[Federal Register Volume 66, Number 135 (Friday, July 13, 2001)]
[Proposed Rules]
[Pages 36715-36717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17417]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 66, No. 135 / Friday, July 13, 2001 / 
Proposed Rules  

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FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 950 and 952

[No. 2001-15]
RIN 3069-AA99


Amendment of Community Investment Cash Advance Programs 
Regulation

AGENCY: Federal Housing Finance Board.

ACTION: Proposed rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is proposing 
to amend its regulation on Community Investment Cash Advance (CICA) 
Programs (CICA Regulation) to make certain technical revisions 
clarifying CICA Program requirements and improving the operation of 
CICA Programs. The proposed rule would clarify that the Federal Home 
Loan Banks (Banks) may offer grants, in addition to advances, under 
certain CICA Programs, and add a definition of ``median income for the 
neighborhood'' in connection with the funding of manufactured housing 
park projects and economic development projects located in a 
neighborhood.

DATES: Comments on this proposed rule must be received in writing on or 
before August 13, 2001.

ADDRESSES: Send comments to: Elaine L. Baker, Secretary to the Board, 
Federal Housing Finance Board, 1777 F Street, NW., Washington, DC 
20006. Comments will be available for public inspection at this 
address.

FOR FURTHER INFORMATION CONTACT: Charles E. McLean, Deputy Director, 
(202) 408-2537, or Melissa L. Allen, Program Analyst, (202) 408-2524, 
Program Assistance Division, Office of Policy, Research and Analysis; 
or Sharon B. Like, Senior Attorney-Advisor, Office of General Counsel, 
(202) 408-2930, Federal Housing Finance Board, 1777 F Street, NW., 
Washington, DC 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

    Section 10(j)(10) of the Federal Home Loan Bank Act (Bank Act) 
authorizes the Banks to establish CICA Programs to support community 
investment. See 12 U.S.C. 1430(j)(10). In order to facilitate and 
encourage targeted community lending under section 10(j)(10), in 1998, 
the Finance Board adopted a final regulation providing the Banks with 
parameters for the establishment of CICA Programs. See 63 FR 65536 
(Nov. 27, 1998); 12 CFR part 952 (formerly 12 CFR part 970).
    In the course of implementing CICA Programs under the new CICA 
Regulation, the Banks and Finance Board staff have identified several 
technical issues, the resolution of which would clarify CICA Program 
requirements and improve the effectiveness of CICA Programs. These 
issues are discussed in the Analysis of the Proposed Rule section 
below.

II. Analysis of the Proposed Rule

A. Providing Grants Under Certain CICA Programs--Secs. 950.1, 952.2, 
952.3, 952.5, 952.7

    A number of Banks have asked whether the CICA Regulation does or 
could authorize the Banks to provide grants, in addition to advances, 
to members under certain CICA Programs. The current CICA Regulation 
defines an ``RDA program or Rural Development Advance program'' and a 
``UDA program or Urban Development Advance program'' as a program 
offered by a Bank for community lending in rural or urban areas, 
respectively. See 12 CFR 952.3. Even though these programs are styled 
as ``advance'' programs in the CICA Regulation, the definitions do not 
specify the types of financing, such as advances or grants, that a Bank 
may offer under such programs nor do they limit financing to advances. 
Accordingly, the Finance Board has interpreted these definition 
provisions to mean programs under which a Bank offers advances or 
grants to members. See Finance Board Regulatory Interpretation 2000-RI-
2 (April 10, 2000).
    The proposed rule would amend the definitional provisions and 
terminology in Sec. 950.1 of the Finance Board's Advances Regulation 
and Secs. 952.2, 952.3, 952.5 and 952.7 of the CICA Regulation to 
incorporate the Finance Board's interpretation, thereby specifying and 
clarifying the grant authority in the rule.\1\ Specifically, references 
to the authority to provide grants under RDA and UDA Programs would be 
added, and the word ``funding,'' which incorporates the concept of 
grants, would be substituted for the word ``advance,'' where 
applicable. Thus, the ``RDA program or Rural Development Advance 
program'' would be renamed the ``RDF program or Rural Development 
Funding program,'' and the ``UDA program or Urban Development Advance 
program'' would be renamed the ``UDF program or Urban Development 
Funding program.'' The definitions of ``RDA or Rural Development 
Advance'' and ``UDA or Urban Development Advance'' would be deleted as 
redundant. Certain other technical amendments would be made to provide 
greater clarity to the language.
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    \1\ This interpretation and the proposed amendments, however, 
would not apply to the Banks' Community Investment Programs (CIP), 
which remain exclusively advance programs.
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    Under the current CICA Regulation, members receiving grants from a 
Bank must use the proceeds of such grants to ``provide financing'' to 
targeted beneficiaries, which is defined to include certain types of 
financing, including making loans to targeted beneficiaries. See 12 CFR 
952.3. If a Bank chooses to provide grants under its RDF or UDF 
Programs, the Bank may establish requirements with which members must 
comply in order to obtain and use the grants.

B. Definition of ``Median Income for the Neighborhood''--Sec. 952.3

    Under the current CICA Regulation, economic development projects 
and manufactured housing parks are eligible for CICA funding if they 
are located in areas or neighborhoods with a median income at or below 
the targeted income level of the specific CICA Program (e.g., 80% for 
CIP, 100% for UDA Programs, 115% for RDA Programs). See 12 CFR 952.3. 
Section 952.3 defines ``median income for the area'' generally as one 
or more of the following, as determined by the Bank: (1) The median 
income for the area, as published annually by the Department of Housing 
and Urban Development (HUD); (2) the applicable median family income, 
as determined under 26 U.S.C. 143(f) and published by a state mortgage 
revenue bond program;

[[Page 36716]]

(3) the median income for the area, as published by the U.S. Department 
of Agriculture; or (4) the median income for any definable geographic 
area, as published by a Federal, state or local government entity for 
purposes of that entity's housing and economic development programs, 
and approved by the Finance Board, at the request of a Bank. See 12 CFR 
952.3. These are the same median income data sources as those adopted 
by the Finance Board in the revised Affordable Housing Program (AHP) 
Regulation in 1997. See 12 CFR 951.1 (formerly 12 CFR 960.1). However, 
the AHP Regulation does not incorporate the concept of ``neighborhood'' 
in its median income standards. A ``neighborhood'' is defined in the 
CICA Regulation as a small geographic area, i.e., a census tract, block 
numbering area, unit of local government with a population of 25,000 or 
less, rural county, or other geographic location designated in 
comprehensive plans, ordinances, or other local documents as a 
neighborhood, village, or similar geographic designation that is 
within, but smaller than, a unit of general local government. 12 CFR 
952.3.
    The Finance Board has determined that the median income data 
provided by the above sources for determining the median income for an 
area are not sufficient for the Banks to determine the median income 
for a neighborhood, as defined in the CICA Regulation. The sources 
provide current median income data on an annual basis for areas, such 
as counties, Metropolitan Statistical Areas and states, but not for 
smaller geographical areas defined as ``neighborhoods'' in the CICA 
Regulation. HUD does publish annually the 1990 Census information for 
median income for census tracts, but this data is not updated from the 
1990 figures. The Finance Board believes that up-to-date income data 
will enhance the Banks' capacity to implement effectively the 
``neighborhood'' provisions of the CICA Regulation, an important tool 
in meeting local economic development needs. Consequently, the proposed 
rule would add a definition of ``median income for the neighborhood'' 
to the CICA Regulation that would enable the Banks to obtain median 
income data for neighborhoods from: (1) The Federal Financial 
Institutions Examination Council (FFIEC); or (2) other public or 
private sources with the approval of the Finance Board. The proposed 
rule specifies FFIEC because it is a Federal government source that 
publishes such median income data. The proposed rule does not specify 
any of the possible private sources, but allows the Banks to obtain 
Finance Board approval for the use of a source other than FFIEC if one 
can be identified.
    The proposed rule would allow the use of these additional sources 
of data only for economic development projects and manufactured housing 
parks located in neighborhoods, as defined in the CICA Regulation, and 
only when current median income data for the applicable neighborhood is 
unavailable from the sources prescribed in the definition of ``median 
income for the area'' in the CICA Regulation.

C. Technical Clarification of Definition of ``Housing Projects''--
Sec. 952.3

    Section 952.3 of the current CICA Regulation defines ``Housing 
projects'' as projects or activities that involve the purchase, 
construction or rehabilitation of, or predevelopment financing for, 
certain types of housing. See 12 CFR 952.3. Section 952.5(c) of the 
current CICA Regulation states that CICA funding other than AHP funding 
also may be used to refinance economic development projects and housing 
projects under certain conditions. See 12 CFR 952.5(c). The proposed 
rule would add refinancing (subject to the conditions in Sec. 952.5(c)) 
to the definition of ``Housing projects'' in Sec. 952.3 to clarify, 
consistent with Sec. 952.5(c), that housing projects involving 
refinancing also are eligible projects for CICA funding.

D. Technical Clarification of Definition of ``Geographically Defined 
Beneficiaries''-- Sec. 952.3 (par. (1)(ix))

    A ``Geographically defined beneficiary'' is defined in the current 
CICA Regulation to include a ``project [that] is located in a state 
declared disaster area, or qualifies for assistance under another 
Federal or state targeted economic development program, approved by the 
Finance Board.'' 12 CFR 952.3 (definition of ``Targeted beneficiaries'' 
(par. (1)(ix))). The proposed rule would insert the words ``other area 
that'' before the word ``qualifies'' in this sentence to clarify that, 
to be a geographically defined beneficiary, it is not the project 
itself, but rather the area in which the project is located, that must 
qualify for such targeted economic development assistance.

III. Regulatory Flexibility Act

    The proposed rule applies only to the Banks, which do not come 
within the meaning of ``small entities,'' as defined in the Regulatory 
Flexibility Act (RFA). See 5 U.S.C. 601(6). Therefore, in accordance 
with section 605(b) of the RFA, see id. section 605(b), the Finance 
Board hereby certifies that the proposed rule, if promulgated as a 
final rule, will not have a significant economic impact on a 
substantial number of small entities.

List of Subjects

12 CFR Part 950

    Credit, Federal home loan banks, Housing, Reporting and 
recordkeeping requirements.

12 CFR Part 952

    Community development, Credit, Federal home loan banks, Housing, 
Reporting and recordkeeping requirements.
    Accordingly, chapter IX, title 12, Code of Federal Regulations, is 
hereby proposed to be amended, as set forth below:

Subchapter G--Federal Home Loan Bank Assets and Off-Balance Sheet Items

PART 950--ADVANCES

    1. The authority citation for part 950 continues to read as 
follows:

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1429, 1430, 
1430b, and 1431.


Sec. 950.1  [Amended]

    2. Amend Sec. 950.1 in the definition of Community Investment Cash 
Advance or CICA by:
    a. Removing the words ``advances for targeted community lending'' 
and adding, in their place, the words ``funding for targeted community 
lending''; and
    b. Removing the words ``Rural Development Advance (RDA)'' and 
``Urban Development Advance (UDA)'' and adding, in their place, the 
words ``Rural Development Funding (RDF)'' and ``Urban Development 
Funding (UDF)'', respectively.

PART 952--COMMUNITY INVESTMENT CASH ADVANCE PROGRAMS

    3. The authority citation for part 952 continues to read as 
follows:

    Authority: 12 U.S.C. 1422b(a)(1) and 1430.


Sec. 952.2  [Amended]

    4. Amend Sec. 952.2 by:
    a. Removing the words ``Rural Development Advance (RDA)'' and 
``Urban Development Advance (UDA)'' and adding, in their place, the 
words ``Rural Development Funding (RDF)'' and ``Urban Development 
Funding (UDF)'', respectively; and
    b. Adding a sentence at the end of the section to read as follows:

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Sec. 952.2  Purpose.

    * * * A Bank may provide advances or grants under its CICA programs 
except for CIP programs, under which a Bank may only provide advances.


Sec. 952.3  [Amended]

    5. Amend Sec. 952.3 by:
    a. In the definition of CICA program or Community Investment Cash 
Advance program, in paragraph (3), removing the term ``REA'' and 
adding, in its place, the word ``A'', and removing the terms ``RDA'' 
and ``UDA'' and adding, in their place, the terms ``RDF'' and ``UDF'', 
respectively, and in paragraph (4), adding the words ``advance or 
grant'' before the word ``program'';
    b. In the definition of CIP, removing the words ``a CICA program'' 
and adding, in their place, the words ``an advance program under 
CICA'';
    c. In the introductory text of the definition of Housing projects, 
removing the words ``purchase, construction or rehabilitation'' and 
adding, in their place, the words ``purchase, construction, 
rehabilitation or refinancing (subject to Sec. 952.5(c) of this 
part)'';
    d. Adding, in alphabetical order, a definition of ``Median income 
for the neighborhood'';
    e. In the definition of Provide financing, removing the words ``an 
advance'' in paragraphs (4) and (5) and the word ``advance'' in 
paragraph (6), and adding, in their place, the word ``funding'';
    f. Removing the definition of RDA or Rural Development Advance;
    g. In the definition of RDA program or Rural Development Advance 
program, removing the terms ``RDA'' and ``Advance'' and adding, in 
their place, the terms ``RDF'' and ``Funding'', respectively, and 
removing the words ``a program'' and adding, in their place, the words 
``an advance or grant program'';
    h. In paragraph (1)(ix) of the definition of Targeted 
beneficiaries, adding the words ``or other area that'' before the word 
``qualifies'';
    i. In the definition of Targeted income level, amending the 
introductory text of paragraph (3) by removing the term ``CICA''; and 
amending paragraph (4) by removing the words ``CICA advances'' and 
adding, in their place, the words ``advances or grants'';
    j. Removing the definition of UDA or Urban Development Advance; and
    k. In the definition of UDA program or Urban Development Advance 
program, removing the terms ``UDA'' and ``Advance'' and adding, in 
their place, the terms ``UDF'' and ``Funding'', respectively, and 
removing the words ``a program'' and adding, in their place, the words 
``an advance or grant program'', to read as follows:


Sec. 952.3  Definitions.

* * * * *
    Median income for the neighborhood. In the case of manufactured 
housing park projects and economic development projects located in a 
neighborhood, for which current median income data listed in the 
definition of ``median income for the area'' in this section is 
unavailable, median income for the neighborhood means the median income 
for the neighborhood published by the Federal Financial Institutions 
Examination Council, or the median income for the neighborhood obtained 
from another public entity or a private source and approved by the 
Board of Directors, at the request of a Bank, for use under the Bank's 
CICA programs.
* * * * *


Sec. 952.5  [Amended]

    6. Amend Sec. 952.5 by:
    a. In paragraph (a)(3), removing the terms ``RDA'' and ``UDA'' and 
adding, in their place, the terms ``RDF'' and ``UDF'', respectively;
    b. In paragraph (c), removing the word ``advances'' and adding, in 
its place, the word ``funding'';
    c. In the heading of paragraph (d), and in paragraphs (d)(2) and 
(d)(3), removing the term ``CICA'' wherever it appears; and
    d. In paragraphs (d)(5) and (d)(6)(i), removing the words ``CICA 
advances'' wherever they appear and adding, in their place, the words 
``advances made under CICA programs''.


Sec. 952.7  [Amended]

    7. Amend Sec. 952.7 by:
    a. In paragraph (a), removing the words ``by a CICA advance'' and 
adding, in their place, the words ``under a CICA program''; and
    b. In paragraph (c), removing the word ``lending'' and adding, in 
its place, the word ``funding''.

    Dated: June 29, 2001.

    By the Board of Directors of the Federal Housing Finance Board.
J. Timothy O'Neill,
Chairman.
[FR Doc. 01-17417 Filed 7-12-01; 8:45 am]
BILLING CODE 6725-01-P