Capital Magnet Fund

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Community Development Financial Institutions Fund</SUBAGY> <CFR>12 CFR Part 1807</CFR> <RIN>RIN 1559-AA03</RIN> <SUBJECT>Capital Magnet Fund</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Community Development Financial Institutions Fund, Department of the Treasury. <HD SOURCE="HED">ACTION:</HD> Interim rule with request for public comment. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Department of the Treasury is issuing a revised interim rule implementing the Capital Magnet Fund (CMF), administered by the Community Development Financial Institutions Fund (CDFI Fund). This revised interim rule incorporates, among other things: revisions to certain definitions and CMF program requirements to improve the public's understanding and streamline the administration of CMF program requirements; revisions to project level requirements to better align CMF with other Federal housing programs; programmatic updates to address current business practices in the affordable housing industry; and consolidation of Economic Development Activities under a new section for a more comprehensive articulation of the criteria. This revised interim rule also reflects requirements set forth in a final rule, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, adopted by the Department of the Treasury on December 19, 2014 (hereafter referred to as the Uniform Administrative Requirements). </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> June 25, 2024. All comments must be submitted on or before August 26, 2024. Comments can be submitted electronically via the e-Rulemaking Portal: <E T="03">www.regulations.gov.</E> The compliance date requirements for the collection of information in § 1807.902 is stayed indefinitely, pending Office of Management and Budget approval and assignment of an OMB control number. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit comments concerning this revised interim rule via the Federal e-Rulemaking Portal at <E T="03">www.regulations.gov.</E> Follow the instructions on the website for the submission of comments. In general, all comments will be available for inspection at <E T="03">www.regulations.gov.</E> Comments, including attachments and other supporting materials, are part of the public record. Do not submit any information in your comments or supporting materials that you consider confidential or inappropriate for public disclosure. Information regarding the CDFI Fund and its programs may be obtained through the CDFI Fund's website at <E T="03">http://www.cdfifund.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Andrew Schlack, Program Manager, Capital Magnet Fund, Community Development Financial Institutions Fund, by phone at 202-453-2047 or email at <E T="03">cmf@cdfi.treas.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> The Capital Magnet Fund (CMF) was established through the Housing and Economic Recovery Act of 2008 (the Act), Public Law 110-289, section 1131, as a trust fund to carry out a competitive grant program administered by the CDFI Fund. The mission of the CDFI Fund is to increase economic opportunity and promote community development investments for underserved populations and in distressed communities in the United States. Its long-term vision is an America in which all people have access to affordable credit, capital, and financial services. Between fiscal year 2010 and fiscal year 2023, the CDFI Fund administered a total of eight CMF Application rounds, obligating nearly $1.1 billion in total awards. Since the last update to the rule in 2016, there have been changes in business practices in the affordable housing industry and regulatory requirements in other relevant Federal affordable housing assistance programs. Accordingly, the CDFI Fund is promulgating this revised interim rule: to streamline and update terms, concepts, and provisions in order to improve the public's understanding and administration of the CMF program requirements; to better align the CMF with other Federal housing assistance programs; and to better reflect current business practices in the affordable housing industry. Through the CMF, the CDFI Fund is authorized to make financial assistance grants to Certified Community Development Financial Institutions (CDFIs) and Nonprofit Organizations that have a principal purpose which is the development or management of affordable housing. CMF Awards must be used to attract private financing for and increase investment in the Development, Preservation, Rehabilitation, and Purchase of Affordable Housing primarily for Extremely Low-Income, Very Low-Income, and Low-Income Families and Economic Development Activities which, in conjunction with Affordable Housing Activities, will stabilize or revitalize a Low-Income Area or Underserved Rural Area. All capitalized terms herein are defined in the definitions section of this revised interim rule, as set forth in 12 CFR 1807.104. <HD SOURCE="HD1">II. Comments on the February 8, 2016, Interim Rule</HD> The current version of the rule is an Interim Rule that went into effect on February 8, 2016. The comment period for the February 8, 2016, Interim Rule (“2016 interim rule”) ended on April 8, 2016. The CDFI Fund received eight written submissions. <HD SOURCE="HD2">A. 12 CFR 1807.104. Definitions</HD> The CDFI Fund received two comments related to the definition of “Affordable Housing Fund.” One commenter suggested that the definition should be revised to mean a revolving loan, grant, or investment fund that may be formed as a separate legal entity, managed by the Recipient and for which its capital is used to finance Affordable Housing Activities. A second commenter suggested that the term “Revolving Fund” be removed from the definition of “Affordable Housing Fund” since not all Affordable Housing Funds will revolve and noted there is a separate definition in the 2016 interim rule for a “Revolving Loan Fund.” The CDFI Fund appreciates these comments and incorporates debt, grant, and equity investments into the definition of “Affordable Housing Fund.” The CDFI Fund has also removed the phrase “revolving fund” from the definition, as reflected in the revised interim rule. Capitalizing a Revolving Loan Fund is now a separate Eligible Use, a newly defined term in the revised interim rule, of the CMF Award. Additionally, the CDFI Fund notes that, under the revised definition of Affordable Housing Fund, Recipients may continue to capitalize an Affordable Housing Fund through a single purpose entity—which must be approved in advance by the CDFI Fund to carry out CMF activities—as further detailed under the terms of an Assistance Agreement. One commenter stated that the definition of “Homeownership” did not include cooperative or mutual housing. The CDFI Fund appreciates this comment and notes that under the 2016 interim rule, the definition of “Homeownership” includes ownership in a cooperative housing or mutual housing project as a qualified form of ownership notwithstanding the fact that the Recipient is required to determine whether such ownership or membership constitutes “Homeownership” under State law. To minimize confusion and alleviate concerns, the definition of “Homeownership” in the revised interim rule clearly states that Homeownership includes ownership interest in “condominium, cooperative, mutual housing, or ground lease title interest,” as allowed under State law in Single-family housing or manufactured housing unit. <HD SOURCE="HD2">B. 12 CFR 1807.402—Affordable Housing Homeownership</HD> Several commenters expressed concern that the recoupment and replacement requirement for Homeownership units sold before the end of the Affordability Period set forth at 12 CFR 1807.402(a)(5) in the 2016 interim rule could be a barrier when using the CMF Award to support Homeownership or result in disincentivizing mortgage originators from using the CMF Award in underwriting loans. One commenter suggested that deed-restricted sales capping the resale value of the Housing make selling such mortgages on the secondary market very challenging. The CDFI Fund appreciates the comments and recognizes the commenters' concerns related to the recoupment and replacement requirements in the 2016 interim rule. To alleviate some of the commenters' concerns, the CDFI Fund updated the redesignated 12 CFR 1807.402(a)(1)(vi) in the revised interim rule to require recoupment and replacement of the Housing only when the resale to an unqualified Homebuyer occurs any time during the first five years after the date of Purchase. When the resale to an unqualified Homebuyer occurs any time during year six through the end of the Affordability Period, the CMF investment will be recouped proportionally; however, the Recipient is not required to replace the sold Housing unit with another Housing unit. Recoupment of the CMF investment is Program Income, as described in the Assistance Agreement. One commenter suggested that the CDFI Fund create a separate allocation of the CMF Awards specifically for Homeownership applicants. The CDFI Fund appreciates the commenter's suggestion, but making an allocation of the CMF Awards to a select group of applicants is not authorized under the Act. <HD SOURCE="HD2">C. Economic Development Activities</HD> Two commenters stated that there should not be a limit on the use of the CMF Award for Economic Development Activities, as the statute establishing the CMF does not set a limit. The commenters recommended that if a limit were to be established, it should be clarified in the Notice of Funds Availability and not in the regulations. The CDFI Fund appreciates the comments and finds limiting the use of the CMF Award for Economic Development Activi ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 156k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━