On February 17, the CDFI Fund and Treasury Department’s Office of Financial Stability hosted an informational call regarding the Community Development Capital Initiative (CDCI) which will make capital available to qualifying, CDFI certified financial institutions, including credit unions. Donna Gambrell, Director of the CDFI Fund, Michael Tae, Director of Investments of the Office of Financial Stability from Treasury, and Cliff Rosenthal of the Federation.
What is the Community Development Capital Initiative?
The Community Development Capital Initiative is a capital access program for CDFI-certified financial institutions. For credit unions, this initiative will make secondary capital available to qualified, CDFI certified and low income designated credit unions.
What is Secondary Capital?
In brief, secondary capital is a loan that can be counted towards regulatory net worth for a period of time. For additional information about secondary capital, please click here.
How much capital can I apply for?
Qualified credit unions can apply for up to 3.5% of total assets. However, several factors will be considered in determining the maximum amount. Part of this depends on whether your credit union is deemed “viable” by NCUA. NCUA is currently working on this definition and we expect clear guidelines to be announced soon.
In the event a credit union is not deemed “viable”, it may still be eligible to receive an investment under the CDC initiative. However, any such credit unions are required to get a matching investment from a private (non-government) investor.
See Term Sheet, section “Size of Offering” for further details: http://www.financialstability.gov/docs/CDCI/CDCI%20Credit%20Union%20Term%20Sheet.pdf.
Terms of Investment
This is a 13 year loan. The dividends rate will be 2% for the first 8 years and 9% for years 9-13. Dividends will be payable quarterly. Note: This is a loan that must be repaid. According to NCUA’s interim rules, this loan may be prepaid prior to maturity, see NCUA’s interim rules and press release for details:
Interim Rules: http://www.ncua.gov/Resources/RegulationsOpinionsLaws/FinalRegulations.aspx
Press Release: http://www.ncua.gov/news/press_releases/2010/MA10-0212.pdf
Who’s eligible?
You must be a CDFI certified credit union AND have low income designation from NCUA.
What if my credit union is not CDFI certified?
Credit unions that are not CDFI certified may still be eligible.
Credit unions have until 5pm EST, on Friday, April 16, 2010 to submit their CDFI certification application. In addition, the CDFI Fund will hold certification workshops on March 3, March 11, and March 18.
What if I am CDFI certified but need to apply for recertification?
Credit unions that need to apply for recertification of their CDFI status are still eligible for this initiative.
For more information on CDFI certification, please click here:
http://www.cdfifund.gov/what_we_do/applicants.asp
The Federation also offers on-going CDFI certification support services. For further information, please contact Pablo DeFilippi at 212.809.1850 x304 or pablo@cdcu.coop.
What is the application process?
Credit unions must submit an application and secondary capital plan to NCUA.
CDCI Applications may be obtained from the Treasury Department’s website:
http://www.financialstability.gov/docs/CDCI/Credit%20Union%20CDCI%20Application%20Form.pdf
Applications must be submitted to the NCUA by Friday, April 2, 2010.
Details regarding secondary capital plan submissions have not yet been released by NCUA. After your application and materials are reviewed by NCUA, NCUA will make a recommendation to the Treasury Department who will then accept or reject your request. CDCI investments will be disbursed through September 30, 2010.
