Deal Sizes: 

Treasury may guarantee up to 10 bonds per year, each at a minimum of $100 million, with a total of up to $1 billion in bonds guaranteed per year. 

Scope: 

Bonds (including principal, interest, and call premiums) will be 100% guaranteed by the U.S. government. The Federal Financing Bank will be the sole purchaser of bonds issued under the CDFI Bond Guarantee Program. 

Eligible Uses: 

Bond proceeds may be used to provide financing in low income (not more than 80% of area median family income) or underserved rural areas for any of the following types of eligible projects:

• Commercial facilities that promote revitalization, community stability, or job creation or retention;
• Businesses that provide jobs for low income people or are owned by low income people; or enhance the availability of products and services to low income people;
• Community facilities;
• Providing basic financial services; and
• Housing that is principally affordable to low income people.

Specific examples of the types of eligible projects provided by the CDFI Fund include small businesses, commercial real estate, housing units, shelters, charter schools, and daycare or healthcare centers. 
 

Structure: 

CDFIs may apply to become “Qualified Issuers.” A Qualified Issuer will be authorized to issue the bonds and use the bond proceeds to make Bond loans to other CDFIs. The Qualified Issuer may not use the Bond proceeds to make loans to themselves. The recipients of the Bond loans are called “Eligible Borrowers” and they can use the Bond loan proceeds to make investments in eligible projects or to make secondary loans to “Secondary Borrowers.” Secondary Borrowers do not have to be CDFIs. Other key features of the structure include:

• Repayment of the Bonds are nonrecourse to the Qualified Issuers (but the Bond loans are recourse to the Eligible Borrowers);
• Qualified Issuers must loan 100% of the Bond proceeds on the closing date; and
• Eligible Borrowers must re loan or use 50% of the Bond loan proceeds within 12 months and 100% within 24 months. 
   

Loan Loss/
Risk Share Pool: 

Qualified Issuers must fund a loan loss reserve of 5% of the Bond issuance and Bond proceeds may be used to fund this reserve. Eligible Borrowers must fund a risk share pool of at least 3% of the Bond loan amount from sources other than Bond proceeds.  

Timeline:

The CDFI Fund has not yet announced dates for the applications for this new program but we are keeping a close watch on all announcements and will be attending the upcoming CDFI Fund training sessions. The interim rules are effective 60 days after the upcoming publication in the Federal Register and the CDFI Fund will be receiving comments on the interim rules during this 60-day period.