WASHINGTON (3/2/10)—Low-income credit unions (LICUs) interested in participating in the new U.S. Treasury program intended to bolster service to economically hard-hit communities just got help in sorting out the details of that program. The National Federation of Community Development Credit Unions(federation) has developed a fact sheet covering nine frequently asked questions about the Treasury’s new Community Development Capital Initiative (CDCI). The program was announced Feb. 3 and is set up to provide long-term secondary capital loans to qualified LICUs and community banks. To qualify, a credit union must be both a Treasury-certified Community Development Financial Institution—CDFI—and have low-income designation form federal or state regulators. The federation document notes that while the program falls under the government’s TARP authority, it is “very different from TARP for banks,” which is often referred to as bailout money. CDCI is “not to bail out failing institutions,” the federation underscores. “It is a highly targeted program to enhance lending to low-income communities.” Other information from the federation includes:
* The funds take the form of deeply subordinated debt that is classified as net worth, subject to certain conditions. LICUs are the only credit unions that can accept this type of loan; * A credit union can apply for amounts up to 3.5% of its total assets; * The basic terms for the loans are: 2% for the first eight years, then increasing to 9% for an additional five years, if the credit union chooses to retain the loan; * Credit unions must be approved by the National Credit Union Administration (NCUA) to participate. The regulator must affirm the applicant is “viable,” although that term has not yet been defined; and * Credit unions that do not meet the to-be-defined standard for viability may still access the CDCI funds if they can raise dollar-for-dollar matching funds from non-federal sources.
Last month, the federation and the NCUA announced a March 4 joint audio conference on the CDCI, intended to be a “how-to” introduction to the program. No registration is required. The call-in number for the free, 60-minute audio conference, which begins at 2 p.m. (ET), is (877) 293-6129. To access the conference, provide Conference ID Number: 58577856. Use the resource links below for more information on the CDCI.