6 March 2009

[Federal Register: March 6, 2009 (Volume 74, Number 43)]
[Notices]               
[Page 9869-9871]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06mr09-75]                         

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Community Development Financial Institutions Fund

 
Capital Magnet Fund

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

ACTION: Request for public comment.

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

SUMMARY: This notice invites comments from the public on issues 
regarding how the Community Development Financial Institutions (CDFI) 
Fund should design, implement, and administer the Capital Magnet Fund, 
as set forth in Section 1339 of the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (the Act), which was added 
through Section 1131(b) of the Housing and Economic Recovery Act of 
2008. All materials submitted will be available for public inspection 
and copying.

DATES: All comments and submissions must be received by May 5, 2009.

ADDRESSES: Comments may be sent by mail to: Deputy Director of Policy 
and Programs, CDFI Fund, U.S. Department of the Treasury, 601 13th 
Street, NW., Suite 200 South, Washington, DC 20005; by e-mail to 
cdfihelp@cdfi.treas.gov; or by facsimile at (202) 622-7754. Please note 
this is not a toll free number.

FOR FURTHER INFORMATION CONTACT: Information regarding the CDFI Fund 
and the Capital Magnet Fund may be downloaded from the CDFI Fund's Web 
site at http://www.cdfifundgov.

SUPPLEMENTARY INFORMATION: The Capital Magnet Fund was established 
through the Housing and Economic Recovery Act of 2008, which added 
Section 1339 of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (the Act), 12 U.S.C. 4569. Through the Capital 
Magnet Fund, the CDFI Fund will carry out a competitive grant program 
for CDFIs and nonprofit organizations (if one of their principal 
purposes is the development or management of affordable housing) to 
attract private capital for and increase investment in the development, 
preservation, rehabilitation, and purchase of affordable housing for 
primarily extremely low-, very low-, and low-income families; and 
economic development activities or community service facilities (such 
as day care centers, workforce development centers, and health care 
clinics) which in conjunction with affordable housing activities will 
implement a concerted strategy to stabilize or revitalize a low-income 
area or underserved rural area. Section 1339 established the Capital 
Magnet Fund as a program that will be administered by the CDFI Fund.
    The CDFI Fund invites and encourages comments and suggestions 
germane to the mission, purpose, and implementation of the Capital 
Magnet Fund. The CDFI Fund is particularly interested in comments in 
the following areas:

Eligible Use of Funds

    Section 1339(c) of the Act states that Capital Magnet Fund grants 
shall be used to attract private capital for and increase investment 
in: (a) The development, preservation, rehabilitation, or purchase of 
affordable housing for primarily extremely low-, very low-, and low-
income families; and (b) economic development activities or community 
service facilities, such as daycare centers, workforce development 
centers, and health care clinics, which in conjunction with affordable 
housing activities implement a concerted strategy to stabilize or 
revitalize a low-income area or underserved rural area. Section 1339(f) 
of the Act states that grant amounts awarded from the Capital Magnet 
Fund may be used in furtherance of the purposes above, including for 
the following eligible uses:
    (1) To provide loan loss reserves;
    (2) To capitalize a revolving loan fund;
    (3) To capitalize an affordable housing fund;
    (4) To capitalize a fund to support economic development activities 
or community service facilities, as described in Section 1339(c)(2) of 
the Act; and
    (5) For risk-sharing loans.
    The CDFI Fund welcomes comments on issues relating to the 
eligibility of certain activities, particularly with respect to the 
following questions:
    (a) What definition should the CDFI Fund use to assess what 
constitutes ``affordable housing?'' What affordability thresholds or 
restrictions (if any) should the Fund require, and for how long a 
period should these be in place?
    (b) How should ``primarily'' be defined, as such term is used in 
Section 1339(c)(l)? What are the appropriate minimum levels of 
targeting that each project should be required to achieve (e.g., 50 
percent of housing units are affordable to low-income persons, 20 
percent of housing units are available to extremely low-income persons, 
etc.)?
    (c) How should ``preservation'' be defined, as such term is used in 
Section 1339(c)(1)? Should it include the re-financing of single- or 
multi-family mortgages as eligible activities?
    (d) How should ``rehabilitation'' be defined, as such term is used 
in Section 1339(c)(1)?
    (e) Capital Magnet Fund grants may be used to finance economic 
development activities and/or community service facilities ``in 
conjunction with affordable housing activities.''
    (i) What restrictions (if any) should the CDFI Fund place on the 
percentage of award dollars that an awardee may apply towards economic 
development activities and/or community service facilities (e.g., no 
more than 20 percent of a total award)?
    (ii) Should the CDFI Fund support economic development activities/
community service facilities in conjunction with affordable housing 
activities financed by sources other than

[[Page 9870]]

Capital Magnet Fund grants (e.g., Low-Income Housing Tax Credits; Hope 
VI; or private sources) or solely in conjunction with Capital Magnet 
Fund grants?
    (iii) How should the CDFI Fund define ``in conjunction with''? For 
example, does this mean on the same premises, in a separate property 
adjoining the premises, contiguous to or within the census tract where 
the premises is located, or within a certain distance from the 
premises? (iv) How should the CDFI Fund define ``concerted strategy''?

Eligible Grantees

    Section 1339(e) of the Act states that Capital Magnet Fund grants 
may only be made to: (a) A CDFI that has been certified by the CDFI 
Fund; or (b) a nonprofit organization having as one of its principal 
purposes the development or management of affordable housing. How 
should the CDFI Fund define ``principal purpose,'' with respect to 
determining whether one of an entity's principal purposes is the 
development or management of affordable housing?

Applications

    The CDFI Fund welcomes comments pertaining to the content of the 
application materials, the timing of award rounds, and the application 
scoring and review protocols particularly with respect to the following 
questions:
    (a) Are there other competitive award programs, Federal or 
otherwise, upon which the CDFI Fund should model the Capital Magnet 
Fund's application scoring and review protocols?
    (b) Should the CDFI Fund divide applicants among different pools so 
that they compete only among organizations at the same capacity level 
(similar to the Core and SECA designations for the CDFI Program)?
    (c) Should the CDFI Fund accept applications on an annual basis or 
more often (e.g., twice a year)?
    (d) Section 1339(j)(2)(D)(ii) requires ``a prioritization of 
funding based upon:
    (1) The ability to use such funds to generate additional 
investments;
    (2) Affordable housing need (taking into account the distinct needs 
of different regions of the country); and
    (3) Ability to obligate amounts and undertake activities so funded 
in a timely manner.'' With respect to this particular requirement:
    (i) How should the CDFI Fund quantify each of the three priority 
factors? For each of the three factors, what should applicants be 
required to present and/or address as part of their application 
materials?
    (ii) Should this prioritization be incorporated into the standard 
scoring of the application (e.g., by weighting certain questions more 
heavily) or should there be separate ``priority points'' specific to 
each of the three criteria?

Geographic Diversity

    Section 1339(h)(2)(A) of the Act states: ``The Secretary of the 
Treasury shall seek to fund activities in geographically diverse areas 
of economic distress, including metropolitan and undeserved rural areas 
in every State.'' Section 1 339(h)(2)(B) provides that objective 
criteria of economic distress may include:
    (1) The percentage of low-income families or the extent of poverty;
    (2) The rate of unemployment or underemployment;
    (3) The extent of blight and disinvestment;
    (4) Projects that target extremely low-, very low-, and low-income 
families in or outside a designated economic distress area; or
    (5) Any other criteria designated by the Secretary of the Treasury.
    The CDFI Fund welcomes comments on issues relating to geographic 
diversity, particularly with respect to the following questions:
    (a) What objective criteria of economic distress should the CDFI 
Fund adopt?
    (1) If the percentage of low-income families is selected as an 
objective criterion of economic distress, what is the appropriate 
minimum level (e.g., census tracts where the median family income is at 
or below 80 percent of the applicable area median family income)?
    (2) If poverty rate is selected as an objective criterion of 
economic distress, what is the appropriate minimum level (e.g., census 
tracts with at least a 20 percent poverty rate)?
    (3) If unemployment or underemployment is selected as an objective 
criterion of economic distress, what is the appropriate minimum level 
(e.g., census tracts with an unemployment rate at least 1.5 times the 
national average)?
    (4) If ``blight'' or ``disinvestment'' is selected as an objective 
criterion of economic distress, how should they be defined?
    (5) Are there additional criteria of distress, other than those 
specifically listed in Section 1339(h)(2)(B), that the CDFI Fund should 
consider? For example, is there a measure specific to housing that 
should be considered (e.g., the ratio of renters to homeowners in a 
community; percentage of vacant properties in a community; or 
percentage of substandard properties in a community)?
    (6) Are there special populations facing economic distress or with 
high housing needs that the Fund should consider? Are there particular 
measures that should not be used because they may inadvertently 
disadvantage certain populations? If so, provide examples of particular 
households or communities that would not qualify under specific 
definitions.
    (b) How should the CDFI Fund define ``rural areas''? For example, 
is a rural area any census tract that is not located in a metropolitan 
statistical area (MSA)? Respondents should discuss how a particular 
definition would enable the program to best ensure funding to people in 
rural areas, and discuss whether there are particular measures that 
should not be used because they may inadvertently disadvantage certain 
populations (i.e., provide examples of particular households or 
communities that would not qualify under specific definitions).
    (c) Should the CDFI Fund ensure that, in any given award round, 
there is a project located in every state? Should the CDFI Fund ``skip 
over'' otherwise higher rated applicants to ensure that this geographic 
diversity goal is met?
    (d) Section 1339(j)(2)(D)(i) of the Act requires that ``funds be 
fairly distributed to urban, suburban, and rural areas.'' How can the 
CDFI Fund best achieve this outcome?

Leverage of Funds

    Section 1339(h)(3) of the Act states: ``Each grant from the Capital 
Magnet Fund awarded under this section shall be reasonably expected to 
result in eligible housing, or economic and community development 
projects that support or sustain an affordable housing project funded 
by a grant under this section whose aggregate costs total at least 10 
times the grant amount.''
    The CDFI Fund welcomes comments regarding how applicants would be 
able to demonstrate a leveraging ratio of 10:1 of ``total aggregate 
costs,'' particularly with respect to the following questions:
    (a) What documentation should be required to demonstrate a 
leveraging ratio of 10:1 of ``total aggregate costs''?
    (b) How should this 10:1 standard be measured (e.g., on a project-
by-project basis for each project funded, or on a collective basis for 
all projects financed)?
    (c) Is there a timing consideration as to when the CDFI Fund should 
release its award dollars (e.g., not until all other sources of 
financing have been secured)?

[[Page 9871]]

Commitment for Use Deadline

    Section 1339(h)(4) of the Act states: ``Amounts made available for 
grants under this section shall be committed for use within 2 years of 
the date of such allocation.'' The CDFJ Fund welcomes comments 
regarding how the term ``committed'' should be defined, and how it can 
be verified, for the purposes of this requirement.

Prohibited Uses

    Section 1339(h)(5)-(6) of the Act lists prohibited uses with 
respect to grants awarded under this program.
    Are there any additional prohibitions or limitations that should be 
applied? For example, there are no stated limitations regarding the 
portions of Capital Magnet Fund grants that may be retained by the 
awardee to cover operating costs. Should the CDFJ Fund permit a set 
portion of awards to cover operating costs? If so, what percentage of 
the funds should be allowed? Should awardees be restricted in the level 
of fees they charge to sub recipients/end-users?

Accountability of Recipients and Grantees

    Section 1339(h)(8) of the Act provides for accountability standards 
with respect to tracking the use of award dollars, as well as remedies 
in the event that an awardee misuses funds.
    The CDFI Fund welcomes comments on how to administer awards and 
monitor the deployment of funds awarded under the Capital Magnet Fund, 
particularly with respect to the following questions:
    (a) What documentation should be required to demonstrate that funds 
awarded under the Capital Magnet Fund have been committed?
    (b) What types of documentation should be required to demonstrate 
completion of projects?
    (c) What types of documentation should be required to demonstrate 
satisfaction of the affordability requirement related to housing 
developed, preserved, rehabilitated, or purchased with the support of 
Capital Magnet Fund awards?
    (d) What support, if any, would applicants and awardees like to see 
from the CDFI Fund at the post-award stage?
    (e) What specific industry standards for impact measures (units 
produced, percentage of units affordable to low-income persons; time to 
complete; etc.) should the CDFI Fund adopt for evaluating and 
monitoring projects funded under the Capital Magnet Fund?

General Comments

    The Fund is interested in comments regarding the types of 
affordable housing projects or activities for which applicants 
anticipate applying under the Capital Magnet Fund. Please detail the 
specific activity (development, preservation, rehabilitation, purchase, 
etc.), the populations served by this activity, the applicant's role in 
the activity, the sources of finance used to complete each activity, 
and the preferred time frame of grants received under the Capital 
Magnet Fund.

    Authority: 12 U.S.C. 4569.

    Dated: February 27, 2009.
Donna J. Gambrell.
 Director, Community Development Financial Institutions Fund.
 [FR Doc. E9-4648 Filed 3-5-09; 8:45 am]

BILLING CODE 4810-70-M