[Federal Register Volume 66, Number 192 (Wednesday, October 3, 2001)]
[Rules and Regulations]
[Pages 50293-50296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24587]



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 Rules and Regulations
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  Federal Register / Vol. 66, No. 192 / Wednesday, October 3, 2001 / 
Rules and Regulations  

[[Page 50293]]



FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 950 and 952

[No. 2001-19]
RIN 3069-AA99


Amendment of Community Investment Cash Advance Programs 
Regulation

AGENCY: Federal Housing Finance Board.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Board (Finance Board) is amending 
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 
final rule clarifies that the Federal Home Loan Banks (Banks) may offer 
grants, in addition to advances, under certain CICA Programs, and 
amends the definition of ``median income for the area'' to include 
additional sources of median income data that may be used to determine 
income eligibility for projects and households funded under CICA 
programs.

EFFECTIVE DATE: The final rule shall be effective on November 2, 2001.

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, N.W., 
Washington, D.C. 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. 
Accordingly, on July 13, 2001, the Finance Board published a proposed 
rule requesting comment on proposed amendments to the CICA Regulation. 
See 66 FR 36715, July 13, 2001. The proposed rule provided for a 30-day 
comment period, which closed on August 13, 2001.
    The Finance Board received five comment letters on the proposed 
rule. Commenters included: three Banks; one trade association; and one 
lender. The comments are discussed in the Analysis of Final Rule 
section below.

II. Analysis of Final Rule

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

    As discussed in the SUPPLEMENTARY INFORMATION section of the 
proposed rule, 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.
---------------------------------------------------------------------------

    \1\ This interpretation and the proposed amendments, however, 
would not apply to the Banks' Community Investment Programs (CIP), 
which remain exclusively advance programs.
---------------------------------------------------------------------------

    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.
    Commenters generally supported the proposed clarification of grant 
authority. Accordingly, the final rule adopts without change the 
proposed amendments clarifying the Bank's grant authority in 
Secs. 950.1, 952.2, 952.3, 952.5, and 952.7.

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

    Under the current CICA Regulation, economic development projects 
and

[[Page 50294]]

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 id. Sec. 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; (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 id. Sec. 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 id. Sec. 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 (BNA), 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. Id. Sec. 952.3.
    As discussed in the SUPPLEMENTARY INFORMATION section of the 
proposed rule, 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 (MSAs), non-
metropolitan 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 to 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 specified FFIEC 
because it is a Federal government source that publishes updated median 
income data for neighborhoods and other areas, based on existing HUD 
median income data. The proposed rule did not specify any of the 
possible private sources, but allowed 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 median income 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.
    Commenters generally supported allowing the Banks to use FFIEC and 
other sources of median income data for economic development projects 
and manufactured housing parks located in neighborhoods. One commenter 
recommended allowing FFIEC to be used as a primary source of median 
income data, even if current median income data for the applicable 
neighborhood is available from the sources already prescribed in the 
regulation. The commenter stated that the FFIEC data is readily 
available, objective information, and that the Banks should not have to 
verify for each project that median income data is not otherwise 
available from the sources listed in the regulation. The Finance Board 
believes that these points have merit, and, therefore, the final rule 
allows FFIEC to be used as a primary source for median income data for 
economic development projects and manufactured housing parks located in 
neighborhoods, regardless of the availability of other median income 
data sources.
    In addition, because the updated FFIEC median income data is 
derived from existing HUD data, which is a permissible source of area 
median income data for housing projects under the current CICA 
Regulation, the Finance Board believes that the Banks should be able to 
use such FFIEC data not only for economic development projects and 
manufactured housing parks, but also for housing projects. Therefore, 
instead of adding a separate definition of ``Median income for the 
neighborhood,'' the final rule adds new paragraphs (1)(ii) and (2)(ii) 
to the existing definition of ``Median income for the area'' in 
Sec. 952.3 to include FFIEC as a primary data source, and renumbers the 
remaining paragraphs accordingly.
    As noted above, under the current CICA regulation, a Bank may use 
median income data published by a government entity for purposes of 
that entity's own housing and economic development programs, subject to 
Finance Board approval. See id. Sec. 952.3 (definition of ``Median 
income for the area'' (paragraphs (1)(iv), (2)(ii))). The proposed rule 
would expand this authority by allowing the Banks to use other public 
or private median income data sources for economic development projects 
and manufactured housing parks located in neighborhoods, subject to 
Finance Board approval, without the requirement that such data be 
published for purposes of the entity's own housing and economic 
development programs. Since these alternative public or private sources 
may also calculate area median income data for areas other than 
neighborhoods, the Finance Board believes that the Banks should be able 
to use such data not only for economic development projects and 
manufactured housing parks located in neighborhoods, but also for 
housing projects. Accordingly, the final rule replaces existing 
paragraphs (1)(iv) and (2)(ii) of the definition of ``Median income for 
the area'' with this new broader authority in renumbered paragraphs 
(1)(v) and (2)(iii).
    A commenter suggested that the requirement for Finance Board 
approval of alternative sources of median income data be removed, on 
the basis that the Banks are in the best position to determine whether 
such a source of median income data is acceptable, subject to Finance 
Board review and examination. The Finance Board believes that Finance 
Board approval of alternative sources of median income data continues 
to be important for consistency and reliability in implementing CICA 
programs. Therefore, the commenter's suggestion is not adopted in the 
final rule.
    Another commenter stated that Finance Board approval should not be 
required for a Bank if an alternative

[[Page 50295]]

median income data source has been previously approved by the Finance 
Board for another Bank. The language of the proposed rule, which is 
adopted without change in the final rule, does not require additional 
Finance Board approval under such circumstances.

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 id. Sec. 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 id. Sec. 952.5(c). As discussed 
in the SUPPLEMENTARY INFORMATION section of the proposed rule, 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. 
Commenters generally supported the proposed clarification.
    Accordingly, the final rule adopts the proposed amendment to 
Sec. 952.3 without change.

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.'' Id. Sec. 952.3 (definition of ``Targeted 
beneficiaries'' (par. (1)(ix))). As discussed in the SUPPLEMENTARY 
INFORMATION section of the proposed rule, 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. Commenters generally supported the proposed 
clarification.
    Accordingly, the final rule adopts the proposed amendment to 
Sec. 952.3 (par. (1)(ix)) without change.

III. Regulatory Flexibility Act

    The final 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 final rule will not have a significant 
economic impact on a substantial number of small entities.

IV. Paperwork Reduction Act

    The final rule does not contain any collections of information 
pursuant to the Paperwork Reduction Act of 1995. See 44 U.S.C. 3501 et 
seq. Therefore, the Finance Board has not submitted any information to 
the Office of Management and Budget for review.

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 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:


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'' between the words ``other'' and ``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. In the definition of ``Median income for the area'', 
redesignating paragraphs (1)(ii) through (1)(iv) and paragraph (2)(ii) 
as paragraphs (1)(iii) through (1)(v) and (2)(iii), respectively; 
adding new paragraphs (1)(ii) and (2)(ii); and revising newly 
redesignated paragraphs (1)(v) and (2)(iii);
    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'';

[[Page 50296]]

    h. In paragraph (1)(ix) of the definition of Targeted 
beneficiaries, adding the words ``other area that'' between the words 
``or'' and ``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''.
    The additions and revisions read as follows:


Sec. 952.3  Definitions.

* * * * *
    Median income for the area.
    (1) * * *
    (ii) The median income for the area obtained from the Federal 
Financial Institutions Examination Council;
* * * * *
    (v) The median income for the area 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.
    (2) * * *
    (ii) The median income for the area obtained from the Federal 
Financial Institutions Examination Council;
    (iii) The median income for the area 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: September 26, 2001.

    By the Board of Directors of the Federal Housing Finance Board.
J. Timothy O'Neill,
Chairman.
[FR Doc. 01-24587 Filed 10-2-01; 8:45 am]
BILLING CODE 6725-01-P