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

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 cha

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