[Federal Register Volume 60, Number 202 (Thursday, October 19, 1995)]
[Rules and Regulations]
[Pages 54110-54133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25725]



      

[[Page 54109]]

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Part III





Department of the Treasury





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Community Development Financial Institutions Fund



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12 CFR Chapter XVIII et al.



Community Development Financial Institutions Program, Bank Enterprise 
Award Program, Environmental Quality; Interim Final Rule

  Federal Register / Vol. 60, No. 202 / Thursday, October 19, 1995 / 
Rules and Regulations   

[[Page 54110]]


DEPARTMENT OF THE TREASURY

Community Development Financial Institutions Fund

12 CFR Chapter XVIII and Parts 1805, 1806 and 1815

RIN 1505-AA71


Community Development Financial Institutions Program, Bank 
Enterprise Award Program, Environmental Quality

AGENCY: Community Development Financial Institutions Fund, Department 
of the Treasury.

ACTION: Interim rule with request for comment.

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SUMMARY: The Department of the Treasury is issuing an interim rule 
implementing two new programs administered by the Community Development 
Financial Institutions Fund (CDFI Fund or Fund). The initiatives shall 
be known as the Community Development Financial Institutions Program 
(CDFI Program) and the Bank Enterprise Award Program (BEA Program). The 
programs were authorized by the Community Development Banking and 
Financial Institutions Act of 1994. The interim rule also provides 
environmental quality procedures related to these programs. The CDFI 
Fund's programs are designed to facilitate the flow of lending and 
investment capital into distressed communities and to individuals who 
have been unable to take full advantage of the financial services 
industry.

DATES: Interim rule effective October 19, 1995; comments must be 
received on or before January 15, 1996.

ADDRESSES: All comments concerning this interim rule should be 
addressed to the Director, Community Development Financial Institutions 
Fund, Department of the Treasury, 1500 Pennsylvania Avenue N.W., Room 
5116, Washington, DC 20220. Comments may be inspected at the above 
address between 9:30 a.m. and 4:30 p.m.

FOR FURTHER INFORMATION CONTACT: Kirsten Moy, Community Development 
Financial Institutions Fund, at (202) 622-8662. (This is not a toll 
free number.)

SUPPLEMENTARY INFORMATION:

I. General

Executive Order (E.O.) 12866

    It has been determined that this regulation is a significant 
regulatory action as defined in E.O. 12866. Because no substantive 
changes were made to this regulation subsequent to submission to the 
Office of Management and Budget (OMB), the provisions of section 
6(a)(3)(E) of the Order do not apply.

Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required for this 
interim rule, the provisions of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.) do not apply. Moreover, the Department of the 
Treasury finds that any economic or other consequence of this interim 
rule are a direct result of the implementation of statutory provisions.

Paperwork Reduction Act

    The Department of the Treasury is issuing these regulations without 
notice and public comment pursuant to the Administrative Procedure Act 
(5 U.S.C. 553). For this reason, the collections of information 
contained in these regulations have been reviewed and, pending receipt 
and evaluation of public comments, approved by the Office of Management 
and Budget under control number 1505-0153 (expires 9/30/98). Comments 
concerning the collections of information, the accuracy of the 
estimated average annual burden, and suggestions for reducing such 
burden should be directed to the Office of Management and Budget, 
Paperwork Reduction Project (OMB Paperwork control number 1505-0153), 
Washington, DC 20503, with copies to the Community Development 
Financial Institutions Fund, Department of the Treasury, 1500 
Pennsylvania Avenue N.W., Room 5116, Washington, DC 20220. Any such 
comments should be submitted not later than January 15, 1996.
    Provisions requiring the collection of information can be found in 
Secs. 1805.701, 1805.903, 1806.206, 1806.301, 1806.304, 1806.305 and 
1815.105 of these regulations. The information requested in such 
provisions is necessary to evaluate applications, monitor the 
performance of entities receiving assistance, and ensure compliance 
with statutory and program requirements. The anticipated respondents 
and recordkeepers are financial institutions that may apply for and 
receive assistance.
    Estimated total annual reporting and/or recordkeeping burden:
CDFI Program:
    Applicants--30,000 hours
    Awardees--2,160 hours.
BEA Program:
    Applicants--1,000 hours
    Awardees--750 hours.
    Total Hours--33,910.
    Estimated average annual burden hours per respondent and/or 
recordkeeper:
CDFI Program:
    Applicants--100 hours
    Awardees--72 hours.
BEA Program:
    Applicants--12 hours
    Awardees--25 hours.
    Estimated number of respondents and/or recordkeepers: 400.
    Estimated annual frequency of responses: CDFI Program: 1-5; BEA 
Program: 1-2.

National Environmental Policy Act

    Pursuant to Treasury Directive 75-02 (Department of the Treasury 
Environmental Quality Program), the Department has determined that 
these regulations are categorically excluded from the National 
Environmental Policy Act and do not require an environmental review.

Administrative Procedures Act

    Pursuant to the provisions of 5 U.S.C. 553(a)(2), these regulations 
are exempt from the proposed rule-making requirements of 5 U.S.C. 
553(b) and are being issued as interim regulations without opportunity 
for notice and public comment prior to their effective date. 
Furthermore, the Department for good cause finds that notice and public 
comment prior to effect are impracticable and contrary to the public 
interest. The statute authorizing the programs was enacted over a year 
ago. As part of that Act, Congress set up special procedures to make 
the CDFI Fund operational as soon as possible. Furthermore, Congress 
appropriated funds for FY 1995 and required such funds to be obligated 
by September 30, 1996. Such actions clearly indicate Congress' intent 
that the program be implemented in an expeditious manner. If the 
Department does not issue these regulations for effect, it will not be 
feasible to implement the program prior to September 30, 1996 in a 
manner that achieves the results intended by Congress.

    Catalog of Federal Financial Assistance Numbers: Community 
Development Financial Institutions Program--21.020; Bank Enterprise 
Award Program--21.021.

II. Background

    The CDFI Fund was established as a wholly owned government 
corporation by the Community Development Banking and Financial 
Institutions Act of 1994 (the CDFI Act). Subsequent legislation placed 
the Fund within the Department of the Treasury and gave the Secretary 
of the Treasury all powers and rights of the Administrator of the Fund 
as set forth in the authorizing statute. 

[[Page 54111]]

    Consistent with the placement and administration of the Fund within 
the Department's organizational structure, the Department of the 
Treasury's Inspector General will serve as the Inspector General for 
the Fund. Any individual who becomes aware of the existence or apparent 
existence of fraud, waste or abuse of assistance provided by the Fund 
is encouraged to report it to the Department of the Treasury's Office 
of Inspector General in writing or on the Inspector General's Hotline 
(toll free 1-800-359-3898). All telephone calls will be handled 
confidentially. Written complaints should be addressed to the U.S. 
Department of the Treasury, Office of Inspector General, Room 2412, 
1500 Pennsylvania Avenue N.W., Washington, DC 20220.
    All records and materials pertaining to the selection and award of 
assistance by the Fund shall be fully subject to the Freedom of 
Information Act. Interested parties should contact the U.S. Department 
of the Treasury, Office of the Assistant Secretary for Management, 
Disclosure Services at (202) 622-1500.
    The CDFI Fund's programs are designed to facilitate the flow of 
lending and investment capital into distressed communities and to 
individuals who have been unable to take full advantage of the 
financial services industry. The initiative is an important step in 
rebuilding poverty-stricken and transitional communities and creating 
economic opportunity for people often left behind by the economic 
mainstream.
    Access to credit and investment capital is an essential ingredient 
for creating and retaining jobs, developing affordable housing, 
revitalizing neighborhoods, unleashing the economic potential of small 
business, and empowering people. Over the past three decades, 
community-based financial institutions have proven that strategic 
lending and investment activities tailored to the unique 
characteristics of underserved markets are highly effective in 
improving the economic well-being of communities and the people who 
live there.
    The CDFI Fund was established to facilitate the creation of new, 
and expansion of existing, financial institutions that are specialized 
in serving these markets. These institutions--while highly effective--
are typically small in scale, too few in number, and often have 
difficulty raising the equity capital needed to meet the demands for 
their products and services. The investments of the CDFI Program are 
intended to provide much-needed capital that will enable existing 
institutions to expand and facilitate the start-up of new institutions.
    The CDFI Fund also recognizes the important role that traditional 
financial institutions have played, and should continue to play, in 
serving the credit needs of distressed communities and their residents. 
As a means of facilitating increased activity and innovation among 
traditional financial institutions, these regulations will implement 
the BEA Program. The BEA Program has its roots in the Federal Deposit 
Insurance Corporation Improvement Act of 1991. The program was 
significantly modified as part of the CDFI Act to enable it to function 
as a companion to the CDFI Program. Together, the CDFI Program and BEA 
Program will promote activity among the spectrum of financial 
institutions that serve distressed communities.
    The following interim regulations permit the Fund to implement the 
CDFI Program and the BEA Program. Today's Federal Register contains a 
separate Notice of Funds Availability (NOFA) for each of these 
programs. It is the intention of the Fund to evaluate the first round 
of applications for the programs using these regulations and applicable 
Department of the Treasury regulations. Final regulations will be 
published after receipt and consideration of public comments. Such 
public comments are extremely important to the development of the final 
regulations. The remainder of this background section provides a 
summary of the major provisions in the regulations and highlights 
important issues for public comment.

III. Community Development Financial Institutions Program

    Under the CDFI Program (12 CFR part 1805), the Fund will provide 
financial and technical assistance to selected applicants in order to 
enhance their ability to make loans and investments and provide 
services for the benefit of designated investment area(s), targeted 
population(s) or both. The Fund will select awardees through a 
competitive application process. After selection, each awardee will 
enter into an assistance agreement with the Fund that will require it 
to achieve financial, organizational development, and community impact 
performance goals.

Subpart A--General Provisions

    Subpart A contains general provisions of the CDFI Program, 
including its relationship to other Fund programs (Sec. 1805.102) and 
the definitions applicable to this part (Sec. 1805.104).

Subpart B--Eligibility

    Section 1805.200 establishes criteria for qualification as a CDFI. 
The criteria reflect the requirements stated in the authorizing 
statute. To be eligible to apply for assistance, an entity must either 
be, or propose to become, a CDFI. The regulations describe the 
information needed by the Fund to assess whether, among other things: 
(1) The applicant has a primary mission of community development; (2) 
the applicant's predominant business activity is the provision of loans 
or investments; and (3) the applicant serves an investment area(s) or 
targeted population(s). The Fund recognizes that there will be 
significant diversity among applicants with respect to asset size, 
organizational type, stage of organizational development, products and 
services offered, and the geographic location. The Fund seeks comments 
on how effectively the eligibility criteria in the regulations apply to 
this broad range of organizations.
    Section 1805.201 allows an entity to apply to the Fund for 
certification as a CDFI regardless of whether it is applying for 
assistance. The Fund believes that such a certification process will 
recognize the importance of the activities that institutions are 
engaged in, enhance their credibility with investors, and facilitate 
participation by CDFIs in other government programs.

Subpart C--Target Markets

    As stated in Sec. 1805.300, an applicant must designate one or more 
investment areas or targeted populations as the target market(s) it 
intends to serve. Section 1805.301 gives each applicant significant 
flexibility in designating an investment area provided that certain 
conditions are met. Investment areas must meet objective criteria of 
distress. Consistent with its statutory mandate, the Fund has developed 
objective criteria that are appropriate for identifying distress in 
metropolitan, non-metropolitan and Native American communities. These 
criteria were developed in consultation with the Departments of Housing 
and Urban Development, Agriculture, Interior and Commerce and the Small 
Business Administration. Investment areas can comprise a variety of 
different geographic units in order to reflect the neighborhoods, 
areas, or markets that applicants serve or propose to serve. The Fund 
seeks input from applicants and other interested parties on whether the 
Fund's criteria for designation of investment areas are appropriate for 
the markets and communities that applicants serve.

[[Page 54112]]

    Section 1805.302 incorporates the statutory requirements for 
defining a targeted population.

Subpart D--Use of Funds/Eligible Activities

    Section 1805.401 lists the eligible activities for which financial 
assistance must be used and permits the Fund to approve other 
activities. Section 1805.402 requires that an applicant's use of the 
Fund's assistance and any corresponding matching funds for purposes 
approved by the Fund as reflected in an assistance agreement. The 
regulations place restrictions on such applicant's distribution of 
monies to affiliates or its community partners. Section 1805.403 
provides that technical assistance resources may be allocated at the 
discretion of the Fund and must be used to build the capacity of CDFIs. 
Such assistance may be provided regardless of whether an entity 
receives financial assistance.

Subpart E--Investment Instruments

    Section 1805.500 states that the Fund's primary objective in 
awarding financial assistance is to enhance the stability, performance 
and capacity of an awardee. Both Fund financial assistance and matching 
funds must be used to achieve specific performance goals. The Fund 
retains discretion to provide its assistance in a manner and amount 
different from an applicant's request.
    Section 1805.501 describes the types of investment instruments 
through which the Fund may provide financial assistance. Section 
1805.502 restates the CDFI Act's aggregate assistance limit of $5 
million for each applicant in any three-year period (which may be 
increased by up to $3.75 million under special circumstances). Pursuant 
to Sec. 1805.503, the Fund has the right to sell its equity investments 
or loans, but retains the authority to monitor and enforce each 
awardee's performance goals.

Subpart F--Matching Funds Requirements

    Pursuant to Sec. 1805.600, each applicant must obtain matching 
funds from sources other than the Federal government that are at least 
equal to the amount of financial assistance provided by the Fund. 
Community Development Block Grant funds may not be used for the match. 
As required by the Act and Sec. 1805.601, the matching funds must be 
comparable in form and value to the Fund's financial assistance. This 
provision is intended to encourage match providers to offer their 
resources under the most favorable terms and conditions possible and 
enable a CDFI to obtain the Fund's assistance in a like manner. Under 
certain limited circumstances and at the Fund's discretion, an 
applicant may receive a severe constraints waiver of the matching funds 
requirements pursuant to Sec. 1805.602. Section 1805.603 permits 
applicants to use matching funds obtained for up to one year prior to 
publication of a NOFA for a particular funding round. Each NOFA may 
establish other conditions or restrictions on the time period for 
raising matching funds. The Fund seeks comments on how to structure its 
assistance so that CDFIs may seek matching funds on the most favorable 
terms possible.

Subpart G--Applications for Assistance

    Section 1805.701 specifies the information that must be provided as 
part of an application. This information describes how an applicant can 
demonstrate whether it meets the eligibility requirements of subpart B. 
The section also describes information that an applicant must provide 
to be evaluated and selected under subpart H. The most significant 
component of the application is a five-year comprehensive business 
plan. The plan will provide the basis for evaluating both the 
applicant's current capacity and its potential for the future. The plan 
must include, among other things, elements related to financial 
performance, management policies and capacity, market analysis, 
coordination efforts, community impact, funding resources, and timing. 
The application must contain a detailed description of the matching 
funds to be raised by the applicant for use in conjunction with the 
Fund's assistance. In developing the application requirements, the Fund 
has sought to focus on the types of information that private or public 
investors would expect from such institutions. The Fund seeks comments 
from applicants and other interested parties on the appropriateness of 
the comprehensive business plan's contents.

Subpart H--Rating and Selection of Applicants

    Section 1805.800 outlines the evaluation and selection process. 
Section 1805.801 indicates the Fund's intent to seek to fund a 
geographically diverse group of applicants as required by the CDFI Act. 
Pursuant to Sec. 1805.802, applicants will be evaluated and selected on 
a competitive basis using a three-tiered process. Tier I is intended to 
screen out applicants that do not meet the eligibility requirements or 
who have submitted inadequate application materials. Tier II is 
intended to screen out applicants that do not possess the 
organizational and financial capacity to be a successful CDFI. Tiers I 
and II will eliminate applications not appropriate for funding and 
allow the Fund to focus on those applications with the greatest ability 
to maximize community impact, operate in a sound manner, and achieve 
the public policy goals of the program. As provided in the CDFI Act, 
the Fund has sole discretion in selecting applicants for assistance.
    Tier III of the process will be used to evaluate the qualitative 
aspects of the remaining applications. The Fund will examine factors 
related to organizational capacity, extent of external resources, and 
community impact. The Fund will seek to implement the evaluation and 
selection process in a manner that takes into consideration the unique 
characteristics of applicants that vary by organizational type, total 
asset size, and stage of organizational development. The process will 
consider the contributions of community partners in an applicant's 
efforts. The process will permit the Fund to give additional 
consideration to applicants that: (1) Have secured all their matching 
funds; (2) concentrate their activities within target markets; and (3) 
dedicate the greatest portion of their overall resources to lending, 
investments and development service activities.
    The Fund has dedicated significant efforts toward designing its 
evaluation and selection process and seeks comments on its 
effectiveness in directing resources to applicants that can best 
fulfill the objectives of the program. Comments are also requested to 
assist the Fund in identifying the best measures of an applicant's 
organizational and financial capacity--reflecting its desire to direct 
monies to applicants that can use its resources most effectively. 
Finally, the Fund seeks comments on other priorities that should be 
reflected in the evaluation and selection process.

Subpart I--Terms and Conditions of Assistance

    While Federal and State agencies will retain responsibility for 
assuring the safety and soundness of insured CDFIs, pursuant to 
Sec. 1805.900 the Fund will (to the extent practicable) ensure that 
unregulated awardees are financially and managerially sound and 
maintain appropriate internal controls. Prior to receiving assistance, 
each awardee will execute an agreement with the Fund that describes its 
performance goals and other terms and conditions of assistance. Section 
1805.901 describes the nature and use of the Fund's assistance 
agreements. The agreement 

[[Page 54113]]
will contain sanctions for noncompliance. As required by the Act, any 
proposed sanctions to be imposed on an insured CDFI must be discussed 
with the appropriate Federal banking agency under specific procedures. 
Pursuant to Sec. 1805.902, disbursement of assistance from the Fund 
will be in a lump sum or over a period of time, as determined by the 
Fund. However, the Fund may provide no financial assistance until the 
awardee has secured a firm commitment for its corresponding matching 
funds. This provision is intended to ensure that no Federal funds are 
released until other resources are leveraged.
    Section 1805.903 describes the recordkeeping and reporting 
requirements applicable to awardees. These requirements are consistent 
with the Fund's fiduciary and monitoring responsibilities. Awardees are 
required to submit quarterly data on financial performance and annual 
reports and audits on its financial and programmatic performance. The 
Fund will seek to utilize information available through the appropriate 
Federal banking agencies on insured CDFIs as required by the CDFI Act.
    In developing its regulations, the Fund has sought to minimize its 
recordkeeping and reporting requirements. The Fund requests input on 
how to further reduce such burden while still meeting its monitoring 
and enforcement needs. The Fund further seeks suggestions how to best 
measure and monitor the performance of awardees without imposing 
onerous reporting requirements.
    All awardees shall be subject to legal requirements pertaining to 
the Fund's assistance, including conflict of interest standards. 
Section 1805.905 requires each awardee to comply with all other 
governmental requirements. Section 1805.906 requires awardees to 
maintain standards of conduct acceptable to the Fund. Section 1805.907 
describes lobbying restrictions applicable to awardees.

IV. Bank Enterprise Award Program

    Section 114 of the CDFI Act is based on the Bank Enterprise Act and 
gives the Fund authority to implement, with some modifications, its 
provisions. The Bank Enterprise Act was enacted in 1991, but had not 
previously received appropriated funds for implementation.
    The purpose of the BEA Program (12 CFR part 1806) is to encourage 
insured depository institutions to increase loans, services and 
technical assistance within distressed communities and to make equity 
investments in CDFIs. The BEA Program rewards participating insured 
depository institutions for increasing their activities in economically 
distressed communities and investing in CDFIs. Applicants are selected 
to participate in the program through a competitive process which 
evaluates applications based on the value of proposed increases in 
their specified activities. Program participants receive monies only 
after successful completion of the specified activities.

Subpart A--General Provisions

    Section 1806.102 describes the program's relationship to the CDFI 
Program (part 1805). To prevent applicants from receiving more than one 
Federal award for a single activity, no CDFI may receive an award under 
the BEA Program if it: (1) Has an application pending under the CDFI 
Program; (2) has received assistance from that program within the 
preceding 12 months; or (3) has ever received assistance under that 
program for the same activities proposed in a BEA Program application. 
Assistance provided to a CDFI by a BEA Program participant may be used 
by the CDFI as matching funds for the CDFI Program. BEA applicants that 
propose to make an equity investment in a CDFI must request that the 
entity be certified as a CDFI under Sec. 1805.201 of the CDFI Program 
regulations.

Subpart B--Awards

Distressed Community
    Section 1806.200 describes the community eligibility and 
designation process. An insured depository institution applying for an 
award is required to designate a distressed community or communities if 
it proposes to carry out certain specified activities (Eligible 
Development Activities) or make equity investments that support the 
efforts of a CDFI in a distressed community.
    The statute mandates that each designated distressed community meet 
certain geographic requirements and distress criteria. Under the 
geographic requirements, the community must be located within certain 
boundaries, its boundaries must be contiguous and its population must 
meet certain requirements or it must be located entirely within an 
Indian Reservation (as defined in the regulations). The distress 
criteria require that at least 30 percent of the residents have incomes 
which are less than the national poverty level and the unemployment 
rate for the area must be at least 1.5 times the national average (as 
determined by the Bureau of the Statistics' most recent figures). Such 
criteria will target BEA Program resources to some of the most 
distressed communities in the nation. The Fund seeks comments from 
applicants and other interested parties on how, working within the 
framework of the geographic requirements and distress criteria, it can 
maximize participation in the program.
Qualified Activities
    In Sec. 1806.201 the activities that program participants may 
engage in are categorized as equity investments in CDFIs or Eligible 
Development Activities. Eligible Development Activities include certain 
consumer, commercial real estate, single family, multi-family, business 
and agricultural loans. Each of these loans is defined and must serve 
the distressed community. Additional Eligible Development Activities 
specified are deposit taking activities and providing certain services 
and technical assistance to specified persons. Certain grants, loans 
and technical assistance to CDFIs also qualify as Eligible Development 
Activities. Each Eligible Development Activity is assigned a priority 
factor based on the Fund's assessment of its degree of difficulty, the 
extent of innovation involved, and the extent of benefits provided to a 
distressed community by the activity. The Fund specifically seeks 
comments about the appropriateness of the priority factors assigned to 
each activity, as well as other methodologies that could be explored 
for prioritizing activities.
    In developing the categories of Eligible Development Activities, 
the Fund sought to minimize recordkeeping and reporting burdens. The 
Fund specifically seeks comments on the extent to which the activity 
categories correspond to information already collected by insured 
depository institutions and how the categories (and the manner in which 
activities are valued) might be modified to reduce reporting burden.
Measuring Activities
    Section 1806.202 describes the methodology used to measure 
activities for the purpose of ranking applications and determining 
award amounts. All qualified activities will be measured by the 
increases in value of the activities between a retroactive baseline 
period (for which the applicant will provide historical data) and a 
prospective assessment period (for which the applicant must project 
future activity levels). Dates for the baseline and assessment periods 
will be published in the NOFA for each funding round. 

[[Page 54114]]

Estimated Award Amounts
    In Sec. 1806.203 procedures are established for calculating 
estimated award amounts. In general, the estimated award amount for 
equity investments in CDFIs will be equal to 15 percent of an 
applicant's anticipated increase in such equity investments. For 
Eligible Development Activities, a seven step procedure is established 
under which a total score is calculated. Generally, if the applicant is 
a CDFI, the total score is multiplied by 15 percent to determine the 
estimated award. If the applicant is not a CDFI, the total score is 
multiplied by 5 percent. The Fund specifically seeks comment on whether 
the award levels are appropriate for prompting applicants to increase 
their activities within distressed communities. The Fund also requests 
comments on whether there are other approaches or methodologies that 
could be explored for facilitating increased activity levels among 
insured depository institutions.
Selection Process
    A selection process is established in Sec. 1806.204 which reflects 
the funding priorities mandated in statute. First, applications that 
propose equity investments in CDFIs that support the efforts of those 
institutions in distressed communities will be selected. Second, 
applicants that propose equity investments in other CDFIs will be 
selected. Finally, applicants that propose to undertake Eligible 
Development Activities will be selected. Applications in the first two 
categories will be ranked based on the extent to which an applicant 
proposes to reduce its award below 15 percent. Ties between applicants 
will be broken using the ratio of proposed equity investments to the 
asset size of the institution. Applications in the last category of 
funding priorities will be ranked according to the ratio of an 
applicant's total score relative to its asset size. Any ties between 
such applicants will be broken using the poverty rates of the 
distressed communities.
Actual Award Amounts
    Section 1806.205 establishes the funding process. In developing 
these regulations, the Fund considered three alternative schemes for 
selecting and funding applicants. A ``prospective'' system was 
considered which makes selections based on projected achievements and 
provides incentives at the beginning of the implementation period (with 
a requirement that the award be returned in the event of 
nonperformance). A ``ex-post facto'' system was also considered which 
evaluates and makes awards based on activities that have already been 
implemented. Finally, a ``hybrid'' system was considered which selects 
program participants based on projected performance, but provides 
awards only after the activities have been implemented. The latter 
approach was selected because it: (1) Provides greater certainty to 
program participants that they will be rewarded for completing their 
projected activities; and (2) achieves the public policy objective of 
utilizing the Fund's limited resources to catalyze new activities. The 
Fund specifically seeks comments on whether this approach will best 
maximize community impact and the participation of insured depository 
institutions. The Fund also seeks suggestions on other approaches that 
might maximize the impact of its limited resources.
    Awards are provided based on activities that are actually carried 
out. If an awardee carries out 90 percent or more of its projected 
activities, it will receive the full estimated award amount. If an 
awardee only partially achieves its projected activities, the Fund may 
provide a partial award. Partial achievement is set at less than 90 
percent but at least 75 percent. The Fund may adjust the percentages 
used to define partial achievement in certain circumstances. These 
provisions will allow the Fund to pro-rate award amounts based on 
actual performance in order to: (1) Prevent applicants from over-
estimating projected activities to enhance their competitiveness in the 
selection process; and (2) recognize that achieving a projected 
performance goal is not always within the complete control of the 
program participant. The Fund specifically seeks public comments on 
whether such a mechanism will accomplish these goals or whether there 
are alternative mechanisms that should be explored.
Application Process
    Section 1806.206 describes the application process for Bank 
Enterprise Awards. Each funding round will be proceeded by a NOFA 
published in the Federal Register. The NOFA will contain specific 
information on requirements or restrictions applicable to such round. 
As indicated above, the Fund has sought to minimize its application and 
reporting requirements and seeks comment on how these requirements 
might be improved.

Subpart C--Terms and Conditions of Assistance

    Section 1806.300 requires that each Awardee execute an award 
agreement with the Fund. The agreement will establish requirements for 
receiving funds and appropriate sanctions for failure to comply with 
program requirements. Section 1806.301 specifies that, at the end of 
the assessment period, each Awardee will submit evidence of its 
completed activities and an estimate of the benefits they have 
generated within the distressed community. Upon receipt of these final 
reports, the Fund will make the appropriate disbursement of funds to 
the awardee.

V. Environmental Quality

    The National Environmental Policy Act (NEPA) directs Federal 
agencies to interpret and administer the policies, regulations and 
public laws of the United States in accordance with the environmental 
policies established in section 101 of NEPA. The Council on 
Environmental Quality (CEQ) issued regulations to provide uniform 
standards applicable throughout the Federal government for conducting 
environmental reviews. The CEQ regulations require that each agency 
develop its own procedures to supplement the CEQ regulations. The 
Department of the Treasury's NEPA implementing procedures are contained 
in Treasury Directive 75-02, Department of the Treasury Environmental 
Quality Program. The Directive provides that each bureau issue its own 
supplementary procedures as necessary for the implementation of NEPA.
    The regulations in 12 CFR 1815 are the Fund's implementing 
procedures for compliance with NEPA and the CEQ regulations. These 
regulations are designed to: (1) Integrate the NEPA process with other 
planning and decisionmaking processes of the Fund; (2) ensure that the 
Fund's decisions are made in compliance with NEPA and the CEQ 
regulations, and (3) involve the public in the NEPA process in an 
appropriate and responsible manner. These procedures address: (1) the 
Fund's decisionmaking process related to substantive consideration of 
environmental factors; (2) the procedural requirements for 
environmental documentation at critical stages of the decisionmaking 
process; and (3) establishment of criteria to assist in determining the 
need for environmental assessments and environmental impact statements. 
Part 1815 of these regulations have been reviewed by the CEQ for 
conformance with NEPA and the CEQ regulations.
    Section 1815.103 designates the Director of the Fund as the 
official responsible for implementation of the 

[[Page 54115]]
Fund's environmental quality policies and procedures. Section 1815.104 
sets forth the specific duties of such official.
    As indicated in Sec. 1815.105, there are two distinct stages in the 
decisionmaking process for award of the Fund's assistance: (1) A 
preliminary approval point at which applications are selected; and (2) 
a subsequent stage where funding actually occurs. Part 1815 of the 
regulations have been drafted to take into account this staged process. 
During its initial application review, the Fund will determine whether 
an applicant proposes actions which are categorically excluded or that 
normally require an environmental impact statement (EIS) or an 
environmental assessment. If any proposed action is not categorically 
excluded, funding approval will be conditioned upon submission of 
information by the applicant that is necessary to perform the 
appropriate environmental review. No Federal funds may be used for such 
an action until the environmental review is completed and approved by 
the Fund. If the information provided is not sufficient to perform a 
meaningful environmental review during the application screening 
process, Sec. 1815.106 requires a supplemental environmental review 
prior to taking any action: (1) That is not categorically excluded; (2) 
that directly uses Federal funds; and (3) for which an environmental 
assessment or EIS has not been approved by the Fund. The Fund will 
require that it be informed of any action that would require further 
environmental review prior to the use of any Federal funds as part of 
the required application materials and assistance agreements.
    Section 1815.108 establishes certain actions that will require an 
EIS to be performed. Section 1815.109 prescribes procedures to be 
followed when such an EIS is necessary. Section 1815.110 provides a 
list of actions that constitute a categorical exclusion (activities 
that do not individually or collectively have a significant effect on 
the human environment). Absent extraordinary circumstances, these 
actions do not require preparation of either an environmental 
assessment or an EIS. Section 1815.112 outlines procedures for the 
preparation of an environmental assessment if an action does not 
normally require an EIS and is not categorically excluded. As indicated 
in Sec. 1815.113, information collected by the Fund will be available 
to the public consistent with the CEQ regulations.
    The Fund anticipates that most actions to be proposed and carried 
out by applicants will be categorically excluded. However, if it 
becomes evident during either the application review or implementation 
stages that an action does not meet these exclusion standards, the Fund 
(in cooperation with the program recipient) will diligently perform its 
environmental review responsibilities under NEPA, the CEQ regulations, 
and these supplemental procedures.

List of Subjects

12 CFR Part 1805

    Community development, Economic development, Grant programs--
community development, Loan programs--community development, Reporting 
and recordkeeping requirements, Small businesses.

12 CFR Part 1806

    Banks, banking, Community development, Economic development, Grant 
programs--community development, Reporting and recordkeeping 
requirements, Savings associations.

12 CFR Part 1815

    Environmental impact statements, Environmental protection, 
Reporting and recordkeeping requirements.

    Dated: October 10, 1995.
John D. Hawke, Jr.,
Under Secretary (Domestic Finance).
    For the reasons set forth in the preamble, a new chapter XVIII 
consisting of parts 1805, 1806, and 1815 is established in title 12 of 
the Code of Federal Regulations to read as follows:
CHAPTER XVIII--COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND, 
DEPARTMENT OF THE TREASURY
Part
1805  Community development financial institutions program
1806  Bank enterprise award program
1815  Environmental quality

PART 1805--COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS PROGRAM

Subpart A--General Provisions

Sec.
1805.100  Purpose.
1805.101  Summary.
1805.102  Relationship to other Fund programs.
1805.103  Awardee not instrumentality.
1805.104  Definitions.
1805.105  Waiver authority.
1805.106  OMB control number.

Subpart B--Eligibility

1805.200  Applicant eligibility.
1805.201  Certification as a Community Development Financial 
Institution.

Subpart C--Target Markets

1805.300  Target markets--general.
1805.301  Investment Area.
1805.302  Targeted Population.

Subpart D--Use of Funds/Eligible Activities

1805.400  Purposes of financial assistance.
1805.401  Eligible activities.
1805.402  Restrictions on use of assistance.
1805.403  Technical assistance.

Subpart E--Investment Instruments

1805.500  Investment instruments--general.
1805.501  Forms of investment instruments.
1805.502  Assistance limits.
1805.503  Authority to sell.

Subpart F--Matching Funds Requirements

1805.600  Matching funds--general.
1805.601  Comparability of form and value.
1805.602  Severe constraints waiver.
1805.603  Time frame for raising match.

Subpart G--Applications for Assistance

1805.700  Notice of funds availability.
1805.701  Application contents.

Subpart H--Rating and Selection of Applications

1805.800  Rating and selection--general.
1805.801  Geographic diversity.
1805.802  Tiered review process.

Subpart I--Terms and Conditions of Assistance

1805.900  Safety and soundness.
1805.901  Assistance Agreement; sanctions.
1805.902  Disbursement of funds.
1805.903  Data collection and reporting.
1805.904  Information.
1805.905  Compliance with government requirements.
1805.906  Conflict of interest requirements.
1805.907  Lobbying restrictions.
1805.908  Criminal provisions.
1805.909  Fund deemed not to control.
1805.910  Limitation on liability.
1805.911  Fraud, waste and abuse.

    Authority: 12 U.S.C. 4703, 4717; chapter X, Pub. L. 104-19, 109 
Stat. 237 (12 U.S.C. 4703 note).

Subpart A--General Provisions


Sec. 1805.100  Purpose.

    The purpose of the Community Development Financial Institutions 
Program is to facilitate the creation of a national network of 
financial institutions that is dedicated to community development.

Sec. 1805.101  Summary.

    Under the Community Development Financial Institutions Program, the 
Fund will provide financial and technical assistance to Applicants 
selected by the Fund in order to enhance their ability to make loans 
and investments and provide services. An Awardee must serve an 
Investment Area(s), Targeted Population(s), or both. The Fund will 
select Awardees to receive financial and technical 

[[Page 54116]]
assistance through a competitive application process. Each financial 
assistance Awardee will enter into an Assistance Agreement which will 
require it to achieve financial, organizational development, and 
community impact goals.


Sec. 1805.102  Relationship to other Fund programs.

    (a) Bank Enterprise Award Program. (1) No Insured CDFI may receive 
assistance from the Bank Enterprise Award Program (part 1806 of this 
chapter) if it has:
    (i) An application for assistance pending under the Community 
Development Financial Institutions Program;
    (ii) Received assistance under the Community Development Financial 
Institutions Program within the preceding 12-month period; or
    (iii) Received assistance under the Community Development Financial 
Institutions Program for the same activities as proposed under an 
application for the Bank Enterprise Award Program.
    (2) An Equity Investment (as defined in part 1806 of this chapter) 
in, or a loan to, a CDFI made by a Bank Enterprise Award Program 
Awardee may be used to meet the matching fund requirements described in 
subpart F of this part. Receipt of such Equity Investment or loan does 
not disqualify a CDFI from receiving assistance under this part.
    (b) Liquidity enhancement program. No entity that receives 
assistance through the liquidity enhancement program authorized under 
section 113 (12 U.S.C. 4712) of the Act may receive assistance under 
the Community Development Financial Institutions Program.


Sec. 1805.103  Awardee not instrumentality.

    No Awardee (or its Community Partner) shall be deemed to be an 
agency, department, or instrumentality of the United States.


Sec. 1805.104  Definitions.

    For the purpose of this part:
    (a) Act means the Community Development Banking and Financial 
Institutions Act of 1994 (12 U.S.C. 4701 et seq.);
    (b) Affiliate means any company or entity that controls, is 
controlled by, or is under common control with another company;
    (c) Applicant means any entity submitting an application for 
assistance under this part;
    (d) Appropriate Federal Banking Agency has the same meaning as in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1811 et 
seq.), and also includes the National Credit Union Administration with 
respect to Insured Credit Unions;
    (e) Assistance Agreement means a contract between the Fund and an 
Awardee which specifies the terms and conditions of assistance under 
this part;
    (f) Awardee means an Applicant selected by the Fund to receive 
assistance pursuant to this part;
    (g) Community Development Financial Institution (or CDFI) means an 
entity currently meeting the eligibility requirements under 
Sec. 1805.200;
    (h) Community Development Financial Institutions Program means the 
program authorized by sections 105-108 of the Act (12 U.S.C. 4704-4707) 
and implemented under this part;
    (i) Community Facility means a facility where health care, child 
care, educational, cultural, or social services are provided;
    (j) Community-Governed means an entity in which the residents of an 
Investment Area(s) or members of a Targeted Population(s) represent 
greater than 50 percent of the governing body;
    (k) Community-Owned means an entity in which the residents of an 
Investment Area(s) or members of a Targeted Population(s) have an 
ownership interest of greater than 50 percent;
    (l) Community Partner means a person (other than an individual) 
that provides loans, equity investments, or Development Services and 
enters into a Community Partnership with an Applicant. A Community 
Partner may include a Depository Institution Holding Company, an 
Insured Depository Institution, an Insured Credit Union, a not-for-
profit or for-profit organization, a State or local government entity, 
a quasi-government entity, or an investment company authorized pursuant 
to the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.);
    (m) Community Partnership means an agreement between an Applicant 
and a Community Partner to collaboratively provide loans, equity 
investments, or Development Services to an Investment Area(s) or a 
Targeted Population(s);
    (n) Comprehensive Business Plan means a document covering not less 
than the next five fiscal years which meets the requirements described 
under Sec. 1805.701(d);
    (o) Depository Institution Holding Company means a bank holding 
company or a savings and loan holding company as defined in section 3 
of the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.);
    (p) Development Investment means an equity investment made by an 
Applicant which, in the judgment of the Fund, directly supports or 
enhances activities that serve an Investment Area(s) or a Targeted 
Population(s). Such investments must be made through an arms-length 
transaction with a third party that does not have a relationship with 
the Applicant as an Affiliate;
    (q) Development Services means activities that promote community 
development and are integral to lending and Development Investment 
activities. Such services shall prepare or assist potential borrowers 
or investees to utilize the lending or investment products of the 
Awardee, its Affiliates, or its Community Partners. Such services 
include:
    (1) Financial or credit counseling to individuals for the purpose 
of facilitating home ownership, promoting self-employment, or enhancing 
consumer financial management skills; or
    (2) Technical assistance to borrowers or investees for the purpose 
of enhancing business planning, marketing, management, and financial 
management skills;
    (r) Financial Services means checking, check-cashing, money orders, 
certified checks, automated teller machines, deposit-taking, and safe 
deposit box services;
    (s) Fund means the Community Development Financial Institutions 
Fund established under section 104(a) (12 U.S.C. 4703(a)) of the Act;
    (t) Indian Reservation means any geographic area that meets the 
requirements of section 4(10) of the Indian Child Welfare Act of 1978 
(25 U.S.C. 1903(10)), and shall include land held by incorporated 
Native groups, regional corporations, and village corporations, as 
defined in and pursuant to the Alaska Native Claims Settlement Act (43 
U.S.C. 1601 et seq.), public domain Indian allotments, and former 
Indian reservations in the State of Oklahoma;
    (u) Indian Tribe means any Indian Tribe, band, pueblo, nation, or 
other organized group or community, including any Alaska Native village 
or regional or village corporation, as defined in or established 
pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et 
seq.), which is recognized as eligible for special programs and 
services provided by the United States to Indians because of their 
status as Indians;
    (v) Insider means any director, officer, employee, principal 
shareholder (owning, individually or in combination 

[[Page 54117]]
with family members, five percent or more of any class of stock), or 
agent (or any family member or business partner of any of the above) of 
any Applicant, Affiliate or Community Partner;
    (w) Insured CDFI means a CDFI that is an Insured Depository 
Institution or an Insured Credit Union;
    (x) Insured Credit Union means any credit union, the member 
accounts of which are insured by the National Credit Union Share 
Insurance Fund;
    (y) Insured Depository Institution means any bank or thrift, the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation;
    (z) Investment Area means a geographic area meeting the 
requirements of Sec. 1805.301;
    (aa) Low-Income means an income (as reported by the Bureau of the 
Census in the 1990 decennial census), adjusted for family size, of not 
more than:
    (1) For Metropolitan Areas, 80 percent of the area median family 
income; and
    (2) For non-Metropolitan Areas, the greater of:
    (i) 80 percent of the area median family income; or
    (ii) 80 percent of the statewide non-Metropolitan Area median 
family income;
    (bb) Metropolitan Area means an area designated as such by the 
Office of Management and Budget pursuant to 44 U.S.C. 3504(d)(3) and 31 
U.S.C. 1104(d) and Executive Order 10253 (3 CFR, 1949-1953 Comp., p. 
758), as amended;
    (cc) Non-Regulated CDFI means any entity meeting the eligibility 
requirements of Sec. 1805.200 which is not a Depository Institution 
Holding Company, Insured Depository Institution, or Insured Credit 
Union;
    (dd) State means any State of the United States, the District of 
Columbia or any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Trust Territories of the Pacific Islands, the 
Virgin Islands, and the Northern Mariana Islands;
    (ee) Subsidiary means any company which is owned or controlled 
directly or indirectly by another company and includes any service 
corporation owned in whole or part by an Insured Depository Institution 
or any Subsidiary of such a service corporation, except as provided in 
Sec. 1805.200(h)(4); and
    (ff) Targeted Population means individuals or an identifiable group 
meeting the requirements of Sec. 1805.302.


Sec. 1805.105  Waiver authority.

    The Fund may waive any requirement of this part that is not 
required by law upon a determination of good cause. Each such waiver 
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 Fund must determine that application of the requirement to be 
waived would adversely affect the achievement of the purposes of the 
Act. For waivers of general applicability, the Fund will publish notice 
of granted waivers in the Federal Register.


Sec. 1805.106  OMB control number.

    The collection of information requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB 
control number 1505-0153 (expires September 30, 1998).

Subpart B--Eligibility


Sec. 1805.200  Applicant eligibility.

    (a) General requirements. (1) An entity that meets the requirements 
described in paragraphs (b) through (h) of this section will be 
considered a CDFI and will be eligible to apply for assistance under 
this part. Criteria to establish compliance with such requirements are 
set forth in Sec. 1805.701(b).
    (2) An entity that proposes to become a CDFI is eligible to apply 
for assistance under this part if the Fund determines that such 
entity's Comprehensive Business Plan provides a realistic course of 
action to ensure that it will meet the requirements described in this 
section within three years of entering into an Assistance Agreement 
with the Fund.
    (3) The Fund, in its sole discretion, shall determine whether an 
Applicant fulfills the requirements set forth in this section and as 
set forth in Sec. 1805.701(b).
    (b) Primary mission. A CDFI shall have a primary mission of 
promoting community development.
    (c) Target market. A CDFI shall serve an Investment Area(s) or 
Targeted Population(s).
    (d) Financing entity. A CDFI shall be an entity whose predominant 
business activity is the provision of loans or Development Investments.
    (e) Development Services. A CDFI, directly or through an Affiliate, 
shall provide Development Services in conjunction with loans or 
Development Investments.
    (f) Accountability. A CDFI must maintain accountability to its 
Investment Area(s) or Targeted Population(s) through representation on 
its governing board or otherwise.
    (g) Non-government entity. A CDFI shall not be an agency or 
instrumentality of the government of the United States, or any State or 
political subdivision thereof. An entity that is created by, or that 
receives substantial assistance from, one or more government entities 
may be a CDFI provided that it is not controlled by such entities and 
maintains independent decision-making power over its activities.
    (h) Provisions applicable to Depository Institution Holding 
Companies and Insured Depository Institutions. (1) A Depository 
Institution Holding Company may qualify as a CDFI only if it and its 
Affiliates collectively satisfy the requirements described in 
paragraphs (a) through (g) of this section.
    (2) No Affiliate of a Depository Institution Holding Company may 
qualify as a CDFI unless the holding company and all of its Affiliates 
collectively meet the requirements described in paragraphs (a) through 
(g) of this section.
    (3) No Subsidiary of an Insured Depository Institution may qualify 
as a CDFI if the Insured Depository Institution and its Subsidiaries do 
not collectively meet the requirements described in paragraphs (a) 
through (g) of this section.
    (4) For the purposes of paragraphs (h) (1), (2) and (3) of this 
section, an Applicant will not be considered to be a Subsidiary of any 
Insured Depository Institution or Depository Institution Holding 
Company that controls less than 25 percent of any class of its voting 
shares, and which does not, in any manner, otherwise control the 
election of a majority of directors of the Applicant.


Sec. 1805.201  Certification as a Community Development Financial 
Institution.

    An entity may apply to the Fund for certification that it meets the 
CDFI eligibility requirements (as described under Sec. 1805.200) 
regardless of whether it is seeking financial or technical assistance 
from the Fund. Entities seeking such certification shall provide the 
information described under Sec. 1805.701(b). Certification by the Fund 
will verify that the entity meets the CDFI eligibility requirements. 
However, such a certification shall not constitute an opinion by the 
Fund as to the financial viability of the entity that obtains such 
certification.

Subpart C--Target Markets


Sec. 1805.300  Target markets--general.

    An Applicant shall designate one or more Investment Area(s) or 
Targeted Population(s) that it proposes to serve. An Applicant may also 
choose to serve both an Investment Area(s) and a Targeted 
Population(s). An Investment 

[[Page 54118]]
Area shall meet specific geographic and other criteria discussed in 
Sec. 1805.301. A Targeted Population shall consist of Low-Income 
persons or those who otherwise lack adequate access to loans or equity 
investments.


Sec. 1805.301  Investment area.

    (a) General. A geographic area will be considered eligible for 
designation as an Investment Area if it:
    (1)(i) Meets at least one of the objective criteria of economic 
distress as set forth in paragraph (d) of this section and has 
significant unmet needs for loans or equity investments as described in 
paragraph (e) of this section; or
    (ii) Encompasses or is located in an Empowerment Zone or Enterprise 
Community designated under section 1391 of the Internal Revenue Code of 
1986 (26 U.S.C. 1391); and
    (2) Is entirely located within the geographic boundaries of the 
United States (which shall encompass any State of the United States, 
the District of Columbia or any territory of the United States, Puerto 
Rico, Guam, American Samoa, the Trust Territories of the Pacific 
Islands, the Virgin Islands, and the Northern Mariana Islands).
    (b) Geographic units. An Investment Area shall consist of a 
geographic unit(s) that is a county (or equivalent area), minor civil 
division that is a unit of local government, incorporated place, census 
tract, block numbering area, block group, or American Indian or Alaska 
Native area (as such units are defined or reported by the U.S. Bureau 
of the Census). An Applicant can designate one or more Investment Areas 
as part of a single application.
    (c) Designation. An Applicant can designate an Investment Area by 
selecting:
    (1) A geographic unit(s) which individually meets one of the 
criteria in paragraph (d) of this section; or
    (2) A group of contiguous geographic units which together meet one 
of the criteria in paragraph (d) of this section, provided that the 
combined population residing within individual geographic units not 
meeting any such criteria does not exceed 15 percent of the total 
population of the entire Investment Area.
    (d) Distress criteria. An Investment Area (or the units that 
comprise an area) must meet at least one of the following objective 
criteria of economic distress (as reported in the 1990 (or subsequent) 
decennial Census and published by the U.S. Bureau of the Census):
    (1) The percentage of the population living in poverty is at least 
20 percent;
    (2) In the case of an Investment Area located:
    (i) Within a Metropolitan Area, the median family income shall be 
at or below 80 percent of the Metropolitan Area median family income or 
the national Metropolitan Area median family income, whichever is 
greater; or
    (ii) 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;
    (3) The unemployment rate is at least 1.5 times the national 
average;
    (4) The percentage of occupied distressed housing (as indicated by 
lack of complete plumbing and occupancy of more than one person per 
room) is at least 20 percent; or
    (5) In areas located outside of a Metropolitan Area, the county 
population loss between 1980 and 1990 is at least 10 percent.
    (e) Unmet needs. An Investment Area will be deemed to have 
significant unmet needs for loans or equity investments if studies or 
other analyses provided by the Applicant adequately demonstrate a 
pattern of unmet needs for loans and equity investments within such 
area(s).


Sec. 1805.302  Targeted population.

    (a) A Targeted Population shall mean individuals, or an 
identifiable group of individuals, who: Are Low-Income persons; or lack 
adequate access to loans or equity investments. An Applicant can serve 
the members of a Targeted Population directly or through borrowers or 
investees that directly serve or provide significant benefits to such 
members.
    (b) The members of a Targeted Population shall reside within the 
boundaries of the United States (which shall encompass any State of the 
United States, the District of Columbia or any territory of the United 
States, Puerto Rico, Guam, American Samoa, the Trust Territories of the 
Pacific Islands, the Virgin Islands, and the Northern Mariana Islands).
    (c) An Applicant shall provide its products and services in a 
manner that is consistent with the Equal Credit Opportunity Act (15 
U.S.C. 1691), to the extent that the Applicant is subject to the 
requirements of such Act.

Subpart D--Use of Funds/Eligible Activities


Sec. 1805.400  Purposes of financial assistance.

    The Fund may provide financial assistance through investment 
instruments described under subpart E of this part. Such financial 
assistance is intended to strengthen the capital position and enhance 
the ability of an Awardee to make loans and Development Investments and 
provide Financial Services.


Sec. 1805.401  Eligible activities.

    Financial assistance provided under this part may be used by an 
Awardee to serve Investment Area(s) or Targeted Population(s) by 
developing or supporting:
    (a) Commercial facilities that promote revitalization, community 
stability or job creation or retention;
    (b) Businesses that:
    (1) Provide jobs for Low-Income persons;
    (2) Are owned by Low-Income persons; or
    (3) Enhance the availability of products and services to Low-Income 
persons;
    (c) Community Facilities;
    (d) The provision of Financial Services;
    (e) Housing that is principally affordable to Low-Income persons, 
except that assistance used to facilitate home ownership shall only be 
used for services and lending products that serve Low-Income persons 
and that:
    (1) Are not provided by other lenders in the area; or
    (2) Complement the services and lending products provided by other 
lenders that serve the Investment Area(s) or Targeted Population(s);
    (f) The provision of Consumer Loans (a loan to one or more 
individuals for household, family, or other personal expenditures); or
    (g) Other businesses or activities as requested by the Applicant 
and deemed appropriate by the Fund.


Sec. 1805.402  Restrictions on use of assistance.

    (a) An Awardee shall only use assistance provided by the Fund and 
its corresponding matching funds for the eligible activities approved 
by the Fund and described in the Assistance Agreement.
    (b) An Awardee shall consult with, and obtain the approval of, the 
Fund for any significant changes in its activities from those approved 
by the Fund and described in the Assistance Agreement.
    (c) An Awardee may not distribute assistance to an Affiliate 
without the Fund's consent.
    (d) Assistance provided upon approval of an application involving a 
Community Partnership shall only be distributed to the Awardee and 
shall not be used to fund any activities carried out by a Community 
Partner or an Affiliate of a Community Partner. 

[[Page 54119]]



Sec. 1805.403  Technical assistance.

    (a) General. The Fund may provide technical assistance to build the 
capacity of a CDFI. Such technical assistance may include training for 
management and other personnel; development of programs, products and 
services; improving financial management and internal operations; 
enhancing a CDFI's community impact; or other activities deemed 
appropriate by the Fund. The Fund, in its sole discretion, may provide 
technical assistance in amounts, or under terms and conditions that are 
different from those requested by an Applicant. The Fund may not 
provide any technical assistance to an Applicant for the purpose of 
assisting in the preparation of an application. The Fund may provide 
technical assistance to a CDFI directly, through grants, or by 
contracting with organizations that possess the appropriate expertise.
    (b) The Fund may provide technical assistance regardless of whether 
or not the recipient also receives financial assistance under this 
part. Technical assistance provided pursuant to this part is subject to 
the assistance limits described in Sec. 1805.502.
    (c) An Applicant seeking technical assistance must meet the 
eligibility requirements of Sec. 1805.200 and submit an application as 
described in Sec. 1805.701.
    (d) The Fund, in its sole discretion, may select Applicants to 
receive technical assistance.

Subpart E--Investment Instruments


Sec. 1805.500  Investment instruments--general.

    The Fund's primary objective in awarding financial assistance is to 
enhance the stability, performance and capacity of an Awardee. The Fund 
will require each Awardee to utilize such financial assistance and its 
corresponding matching funds to achieve the performance goals 
established in its Assistance Agreement. The Fund will provide 
financial assistance to an Awardee through one or more of the 
investment instruments described in Sec. 1805.501, and under such terms 
and conditions as described in this subpart. The Fund, in its sole 
discretion, may provide financial assistance in amounts, through 
investment instruments, or under rates, terms and conditions that are 
different from those requested by an Applicant.


Sec. 1805.501  Forms of investment instruments.

    (a) Equity. The Fund may purchase non-voting stock in a for-profit 
Awardee. The stock shall be transferable and may convert to voting 
stock upon transfer. The Fund shall not own more than 50 percent of the 
equity of an Awardee and shall not control its operations.
    (b) Capital grants. The Fund may award grants.
    (c) Loans. The Fund may make loans, if permitted by applicable law.
    (d) Deposits and credit union shares. The Fund may make deposits 
(which shall include credit union shares) in Insured CDFIs. Deposits in 
an Insured CDFI shall not be subject to any requirement for collateral 
or security.


Sec. 1805.502  Assistance limits.

    (a) General. Except as provided in paragraph (b) of this section, 
the Fund may not provide more than $5 million, in the aggregate, in 
financial and technical assistance to an Awardee and its Affiliates 
during any three-year period.
    (b) Additional amounts. If an Awardee proposes to establish a new 
Affiliate to serve an Investment Area(s) or Targeted Population(s) 
outside of any State, and outside of any Metropolitan Area, currently 
served by the Awardee or its Affiliates, the Awardee may receive 
additional financial assistance up to a maximum of $3.75 million during 
the same three-year period. Such additional assistance:
    (1) Shall only be used to finance activities in the new or expanded 
Investment Area(s) or Targeted Population(s); and
    (2) Must be distributed to a new Affiliate that meets the 
eligibility requirements described in Sec. 1805.200 and is selected for 
assistance pursuant to subpart H of this part.
    (c) An Awardee may only receive the financial assistance described 
in paragraph (b) of this section if no other application to serve 
substantially the same Investment Area(s) or Targeted Population(s) has 
been selected by the Fund within the previous one-year period, and no 
other application which meets the minimum requirements of 
Sec. 1805.802(a) and (b) was submitted within the current funding 
round.


Sec. 1805.503  Authority to sell.

    The Fund may, at any time, sell its equity investments and loans. 
Subsequent to such disposition, the Fund shall retain the authority to 
enforce the provisions of the Assistance Agreement until the 
performance goals specified therein have been met.

Subpart F--Matching Funds Requirements


Sec. 1805.600  Matching funds--general.

    All financial assistance awarded under this part shall be matched 
with funds from sources other than the Federal government. Except as 
provided in Sec. 1805.602, such matching funds shall be provided on the 
basis of not less than one dollar for each dollar provided by the Fund. 
Community Development Block Grant Program and other funds provided 
pursuant to the Housing and Community Development Act of 1974, as 
amended (42 U.S.C. 5301 et seq.), shall be considered Federal 
government funds and shall not be used to meet the matching 
requirements. Matching funds shall be used as provided in the 
Assistance Agreement.


Sec. 1805.601  Comparability of form and value.

    (a) Matching funds shall be at least comparable in form (e.g., 
equity investments, deposits, credit union shares, loans and grants) 
and value to financial assistance provided by the Fund (except as 
provided in Sec. 1805.602). The Fund shall have the discretion to 
determine whether matching funds pledged are comparable in form and 
value to the financial assistance requested.
    (b) In the case of an Awardee that raises matching funds from more 
than one source, through different investment instruments, or under 
varying terms and conditions, the Fund may provide financial assistance 
in a manner that represents the combined characteristics of such 
instruments.
    (c) An Awardee may meet all or part of its matching requirements by 
committing available earnings retained from its operations.


Sec. 1805.602  Severe constraints waiver.

    (a) In the case of an Applicant with severe constraints on 
available sources of matching funds, the Fund, in its sole discretion, 
may permit such Applicant to comply with the matching requirements by:
    (1) Reducing such requirements by up to 50 percent; or
    (2) Permitting an Applicant to provide matching funds in a form to 
be determined at the discretion of the Fund, if such an Applicant:
    (i) Has total assets of less than $100,000;
    (ii) Serves an area that is not a Metropolitan Area; and
    (iii) Is not requesting more than $25,000 in assistance.
    (b) Not more than 25 percent of the total funds available for 
obligation 

[[Page 54120]]
under this part in any fiscal year may be matched as described in 
paragraph (a) of this section.
    (c) An Applicant may request a ``severe constraints waiver'' as 
part of its application for assistance. An Applicant shall provide a 
narrative justification for its request, indicating:
    (1) The cause and extent of the constraints on raising matching 
funds;
    (2) Efforts to date, results, and projections for raising matching 
funds;
    (3) A description of the matching funds expected to be raised; and
    (4) Any additional information requested by the Fund.
    (d) The Fund will grant a ``severe constraints waiver'' only in 
exceptional circumstances when it has been demonstrated, to the 
satisfaction of the Fund, that an Investment Area(s) or Targeted 
Population(s) would not be adequately served without the waiver.


Sec. 1805.603  Time frame for raising match.

    Applicants may use monies that have been obtained or legally 
committed for up to one year prior to the publication of a Notice of 
Funds Availability (NOFA) for an applicable funding round to meet the 
matching requirements. An Applicant shall raise the balance of its 
matching requirements within the period set forth in the applicable 
NOFA.

Subpart G--Applications for Assistance


Sec. 1805.700  Notice of Funds Availability.

    Each Applicant shall submit an application for financial or 
technical assistance under this part in accordance with these 
regulations and a NOFA published in the Federal Register. The NOFA will 
advise Applicants on how to obtain an application packet and will 
establish deadlines and other requirements. The NOFA may specify any 
limitations, special rules, procedures, and restrictions for a 
particular funding round. After receipt of an application, the Fund may 
request clarifying or technical information on the materials submitted 
as part of such application.


Sec. 1805.701  Application contents.

    Each application must contain the information specified in the 
application packet including the items specified in this section.
    (a) Award request. An Applicant shall indicate:
    (1) The dollar amount, form, rates, terms and conditions of 
financial assistance requested; and
    (2) Any technical assistance needs for which it is requesting 
assistance.
    (b) Eligibility verification. An Applicant shall provide 
information necessary to establish that it is, or will be, a CDFI. An 
Applicant shall demonstrate whether it meets the eligibility 
requirements described in Sec. 1805.200 by providing the information 
requested in this paragraph. The Fund, in its sole discretion, shall 
determine whether an Applicant has satisfied the requirements of this 
paragraph.
    (1) Primary mission. (i) A CDFI shall have a primary mission of 
promoting community development. The Fund will consider an Applicant to 
have such a mission if the activities of the Applicant and its 
Affiliates are principally directed:
    (A) Within the geographic boundaries of an Investment Area(s);
    (B) To members of a Targeted Population(s);
    (C) To projects that provide significant benefits to residents of 
an Investment Area(s) or members of a Targeted Population(s); or
    (D) To any combination of the above.
    (ii) Using indicators selected by the Applicant that are 
appropriate given the nature of the products and services it (and its 
Affiliates) offers, an Applicant shall be deemed to satisfy the 
requirements of paragraph (b)(1)(i) of this section if it demonstrates 
that the activities of the Applicant and each Affiliate, when viewed 
collectively (as a whole), principally benefit such area(s) or 
population(s).
    (iii) An Applicant shall provide the information requested in 
paragraph (b)(1)(ii) of this section in accordance with paragraph (c) 
of this section.
    (2) Target markets. Using the information in paragraph (b)(1) of 
this section that is submitted for the Applicant (excluding information 
on any Affiliates), an Applicant shall demonstrate that its total 
activities predominantly serve Investment Area(s), Targeted 
Population(s) or both.
    (3) Designation. An Applicant shall provide a description of the 
Investment Area(s) or Targeted Population(s) to be served. If an 
Applicant is serving:
    (i) An Investment Area(s), it shall submit:
    (A) A completed Investment Area Designation worksheet contained in 
the application packet;
    (B) A map of the designated area(s); and
    (C) Studies or other analyses as described in Sec. 1805.301(e);
    (ii) A Targeted Population(s), it shall submit:
    (A) A completed Targeted Population Designation worksheet contained 
in the application packet; or
    (B) Studies or other analyses that provide adequate evidence of 
lack of adequate access to loans or equity investments.
    (4) Financing entity. (i) A CDFI shall be an entity whose 
predominant business activity is the provision of loans or Development 
Investments. An Applicant can demonstrate that it is such an entity if 
it is a:
    (A) Depository Institution Holding Company;
    (B) Insured Depository Institution or Insured Credit Union; or
    (C) Organization which is deemed by the Fund to have such a 
predominant business activity as a result of analysis of its financial 
statements, annual reports, organizing documents, and any other 
information submitted as part of its application. In conducting such 
analysis, the Fund may take into consideration an Applicant's 
institutional type, total asset size, and stage of organizational 
development.
    (ii) An Applicant described under:
    (A) Paragraph (b)(4)(i)(A) of this section shall submit a copy of 
its organizing documents that indicate that it is a Depository 
Institution Holding Company;
    (B) Paragraph (b)(4)(i)(B) of this section shall submit a copy of 
its current certificate of insurance issued by the Federal Deposit 
Insurance Corporation or the National Credit Union Administration; and
    (C) Paragraph (b)(4)(i)(C) of this section shall submit a copy of 
its balance sheets and income and expense statements (and any notes or 
other supplemental information to its financial statements) as 
described in paragraph (d)(2)(i) of this section which clearly document 
its assets, liabilities, and net worth that are dedicated to lending 
and Development Investments and an explanation of how such assets, 
liabilities and net worth support these activities. An Applicant shall 
provide the information specified in this paragraph (b)(4)(ii)(C) for 
such periods as specified in paragraph (c) of this section.
    (5) Development Services. An Applicant shall submit a summary 
description of the Development Services to be offered, the expected 
provider of such services, and information on the persons expected to 
use such services.
    (6) Accountability. An Applicant shall describe how it has and will 
maintain accountability to the Investment Area(s) or Targeted 
Population(s) it serves.
    (7) Non-government. An Applicant shall submit articles of 
incorporation (or comparable organizing documents), charter, by-laws, 
or other legal documentation or opinions sufficient to verify that it 
is not a government entity.
    (8) Ownership. An Applicant shall submit information indicating the 
portion of shares of all classes of voting 

[[Page 54121]]
stock that are held by each Insured Depository Institution or 
Depository Institution Holding Company investor (if any).
    (9) Previous Awardees. In the case of an Applicant that has 
previously received assistance under this part, the Applicant shall 
demonstrate that it:
    (i) Has substantially met its performance goals and other 
requirements described in its previous Assistance Agreement(s); and
    (ii) Will expand its operations into a new Investment Area(s), 
serve a new Targeted Population(s), offer new products and services, or 
increase the volume of its activities.
    (10) Previous history. An Applicant with a prior history of serving 
Investment Area(s) or Targeted Population(s) shall describe its 
activities, operations and community benefits created for such periods 
as described in paragraph (c) of this section.
    (c) Time of operation. At the time of submission of an application, 
an Applicant that has been in operation for:
    (1) Three years or more shall submit information on its activities 
(as described in paragraphs (b) (1), (2) and (10) of this section) and 
financial statements (as described in paragraph (d)(2)(i) of this 
section) for the three most recent fiscal years;
    (2) For more than one year, but less than three years, shall submit 
information on its activities (as described in paragraphs (b) (1), (2) 
and (10) of this section) and financial statements (as described in 
paragraph (d)(2)(i) of this section) for each full fiscal year since 
its inception; or
    (3) For less than one year (including a start up organization), 
shall submit information on its activities and financial statements as 
described in paragraph (d) of this section.
    (d) Comprehensive Business Plan. An Applicant shall submit a five-
year Comprehensive Business Plan that addresses the items described in 
this paragraph. The Comprehensive Business Plan shall provide that an 
Applicant is a CDFI and will maintain such status throughout the five-
year period, or will become a CDFI within three years of entering into 
an Assistance Agreement and maintain such status for the balance of the 
five-year period. The Plan should include projections that are 
appropriate given an Applicant's current and anticipated organizational 
type, total asset size, and stage of organizational development.
    (1) Executive summary. An Applicant shall provide an executive 
summary of the Comprehensive Business Plan which includes a description 
of the institution (including relationships to any Affiliates), markets 
served or to be served, community needs, and other pertinent 
information.
    (2) Financial performance--(i) Historic performance. An Applicant 
shall submit historic financial statements for such periods as 
specified in paragraph (c) of this section. Such statements should 
include balance sheets, income and expense statements, and a 
capitalization statement (which includes information on changes in 
capital structure and funding from outside sources) for the Applicant. 
The Applicant shall provide information necessary to assess trends in 
financial and operating performance (e.g., portfolio delinquencies, 
defaults and charge-offs, origination volume and volume of loans 
closed, annual or cumulative operating ratios).
    (ii) Future projections. An Applicant shall submit projections for 
each of the next five years which includes balance sheet projections, 
income and expense projections, operating budgets, capitalization 
projections, estimates of the volume of new activity to be achieved 
with assistance provided by the Fund and matching funds, and describe 
any assumptions that underlie its projections.
    (iii) Financial statements. If available, an Applicant shall submit 
audited financial statements. If audited statements are not available, 
an Applicant shall submit financial statements that have been reviewed 
by a certified public accountant and developed using accrual based 
accounting methods. All financial statements shall be reported on the 
basis of the Applicant's fiscal year. If an Applicant is seeking to use 
retained earnings to meet its match requirements pursuant to 
Sec. 1805.600, it must submit audited financial statements for the 
applicable period.
    (iv) Financial management policies. An Applicant shall submit 
information on its financial management policies that describe its 
methodologies for underwriting and approving loans and investments and 
managing and monitoring its portfolio, internal operations, and 
capitalization needs.
    (3) Management capacity. An Applicant shall provide information on 
the background and capacity of its management team, including the 
relevant background and expertise of management (such as resumes or 
statements of personal history), key personnel and governing board 
members, if appropriate. The Applicant shall also provide information 
on any training or technical assistance needed to enhance the capacity 
of the organization to successfully carry out its Comprehensive 
Business Plan.
    (4) Market analysis. An Applicant shall provide an analysis of its 
target markets. An Applicant must:
    (i) Describe its proposed target market(s), including a description 
of the characteristics of the Investment Area(s) (e.g., location, 
boundaries, economic characteristics, relationships to Metropolitan, 
non-Metropolitan, or regional markets) or Targeted Population(s) (e.g., 
number of persons, income, and other socio-economic characteristics), 
its methodology for selecting such target market(s), the size of the 
market(s), and any relevant market trends;
    (ii) Describe the products and services (and corresponding pricing) 
it proposes to provide and analyze the competitiveness of such products 
and services in the target market(s); and
    (iii) Identify and analyze any characteristics of the target 
market(s) that will create opportunities or present impediments for its 
products, services and overall market strategy (e.g., economic 
conditions, perceived or documented credit needs or Financial Service 
needs, market activity, neighborhood perceptions, government services 
or delivery systems, community institutions, or the strength of the 
employment base).
    (5) Strategy. An Applicant shall describe its strategy for 
delivering its products and services to its target market(s). An 
Applicant may also describe any product or service development 
activities that are necessary before undertaking its strategy including 
the nature, scope, cost, timing, and risks of such activities. An 
Applicant shall also describe anticipated incremental increases in 
activity to be achieved with assistance provided by the Fund and 
matching funds.
    (6) Coordination strategy. An Applicant shall describe:
    (i) Its plan to coordinate use of assistance from the Fund with 
existing Federal, State, local, and tribal government assistance 
programs and private sector resources;
    (ii) How its proposed activities are consistent with existing 
economic, community and housing development plans adopted for an 
Investment Area(s) or Targeted Population(s); and
    (iii) How it will coordinate with community organizations, 
financial institutions, and Community Partners which will provide 
loans, equity investments, secondary markets, or other services to an 
Investment Area(s) or a Targeted Population(s). 

[[Page 54122]]

    (7) Projected community impact. An Applicant shall provide an 
estimate of the benefits expected to be created within its Investment 
Area(s) or Targeted Population(s) over the next five years, as 
indicated by the extent to which:
    (i) The Applicant will concentrate its activities within an 
Investment Area(s) or among Targeted Population(s);
    (ii) The Applicant's activities will expand economic opportunity 
(e.g., number of jobs created, jobs retained, businesses financed, 
business ownership opportunities facilitated, residents of Investment 
Area(s) or members of Targeted Population(s) employed, number or dollar 
amount of business loans and investment originations);
    (iii) The Applicant's activities will facilitate revitalization 
(e.g., number of square feet of commercial space financed, dollar 
amount of commercial real estate loan originations, indicators of 
demand for such commercial space (e.g., market vacancy rates, pre-
leased tenants, number of long term leases), number and square feet of 
Community Facility space financed, number of long term leases, and 
dollar amount of Community Facility loan originations);
    (iv) The Applicant's activities will promote affordable housing 
(e.g., number of affordable rental units, dollar amount of affordable 
rental housing loans originated, information on the demand for such 
housing (e.g., market vacancy rates, number of people on public and 
assisted housing waiting lists), information on the type of size of 
units and the people who will reside in such units (e.g., families, 
special needs populations), number of homes purchased and dollar amount 
of home ownership loan originations));
    (v) The Applicant will provide Development Services (as measured by 
the number of individuals that will receive Development Services);
    (vi) The Applicant will provide Financial Services (as measured by 
the number of new customers of Financial Services (e.g., individuals 
opening checking and savings accounts)); and
    (vii) Such other indicators as deemed appropriate by the Applicant 
or the Fund.
    (8) Community need. An Applicant may provide information on the 
extent of economic distress within its Investment Area(s) or needs of 
its Targeted Population(s) to supplement the data required pursuant to 
subpart C of this part and paragraph (b)(3) of this section. Such 
information may be from sources other than the 1990 decennial census.
    (9) Funding sources. An Applicant shall provide information:
    (i) On its current and projected sources of capital and other 
financial support;
    (ii) To demonstrate that it has a plan for achieving or maintaining 
financial viability within the five-year period; and
    (iii) To demonstrate that it will, to the maximum extent 
appropriate, increase self-sufficiency. Such information shall 
demonstrate that the Applicant will not be dependent upon future awards 
from the Fund for continued viability.
    (10) Risks and assumptions. An Applicant shall identify and discuss 
critical risks (including strategies to mitigate risk) and assumptions 
contained in its Comprehensive Business Plan, and any significant 
impediments to the Plan's implementation.
    (11) Schedule. An Applicant shall provide a schedule indicating the 
timing of major events necessary to realize the objectives of its 
Comprehensive Business Plan.
    (12) Community Partnership. In the case of an Applicant submitting 
an application with a Community Partner, the Applicant shall:
    (i) Describe how the Applicant and the Community Partner will 
participate in carrying out the Community Partnership and how the 
partnership will enhance activities serving the Investment Area(s) or 
Targeted Population(s);
    (ii) Demonstrate that the Community Partnership activities are 
consistent with the Comprehensive Business Plan;
    (iii) Provide information necessary to evaluate such an application 
as described under Sec. 1805.802(c)(4);
    (iv) Include a copy of any written agreement between the Applicant 
and the Community Partner related to the Community Partnership; and
    (v) Provide information to demonstrate that the Applicant meets the 
eligibility requirements described in Sec. 1805.200 and satisfies the 
selection criteria described in subpart H of this part. (A Community 
Partner shall not be required to meet the eligibility requirements 
described in Sec. 1805.200.)
    (e) Matching funds. (1) An Applicant shall submit a detailed 
description of its plans for raising matching funds and likely or 
committed sources of funds to match the amount of financial assistance 
requested from the Fund. An Applicant shall indicate the extent to 
which such matching funds will be derived from private, non-government 
sources.
    (2) An Applicant shall submit a description of any matching funds 
previously obtained or legally committed. Such description shall 
include the name of the source, total amount of such match, the date 
the matching funds were obtained or legally committed, percentage that 
remains available to serve as match, and terms and restrictions on use 
for each matching source. The Application shall include copies of any 
agreements, memoranda of understanding, letters of intent, or similar 
documents pertaining to matching funds. The Applicant shall provide 
documentation to indicate that the matching fund source(s) has approved 
the use of the funds for matching purposes and the name, address and 
telephone number of a contact person for each entity providing matching 
funds.
    (3) If the Applicant intends to use retained earnings to meet the 
matching requirements, it shall provide the information described in 
paragraph (d)(2)(iii) of this section and a copy of its tax returns for 
the same period. The Applicant shall submit a certification from its 
governing body:
    (i) As to the amount and form of retained earnings available as 
matching funds; and
    (ii) That such earnings will be used for the purposes described in 
its application.
    (4) If the Applicant is requesting a ``severe constraint waiver'' 
of any matching requirements, it shall submit the information requested 
in Sec. 1805.602.
    (f) Support. An Applicant shall provide information to demonstrate 
the extent of support (if any) within the Investment Area(s) or 
Targeted Population(s) for its activities.
    (g) Community Ownership and Governance. An Applicant shall provide 
information to demonstrate whether it is Community-Owned or Community-
Governed.
    (h) Conflict of interest. An Applicant shall submit a copy of its 
conflict of interest policies that are consistent with the requirements 
of Sec. 1805.906.
    (i) Environmental information. The Applicant shall provide 
sufficient information regarding the potential environmental impact of 
its proposed activities in order for the Fund to complete its 
environmental review requirements pursuant to part 1815 of this 
chapter.
    (j) Applicant certification. The Applicant and Community Partner 
(if applicable) shall certify that:
    (1) It possesses the legal authority to apply for assistance from 
the Fund;
    (2) The application has been duly authorized by its governing body 
and duly executed; 

[[Page 54123]]

    (3) It will not use any Fund resources for lobbying activities as 
set forth in Sec. 1805.907; and
    (4) It will comply with all relevant provisions of this chapter and 
all applicable Federal, State, and local laws, ordinances, regulations, 
policies, guidelines, and requirements.

Subpart H--Rating and Selection of Applications


Sec. 1805.800  Rating and selection--general.

    Applicants will be rated and selected, at the sole discretion of 
the Fund, to receive assistance based on a multi-tiered review process 
that is intended to:
    (a) Screen out Applicants that do not meet the basic program 
requirements or possess adequate capacity to be a successful CDFI;
    (b) Take into consideration the unique characteristics of 
institutions that vary by institution type, total asset sizes, stage of 
organizational development, markets served, products and services 
provided, and location; and
    (c) Evaluate and select Applicants.


Sec. 1805.801  Geographic diversity.

    In selecting Awardees, the Fund shall seek to fund a geographically 
diverse group of Applicants serving Metropolitan Areas, non-
Metropolitan Areas, and Indian Reservations from different regions of 
the United States.


Sec. 1805.802  Tiered review process.

    (a) Tier I Review. Tier I of the review process is intended to 
ensure that an Applicant meets the eligibility requirements described 
under Sec. 1805.200 and has submitted complete application materials. 
An Applicant that fails to meet the basic eligibility and application 
requirements will be notified of the reasons for such determination.
    (b) Tier II Review. Tier II of the review process is intended to 
ensure that an Applicant meeting the Tier I requirements possesses the 
financial and organizational capacity to be a successful CDFI.
    (1) The Fund will examine several criteria in evaluating financial 
and organizational capacity and an Applicant's likelihood of success in 
meeting the goals of its Comprehensive Business Plan. These criteria 
will include the strength and background of an Applicant's management 
team and other key personnel, the quality of its financial management 
policies and practices, breadth and depth of its financial resources, 
the depth of its market analysis, and trends in financial and operating 
performance.
    (2) An Applicant that fails to meet the minimum requirements of 
Tier II will be notified of the reasons for such determination.
    (c) Tier III Review. Tier III of the review process is intended to 
examine other qualitative aspects of an application. The Fund will rate 
each application meeting the Tier I and II requirements based on the 
selection criteria set forth in this part. The selection criteria and 
ratings will be considered in the following categories:
    (1) Organizational capacity. The Fund will evaluate the information 
described in the Tier II review to rate an Applicant's organizational 
and financial strength and capacity.
    (2) External resources. The Fund will evaluate the extent of 
external resources available to an Applicant based on:
    (i) The amount of firm commitments to meet or exceed the matching 
requirements and the likely success of the plan for raising the balance 
of the matching funds in a timely manner;
    (ii) The extent to which the matching funds are, or will be, 
derived from private sources or new investments;
    (iii) Whether an Applicant is, or will become, an Insured CDFI; and
    (iv) The extent to which an Awardee will use assistance to expand 
the funds available for lending and equity investments beyond the sum 
of the award and the matching funds.
    (3) Community impact. The Fund will evaluate an application's 
community impact based on:
    (i) The extent of economic distress within the designated 
Investment Area(s) or the extent to which the designated Targeted 
Population(s) is Low-Income;
    (ii) The extent to which an Applicant will concentrate its 
activities on serving Investment Area(s) or Targeted Population(s);
    (iii) The extent of need for loans, equity investments, Development 
Services, and Financial Services within the designated Investment 
Area(s) or Targeted Population(s);
    (iv) The extent to which the activities proposed in the 
Comprehensive Business Plan will expand economic opportunities within 
the designated Investment Area(s) or Targeted Population(s);
    (v) The extent of support from the designated Investment Area(s) or 
Targeted Population(s);
    (vi) The extent to which an Applicant is, or will be, Community-
Owned or Community-Governed;
    (vii) The extent to which an Applicant will increase its resources 
through such means as a Community Partnership, participation in the 
secondary market, and coordination with other institutions (e.g., a 
local Empowerment Zone or Enterprise Community coordinating entity), 
particularly other CDFIs; and
    (viii) In the case of an Applicant with a prior history of serving 
Investment Area(s) or Targeted Population(s), the extent of success in 
serving them.
    (4) Community Partnerships. Community Partnerships will be rated 
based on the extent to which the Applicant and Community Partner meet 
the factors described in paragraphs (c) (1), (2) and (3) of this 
section and giving consideration to the extent to which:
    (i) The Community Partner will participate in carrying out the 
activities of the Community Partnership;
    (ii) The Community Partnership will enhance the likelihood of 
success of the Comprehensive Business Plan; and
    (iii) Service to an Investment Area(s) or Targeted Population(s) 
will be better performed by a Community Partnership than by an 
Applicant alone.
    (5) Other factors. The Fund may consider any other factors with 
respect to any application as it deems appropriate.
    (6) Priorities. The Fund may give additional consideration to 
Applicants that:
    (i) Have secured firm commitments for all of the matching funds at 
the time of submission of an application;
    (ii) Concentrate their activities within an Investment Area(s) or 
Targeted Population(s); or
    (iii) Dedicate the greatest portion of their total resources to 
lending, Development Investments, and Development Services.
    (d) Consultation with Appropriate Federal Banking Agencies. The 
Fund shall consult with, and consider the views of, the Appropriate 
Federal Banking Agency prior to providing assistance to:
    (1) An Insured CDFI;
    (2) A CDFI that is examined by or subject to the reporting 
requirements of an Appropriate Federal Banking Agency; and
    (3) A CDFI that has as its Community Partner an institution that is 
examined by, or subject to, the reporting requirements of an 
Appropriate Federal Banking Agency.
    (e) Awardee selection. The Fund will select Awardees based on the 
criteria described in paragraph (c) of this section and any other 
criteria set forth in this part or the applicable NOFA.

Subpart I--Terms and Conditions of Assistance


Sec. 1805.900  Safety and soundness.

    (a) Regulated institutions. Nothing in this part, or in an 
Assistance Agreement, 

[[Page 54124]]
shall affect any authority of an Appropriate Federal Banking Agency to 
supervise and regulate any institution or company.
    (b) Non-Regulated CDFIs. The Fund will, to the extent practicable, 
ensure that Awardees that are Non-Regulated CDFIs are financially and 
managerially sound and maintain appropriate internal controls.


Sec. 1805.901  Assistance Agreement; sanctions.

    (a) Prior to providing any assistance, the Fund and an Awardee 
shall execute an Assistance Agreement that requires an Awardee to 
comply with performance goals and abide by other terms and conditions 
of assistance. If a Community Partner is part of an application that is 
selected for assistance, such partner must be a party to the Assistance 
Agreement if deemed appropriate by the Fund.
    (b) An Awardee shall comply with performance goals that have been 
negotiated with the Fund and which are based upon the Comprehensive 
Business Plan submitted as part of the Awardee's application. 
Performance goals for Insured CDFIs shall be determined in consultation 
with the Appropriate Federal Banking Agency. Such goals shall be 
incorporated in, and enforced under, the Awardee's Assistance 
Agreement.
    (c) The Assistance Agreement shall provide that, in the event of 
fraud, mismanagement, noncompliance with the Fund's regulations or 
noncompliance with the terms and conditions of the Assistance Agreement 
on the part of the Awardee (or the Community Partner, if applicable), 
the Fund, in its discretion, may:
    (1) Require changes in the performance goals set forth in the 
Assistance Agreement;
    (2) Require changes in the Awardee's Comprehensive Business Plan;
    (3) Revoke approval of the Awardee's application;
    (4) Reduce or terminate the Awardee's assistance;
    (5) Require repayment of any assistance that has been distributed 
to the Awardee;
    (6) Bar the Awardee (and the Community Partner, if applicable) from 
reapplying for any assistance from the Fund; or
    (7) Take any other action as permitted by the terms of the 
Assistance Agreement.
    (d) In the case of an Insured Depository Institution, the 
Assistance Agreement shall provide that the provisions of the Act, this 
part, and the Assistance Agreement shall be enforceable under section 8 
of the Federal Deposit Insurance Act by the Appropriate Federal Banking 
Agency and that any violation of such provisions shall be treated as a 
violation of the Federal Deposit Insurance Act. Nothing in this 
paragraph precludes the Fund from directly enforcing the Assistance 
Agreement as provided for under the terms of the Act.
    (e) The Fund shall notify the Appropriate Federal Banking Agency 
before imposing any sanctions on an Insured CDFI or other institution 
that is examined by or subject to the reporting requirements of that 
agency. The Fund shall not impose a sanction described in paragraph (c) 
of this section if the Appropriate Federal Banking Agency, in writing, 
not later than 30 calendar days after receiving notice from the Fund:
    (1) Objects to the proposed sanction;
    (2) Determines that the sanction would:
    (i) Have a material adverse effect on the safety and soundness of 
the institution; or
    (ii) Impede or interfere with an enforcement action against that 
institution by that agency;
    (3) Proposes a comparable alternative action; and
    (4) Specifically explains:
    (i) The basis for the determination under paragraph (e)(2) of this 
section and, if appropriate, provides documentation to support the 
determination; and
    (ii) How the alternative action suggested pursuant to paragraph 
(e)(3) of this section would be as effective as the sanction proposed 
by the Fund in securing compliance and deterring future noncompliance.
    (f) In reviewing the performance of an Awardee in which its 
Investment Area(s) includes an Indian Reservation or Targeted 
Population(s) includes an Indian Tribe, the Fund shall consult with, 
and seek input from, the appropriate Tribal Government.
    (g) Prior to imposing any sanctions pursuant to this section or an 
Assistance Agreement, the Fund shall, to the maximum extent 
practicable, provide the Awardee (or the Community Partner, if 
applicable) with written notice of the proposed sanction and an 
opportunity to comment. Nothing in this section, however, shall provide 
an Awardee or Community Partner with the right to any formal or 
informal hearing or comparable proceeding not otherwise required by 
law.


Sec. 1805.902  Disbursement of funds.

    Assistance provided pursuant to this part may be provided in a lump 
sum or over a period of time, as determined appropriate by the Fund. 
The Fund shall not provide any assistance (other than technical 
assistance) under this part until an Awardee has satisfied any 
conditions set forth in its Assistance Agreement and has secured firm 
commitments for the matching funds required for such assistance. At a 
minimum, a firm commitment must consist of a binding written agreement 
between an Awardee and the source of the matching funds that is 
conditioned only upon the availability of the Fund's assistance and 
such other conditions as the Fund, in its sole discretion, may deem 
appropriate. Such agreement must provide for disbursal of the matching 
funds to an Awardee prior to, or simultaneously with, receipt by an 
Awardee of the Federal funds.


Sec. 1805.903  Data collection and reporting.

    (a) Data--general. An Awardee (and a Community Partner, if 
appropriate) shall maintain such records as may be prescribed by the 
Fund which are necessary to:
    (1) Disclose the manner in which Fund assistance is used; and
    (2) Demonstrate compliance with the requirements of this part and 
an Assistance Agreement.
    (b) Customer profiles. An Awardee (and a Community Partner, if 
appropriate) shall compile such data on the gender, race, ethnicity, 
national origin, or other information on individuals that utilize its 
products and services as the Fund shall prescribe in an Assistance 
Agreement. Such data will be used to determine whether residents of 
Investment Area(s) or members of Targeted Population(s) are adequately 
served.
    (c) Access to records. An Awardee (and a Community Partner, if 
appropriate) 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 Fund or the U.S. Department 
of Treasury to ensure compliance with the requirements of this part. 
The United States Government, including the U.S. Department of 
Treasury, the Comptroller General, and their duly authorized 
representatives, shall have full and free access to the Awardee's 
offices and facilities and all books, documents, records, and financial 
statements relating to use of Federal funds and may copy such documents 
as they deem appropriate. The Fund, if it deems appropriate, may 
prescribe access to record requirements for entities that are borrowers 
of, or that receive investments from, an Awardee. 

[[Page 54125]]

    (d) Retention of records. An Awardee shall comply with all record 
retention requirements as set forth in OMB Circular A-110 (as 
applicable).
    (e) Review. (1) At least annually, the Fund will review the 
progress of an Awardee (and a Community Partner, if appropriate) in 
implementing its Comprehensive Business Plan and satisfying the terms 
and conditions of its Assistance Agreement. During such review, the 
Fund may consider requests to modify Comprehensive Business Plans or 
performance goals.
    (2) An Awardee shall submit a report within:
    (i) 45 days of the end of each calendar quarter with information on 
the performance of its loans, Development Investments, Development 
Services, and Financial Services in the previous quarter, and unaudited 
financial statements. Such report shall include key indicators of 
portfolio performance, including volume of originations, delinquencies, 
and defaults, and charge-offs for the previous quarter; and
    (ii) 60 days at the end of each Federal fiscal year with:
    (A) Information on its customer profile and the performance of its 
loans, Development Investments, Development Services, and Financial 
Services for the previous year;
    (B) Information on its portfolio performance, including volume of 
originations, delinquencies, and defaults and charge-offs for the 
previous year;
    (C) Qualitative and quantitative information on an Awardee's 
compliance with its performance goals and (if appropriate) an analysis 
of factors contributing to any failure to meet such goals;
    (D) Information describing the manner in which Fund assistance and 
any corresponding matching funds were used. The Fund will use such 
information to verify that assistance was used in a manner consistent 
with the Assistance Agreement;
    (E) Certification that an Awardee continues to meet the eligibility 
requirements described in Sec. 1805.200; and
    (F) Its most recent audited financial statements prepared by an 
independent certified public accountant. Such statements shall cover 
the operations of the Awardee's most recently completed fiscal year. 
The audit shall be conducted in accordance with generally accepted 
Government Auditing Standards set forth in the General Accounting 
Office's Government Auditing Standards (1994 Revision) issued by the 
Comptroller General and OMB Circular A-133 (``Audits of Institutions of 
Higher Education and Other Nonprofit Institutions''), as applicable. 
The independent certified public accountant shall review and attest 
that an Awardee's use of Federal assistance is in compliance with the 
Assistance Agreement.
    (3) The Fund shall make reports described in paragraph (e)(2) of 
this section available for public inspection after deleting any 
materials necessary to protect privacy or proprietary interests.
    (f) Exchange of information with Appropriate Federal Banking 
Agencies. (1) Except as provided in paragraph (f)(4) of this section, 
prior to directly requesting information from or imposing reporting or 
record keeping requirements on an Insured CDFI or other institution 
that is examined by or subject to the reporting requirements of an 
Appropriate Federal Banking Agency, the Fund shall consult with the 
Appropriate Federal Banking Agency to determine if the information 
requested is available from or may be obtained by such agency in the 
form, format, and detail required by the Fund.
    (2) If the information, reports, or records requested by the Fund 
pursuant to paragraph (f)(1) of this section are not provided by the 
Appropriate Federal Banking Agency within 15 calendar days after the 
date on which the material is requested, the Fund may request the 
information from or impose the record keeping or reporting requirements 
directly on such institutions with notice to the Appropriate Federal 
Banking Agency.
    (3) The Fund shall use any information provided by the Appropriate 
Federal Banking Agency under this section to the extent practicable to 
eliminate duplicative requests for information and reports from, and 
record keeping by, an Insured CDFI or other institution that is 
examined by or subject to the reporting requirements of an Appropriate 
Federal Banking Agency.
    (4) Notwithstanding paragraphs (f)(1) and (2) of this section, the 
Fund may require an Insured CDFI or other institution that is examined 
by or subject to the reporting requirements of an Appropriate Federal 
Banking Agency to provide information with respect to the institution's 
implementation of its Comprehensive Business Plan or compliance with 
the terms of its Assistance Agreement, after providing notice to the 
Appropriate Federal Banking Agency.
    (5) Nothing in this part shall be construed to permit the Fund to 
require an Insured CDFI or other institution that is examined by or 
subject to the reporting requirements of a Appropriate Federal Banking 
Agency to obtain, maintain, or furnish an examination report of any 
Appropriate Federal Banking Agency or records contained in or related 
to such report.
    (6) The Fund and the Appropriate Federal Banking Agency shall 
promptly notify each other of material concerns about an Awardee that 
is an Insured CDFI or that is examined by or subject to the reporting 
requirements of an Appropriate Federal Banking Agency, and share 
appropriate information relating to such concerns.
    (7) Neither the Fund nor the Appropriate Federal Banking Agency 
shall disclose confidential information obtained pursuant to this 
section from any party without the written consent of that party.
    (8) The Fund, the Appropriate Federal Banking Agency, and any other 
party providing information under this paragraph (f) of this section 
shall not be deemed to have waived any privilege applicable to the any 
information or data, or any portion thereof, by providing such 
information or data to the other party or by permitting such data or 
information, or any copies or portions thereof, to be used by the other 
party.
    (g) Availability of referenced publications. The publications 
referenced in this section are available as follows:
    (1) OMB Circulars may be obtained from the Office of 
Administration, Publications Office, 725 17th Street, NW., room 2200, 
New Executive Office Building, Washington, DC 20503; and
    (2) General Accounting Office materials may be obtained from GAO 
Distribution, 700 4th Street, NW., suite 1100, Washington, DC 20548.


Sec. 1805.904  Information.

    The Fund and each Appropriate Federal Banking Agency shall 
cooperate and respond to requests from each other and from other 
Appropriate Federal Banking Agencies in a manner that ensures the 
safety and soundness of the Insured CDFIs or other institution that is 
examined by or subject to the reporting requirements of an appropriate 
Federal banking agency.


Sec. 1805.905  Compliance with government requirements.

    In carrying out its responsibilities pursuant to an Assistance 
Agreement, the Awardee shall comply with all applicable Federal, State, 
and local laws, regulations, and ordinances, OMB Circulars, and 
Executive Orders. 

[[Page 54126]]



Sec. 1805.906  Conflict of interest requirements.

    (a) Provision of credit to Insiders. (1) An Awardee that is a Non-
Regulated CDFI may not use any monies provided to it by the Fund to 
make any credit (including loans and Development Investments) available 
to an Insider unless it meets the following restrictions:
    (i) The credit must be provided pursuant to standard underwriting 
procedures, terms and conditions;
    (ii) The Insider receiving the credit, and any family member or 
business partner thereof, shall not participate in any way in the 
decision making regarding such credit;
    (iii) The Board of Directors or other governing body of the Awardee 
shall approve the extension of the credit; and
    (iv) For credit of $10,000 or more, the Awardee shall provide 
written notice to the Fund at least 30 days prior to initial 
disbursement and shall receive written approval from the Fund prior to 
any disbursement.
    (2) An Awardee that is an Insured CDFI or a Depository Institution 
Holding Company shall comply with the restrictions on Insider 
activities and any comparable restrictions established by its 
Appropriate Federal Banking Agency.
    (b) Awardee standards of conduct. An Awardee shall maintain a code 
or standards of conduct acceptable to the Fund that shall govern the 
performance of its Insiders engaged in the awarding and administration 
of any credit (including loans and Development Investments) and 
contracts using monies from the Fund. No Insider of an Awardee shall 
solicit or accept gratuities, favors or anything of monetary value from 
any actual or potential borrowers, owners or contractors for such 
credit or contracts. Such policies shall provide for disciplinary 
actions to be applied for violation of the standards by the Awardee's 
Insiders.


Sec. 1805.907  Lobbying restrictions.

    No assistance made available under this part may be expended by an 
Awardee to pay any person to influence or attempt to influence any 
agency, elected official, officer or employee of a State or local 
government in connection with the making, award, extension, 
continuation, renewal, amendment, or modification of any State or local 
government contract, grant, loan or cooperative agreement as such terms 
as are defined in 31 U.S.C. 1352.


Sec. 1805.908  Criminal provisions.

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


Sec. 1805.909  Fund deemed not to control.

    The Fund shall not be deemed to control an Awardee by reason of any 
assistance provided under the Act for the purpose of any applicable 
law.


Sec. 1805.910  Limitation on liability.

    The liability of the Fund and the United States Government arising 
out of any assistance to a CDFI in accordance with this part shall be 
limited to the amount of the investment in the CDFI. The 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. 1805.911  Fraud, waste and abuse.

    Any person who becomes aware of the existence or apparent existence 
of fraud, waste or abuse of assistance provided under this part should 
report such incidences to the Office of Inspector General of the U.S. 
Department of the Treasury.

PART 1806--BANK ENTERPRISE AWARD PROGRAM

Subpart A--General Provisions

Sec.
1806.100  Purpose.
1806.101  Summary.
1806.102  Relationship to the Community Development Financial 
Institutions Program.
1806.103  Definitions.
1806.104  Waiver authority.
1806.105  OMB control number.

Subpart B--Awards

1806.200  Community eligibility and designation.
1806.201  Qualified activities.
1806.202  Measuring activities.
1806.203  Estimated award amounts.
1806.204  Selection process.
1806.205  Actual award amounts.
1806.206  Applications for Bank Enterprise Awards.

Subpart C--Terms and Conditions of Assistance

1806.300  Award Agreement; sanctions.
1806.301  Records, reports, and audits of Awardees.
1806.302  Compliance with government requirements.
1806.303  Fraud, waste, and abuse.
1806.304  Books of account, records and government access.
1806.305  Retention of records.

    Authority: 12 U.S.C. 4703, 4717; chapter X, Pub. L. 104-19, 109 
Stat. 237 (12 U.S.C. 4703 note).

Subpart A--General Provisions


Sec. 1806.100  Purpose.

    The purpose of the Bank Enterprise Award program is to encourage 
insured depository institutions to make Equity Investments and engage 
in Eligible Development Activities.


Sec. 1806.101  Summary.

    (a) Under the Bank Enterprise Awards Program, the Fund makes awards 
to selected Applicants that:
    (1) Invest in Community Development Financial Institutions;
    (2) Increase lending activities within Distressed Communities; or
    (3) Increase the provision of certain services and assistance.
    (b) Distressed Communities must meet minimum poverty and 
unemployment criteria. Applicants are selected to participate in the 
program through a competitive application process. Generally, awards 
are based on increases in Qualified Activities that are carried out by 
the Applicant during an Assessment Period. Bank Enterprise Awards are 
distributed after successful completion of projected Qualified 
Activities. All awards shall be made subject to the availability of 
funding.


Sec. 1806.102  Relationship to the Community Development Financial 
Institutions Program.

    (a) Prohibition against double funding. No CDFI may receive a Bank 
Enterprise Award if it has:
    (1) An application pending for assistance under the Community 
Development Financial Institutions Program (part 1805 of this chapter);
    (2) Received assistance from the Community Development Financial 
Institutions Program within the preceding 12-month period; or
    (3) Ever received assistance under the Community Development 
Financial Institutions Program for the same activities for which it is 
seeking a Bank Enterprise Award.
    (b) Matching funds. Equity Investments and loans provided to a CDFI 
under this part can be used by the CDFI to meet the matching funds 
requirements of the Community Development Financial Institutions 
Program.
    (c) CDFI certification. Any entity receiving a CDFI certification 
under Sec. 1805.201 of this chapter within two years of the filing an 
application for a Bank Enterprise Award shall qualify as a CDFI for the 
purposes of this part. If an Applicant is proposing to make an 

[[Page 54127]]
Equity Investment in an entity that has not been certified as a CDFI, 
the application submitted by the Applicant under this part shall 
include a letter from the entity requesting certification and the 
information described in Sec. 1805.701(b) of this chapter.


Sec. 1806.103  Definitions.

    For the purpose of this part:
    (a) Act means the Community Development Banking and Financial 
Institutions Act of 1994 (12 U.S.C. 4701 et seq.);
    (b) Agricultural Loan means a new origination (including 
refinancing) of a loan secured by farm land (including farm residential 
and other improvements), a loan to finance agricultural production, or 
a loan to a farmer (other than a Single Family Loan or Consumer Loan);
    (c) Applicant means any insured depository institution (as defined 
in section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1813)) that is applying for a Bank Enterprise Award;
    (d) Appropriate Federal Banking Agency has the same meaning as in 
section 3 of the Federal Deposit Insurance Act;
    (e) Assessment Period means an annual or semi-annual period 
specified in the applicable Notice of Funds Availability (NOFA) in 
which an Applicant will carry out Qualified Activities;
    (f) Award Agreement means a contract between the Fund and an 
Awardee pursuant to Sec. 1806.300;
    (g) Awardee means an Applicant selected by the Fund to receive a 
Bank Enterprise Award;
    (h) Bank Enterprise Award means an award made to an Applicant 
pursuant to this part;
    (i) Bank Enterprise Award Program means the program authorized by 
section 114 of the Act and implemented under this part;
    (j) Baseline Period means an annual or semi-annual period specified 
in the applicable NOFA in which an Applicant has previously carried out 
Qualified Activities;
    (k) Business Loan means a new origination (including refinancing) 
of a loan used for commercial or industrial activities (other than an 
Agricultural Loan, Commercial Real Estate Loan, Multi-Family Loan or 
Single Family Loan);
    (l) Commercial Real Estate Loan means a new origination (including 
refinancing) of a loan (other than a Multi-Family Loan or a Single 
Family Loan) used to finance:
    (1) Construction and land development; or
    (2) Commercial real estate in amounts of more than one million 
dollars and which is secured by real estate;
    (m) Community Development Financial Institution (or CDFI) means an 
entity certified under Sec. 1805.201 of this chapter and that meets the 
eligibility requirements under Sec. 1805.200 of this chapter;
    (n) Consumer Loan means a new origination (including refinancing) 
of a loan to one or more individuals for household, family, or other 
personal expenditures;
    (o) Distressed Community means a geographic community which meets 
the minimum area eligibility requirements specified in Sec. 1806.200;
    (p) Eligible Development Activities means activities described in 
Sec. 1806.201(b)(4) that are carried out by the Applicant or its 
Subsidiary;
    (q) Equity Investment means new financial assistance provided by an 
Applicant or its Subsidiary to a CDFI in the form of a stock purchase, 
a grant (excluding grants used to support operating costs), or a loan 
made on such terms that it has characteristics of equity (and is 
considered as such by the Fund and is consistent with requirements of 
the Applicant's Appropriate Federal Banking Agency);
    (r) Financial Services means check-cashing, providing money orders 
and certified checks, automated teller machines, safe deposit boxes, 
and other services as may be specified by the Fund;
    (s) Fund means the Community Development Financial Institutions 
Fund established under section 104(a) of the Act (12 U.S.C. 4703(a));
    (t) Geographic Units means counties (or equivalent areas), 
incorporated places, minor civil divisions that are units of local 
government, census tracts, block numbering areas, and American Indian 
or Alaska Native areas (as each is defined by the U.S. Bureau of the 
Census) or other areas deemed appropriate by the Fund);
    (u) Indian Reservation means a geographic area that meets the 
requirements of section 4(10) of the Indian Child Welfare Act of 1978 
(25 U.S.C. 1903(10)), and shall include land held by incorporated 
Native groups, regional corporations, and village corporation, as 
defined in and pursuant to the Alaska Native Claims Settlement Act (43 
U.S.C. 1601 et seq.), public domain Indian allotments, and former 
Indian Reservations in the State of Oklahoma;
    (v) Low- and Moderate-Income means income that does not exceed 80 
percent of the median income of the area involved, as determined by the 
Secretary of Housing and Urban Development with adjustments for smaller 
and larger families pursuant to section 102(a)(20) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302(a)(20);
    (w) Metropolitan Area means an area designated as such (as of the 
date of the application) by the Office of Management and Budget 
pursuant to 44 U.S.C. 3504(d)(3), 31 U.S.C. 1104(d) and Executive Order 
10253 (3 CFR, 1949-1953 Comp., p. 758), as amended;
    (x) Multi-Family Loan means a new origination (including 
refinancing) of a loan secured by a five- or more family residential 
property;
    (y) Qualified Activities means Equity Investments and Eligible 
Development Activities;
    (z) Resident means an individual domiciled in a Distressed 
Community;
    (aa) Single Family Loan means a new origination (including 
refinancing) of a loan secured by a one-to-four family residential 
property;
    (bb) Subsidiary has the same meaning as in section 3 of the Federal 
Deposit Insurance Act, except that a CDFI shall not be considered a 
subsidiary of any insured depository institution or any depository 
institution holding company that controls less than 25 percent of any 
class of the voting shares of such corporation and does not otherwise 
control, in any manner, the election of a majority of directors of the 
corporation; and
    (cc) Unit of General Local Government means any city, county, town, 
township, parish, village, or other general purpose political 
subdivision of a State or Commonwealth of the United States, or general 
purpose subdivision thereof, and the District of Columbia.


Sec. 1806.104  Waiver authority.

    The Fund may waive any requirement of this part that is not 
required by law, upon a determination of good cause. Each such waiver 
shall be in writing and supported by a statement of the facts and 
grounds forming the basis of the waiver. For a waiver in any individual 
case, the Fund must determine that application of the requirement to be 
waived would adversely affect the achievement of the purposes of the 
Act. For waivers of general applicability, the Fund will publish notice 
of granted waivers in the Federal Register.


Sec. 1806.105  OMB control number.

    The collection of information requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB 
control 

[[Page 54128]]
number 1505-0153 (expires September 30, 1998).

Subpart B--Awards


Sec. 1806.200  Community eligibility and designation.

    (a) General. If an Applicant proposes to carry out Eligible 
Development Activities, or Equity Investments that support efforts of a 
CDFI in a Distressed Community, the Applicant shall designate one or 
more Distressed Communities in which it proposes to carry out those 
activities.
    (b) Minimum area eligibility requirements. A Distressed Community 
must meet the minimum area eligibility requirements contained in this 
paragraph.
    (1) Geographic requirements. A Distressed Community must be a 
geographic area:
    (i) That is located within the boundaries of a Unit of General 
Local Government;
    (ii) The boundaries of which are contiguous; and
    (iii)(A) The population of which must be at least 4,000 if any 
portion of the area is located within a Metropolitan Area with a 
population of 50,000 or greater;
    (B) The population must be at least 1,000 if no portion of the area 
is located within such a Metropolitan Area; or
    (C) Is located entirely within an Indian Reservation.
    (2) Distress requirements. A Distressed Community must be a 
geographic area where:
    (i) At least 30 percent of the Residents have incomes which are 
less than the national poverty level, as determined by the U.S. Bureau 
of the Census in the 1990 decennial census; and
    (ii) The unemployment rate is at least 1.5 times greater than the 
national average, as determined by the U.S. Bureau of Labor Statistics' 
most recent data.
    (c) Area designation. An Applicant shall designate an area as a 
Distressed Community by:
    (1) Selecting Geographic Units which individually meet the minimum 
area eligibility requirements; or
    (2) Selecting two or more Geographic Units which, in the aggregate, 
meet the minimum area eligibility requirements set forth in paragraph 
(b) of this section provided that no Geographic Unit selected by the 
Applicant within the area has a poverty rate of less than 20 percent.
    (d) Designation and notification process. Upon request, the Fund 
will provide a prospective Applicant with data to help it identify 
areas eligible to be a Distressed Community. A prospective Applicant 
may contact the Fund prior to filing an application to determine if an 
area meets the minimum area eligibility requirements.


Sec. 1806.201  Qualified Activities.

    (a) Equity Investment. An Applicant may receive a Bank Enterprise 
Award for making an Equity Investment during an Assessment Period.
    (b) Eligible Development Activities.--(1) General. An Applicant may 
receive a Bank Enterprise Award for carrying out Eligible Development 
Activities during an Assessment Period.
    (2) Service. The Eligible Development Activities listed in 
paragraphs (b)(4)(i) through (vii) of this section must serve a 
Distressed Community. An activity is considered to serve a Distressed 
Community if it is:
    (i) Undertaken in the Distressed Community; or
    (ii) Provided to Low- and Moderate-Income Residents or enterprises 
integrally involved in the Distressed Community.
    (3) Priority factors. Each Eligible Development Activity is 
assigned a priority factor. A priority factor represents the Fund's 
assessment of the degree of difficulty, the extent of innovation, and 
the extent of benefits accruing to the Distressed Community for each 
type of activity.
    (4) Eligible Development Activities. Eligible Development 
Activities are listed in this paragraph with their corresponding 
priority factors:
    (i) Consumer Loans (priority factor=1.2);
    (ii) Commercial Real Estate Loans (priority factor=1.6);
    (iii) Single Family Loans (priority factor=1.4);
    (iv) Multi-Family Loans (priority factor=1.6);
    (v) Business Loans and Agricultural Loans of $100,000 or less 
(priority factor=1.9);
    (vi) Business Loans and Agricultural Loans of more than $100,000 
through $250,000 (priority factor=1.8);
    (vii) Business Loans of more than $250,000 through $1,000,000 and 
Agricultural Loans of more than $250,000 through $500,000 (priority 
factor=1.7);
    (viii) Deposit liabilities in the form of savings or other demand 
or time accounts accepted from Residents at offices located within the 
Distressed Community (priority factor=1.0);
    (ix) Financial Services provided to Low- and Moderate-Income 
persons in the Distressed Community or provided to enterprises 
integrally involved in the Distressed Community (priority factor=1.2);
    (x) Provision of technical assistance to Residents in managing 
their personal finances through consumer education programs (either 
sponsored or offered by the Applicant) (priority factor=1.4);
    (xi) Provision of technical assistance and consulting services to 
newly formed small businesses located in the Distressed Community 
(priority factor=1.4);
    (xii) Provision of technical assistance to, or servicing the loans 
of, Low- and Moderate-Income home owners and home owners located in the 
Distressed Community (priority factor=1.4); and
    (xiii) Grants used to support the operating costs of, new 
origination (including refinancing) of loans to, or technical 
assistance provided to:
    (A) A CDFI that supports efforts in the Distressed Community 
(priority factor=2.2); and
    (B) Any other CDFI (priority factor=2.0).


Sec. 1806.202  Measuring activities.

    (a) General. Qualified Activities shall be measured by comparing 
the Qualified Activities carried out during the Baseline Period with 
the Qualified Activities projected to be carried out during the 
Assessment Period. Increases in the values of Qualified Activities 
between the Baseline and Assessment Periods will be used in determining 
award amounts. Applicants shall report their activities in all 
categories of Qualified Activities for the Baseline and Assessment 
Periods. The dates of the Baseline Period and the Assessment Periods 
will be published in the NOFA for each funding round.
    (b) Value. The Fund will assess the value of:
    (1) Equity Investments, loans and grants at the original amount of 
such investments, loans or grants;
    (2) Deposit liabilities at the face dollar amount of monies 
deposited; and
    (3) Financial Services and technical assistance based on the 
administrative costs of providing such services.
    (c) Reporting. An Applicant shall report Qualified Activities:
    (1) That were carried out during the Baseline Period; and
    (2) Proposed to be carried out during the Assessment Period.


Sec. 1806.203  Estimated award amounts.

    Award amounts will be determined at the sole discretion of the Fund 
and estimated as described in this section.
    (a) Equity Investments. The estimated award amount for an Equity 
Investment will be equal to 15 percent (or such lower percentage as may 
be requested by the Applicant) of the anticipated increase in the value 
of such investment 

[[Page 54129]]
between the Baseline and Assessment Periods.
    (b) Eligible Development Activities. The estimated award amount for 
Eligible Development Activities will be calculated as follows:
    (1) Step 1. For each type of Eligible Development Activity, 
subtract the value in the Baseline Period from the estimated value for 
the Assessment Period to yield a remainder;
    (2) Step 2. Multiply the remainder for each Eligible Development 
Activity by the assigned priority factor to yield a weighted value for 
each activity;
    (3) Step 3. Add the weighted values for deposit liabilities and 
Financial Services to yield a service score;
    (4) Step 4. Add the weighted values for all other categories of 
Eligible Development Activities to yield a development score. If the 
development score is negative, an Applicant will be ineligible to 
receive a Bank Enterprise Award. If the development score is positive, 
go to Step 5;
    (5) Step 5. If the service score is greater than the development 
score, reduce the service score to equal the same amount as the 
development score to yield an adjusted service score. (The Act 
prohibits an Applicant from receiving more assistance for its deposit 
taking activities than for other Qualified Activities.);
    (6) Step 6. Add the service score (or adjusted service score if 
applicable) and the development score to yield a total score; and
    (7) Step 7. If the Applicant is:
    (i) A CDFI, multiply the total score by 15 percent to yield an 
estimated award amount; or
    (ii) Not a CDFI, multiply the total score by 5 percent to yield an 
estimated award amount.


Sec. 1806.204  Selection process.

    (a) Availability of funds. All awards are subject to the 
availability of funds. If the amount of funds available during a 
funding round is insufficient for all estimated award amounts, Awardees 
will be selected based on the process described in this section.
    (b) Priority of categories.--(1) General. The Fund will rank an 
Applicant's estimated award amount for Qualified Activities according 
to the following priority categories:
    (i) First priority. Equity Investments that support efforts of 
CDFIs in the Distressed Community;
    (ii) Second priority. Other Equity Investments; and
    (iii) Third priority. Eligible Development Activities.
    (2) Ranking among categories. All Applicants in the first priority 
category will be selected as Awardees before Applicants in the second 
priority category, and Applicants in the second priority category will 
be selected as Awardees before Applicants in the third priority 
category. Selections within each priority category will be based on the 
relative rankings within such category, subject to the availability of 
funds.
    (3) Combined awards. If an Applicant receives an award for more 
than one priority category described in paragraph (b)(1) of this 
section, the award amounts will be combined into a single Bank 
Enterprise Award.
    (c) Ranking Equity Investments. Estimated awards for Equity 
Investments will be ranked within each applicable priority category 
based on the extent to which an Applicant proposes to reduce the 
percentage used to calculate its award amount (e.g., an Applicant that 
chooses to reduce its award to 13 percent will be ranked higher than an 
Applicant that reduces its award to 14 percent). For Applicants that 
propose the same percentage, estimated awards will be ranked by the 
ratio of the proposed Equity Investment to the asset size of the 
Applicant (as reported in the Applicant's most recent Report of 
Condition or Thrift Financial Report) at the time of submission of an 
application.
    (d) Ranking Eligible Development Activities. Estimated awards for 
Eligible Development Activities will be ranked by the ratio of the 
total score to the asset size of the Applicant (as reported in the 
Applicant's most recent Report of Condition or Thrift Financial Report) 
at the time of the submission of an application. If the ratios of two 
Applicants are the same, the estimated awards will be ranked based on 
the degree of the poverty of each Applicant's Distressed Community.


Sec. 1806.205  Actual award amounts.

    (a) General. The Fund will assess an Applicant's success in 
achieving the Qualified Activities projected in its application. The 
extent of such success will be measured based on the activities that 
were actually carried out during the Assessment Period. Subject to 
Sec. 1806.204, the actual award amount that an Awardee shall receive 
will be equal to the estimated award previously calculated and (if 
necessary) adjusted pursuant to this section.
    (b) Substantial achievement. If an Awardee carries out 90 percent 
or more of its projected activities, it will be deemed to have 
substantially achieved those activities. Such Awardee will receive the 
full estimated award amount.
    (c) Partial achievement.--(1) General. If an Awardee carries out 
less than 90 percent but at least 75 percent of its projected Qualified 
Activities, it will be deemed to have partially achieved those 
activities. In such cases the Fund may, in its sole discretion, provide 
a partial award based upon (among other things) the Awardee's 
satisfactory explanation for its failure to substantially achieve the 
activities projected in its application. Any estimated award amount 
will be adjusted on a pro rata basis to reflect the activities actually 
performed.
    (2) Adverse change in condition. In the case of an adverse change 
in national or regional economic conditions, the Fund may adjust the 
percentages used to define partial achievement.
    (d) Non-achievement. If an Awardee does not satisfy the conditions 
necessary for substantial or partial achievement, it will be ineligible 
to receive any award amount.
    (e) Unobligated or deobligated funds. The Fund, in its sole 
discretion, may use any deobligated funds or funds not obligated during 
a funding round:
    (1) Using the calculation and selection process contained in this 
part--
    (i) To increase an award amount of an Awardee for achievement in 
excess of the projected Qualified Activities; or
    (ii) To select Applicants not previously selected;
    (2) To make additional monies available for a subsequent funding 
round; or
    (3) As otherwise authorized by the Act.


Sec. 1806.206  Applications for Bank Enterprise Awards.

    (a) Notice of Funds Availability. An Applicant shall submit an 
application for a Bank Enterprise Award in accordance with this section 
and the applicable NOFA published by the Fund in the Federal Register. 
The NOFA will advise potential Applicants on how to obtain an 
application packet and will establish submission deadlines. The NOFA 
also will establish any other requirements or restrictions applicable 
for the funding round including any restrictions on award amounts. 
After receipt of an application, the Fund may request clarifying or 
technical information on materials submitted as part of such 
application.
    (b) Application contents. Each application must contain the 
information required in the application packet, which may include:
    (1) A completed Bank Enterprise Award Rating and Calculations 
worksheet; 

[[Page 54130]]

    (2) A narrative description of each of the Qualified Activities 
expected to be performed in the Assessment Period;
    (3) If applicable, a completed Distressed Community Designation 
worksheet and a map and narrative description of the Distressed 
Community;
    (4) If applicable, a narrative description of each CDFI that the 
Applicant proposes to provide an Equity Investment in and the amount, 
terms, and conditions of the investment;
    (5) The asset size of the Applicant, as reported in its most recent 
Report of Condition or Thrift Financial Report to its Appropriate 
Federal Banking Agency;
    (6) Information necessary for the Fund to complete its 
environmental review requirements pursuant to part 1815 of this 
chapter; and
    (7) Certifications that the Applicant will comply with all relevant 
provisions of this chapter and all applicable Federal, State, and local 
laws, ordinances, regulations, policies, guidelines, and requirements.

Subpart C--Terms and Conditions of Assistance


Sec. 1806.300  Award Agreement; sanctions.

    (a) General. After the Fund selects an Awardee, the Fund and the 
Awardee will enter into an Award Agreement. The Award Agreement shall 
provide that an Awardee:
    (1) Carry out its Qualified Activities in accordance with 
applicable law, the approved application, and all other applicable 
requirements;
    (2) Shall comply with such other terms and conditions (including 
record keeping and reporting requirements) that the Fund may establish; 
and
    (3) Not receive any monies until the Fund has determined that the 
Awardee has fulfilled all applicable requirements.
    (b) Sanctions. In the event of any fraud, misrepresentation, or 
noncompliance with the terms of the Award Agreement by the Awardee, the 
Fund may terminate, reduce, or recapture the Award and pursue any other 
available legal remedies.
    (c) Notice. Prior to imposing any sanctions pursuant to this 
section or an Award Agreement, the Fund shall, to the maximum extent 
practicable, provide the Awardee with written notice of the proposed 
sanction and an opportunity to comment. Nothing in this section, 
however, shall provide an Awardee with the right to any formal or 
informal hearing or comparable proceeding not otherwise required by 
law.


Sec. 1806.301  Records, reports and audits of Awardees.

    (a) At the end of an Assessment Period, each Awardee shall submit 
to the Fund:
    (1) Worksheet. A Bank Enterprise Award worksheet that reports the 
Qualified Activities actually carried out during the Assessment Period;
    (2) Estimate of benefits. An estimate of the benefits generated 
within the Distressed Community by the Qualified Activities that were 
carried out during the Assessment Period, as measured by the:
    (i) Number of jobs created or retained;
    (ii) Type of new financial and technical assistance services 
available;
    (iii) Number and type of businesses created and retained;
    (iv) Number of home owners assisted;
    (v) Number of affordable housing units financed;
    (vi) Number and type of new deposit accounts opened at offices 
located within the Distressed Community; and
    (vii) Other measures deemed appropriate by the Awardee that convey 
the nature or extent of the benefits created by the Qualified 
Activities; and
    (3) Certification. A certification that the information provided to 
the Fund is true and accurately reflects the Qualified Activities 
carried out during an Assessment Period.
    (b) Additional information. At the request of the Fund, the 
Applicant shall make available any records necessary to assess the 
validity of the information provided to the Fund.


Sec. 1806.302  Compliance with government requirements.

    In carrying out its responsibilities pursuant to an Award 
Agreement, the Awardee shall comply with all applicable Federal, state 
and local laws, regulations and ordinances, OMB Circulars, and 
Executive Orders.


Sec. 1806.303  Fraud, waste and abuse.

    Any person who becomes aware of the existence or apparent existence 
of fraud, waste or abuse of assistance provided under this part should 
report such incidences to the Office of Inspector General of the U.S. 
Department of the Treasury.


Sec. 1806.304  Books of account, records and government access.

    An Awardee shall submit such financial and activity reports, 
records, statements, and documents at such times, in such forms, and 
accompanied by such supporting data, as required by the Fund and the 
U.S. Department of the Treasury to ensure compliance with the 
requirements of this part. The United States Government, including the 
U.S. Department of the Treasury, the Comptroller General, and its duly 
authorized representatives, shall have full and free access to the 
Awardee's offices and facilitates and all books, documents, records, 
and financial statements relevant to the award of the Federal funds and 
may copy such documents as they deem appropriate.


Sec. 1806.305  Retention of records.

    An Awardee shall comply with all record retention requirements as 
set forth in OMB Circular A-110 (as applicable). This circular may be 
obtained from Office of Administration, Publications Office, 725 17th 
Street, NW., room 2200, New Executive Office Building, Washington, DC 
20503.

PART 1815--ENVIRONMENTAL QUALITY

Sec.
1815.100  Policy.
1815.101  Purpose.
1815.102  Definitions.
1815.103  Designation of responsible Fund official.
1815.104  Specific responsibilities of designated Fund official.
1815.105  Major decision points.
1815.106  Supplemental environmental review.
1815.107  Determination of review requirement.
1815.108  Actions that normally require an EIS.
1815.109  Preparation of an EIS.
1815.110  Categorical exclusion.
1815.111  Actions that require an environmental assessment.
1815.112  Preparation of an environmental assessment.
1815.113  Public involvement.
1815.114  Fund decisionmaking procedures.
1815.115  OMB control number.

    Authority: 12 U.S.C. 4703, 4717; 42 U.S.C. 4332; Chapter X, Pub 
L. 104-19, 109 Stat. 237 (12 U.S.C. 4703 note).


Sec. 1815.100  Policy.

    The Community Development Financial Institution Fund's policy is to 
ensure that environmental factors and concerns are given appropriate 
consideration in decisions and actions by the Fund and to reduce any 
possible adverse effects of Fund decisions and actions upon the quality 
of the human environment.


Sec. 1815.101  Purpose.

    This part supplements Council on Environmental Quality regulations 
for implementing the procedural provisions of the National 
Environmental Policy Act of 1969, as amended, and describe how the 
Community Development Financial Institutions Fund intends to consider 
environmental factors and 

[[Page 54131]]
concerns in the Fund's decisionmaking process. This part applies only 
to the Fund and not to any other bureau, office or organization within 
the Department of the Treasury.


Sec. 1815.102  Definitions.

    (a) For the purpose of this part:
    (1) Act means the Community Development Banking and Financial 
Institutions Act (12 U.S.C. 4701 et seq.);
    (2) Application means a request for assistance from the Fund 
submitted pursuant to parts 1805 or 1806 of this chapter;
    (3) CEQ regulations means the regulations for implementing the 
procedural provisions of the National Environmental Policy Act of 1969 
as promulgated by the Council on Environmental Quality, Executive 
Office of the President, appearing at 40 CFR parts 1500-1508 and to 
which this part is a supplement;
    (4) Comprehensive Business Plan means a document submitted as part 
of an Application pursuant to part 1805 of this chapter which describes 
an organization's proposed process for offering products or services to 
a particular market, including organizational requirements needed to 
serve that market effectively;
    (5) Consumer Loans means loans to one or more individuals for 
household, family or other personal expenditures;
    (6) Decisionmaker means the Director of the Fund, unless an 
appropriate delegation of authority has been made;
    (7) EIS means an environmental impact statement as defined in 40 
CFR 1508.11 of the CEQ regulations;
    (8) Fund means the Community Development Financial Institutions 
Fund, established under section 104(a) of the Act (12 U.S.C. 4703(a));
    (9) NEPA means the National Environmental Policy Act, as amended, 
42 U.S.C. 4321-4335; and
    (10) Project means all closely related actions relating to a 
specific site.
    (b) Other terms used in this part are defined in 40 CFR part 1508 
of the CEQ regulations.


Sec. 1815.103  Designation of responsible Fund official.

    The Director of the Fund is the designated Fund official 
responsible for implementation and operation of the Fund's policies and 
procedures on environmental quality and control.


Sec. 1815.104  Specific responsibilities of the designated Fund 
official.

    The designated Fund official shall:
    (a) Coordinate the formulation and revision of Fund policies and 
procedures on matters pertaining to environmental quality and control;
    (b) Establish and maintain working relationships with relevant 
government agencies (including Federal, state and local) concerned with 
environmental matters;
    (c) Develop procedures within the Fund's planning and 
decisionmaking processes to ensure that environmental factors are 
properly considered in all proposals and decisions in accordance with 
this part;
    (d) Develop, monitor, and review the Fund's implementation of 
standards, procedures, and working relationships for protection and 
enhancement of environmental quality and compliance with applicable 
laws and regulations;
    (e) Monitor processes to ensure that the Fund's procedures 
regarding consideration of environmental quality are achieving their 
intended purposes;
    (f) Advise the officers and employees of the Fund of technical and 
management requirements of environmental analysis, of appropriate 
expertise available, and, with the assistance of the Department of the 
Treasury's Office of the General Counsel, of relevant legal 
developments;
    (g) Monitor the consideration and documentation of the 
environmental aspects of Fund planning and decisionmaking processes by 
appropriate officers and employees of the Fund;
    (h) Ensure that all environmental assessments and, where required, 
all EISs are prepared in accordance with the appropriate regulations 
adopted by the Council on Environmental Quality and the Fund;
    (i) Ensure that, as required, a legislative EIS is submitted with 
all proposed legislation;
    (j) Consolidate and transmit to appropriate parties the Fund's 
comments on EISs and other environmental reports prepared by other 
agencies;
    (k) Acquire information and prepare appropriate reports on 
environmental matters required of the Fund; and
    (l) Coordinate the Fund's efforts to make available to other 
parties information and advice on the Fund's policies for protecting 
and enhancing the quality of the environment.


Sec. 1815.105  Major decision points.

    (a) The possible environmental effects of an Application, including 
any Comprehensive Business Plan, must be considered along with 
technical, economic, and other factors throughout the decisionmaking 
process. For most Fund actions there are two distinct stages in the 
decisionmaking process:
    (1) Preliminary approval stage, at which point applications are 
selected for funding; and
    (2) Final approval and funding stage.
    (b) Environmental review shall be integrated into the 
decisionmaking process of the Fund as follows:
    (1) During the preliminary approval stage, the designated Fund 
official shall determine whether the Application proposes actions which 
are categorically excluded, or normally require an environmental 
assessment or an EIS;
    (2) If the designated Fund official determines that the Application 
proposes actions which normally require an environmental assessment or 
an EIS, the applicant shall be informed that the final approval and 
funding, in addition to any other conditions, is contingent upon:
    (i) The applicant supplying to the Fund all information necessary 
for the Fund to perform or have performed any environmental review 
required by this part;
    (ii) The applicant not using any Fund financial assistance to 
perform any of such proposed actions in the Application that affect the 
physical environment until Fund approval is received; and
    (iii) The outcome of the environmental review required by this 
part;
    (3) The Fund will perform or have performed the environmental 
reviews required by this part;
    (4) A preliminary approval of an Application may be withdrawn or 
further conditions may be imposed based upon the outcome of an 
environmental review required by this part; and
    (5) If the designated Fund official determines that the Application 
proposes actions that require an environmental assessment or an EIS, 
the environmental assessment and/or EIS must be completed and 
circulated prior to the use of Federal funds for any activity that 
triggers the need for an environmental assessment and/or EIS.


Sec. 1815.106  Supplemental environmental review.

    (a) The designated Fund official shall determine whether the 
proposed actions in the Application are sufficiently definite to 
perform a meaningful environmental review during the preliminary 
approval stage.
    (b) If the designated Fund official determines that the Application 
is sufficiently definite to perform a meaningful environmental review 
during the preliminary approval stage, no conditions for supplemental 
environmental review shall be imposed. 

[[Page 54132]]

    (c) If the designated Fund official determines that the 
Application, or any part of the Application, is not sufficiently 
definite to complete a meaningful environmental review during the 
preliminary approval stage, the Fund shall require a supplemental 
environmental review prior to the taking of any action directly using 
Fund financial assistance that is not categorically excluded from 
environmental review or for which an environmental assessment or EIS 
has not been approved by the Fund. The applicant shall notify the 
designated Fund official when proposing any action requiring a 
supplemental environmental review and shall supply to the Fund all 
information necessary for the Fund to perform the supplemental 
environmental review. The Fund shall perform or have performed such a 
supplemental environmental review. The applicant shall not use any Fund 
financial assistance to perform any of the proposed actions requiring a 
supplemental environmental review that affect the physical environment 
until Fund approval for such action is received.


Sec. 1815.107  Determination of review requirement.

    In deciding whether to prepare an EIS, the designated Fund official 
shall determine whether the proposal is one that normally:
    (a) Requires an EIS;
    (b) Requires an environmental assessment, but not necessarily an 
EIS; or
    (c) Does not require either an EIS or an environmental assessment 
(categorical exclusion).


Sec. 1815.108  Actions that normally require an EIS.

    (a) If necessary, the Fund shall perform or have performed an 
environmental assessment to determine if an Application, or any portion 
of an Application, requires an EIS. However, it may be readily apparent 
that a proposed action in an Application will have a significant impact 
on the environment; in such cases, an environmental assessment is not 
required and the Fund shall immediately begin to prepare, or have 
prepared, an EIS.
    (b) An EIS normally is required where an Application proposes to 
directly use financial assistance from the Fund for any Project that 
would:
    (1) Remove, demolish, convert, or substantially rehabilitate 2,500 
or more existing housing units, or would result in the construction or 
installation of 2,500 or more new housing units, or which would provide 
sites for 2,500 or more new housing units; or
    (2) Remove, demolish, convert, or substantially rehabilitate 
1,500,000 square feet or more of commercial space, or would result in 
the construction or installation of 1,500,000 square feet or more of 
new commercial space, or which would provide sites for 1,500,000 square 
feet or more of new commercial space.


Sec. 1815.109  Preparation of an EIS.

    (a) If the Fund determines that an EIS should be prepared, it shall 
publish a notice of intent in the Federal Register in accordance with 
40 CFR 1501.7 and 1508.22 of the CEQ regulations. After publishing the 
notice of intent, the Fund shall begin to prepare or have prepared the 
EIS. Procedures for preparing the EIS are set forth in 40 CFR part 1502 
of the CEQ regulations.
    (b) The Fund may supplement a draft or final EIS at any time. The 
Fund shall prepare or have prepared a supplement to either the draft or 
final EIS when:
    (1) Substantial changes are proposed to an action contained in the 
draft or final EIS that are relevant to environmental concerns or there 
are significant new circumstances or information relevant to 
environmental concerns and bearing on the proposed action or its 
impacts; or
    (2) Actions are proposed which relate or are similar to other 
action(s) taken or proposed and that together have a cumulatively 
significant impact on the environment.


Sec. 1815.110  Categorical exclusion.

    The CEQ regulations provide for the categorical exclusion of 
actions that do not individually or cumulatively have a significant 
effect on the human environment (40 CFR 1508.4). Therefore, neither an 
environmental assessment nor an EIS is required for such actions. An 
action which falls into one of the categories below may still require 
the preparation of an EIS or environmental assessment if the designated 
Fund official determines it meets the criteria stated in Sec. 1815.109 
or involves extraordinary circumstances that may have a significant 
environmental effect. The Fund has determined the following categorical 
exclusions:
    (a) Actions directly related to the administration or operation of 
the Fund (e.g. personnel actions, including, but not limited to, staff 
recruitment and training; purchase of goods and services for the Fund, 
including, but not limited to, furnishings, equipment, supplies and 
services; space acquisition; property management; and security);
    (b) Actions directly related to and implementing proposals for 
which an environmental assessment or an environmental assessment and 
EIS have been prepared;
    (c) Actions directly related to the granting or receipt of Bank 
Enterprise Act awards pursuant to part 1806 of this chapter;
    (d) Actions directly related to training and/or technical 
assistance;
    (e) Projects for the acquisition, disposition, rehabilitation and/
or modernization of 500 existing housing units or less when all the 
following conditions are met:
    (1) Unit density is not increased more than 20 percent;
    (2) The Project does not involve changes in land use from 
nonresidential to residential;
    (3) The estimated cost of rehabilitation is less than 75 percent of 
the total estimated cost of replacement after rehabilitation; and
    (4) The Project does not involve the demolition of one or more 
buildings containing the primary use served by the project that, 
together, have more than 20 percent of the square footage of the 
Project;
    (f) Projects for the construction of 200 housing units or less when 
all the following conditions are met:
    (1) The Project does not involve changes in existing land use from 
nonresidential to residential; and
    (2) The Project does not involve the demolition of one or more 
buildings containing the primary use served by the project that, 
together, have more than 20 percent of the square footage of the 
Project;
    (g) Projects for the acquisition, disposition, rehabilitation and/
or modernization of 200,000 square feet or less of existing commercial 
space when all the following conditions are met:
    (1) The Project does not involve changes in existing land use from 
residential to nonresidential;
    (2) The estimated cost of rehabilitation is less than 75 percent of 
the total estimated cost of replacement after rehabilitation; and
    (3) The Project does not involve the demolition of more than 10,000 
square feet of commercial space containing the primary use served by 
the Project;
    (h) Projects for the construction of 100,000 square feet or less of 
commercial space when all the following conditions are met:
    (1) The Project does not involve changes in existing land use from 
residential to nonresidential: and
    (2) The Project does not involve the demolition of more than 10,000 
square 

[[Page 54133]]
feet of commercial space containing the primary use served by the 
Project;
    (i) Projects for the acquisition of an existing structure, provided 
that the property to be acquired is in place and will be retained in 
the same use;
    (j) Projects involving Fund financial assistance of $1,000,000 or 
less;
    (k) Actions directly related to the provision of residential 
tenant-based rental assistance, Consumer Loans, health care, child 
care, educational, cultural and/or social services;
    (l) Actions involving Fund financial assistance that is used to 
increase the permanent capital and/or liquidity of an applicant;
    (m) Actions where no use of Federal funds is involved in the 
activity or Project; and
    (n) Actions directly related to the provision of working capital, 
the acquisition of machinery and equipment or the purchase of 
inventory, raw materials or supplies.


Sec. 1815.111  Actions that require an environmental assessment.

    If a Project or action is not one that normally requires an EIS and 
does not qualify for categorical exclusion, the Fund shall prepare, or 
have prepared, an environmental assessment.


Sec. 1815.112  Preparation of an environmental assessment.

    (a) The Fund shall begin the preparation of an environmental 
assessment as early as possible after the designated Fund official has 
determined that it is required. The Fund may prepare an environmental 
assessment at any time to assist planning and decisionmaking.
    (b) An environmental assessment is a concise public document used 
to determine whether to prepare an EIS. An environmental assessment 
aids in complying with the NEPA when no EIS is necessary, and it 
facilitates the preparation of an EIS, if one is necessary. The 
environmental assessment shall contain brief discussions of the 
following topics:
    (1) Purpose and need for the proposed action;
    (2) Description of the proposed action;
    (3) Alternatives considered, including the no action alternative;
    (4) Environmental effects of the proposed action and alternative 
actions; and
    (5) Listing of agencies, organizations or persons consulted.
    (c) The most important or significant environmental consequences 
and effects on the areas listed below should be addressed in the 
environmental assessment. Only those areas which are specifically 
relevant to the particular proposal should be addressed. Those areas 
should be addressed in as much detail as is necessary to allow an 
analysis of the alternatives and the proposal. The areas to be 
considered are the following:
    (1) Natural/ecological features (such as floodplain, wetlands, 
coastal zones, wildlife refuges, and endangered species);
    (2) Air quality;
    (3) Sound levels;
    (4) Water supply, wastewater treatment and water runoff;
    (5) Energy requirements and conservation;
    (6) Solid waste;
    (7) Transportation;
    (8) Community facilities and services;
    (9) Social and economic;
    (10) Historic and aesthetic; and
    (11) Other relevant factors.
    (d) If the Fund completes an environmental assessment and 
determines that an EIS is not required, then the Fund shall prepare a 
finding of no significant impact. The finding of no significant impact 
shall be made available to the public by the Fund as specified in 40 
CFR 1506.6 of the CEQ regulations.


Sec. 1815.113  Public involvement.

    All information collected by the Fund pursuant to this part shall 
be available to the public consistent with the CEQ regulations. 
Interested persons may obtain information concerning any pending EIS or 
any other element of the environmental review process of the Fund by 
contacting the Community Development Financial Institutions Fund, 
Department of the Treasury, 1500 Pennsylvania Avenue N.W., room 5116, 
Washington, DC 20220, or such other contact entity designated by the 
Fund.


Sec. 1815.114  Fund decisionmaking procedures.

    To ensure that at major decisionmaking points all relevant 
environmental concerns are considered by the Decisionmaker, the 
following procedures are established:
    (a) An environmental document, i.e., the EIS, environmental 
assessment, finding of no significant impact, or notice of intent, in 
addition to being prepared at the earliest point in the decisionmaking 
process, shall accompany the relevant proposal or action through the 
Fund's decisionmaking process to ensure adequate consideration of 
environmental factors;
    (b) The Decisionmaker shall consider in its decisionmaking process 
only those alternatives discussed in the relevant environmental 
documents. Also, where an EIS has been prepared, the decisionmaker 
shall consider all comments received during any comment process and all 
alternatives described in the EIS. A written record of the 
consideration of alternatives during the decisionmaking process shall 
be maintained; and
    (c) Any environmental document prepared for a proposal or action 
shall be made part of the record of any formal rulemaking by the Fund.


Sec. 1815.115  OMB control number.

    The collection of information requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB 
control number 1505-0153 (expires September 30, 1998).

[FR Doc. 95-25725 Filed 10-18-95; 8:45 am]
BILLING CODE 4810-70-P