing on
February 16, 2022, to consider H.R. 7733 entitled, ``An
Unprecedented Investment for Historic Results: How Federal
Support for MDIs and CDFIs Have Launched a New Era for
Disadvantaged Communities.''
Committee Consideration
The Committee on Financial Services met in open session on
May 18, 2022 and accepted an amendment to H.R. 7733 offered by
Rep. Timmons by a voice vote. Subsequently, the Committee on
Financial Services ordered H.R. 7733 to be reported favorably
to the House with an amendment in the nature of a substitute by
a voice vote, a quorum being present.
Committee Votes and Roll Call Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that no
roll call votes occurred during consideration of H.R. 7733.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of Performance Goals and Objectives
Pursuant to clause (3)(c) of rule XIII of the Rules of the
House of Representatives, the goals of H.R. 7733 are to reduce
the CDFI Bond Guarantee Program (BGP) minimum issuance
threshold from $100 million to $25 million and make the program
permanent and to activate a re-lending account, which allows
any amounts remaining after bonds are repaid for use to fund
additional loans.
New Budget Authority and CBO Cost Estimate
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a) of the
Congressional Budget Act of 1974, and pursuant to clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 402 of the Congressional Budget Act
of 1974, the Committee has requested an estimate from the
Director of the Congressional Budget Office. CBO was unable to
provide an estimate in a timely manner.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 7733. After
careful review, including discussions with the Congressional
Budget Office, the Committee estimates that H.R. 7733 would
have an insignificant impact on spending.
Unfunded Mandate Statement
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act (as amended by Section 101(a)(2) of the
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee
adopts as its own the estimate of federal mandates regarding
H.R. 7733, as amended, prepared by the Director of the
Congressional Budget Office.
Advisory Committee
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Application of Law to the Legislative Branch
Pursuant to section 102(b)(3) of the Congressional
Accountability Act, Pub. L. No. 104-1, H.R. 7733, as amended,
does not apply to terms and conditions of employment or to
access to public services or accommodations within the
legislative branch.
Earmark Statement
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 7733 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as described in clauses 9(e), 9(f), and 9(g) of rule
XXI.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of H.R. 7733 establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
federal program, a program that was included in any report from
the Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Changes to Existing Law
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, H.R. 7733, as reported, are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
COMMUNITY DEVELOPMENT BANKING AND FINANCIAL INSTITUTIONS ACT OF 1994
* * * * * * *
TITLE I--COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION
Subtitle A--Community Development Banking and Financial Institutions
Act
* * * * * * *
SEC. 114A. GUARANTEES FOR BONDS AND NOTES ISSUED FOR COMMUNITY OR
ECONOMIC DEVELOPMENT PURPOSES.
(a) Definitions.--In this section, the following definitions
shall apply:
(1) Eligible community development financial
institution.--The term ``eligible community development
financial institution'' means a community development
financial institution (as described in section 1805.201
of title 12, Code of Federal Regulations, or any
successor thereto) certified by the Secretary that has
applied to a qualified issuer for, or been granted by a
qualified issuer, a loan under the Program.
(2) Eligible community or economic development
purpose.--The term ``eligible community or economic
development purpose''--
(A) means any purpose described in section
108(b); and
(B) includes the provision of community or
economic development in low-income or
underserved rural areas.
(3) Guarantee.--The term ``guarantee'' means a
written agreement between the Secretary and a qualified
issuer (or trustee), pursuant to which the Secretary
ensures repayment of the verifiable losses of
principal, interest, and call premium, if any, on notes
or bonds issued by a qualified issuer to finance or
refinance loans to eligible community development
financial institutions.
(4) Loan.--The term ``loan'' means any credit
instrument that is extended under the Program for any
eligible community or economic development purpose.
(5) Master servicer.--
(A) In general.--The term ``master servicer''
means any entity approved by the Secretary in
accordance with subparagraph (B) to oversee the
activities of servicers, as provided in
subsection (f)(4).
(B) Approval criteria for master servicers.--
The Secretary shall approve or deny any
application to become a master servicer under
the Program not later than 90 days after the
date on which all required information is
submitted to the Secretary, based on the
capacity and experience of the applicant in--
(i) loan administration, servicing,
and loan monitoring;
(ii) managing regional or national
loan intake, processing, or servicing
operational systems and infrastructure;
(iii) managing regional or national
originator communication systems and
infrastructure;
(iv) developing and implementing
training and other risk management
strategies on a regional or national
basis; and
(v) compliance monitoring, investor
relations, and reporting.
(6) Program.--The term ``Program'' means the
guarantee Program for bonds and notes issued for
eligible community or economic development purposes
established under this section.
(7) Program administrator.--The term ``Program
administrator'' means an entity designated by the
issuer to perform administrative duties, as provided in
subsection (f)(2).
(8) Qualified issuer.--
(A) In general.--The term ``qualified
issuer'' means a community development
financial institution (or any entity designated
to issue notes or bonds on behalf of such
community development financial institution)
that meets the qualification requirements of
this paragraph.
(B) Approval criteria for qualified
issuers.--
(i) In general.--The Secretary shall
approve a qualified issuer for a
guarantee under the Program in
accordance with the requirements of
this paragraph, and such additional
requirements as the Secretary may
establish, by regulation.
(ii) Terms and qualifications.--A
qualified issuer shall--
(I) have appropriate
expertise, capacity, and
experience, or otherwise be
qualified to make loans for
eligible community or economic
development purposes;
(II) provide to the
Secretary--
(aa) an acceptable
statement of the
proposed sources and
uses of the funds; and
(bb) a capital
distribution plan that
meets the requirements
of subsection (c)(1);
and
(III) certify to the
Secretary that the bonds or
notes to be guaranteed are to
be used for eligible community
or economic development
purposes.
(C) Department opinion; timing.--
(i) Department opinion.--Not later
than 30 days after the date of a
request by a qualified issuer for
approval of a guarantee under the
Program, the Secretary shall provide an
opinion regarding compliance by the
issuer with the requirements of the
Program under this section.
(ii) Timing.--The Secretary shall
approve or deny a guarantee under this
section after consideration of the
opinion provided to the Secretary under
clause (i), and in no case later than
90 days after receipt of all required
information by the Secretary with
respect to a request for such
guarantee.
(9) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury.
(10) Servicer.--The term ``servicer'' means an entity
designated by the issuer to perform various servicing
duties, as provided in subsection (f)(3).
(b) Guarantees Authorized.--The Secretary shall guarantee
payments on bonds or notes issued by any qualified issuer, if
the proceeds of the bonds or notes are used in accordance with
this section to make loans to eligible community development
financial institutions--
(1) for eligible community or economic development
purposes; or
(2) to refinance loans or notes issued for such
purposes.
(c) General Program Requirements.--
(1) In general.--A capital distribution plan meets
the requirements of this subsection, if not less than
90 percent of the principal amount of guaranteed bonds
or notes (other than costs of issuance fees) are used
to make loans for any eligible community or economic
development purpose, measured annually, beginning at
the end of the 1-year period beginning on the issuance
date of such guaranteed bonds or notes.
(2) Relending account.--Not more than 10 percent of
the principal amount of guaranteed bonds or notes[,
multiplied by an amount equal to the outstanding
principal balance of issued notes or bonds], minus the
risk-share pool amount under subsection (d), may be
held in a relending account and may be made available
for new eligible community or economic development
purposes.
(3) Limitations on unpaid principal balances.--The
proceeds of guaranteed bonds or notes under the Program
may not be used to pay fees (other than costs of
issuance fees), and shall be held in--
(A) community or economic development loans;
(B) a relending account, to the extent
authorized under paragraph (2); or
(C) a risk-share pool established under
subsection (d).
(4) Repayment.--If a qualified issuer fails to meet
the requirements of paragraph (1) by the end of the 90-
day period beginning at the end of the annual
measurement period, repayment shall be made on that
portion of bonds or notes necessary to bring the bonds
or notes that remain outstanding after such repayment
into compliance with the 90 percent requirement of
paragraph (1).
(5) Prohibited uses.--The Secretary shall, by
regulation--
(A) prohibit, as appropriate, certain uses of
amounts from the guarantee of a bond or note
under the Program, including the use of such
funds for political activities, lobbying,
outreach, counseling services, or travel
expenses; and
(B) provide that the guarantee of a bond or
note under the Program may not be used for
salaries or other administrative costs of--
(i) the qualified issuer; or
(ii) any recipient of amounts from
the guarantee of a bond or note.
(d) Risk-Share Pool.--Each qualified issuer shall, during the
term of a guarantee provided under the Program, establish a
risk-share pool, capitalized by contributions from eligible
community development financial institution participants an
amount equal to 3 percent of the guaranteed amount outstanding
on the subject notes and bonds.
(e) Guarantees.--
(1) In general.--A guarantee issued under the Program
shall--
(A) be for the full amount of a bond or note,
including the amount of principal, interest,
and call premiums;
(B) be fully assignable and transferable to
the capital market, on terms and conditions
that are consistent with comparable Government-
guaranteed bonds, and satisfactory to the
Secretary;
(C) represent the full faith and credit of
the United States; and
(D) not exceed 30 years.
(2) Limitations.--
(A) Annual number of guarantees.--The
Secretary shall issue not more than 10
guarantees in any calendar year under the
Program.
(B) Guarantee amount.--The Secretary may not
guarantee any amount under the Program equal to
less than [$100,000,000] $25,000,000, but the
total of all such guarantees in any fiscal year
may not exceed $1,000,000,000.
(f) Servicing of Transactions.--
(1) In general.--To maximize efficiencies and
minimize cost and interest rates, loans made under this
section may be serviced by qualified Program
administrators, bond servicers, and a master servicer.
(2) Duties of program administrator.--The duties of a
Program administrator shall include--
(A) approving and qualifying eligible
community development financial institution
applications for participation in the Program;
(B) compliance monitoring;
(C) bond packaging in connection with the
Program; and
(D) all other duties and related services
that are customarily expected of a Program
administrator.
(3) Duties of servicer.--The duties of a servicer
shall include--
(A) billing and collecting loan payments;
(B) initiating collection activities on past-
due loans;
(C) transferring loan payments to the master
servicing accounts;
(D) loan administration and servicing;
(E) systematic and timely reporting of loan
performance through remittance and servicing
reports;
(F) proper measurement of annual outstanding
loan requirements; and
(G) all other duties and related services
that are customarily expected of servicers.
(4) Duties of master servicer.--The duties of a
master servicer shall include--
(A) tracking the movement of funds between
the accounts of the master servicer and any
other servicer;
(B) ensuring orderly receipt of the monthly
remittance and servicing reports of the
servicer;
(C) monitoring the collection comments and
foreclosure actions;
(D) aggregating the reporting and
distribution of funds to trustees and
investors;
(E) removing and replacing a servicer, as
necessary;
(F) loan administration and servicing;
(G) systematic and timely reporting of loan
performance compiled from all bond servicers'
reports;
(H) proper distribution of funds to
investors; and
(I) all other duties and related services
that are customarily expected of a master
servicer.
(g) Fees.--
(1) In general.--A qualified issuer that receives a
guarantee issued under this section on a bond or note
shall pay a fee to the Secretary, in an amount equal to
10 basis points of the amount of the unpaid principal
of the bond or note guaranteed.
(2) Payment.--A qualified issuer shall pay the fee
required under this subsection on an annual basis.
(3) Use of fees.--Fees collected by the Secretary
under this subsection shall be used to reimburse the
Department of the Treasury for any administrative costs
incurred by the Department in implementing the Program
established under this section.
(h) Authorization of Appropriations.--
(1) In general.--There are authorized to be
appropriated to the Secretary, such sums as are
necessary to carry out this section.
(2) Use of fees.--To the extent that the amount of
funds appropriated for a fiscal year under paragraph
(1) are not sufficient to carry out this section, the
Secretary may use the fees collected under subsection
(g) for the cost of providing guarantees of bonds and
notes under this section.
(i) Investment in Guaranteed Bonds Ineligible for Community
Reinvestment Act Purposes.--Notwithstanding any other provision
of law, any investment by a financial institution in bonds or
notes guaranteed under the Program shall not be taken into
account in assessing the record of such institution for
purposes of the Community Reinvestment Act of 1977 (12 U.S.C.
2901).
(j) Administration.--
(1) Regulations.--Not later than 1 year after the
date of enactment of this section, the Secretary shall
promulgate regulations to carry out this section.
(2) Implementation.--Not later than 2 years after the
date of enactment of this section, the Secretary shall
implement this section.
(k) Termination.--This section is repealed, and the authority
provided under this section shall terminate, on [September 30,
2014] the date that is 4 years after the date of enactment of
the CDFI Bond Guarantee Program Improvement Act of 2022.
* * * * * * *
[all]