Capital Magnet Fund

AGENCY:

Community Development Financial Institutions Fund, Department of the Treasury.

ACTION:

Interim rule with request for public comment.

SUMMARY:

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).

DATES:

Effective date: June 25, 2024. All comments must be submitted on or before August 26, 2024. Comments can be submitted electronically via the e-Rulemaking Portal: www.regulations.gov. 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.

ADDRESSES:

You may submit comments concerning this revised interim rule via the Federal e-Rulemaking Portal at www.regulations.gov. Follow the instructions on the website for the submission of comments. In general, all comments will be available for inspection at www.regulations.gov. 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 http://www.cdfifund.gov.

FOR FURTHER INFORMATION CONTACT:

Andrew Schlack, Program Manager, Capital Magnet Fund, Community Development Financial Institutions Fund, by phone at 202-453-2047 or email at cmf@cdfi.treas.gov.

SUPPLEMENTARY INFORMATION:

I. Background

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.

II. Comments on the February 8, 2016, Interim Rule

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.

A. 12 CFR 1807.104. Definitions

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.

B. 12 CFR 1807.402—Affordable Housing Homeownership

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.

C. Economic Development Activities

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 Activities to no more than 30 percent to be appropriate and necessary. This ceiling ensures that the CMF Award is primarily used to maintain and increase affordable housing, which appears to be the more dominant focus of the Act. Further, this requirement has not proven to be a barrier to Recipients over the life of the program. Since the Fiscal Year 2016 CMF round, only $3.5 million in CMF Awards have financed/supported 11 Projects with Economic Development Activities. This represents less than one percent of the CMF Awards disbursed to all CMF Projects. Section 1807.302(c) in the 2016 interim rule, which discusses the limitation on the use of the Economic Development Activities, has been redesignated as § 1807.403 in the revised interim rule.

One commenter suggested that the definition of “Economic Development Activity” not only apply to physical structures such as buildings, but also include loans to businesses for working capital and equipment. The CDFI Fund appreciates the comment and notes that while extending business loans plays an important role related to Economic Development Activities, the primary purpose of the CMF is to promote the increase of affordable housing by assisting Recipients with the purchase, development, preservation and rehabilitation of structures, such as Multi-family rental or Single-family housing, and related Community Service Facilities and real estate properties in order to revitalize neighborhoods across the country. Accordingly, the CDFI Fund did not make that change to the definition of “Economic Development Activity” in the revised interim rule at § 1807.104.

Two commenters expressed concern with the definition of “Concerted Strategy” as it relates to Economic Development Activities. The commenters recommended that the CDFI Fund accept a less formal document to evidence a Concerted Strategy and remove the requirement that Economic Development Activities to be located physically proximate to affordable housing. The CDFI Fund appreciates the comments and notes that the definition of “Concerted Strategy” in the revised interim rule reinforces the standard that Economic Development Activities must be part of a local or regional planning document adopted by the jurisdiction. This ensures that the Economic Development Activities are consistent with and reflective of the local vision, are part of a strategy with a geographic focus, and that support synergy amongst community effort, private investment, and affordable housing. The CDFI Fund did not change the documentary requirement in the revised interim rule at § 1807.403(d). The definition of “Concerted Strategy” also remains unchanged in the revised interim rule at § 1807.104, and as further detailed in § 1807.403(c).

D. Preservation

Some commenters opined on the definition of “Preservation.” These comments reflect concern that the current definition of “Preservation” could limit activities to only those that involve refinancing. Another commenter recommended that the current definition of “Preservation” clarify that acquisition-lending to purchase land or existing housing is an eligible use of the CMF Award. Other commenters suggested replacing the term “refinancing” with “recapitalizing,” or adding “recapitalizing” to the definition of “Preservation.” Other comments suggest allowing CMF Recipients to combine the CMF Awards with financial assistance from other CDFI Fund programs, as well as local and State affordable housing programs, as a way to fully capture all possible “Preservation” initiatives. The CDFI Fund appreciates the comments and notes that the definition of “Preservation” in the revised interim rule is modified to add the term “recapitalization” and reflects acquisition, refinancing, recapitalization, and/or rehabilitation of Multi-family rental housing or Single-family housing as Eligible Uses of the CMF Award. Recipients can use the CMF Award in concert with financial assistance from local and State affordable housing programs, as well as with other CDFI Fund programs subject to the restrictions provided in the respective Assistance Agreements designed to avoid duplication or over-subsidization. The revised interim rule further clarifies that “Preservation” activities must involve Projects without prior rent restrictions, or Projects with existing affordability rent restrictions that are set to expire during the Investment Period or expire at other timeframes as determined by the CDFI Fund. For those Projects without existing affordability rent restrictions, the CMF investment will impose a new affordability rent restriction of at least 10 years, or other time period set forth in any applicable NOFA issued by the CDFI Fund. For those Projects with expiring affordability rent restrictions, the CMF investment must create at least an additional 10 years of affordability or other time period set forth in the applicable NOFA issued by the CDFI Fund. This ensures CMF Awards are used in Projects that are at an imminent risk of losing their affordability, and also implements new affordability requirements for those Projects without existing rent restrictions.

E. Underserved Rural Areas

One commenter suggested that the CDFI Fund change the criteria for what qualifies as an “Underserved Rural Area(s)” as it appears in the definition in the 2016 interim rule. The commenter suggested that one of the qualifying factors should be the total prior five years per capita dollars of all Federal assistance (not specific to the CMF Award) used to develop or rehabilitate affordable housing. The CDFI Fund appreciates the comment and notes that this recommendation is not administratively feasible. The CDFI Fund further notes that the revised interim rule includes a new definition, “Rural Area,” which mirrors the definition in 12 CFR 1282.1 (Enterprise Duty to Serve Final Rule) and replaces the term “Underserved Rural Area.”

F. Miscellaneous Comments

The CDFI Fund considered several comments despite the fact that they did not pertain to the specific changes being made in the 2016 revised interim rule. Six comments referred to the “High Housing Need” geographic designation which is no longer a part of the CMF program criteria. Eight comments were about the 2016 CMF Application or Application process. The CDFI Fund notes that these Application-related requirements are set forth in §§ 1807.800 and 1807.801 of the revised interim rule. They remain unchanged except for the deletion of §§ 1807.801(b)(1) through (b)(4) which were deleted due to redundancy. Two other comments were about the reporting requirements for Economic Development Activities and Program Income. These requirements are more appropriate for the CMF Assistance Agreement and other CMF guidance and materials. Another commenter noted that the 2016 interim rule omits any mention of fair housing which is not correct. The CDFI Fund refers to fair housing in § 1807.503(b)(2)(i) of the revised interim rule, which remains unchanged.

III. Comments on the July 7, 2023, Notice and Request for Information

This revised interim rule addresses and incorporates written comments the CDFI Fund received in response to the Notice and Request for Information (RFI) that was published in the Federal Register on July 7, 2023. The CDFI Fund issued the RFI to enhance and improve the efforts of the CMF program to create and preserve affordable housing across the country, minimize administrative burden on program applicants and award recipients, and safeguard public funds. The CDFI Fund received over 40 pieces of correspondence in response to the RFI. Public comments that are within the scope of the revised interim rule are summarized and addressed in the following paragraphs.

Numerous commenters responded to the CDFI Fund's request for input about how to facilitate CMF program alignment with other Federal affordable housing programs. They recommended that aligning the CMF with other Federal programs, particularly the Low-Income Housing Tax Credit (LIHTC) program, would reduce administration burden and prevent duplication of compliance reporting requirements. Additional Federal housing programs that commenters mentioned for alignment included the HUD HOME Investment Partnership Program, HUD Section 8 Housing Choice Voucher Program, United States Department of Agriculture (USDA) Rural Development Section 515 Rural Rental Housing Program, and Section 502 Direct Loan Program. One commenter stated that aligning the CMF with other Federal housing programs allows for a cohesive structure within the affordable housing industry and promotes administrative efficiencies. The CDFI Fund appreciates the comments and the revised interim rule introduces a new concept, Presumptively Compliant, as set forth in § 1807.106, and defined as “Presumptively Compliant” or “Presumptive Compliance” in § 1807.104. Under the Presumptively Compliant concept, certain CMF Affordable Housing projects that are also funded under other designated Federal housing programs and subject to certain rules and restrictions that are similar to those under the CMF program. Subject to verification by the CDFI Fund and as further set forth in the Assistance Agreement and guidance, these projects would be presumed to meet certain CMF rules and requirements, as long as those projects are deemed compliant under applicable designated Federal housing programs.

In response to RFI questions about aligning income definitions and recertifying tenant income, some commenters stated that the definition of “Very Low-Income” should be adjusted from the current definition of 50 percent of the Area Median Income (AMI) to 60 percent AMI to align with LIHTC. They suggested this would increase administrative efficiencies, reduce reporting requirements, and make the CMF more attractive as an additional funding source for LIHTC projects. Some commenters also recommended that the CDFI Fund revise CMF income certification requirements to align with LIHTC to avoid duplicating reporting requirements and reduce administrative burden. The CDFI Fund appreciates the comments and in response, changed the definition of “Very Low-Income” in the revised interim rule from 50 percent AMI and below, to 60 percent AMI and below. In addition, the CDFI Fund will no longer require the annual tenant income recertification for Projects where 100 percent of the units are subject to CMF affordability restrictions; the CDFI Fund will set forth additional parameters in the Assistance Agreement.

In response to a question in the RFI related to Project Commitment requirements, several commenters requested programmatic flexibility and expressed support for a new Commitment process. The CDFI Fund appreciates the comments and accordingly revises the interim rule to include a new Commitment process in § 1807.501. Under the revised interim rule, the CMF Award must first be Committed for Use to at least one of the Eligible Uses set forth in § 1807.301 within two years of receiving the CMF Award. In addition to the requirement that the CMF Award be Committed for Use within two years, in order to ensure that the CMF Awards are committed to specific projects, a Recipient must make a Project Commitment within three years of receiving the CMF Award. This change will allow Recipients one additional year to source qualified projects during the Investment Period.

With respect to the use of Program Income (PI), some commenters recommended easing the current restrictions which required Recipients to only engage in activities designated in the Assistance Agreement. They recommended that the CDFI Fund allow Recipients to use PI for all CMF “eligible activities.” The CDFI Fund appreciates the comments and notes that Recipients' use of PI will continue to be detailed in the Assistance Agreement, which gives the CDFI Fund the appropriate flexibility to implement any updates to its policy on a more frequent basis and communicate them as such.

A number of commenters recommended changing or eliminating the limit on the purchase price of Homeownership Housing financed with the CMF Award. The current limit set forth in the 2016 interim rule is no more than 95 percent of the area median purchase price as determined by HUD under the HOME Investment Partnership Program (HOME Program). The CDFI Fund appreciates the comments and notes that the index used to set purchase price limits in §§ 1807.402(a)(1)(ii) and (b)(1) of the revised interim rule is revised to mirror the limits set forth in the HUD FHA Section 203(b) Mortgage Insurance Program. While some commenters suggested using other indices, such as four times the area median income or state housing finance agency limits, the CDFI Fund deems the FHA 203(b) limits to be a more reliable and effective index, and better reflective of current market conditions.

A few commenters recommended establishing a new minimum compliance period for Economic Development Activities financed using a CMF Award. The CDFI Fund appreciates these comments and § 1807.403 in the revised interim rule now includes a minimum compliance period of three years for Economic Development Activities. One commenter inquired about the leveraged costs and the associated calculation to meet the requirement. The CDFI Fund appreciates the comment and notes that the requested information appears in the Assistance Agreement.

IV. Summary of Changes

A. Overview

The revised interim rule strikes and replaces existing 12 CFR part 1807 in its entirety. Principal changes include, among other things, a clarification of CMF terms, concepts and requirements to improve Recipients' understanding of their obligations and requirements under the CMF program; a revision of CMF program requirements to better address activities and current business practices in the affordable housing industry; the addition of a new section, § 1807.403, detailing parameters related to Economic Development Activities; and a new eligibility requirement regarding Nonprofit Organizations wherein they are required to be designated as such under the laws of the organization's State or Indian Tribe of formation, be exempt from Federal income taxation pursuant to § 501(c)(3) of the Internal Revenue Code—with the exception of organization affiliated with Indian Tribes—and be able to demonstrate that a share of its total assets is dedicated to the development or management of affordable housing. The revised interim rule also deletes and adds new definitions in § 1807.104, replaces title heading and content in § 1807.106, and redesignates, adds or deletes subsections in §§ 1807.300, 1807.400, 1807.401, 1807.402, 1807.500, 1807.501, 1807.503, 1807.801 and 1807.902. Other changes that provide further clarification and elimination of redundancies are identified and discussed further below.

The following is a section-by-section overview of the amendments in this rulemaking.

B. Description of the Revised Interim Rule

The changes to the 2016 interim rule as provided in the revised interim rule, on a section-by-section basis, are as follows:

Subpart A—General Provisions

The change to § 1807.100 clarifies that CMF activities must take place in the United States, specifically, “every State of the United States, the District of Columbia, or territories of the United States.” The revision to § 1807.101(a) clarifies that CDFIs must be certified by the CDFI Fund. The term “merit-based” in § 1807.101(b) is deleted, leaving only “competitive,” as a technical correction. The CMF Application process has always been and remains a competitive one. The term “eligible uses” in § 1807.101(b) is replaced with the defined term “Eligible Uses” in § 1807.104 to align with the terminology used in the Act, and is further described in § 1807.301. Section 1807.102 is revised by removing references to specific CDFI Fund programs to accommodate any future changes or additions to CDFI Fund programs; a corresponding change is made to delete the phrase “Notice of Funds Availability, Notice of Guarantee Availability, or Notice of Allocation Availability,” and replaced with the phrase “are set forth in the applicable funding notice.”

There are a number of changes to the definitions in § 1807.104. A new term “Affordability Period” is added to establish a period of at least 10 years or other longer time period set forth in the applicable NOFA issued by the CDFI Fund. This will give the CDFI Fund the flexibility to extend the affordability requirement, which was set at 10 years in the 2016 interim rule. The term “Affordable Housing Activities” is revised to deem Secondary Market Mortgage Purchase, a new term being introduced in the revised interim rule, as allowable under the definition. This change codifies a regulatory waiver articulated in the Fiscal Year 2023 NOFA related to Secondary Market Mortgage Purchases, to deem the use of a CMF Award for the direct purchase of Secondary Market Mortgages as allowable pursuant to the CMF program requirements. The term “Affordable Housing Fund” is revised by clarifying that it is an investment fund consisting of the CMF Award and any Leveraged Capital that a Recipient manages and uses to finance Affordable Housing Activities. Specifically, a Recipient may use an Affordable Housing Fund for leveraging purposes by making any combination of debt, grant, or equity investments, but excludes the purchase of stock, securities, or the buy-out of partnership interest. A new term “Application” is added to refer to the CDFI Fund's CMF application, including any written and verbal information in connection therewith, and any exhibits, attachments, appendices and/or written or verbal supplements thereto. A new term “CMF Unit” is added to facilitate the understanding and applicability of program performance goals and compliance requirements. The definition implements threshold requirements that units financed with a CMF Award, at a minimum, have separate kitchen and bath facilities, except for single room occupancies, assisted living facilities, and group homes. The term “Committed” is changed to “Committed for Use,” but the definition remains the same. This change accommodates a new Commitment process for the CMF Awards, which better reflects the Act and affords Recipients more time to meet the Project Commitment requirements. The term “Community Service Facility” is revised to clarify that the associated costs and expenses for services rendered at such facilities must directly benefit nearby residents of affordable housing. Some examples of such service programs include health care, childcare, educational programs, job training, food and nutrition services, art and social services, as further specified in the Assistance Agreement. The term “Direct Administrative Expenses” is revised by clarifying that they must be related to “the financing and/or in support of Projects.” The term “Economic Development Activity” is revised by deleting the term “neighborhood based” in order to allow expanded revitalization efforts that include and transcend neighborhood-based businesses; deleting “which, In Conjunction with Affordable Housing Activities, implements,” because the term “In Conjunction with Affordable Housing” is no longer a defined term in the revised interim rule; and clarifying that a CMF Award must be used to stabilize, sustain, or revitalize communities and neighborhoods physically proximate to any affordable housing to benefit a Low-Income Area or Underserved Rural Area. A new term, “Economic Development Activity Fund” is added to describe an investment fund consisting of the CMF Award and any Leveraged Capital that a Recipient manages and uses to finance Economic Development Activities. Specifically, a Recipient may use Economic Development Activity Fund for leveraging purposes by making any combination of debt, grant, or equity investment, but excludes the purchase of stock, securities, or the buy-out of partnership interests. The term “Eligible-Income” is revised by clarifying that for owner-occupied or rental Housing units, the qualifying annual income is at 120 percent or below of the AMI, adjusted for Family size, as determined by HUD. The term “Eligible Project Costs” is revised by deleting “Leveraged Costs” and deeming all development, financing, refinancing, acquisition, relocation, loan loss reserve, guarantee, predevelopment, and related soft costs incurred in achieving Project Completion as eligible, as described in the Assistance Agreement. These costs can be paid using a CMF Award and any Leveraged Capital. A new term “Eligible Uses” is defined and added. This term replaces “Eligible Activities” in § 1807.301 of the 2016 interim rule and as applicable, in relevant parts of the revised interim rule, to align with the terminology used in the Act. The term “Extremely Low-Income” is revised to clarify that for owner-occupied or rental Housing units, the qualifying annual income is at 30 percent or below of the AMI, adjusted for Family size, as determined by HUD. The term “Family” is revised to include both single individuals and a group of individuals living in the same dwelling unit, who may be related by birth, marriage or adoption, or otherwise unrelated to each other in a household. A new term “Feasibility Determination Expenses” is added to create a mechanism by which a Recipient can allocate a portion of the CMF Award to support expenses disbursed to determine the feasibility of potential Affordable Housing Activities and/or Economic Development Activities. The Recipient must incur these expenses before Project Commitment. Such expenses may include preliminary market studies, engineering, architectural analyses, and financial feasibility analyses, which are explicitly excluded from Eligible Project Costs. A new term “Homebuyer” is added to describe a Family that may receive CMF assistance for Homeownership. This addition to the definitions is to ensure that Recipients do not use the CMF Awards to assist Families in buying second homes or multiple homes. The term “Homeownership” is revised to better align with the CMF program requirements by deleting the CDFI Fund's need to approve equivalent forms of ownership, because such approval is no longer a program requirement, and replacing it with a list of additional acceptable types of ownership, including cooperative, mutual housing, or ground lease title interest, as allowed under applicable State law; and deleting subsections (1)(i) through (iii) as they appear in the 2016 interim rule related to specific ground lease terms for Indian trust or restricted Indian lands, Housing located in Guam, the Northern Mariana Islands, the U.S. Virgin Island, and American Samoa, and manufactured housing. The 2016 interim rule specified terms for ground leases based on the location or type of housing. The CDFI Fund has decided that such specifications were overly prescriptive and not necessary for general program administration; instead, the revised interim rule requires compliance with appliable State law; redesignating (2) and (3) as (1) and (2), respectively, with no change to the content in (1); replacing “restrictions on resale” in redesignated (2) with “restrictions on affordability,” and deleting “may only be” and replacing it with “is” to take into account a possible application of affordability restrictions imposed by local homeownership programs. A new term “Homeownership Program” is added to codify the general waiver granted to select Recipients in the Fiscal Year 2018 NOFA, that allowed them to meet the CMF Commitment requirement for Homeownership, as long as the Recipients' Board of Directors established a homeownership program and committed the CMF Award to the program at the time of the Project Commitment. This newly defined term requires Recipients to establish a program to finance Purchase by meeting the requirements of § 1807.501, in a form and substance acceptable to the CDFI Fund. The definition of “Housing” is streamlined to refer to Single-family and Multi-family residential units, such as manufactured housing, permanent supportive housing, single-room occupancy housing, assisted living and group homes that are permanent in nature and not temporary. The term, as revised, consolidates a list of supportive housing types—identified by specific population groups—under the single term “permanent supportive housing” in order to ensure that all eligible population groups are included in the definition; excludes manufactured housing lots as a type of housing, because CMF is not intended to finance dedicated lots or lands without associated Housing; adds assisted living as another eligible type of Housing; removes the reference to elder cottage housing opportunity (ECHO) because it is no longer eligible to be financed with the CMF Award; and clarifies that Housing financed with the CMF Award must be permanent in nature, which is consistent with similar clarifications made throughout the revised interim rule. The term “In Conjunction With Affordable Housing” is no longer a stand-alone definition, but instead embedded in the definition of “Economic Development Activities” at § 1807.403 in the revised interim rule. A new term “Indian Tribe” is added to define any Indian Tribe, pueblo, nation, or other organized group or community, including any Alaska Native village or regional or village corporation, as defined in or established pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.); each such Indian Tribe must be recognized as eligible for special programs and services provided by the United States to Indians because of their status as Indians. The term “Leveraged Costs” is replaced with “Leveraged Capital,” and the definition is revised to reflect a type of capital used to finance and support Affordable Housing Activities and Economic Development Activities that exceed the dollar amount of the CMF Award, as further provided in § 1807.500. The term “Low-Income” is revised to clarify that for owner-occupied or rental Housing units, the qualifying annual income is at 80 percent or below of the AMI, adjusted for Family size, as determined by HUD. The term “Low-Income Area (or LIA)” is revised by deleting a provision referring to block numbering, because it is not part of the geographic verification system. The term “Metropolitan Area” is revised by adding at the end “and as made available by the CDFI Fund for a specific Application funding round” in order to make this definition consistent with the definition of “Non-Metropolitan Area,” as it currently appears in the CMF program guidance. The term “Multi-family” is revised to delete “townhouse” from the definition, because a townhouse is a type of building that can be a Single-family housing, Multi-family housing, or mixed-use building. The term “Nonprofit Organization” is revised to include those organizations that are designated as a nonprofit or non-for-profit entity under the laws of the organization's State or Indian Tribe of formation; exempt from Federal income taxation pursuant to § 501(c)(3) of the Internal Revenue Code of 1986, with the exception of organizations affiliated with Indian Tribes; and able to demonstrate that a share of its total assets are dedicated to the development or management of affordable housing, as provided for in the NOFA. This change promotes consistency regarding the identification of entities within the scope of the definition and consistency with the statutory terminology, and provides additional clarity regarding the inclusion of Indian Tribes. Under the revised definition, a Nonprofit Organization may be an entity controlled by an instrumentality or subdivision of a state or local government. For transition purposes, the CDFI Fund is delaying the implementation of the new definition of “Nonprofit Organization” until the first NOFA published on or after January 1, 2026. The term “Participating Jurisdiction” is no longer a defined term because it refers to a jurisdictional area that receives funding under the HOME program. Given that the revised interim rule incorporates the price limits set forth in HUD FHA Section 203(b) Mortgage Insurance Program and discontinues the use of the limits used in the HOME program, the term “Participating Jurisdiction” is no longer applicable to the CMF. A new term “Permanent Housing” is added to distinguish it from temporary or transitory housing to reinforce that a CMF Award must be used to support Housing that is owned or rented under a written lease with an initial lease term of six months or longer. The term “Preservation” is revised by deleting all content in (1) through (5) as they appear in the 2016 interim rule and replacing it with new content. The definition as revised clarifies that in the case of owner-occupied Single-family housing or Multi-family rental housing with existing rent restrictions, any Preservation effort must extend the existing affordability restrictions that are set to expire within the Investment Period or set to expire at another time as defined by the CDFI Fund. The extension will be subject to the Affordability Period or as set forth in the Assistance Agreement. If the Housing does not have an existing affordability restriction, a new Affordability Period must be imposed subject to the aforementioned requirements. This minimizes the risk of an imminent loss of existing affordability restrictions for projects subject to preservation efforts using a CMF Award. It also proactively addresses the possible loss of affordable housing subject to affordability expiration pursuant to another Federal housing program. A new term “Presumptively Compliant” or “Presumptive Compliance” is added to describe a mechanism by which the CDFI Fund deems certain rules, requirements and designations under other comparable Federal housing programs to meet certain the CMF requirements. This change is being implemented to better align CMF with other Federal funding programs, to ease Recipients' administrative burden and reporting requirements, and to reflect strong support received from stakeholders in response to the RFI. The term “Program Income” is revised by adding “and as further specified in the Recipient's Assistance Agreement” to the existing definition, in order to allow the CDFI Fund to use another appropriate source to further clarify rules regarding Program Income; and replacing “2 CFR part 1000” with “2 CFR part 200” to incorporate a more accurate regulatory citation. The term “Project” is revised to facilitate Recipients' understanding of the term used in the CMF program and to clarify that it refers to a specific Affordable Housing Activity, Economic Development Activity, or Homeownership Program the Recipient uses its CMF Award to finance or support, resulting in Project Completion. A new term “Project Commitment” is added to require the Recipient to provide, in written form and substance acceptable to the CDFI Fund, a commitment to a Project as set forth in § 1807.501. The addition of this term complements the new Commitment process in § 1807.501 and expands on the concept of “Committed” in the 2016 interim rule. It also extends the time for Project Commitment. The term “Purchase” is revised to describe the use of the CMF Award to provide financing to a Family for Homeownership that meets the qualifications set forth in subparts D and E of this part; or, in the case of using the CMF financing for an acquisition of rental Housing, to a developer or a project sponsor who also meets the qualifications set forth in subparts D and E of this part. This is to ensure that the CMF Awards are used for the Purchase of Affordable Housing to serve Families meeting these qualifications, or assist developers or project sponsors who, in turn, ultimately serve such Families. The term “Revolving Loan Fund” is revised to describe an investment fund consisting of the CMF Award and any Leveraged Capital that the Recipient manages and uses to finance and/or support Affordable Housing Activities and/or Economic Development Activities. The repayments on such loans are used to finance additional loans. The term “Risk-Sharing Loan” is revised to describe loans consisting of the CMF Award and any Leveraged Capital made for Affordable Housing Activities and/or Economic Development Activities whereby the risk of borrower default is shared by the Recipient with other lenders. A new term “Rural Area” is added to refer to a census tract that meets the definition of Rural Area, as defined in 12 CFR 1282.1. A new term “Secondary Market Mortgage” is added to create qualifications for the purchase of third-party originated mortgages using a CMF Award. This formalizes the policy guidance provided in the Fiscal Year 2023 NOFA that the Recipients' purchase of CMF eligible loans from a third-party originator within 12 months of origination are an allowable activity under the CMF program. Specifically, the definition restricts the use of the CMF Award for the purchase of Secondary Market Mortgages to those mortgage(s) originated by third party lenders and purchased by Recipients within 12 months or less from the date of their origination as evidenced by an agreement; for which the source of origination is not the CMF Award; and that would not have been originated but for the Recipient's purchase. A new term “Secondary Market Mortgage Purchase” is added to describe a Recipient's purchase of a Secondary Market Mortgage to complement the definition of “Secondary Market Mortgage.” The term “Service Area” is revised by adding a national Service Area or other areas further defined by the CDFI Fund in the applicable NOFA, in order to expand the scope of the coverage. This allows Recipients to better serve certain geographic locations such as Rural Areas. The term “Single-family housing” is revised to include mutual housing, a manufactured housing unit only, or a combination of a manufactured housing unit and its lot. This ensures that the CMF funded financing requires an affordable housing unit and prohibits the financing of a manufactured housing lot only. The term “State” is revised to streamline the definition and accommodate any United States government changes to its territories by deleting the current list of United States territories “the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Island, Guam, the U.S. Virgin Islands, American Samoa, the Trust Territory of the Pacific Islands” from the definition. All United States territories, Districts and Commonwealths remain as eligible geographies. The term “Subsidiary” is revised to refer to an entity that is majority-owned by its parent company. This clarification is to make a clear distinction between the definitions of Affiliates and Subsidiaries. The term “Underserved Rural Area” is revised because it needs to be consistent with the definition of “Rural Area,” which is a new term in the revised interim rule. The term “Uniform Administrative Requirements” is revised by replacing “2 CFR part 1000” with “2 CFR part 200” to incorporate a more accurate regulatory citation. The term “Very Low-Income” is revised by clarifying that for owner-occupied or rental Housing units, the qualifying annual income is at 60 percent or below of the AMI, adjusted for Family size, as determined by HUD.

Section 1807.105 is revised by replacing the term “would” with “would not” to clarify that for individual waivers, the CDFI Fund will determine that the application of the requirement to be waived does not adversely affect achieving the purpose of the Act. Section 1807.106 is redesignated as “Presumptive Compliance with Other Federal Programs,” and the entire content removed and replaced with new CMF requirements related to Presumptive Compliance. Section 1807.107 is revised by deleting the reference to the prior publication of the interim rule “February 8, 2016,” clarifying the applicability of the interim rule to all future uses of prior CMF Awards and all future CMF Awards granted under any NOFA published after the publication date of this revised interim rule, and specifying when the new definition of “Nonprofit Organization” will take effect to facilitate the transition to the new definition.

Subpart B—Eligibility

Section 1807.200(a)(2)(iii) is revised by replacing “[c]an demonstrate that” with “[d]emonstrates” as an editorial change, and by adding relevant CMF program documents at the end of the sentence for clarification. Section 1807.200(b) is revised by clarifying that for an Applicant seeking eligibility under § 1807.200(a)(1), the CDFI will verify that the Applicant is a Certified CDFI pursuant to the guidance provided in the applicable NOFA.

Subpart C—Eligible Purposes; Eligible Uses: Restrictions

Section 1807.300(b) includes an updated definition for “Economic Development Activities,” as further described in § 1807.403, that they must be located in a Low-Income Area or Underserved Rural Area; undertaken in conjunction with any affordable housing that is authorized as such under applicable local, State or Federal housing program laws; and reasonably available, physically proximate to, and benefit residents of such affordable housing. Sections 1807.300(b)(1) through (3) in the 2016 interim rule are deleted and some of the concepts contained therein are reorganized in § 1807.403 as new content.

Section 1807.301 is redesignated as “Eligible Uses,” and § 1807.301(d) is revised to incorporate the newly defined term “Economic Development Activity Fund.”

Section 1807.302(a)(12) is revised by replacing “student dormitories” with “dormitories” to clarify that CMF Awards cannot be used to fund any types of dormitories, not just student dormitories. Section 1807.302(b)(1) is revised by adding to the list of businesses deemed ineligible to receive financing and/or support with a CMF Award those businesses or activities provided in 13 CFR 120.110(c) through (p), and other businesses deemed inconsistent with the general purpose of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4701 et seq.; Pub. L. 103-325). Section 1807.302(c) is revised to state that the restriction on the use of Economic Development Activities to no more than 30 percent of their CMF Awards must be approved in the applicable Assistance Agreement. Section 1807.302(d) is revised to clarify that any Affordable Housing financed and/or supported by Loan Guarantee or Loan Loss Reserves shall be tracked during the Affordability Period for compliance with the affordability requirements, as provided in subpart D of this part. Section 1807.302(e) is revised by clarifying that repayment of loans made pursuant to Loan Guarantees or Loan Loss Reserves during the Investment Period must be used as Program Income, subject to the requirements in the Recipient's Assistance Agreement. Section 1807.302(f) is revised to allow Recipients to use the CMF Award for Direct Administrative Expenses or Feasibility Determination Expenses at amounts set forth in the applicable NOFA and corresponding Assistance Agreement. This change provides additional flexibility on the use of the CMF Award when Recipients are assessing a project's feasibility as part of their preliminary analysis prior to Project Commitment. The expanded guidance further provides that neither Feasibility Determination Expenses nor Direct Administrative Expenses may be deemed as Eligible Project Costs.

Section 1807.303(a) is revised by deleting “for the approved, eligible CMF Award uses” and replacing it with “in the manner as further set forth in the Assistance Agreement,” because terms on the use of Program Income will be provided in the Assistance Agreement. Section 1807.303(b) is revised by replacing “2 CFR part 1000” with “2 CFR part 200” to incorporate a more accurate regulatory citation.

Subpart D—Qualifications as Affordable Housing

Section 1807.400 is restructured with the newly designated subsections 1807.400(a), (b) and (c) and revised with new requirements by maintaining the current guidance on the use of a CMF Award for Affordable Housing Activities, including compliance with affordability qualifications set forth in the applicable NOFA and/or Assistance Agreement; setting forth new requirements based on the new definition of Permanent Housing in the revised interim rule; and establishing that none of the residents of Affordable Housing can be full-time students, unless they are married filing a joint tax return, receive assistance under Title IV of the Social Security Act, enrolled in a job training program, are with dependent children as single parents, as defined in IRC sec. 152, previously enrolled in a foster care program, or meet other criteria specified by the CDFI Fund.

The introductory paragraph to § 1807.401 is revised by clarifying that rental Multi-family housing Projects financed and/or supported with a CMF Award must have at least 20 percent of the units rent-restricted to any combination of Low-Income, Very Low-Income, or Extremely Low-Income Families with specific income levels and meet the rent limits provided for in the applicable NOFA and Assistance Agreement in any CMF funding round. Section 1807.401(a) is revised by deleting all of the content that describes the calculation of CMF rental units according to a tenant's income category and replacing it with “[t]he gross rent limits for Affordable Housing are further specified in the Assistance Agreement.” There are no changes to the content in § 1807.401(b). Section 1807.401(c) is revised to clarify that the gross rent restrictions are set forth in the Assistance Agreement and under IRC sec. 42(g)(2), as applicable. Section 1807.401(d) is revised to clarify that Housing under this section must meet the affordability requirement during the Affordability Period. Moreover, the affordability restrictions are allowed to terminate upon foreclosure of the Housing or transfer in lieu of foreclosure. The affordability requirements must be imposed by deed restrictions, covenants running with the land, or other recording instruments. A Recipient may use other types of recording instruments, as further set forth in the Assistance Agreement, if written approval is obtained from the CDFI Fund. To the extent allowed under State law, proceeds used to pay off mortgages financed with a CMF Award in the event of a sale of a property at a foreclosure sale, transfer in lieu of foreclosure, short sale, or other types of disposition, will be treated as Program Income to allow Recipients to engage in additional Affordable Housing Activities and/or Eligible Uses, except to capitalize an Economic Development Activity Fund, in § 1807.301. Section 1807.401(e) is re-titled as “Standard Lease Terms and Conditions,” and the entire content removed and replaced to prescribe that a written lease or rental agreement, which must be in compliance with applicable State or local law, is required for all tenants occupying rental CMF Units. Section 1807.401(f)(1) is revised to clarify that at the time of each initial lease and occupancy, the tenant income will be determined to ascertain income eligibility. During the Affordability Period, the existing tenant's income will be re-examined annually based on requirements set forth in the Assistance Agreement. In addition, “household” is replaced with “Family” to incorporate the new term and “assisted” with “supported” for clarity as an editorial change. Section 1807.401(f)(3) is deleted, as it is no longer applicable based on the current HOME regulation in effect. Section 1807.401(f)(4) in the 2016 interim rule is redesignated as § 1807.401(f)(3) and is revised by replacing the term “Low-Income Family” with “Family” to expand the scope of applicable Families for the CMF. Section 1807.401(g)(1) is revised to incorporate the new term “CMF Unit.” Section 1807.401(g)(2) is revised by deleting references to IRC sec. 42(g) and 42(h) to the extent that the CDFI Fund has not and is not fully adopting the requirements set forth therein in the revised interim rule, as the rent limitation determination and calculation will be provided for in the Assistance Agreement. Moreover, this section incorporates editorial changes to clarify that the maximum rent for tenants whose incomes no longer qualify is either 30 percent of the Family's annual income, or the amount payable by the tenants under State or local law, whichever is less. Section 1807.401(g)(3) is revised to incorporate the new term “CMF Unit” in lieu of “CMF financed or assisted unit” and clarifies that if the income of a tenant of a CMF Unit no longer qualifies, the Recipient may designate another unit as a rent-restricted replacement unit, as long as it meets the affordability qualification for the same income category as the original unit within the same Project. A new term “Homebuyer” is being incorporated throughout § 1807.402 to prohibit Recipients from using the CMF Awards to assist Families in buying second homes or multiple homes. Section 1807.402 is restructured as follows: § 1807.402(a) in the 2016 interim rule is redesignated as § 1807.402(a)(1); § 1807.402(a)(1) is redesignated as § 1807.402(a)(1)(i) with a new subheading “Single-family housing”; § 1807.402(a)(2) is redesignated as § 1807.402(a)(1)(ii) with a new subheading “Purchase price limits”; § 1807.402(a)(3) is redesignated as § 1807.402(a)(1)(iii) with a new subheading “Qualifying Homebuyer”; a new § 1807.402(a)(1)(iv) is added with new content under subheading “Eligible-Income requirements”; § 1807.402(a)(4) is redesignated as § 1807.402(a)(1)(v); and § 1807.402(a)(5) is redesignated as § 1807.402(a)(1)(vi)(A) and (B). The redesignated § 1807.402(a)(1) is revised by clarifying that a Recipient that uses the CMF Award to finance or support the Purchase of Housing by a qualified Homebuyer must ensure that the Housing and Homebuyer meet the affordability requirements in subpart D of this part. The redesignated § 1807.402(a)(1)(ii) is revised by replacing the Single-family housing purchase price limits of “95 percent of the median purchase price for the area as used in the HOME Program” with the purchase price limits for the area under the HUD FHA Section 203(b) Mortgage Insurance Program, or any other index as designated by the CDFI Fund. This revision is necessary because the index used in the 2016 interim rule has lagged market conditions, resulting in limited availability of housing choices for Families, particularly large Families, and may have had the unintended effect of concentrating affordable housing to certain geographic areas and communities, possibly in conflict with the CMF objectives. This section further requires that the underlying mortgage be originated based on an assessment of whether the borrower can repay the loan based on terms and conditions that are transparent and understandable, and the affordability of the mortgage to the Homebuyer over the life of the loan. The redesignated § 1807.402(a)(1)(iii) is revised by replacing “Family” with “Homebuyer” to incorporate the new term for accuracy; a similar requirement that “the Single-family housing must be the principal residence of the Family throughout the period described in paragraph (a)(4) of this section” is now included in § 1807.402(a)(1)(v). The new § 1807.402(a)(1)(iv) establishes that a qualifying Homebuyer under this section must have a household income at Eligible-Income; to determine whether a Family would be income-eligible under this section, adjusted gross income as defined under Internal Revenue Service (IRS) Form 1040 series for individual Federal annual income tax reporting is used, or other methodology for determining income eligibility as provided in the Assistance Agreement; and a homeowners of one- to four-unit Single-family housing may rent the additional unit(s) as Permanent Housing if at least one unit is maintained as the principal residence of the Homebuyer. This last requirement is being added to encourage an increase in the overall number of rental units to help boost the supply of rental housing and address an unprecedented housing crisis nationwide. The redesignated § 1807.402(a)(1)(v) is revised by adding the requirement that the Single-family housing must be the principal residence of the Homebuyer at the time of Purchase and is subject to the affordability requirements during the Affordability Period as provided in redesignated § 1807.402(a)(1)(vi) to ensure the CMF Award is being used to serve the intended income qualified Homebuyer. It further explains that the Affordability Period does not apply to additional units of the Single-family housing being rented as Permanent Housing. The redesignated § 1807.402(a)(1)(vi) is revised to state that the Recipient must establish and impose recoupment, replacement and resale strategies requiring that under new § 1807.402(a)(1)(vi)(A), if the Housing is sold in five years or less from the date of Purchase, the Housing must be sold in a manner that meets the qualifications set forth in § 1807.402, or the CMF Award will be recouped and the Housing replaced with a replacement unit to satisfy the affordability requirement for the remainder of the Affordability Period. Under new § 1807.402(a)(1)(vi)(B), if the Housing is sold any time after five years from the date of Purchase but before the end of the Affordability Period, the Housing must be sold to a new Eligible-Income Family or, if the Housing is not sold to an Eligible-Income Family, a proportionate share of the CMF investment must be recouped as Program Income. In case the Housing is not sold to an Eligible-Income Family after five years from the date of Purchase and the Recipient recoups a proportional amount of the CMF Awards as Program Income, the Recipient is not required to replace the sold Housing with another replacement unit. Additionally, a Recipient's recoupment, replacement, and resale strategy must meet the requirements of newly designated § 1807.402(a)(1)(vi) for compliance with program requirements and the terms under the Assistance Agreement. The affordability requirements are allowed to terminate at the time of foreclosure, transfer in lieu of foreclosure, or assignment of an FHA-insured mortgage to HUD. The occurrence of these events will result in the Housing no longer being subject to an affordability requirement or a recoupment, replacement, or resale strategy previously imposed by the Recipient. The affordability restrictions shall be revised according to the original terms, however, if during the original Affordability Period, the owner of record before the termination event obtains an ownership interest in the Housing. Section 1807.402(b)(1) is revised by replacing the Single-family housing purchase price limits as used in the HOME Program with those used in the HUD FHA Section 203(b) Mortgage Insurance Program, identical to the change made to § 1807.402(a)(1)(ii). Section 1807.402(b)(2) is revised to reinforce that the Single-family housing must remain the principal residence of the Family throughout the Affordability Period, as described in § 1807.402(b)(3). Section 1807.402(b)(3) is revised by replacing “at least 10 years” with “Affordability Period” to incorporate the new term, and “after Rehabilitation is completed” with “upon Project Completion or meet recoupment, replacement, and/or resale” to accurately describe the program requirement in § 1807.402(a)(1)(vi) as referenced herein. A new § 1807.402(b)(4) is added to describe the allowable uses of permanent additional units as described in the definition of “Housing” for a Homebuyer owning Single-family housing subject to the requirements under this part. Section 1807.402(c) is revised to reinforce that any owner of Single-family housing under this section must meet the definition of “Homebuyer.” Section 1807.402(e) is revised to clarify that when converting rental CMF Units to Homeownership units by selling, donating, or otherwise conveying the units to existing tenants, the tenants can only become Homebuyers under an existing documented rent-to-own program pursuant to the requirements under this section. The Homeownership units are also subject to a minimum period of affordability equal to the remaining rental Affordability Period, as further specified in the Assistance Agreement.

A newly added § 1807.403 comprises CMF program requirements regarding Economic Development Activities and is now consolidated under a single section. The 2016 interim rule requirement, located in § 1807.302(c), that no more than 30 percent of a CMF Award for each individual CMF Award round, may be used for Economic Development Activities, is repeated in the introductory paragraph of § 1807.403. The introductory paragraph to § 1807.403 also provides that a CMF Award used for Economic Development Activities must stabilize, sustain, or revitalize communities and neighborhoods physically proximate to any affordable housing to meet the requirements outlined in this section.

Section 1807.403(a) describes the Eligible Uses of a CMF Award to finance and support Economic Development Activities pursuant to § 1807.301, with the exception of Affordable Housing Fund. This revision extends all Eligible Uses for Economic Development Activities, which was not previously articulated in the 2016 interim rule. Section 1807.403(b) provides a new requirement that Recipients who use their CMF Awards for allowable Economic Development Activities resulting in real estate and/or physical structures must ensure such are used for a minimum of three years commencing with Project Completion. This requirement establishes a new compliance requirement, which is absent in the 2016 interim rule, that physical structures resulting from Economic Development Activities retain the intended or similar purpose for at least three years from Project Completion. Section 1807.403(c) restates the definitional requirement that the Economic Development Activities must be undertaken as part of a Concerted Strategy which, for example, will result in increased education, employment, transportation, financial services or other opportunities in a Low-Income Area or Underserved Rural Area. Section 1807.403(d) incorporates the requirements related to the term “In Conjunction with Affordable Housing” which appears in the 2016 interim rule. This section establishes that Economic Development Activities must be located in a Low-Income Area or Underserved Rural Area; undertaken in conjunction with any affordable housing that is subject to or authorized by local, State or Federal laws; and reasonably available, physically proximate, and benefit residents of such affordable housing. This section also establishes criteria for physical proximity for Metropolitan and Non-Metropolitan Areas, which are existing provisions in the 2016 interim rule being reorganized under this section for ease of reference.

Subpart E—Leveraged Capital; Eligible Project Costs; Commitment Requirements

Section 1807.500(a) is revised under a new subheading “Eligible Project Costs” to clarify that the leverage requirement to generate Eligible Project Costs in an amount at least 10 times the CMF Award excludes any Direct Administrative Expenses and Feasibility Determination Costs, combined, from the calculation. This is to allow Recipients additional flexibility in the use of the CMF Award in determining whether to proceed with prospective projects prior to Project Commitment. In § 1807.500(b)(1), “percentage” is replaced with “multiplier” to reflect the update to the term “Leveraged Capital,” and “private” is added before “non-government sources” for clarity. Sections 1807.500(b)(2)(ii) through (iii) are revised to reinforce that Leveraged Capital used to finance and/or support Affordable Housing Activities or Economic Development Activities must comply with §§ 1807.400, 1807.401 and 1807.402 or § 1807.403 in subpart D, respectively, and as further provided in the Assistance Agreement. Section 1807.500(c) is deleted in its entirety; any related requirements will be described in the Assistance Agreement.

Section 1807.501, re-titled as “Commitments,” establishes a new Commitment process to better align with the requirements under the Act. This section also adds new content at §§ 1807.501(c)(4) through (6) to expand the requirements to determine Project Commitment. To afford Recipients additional time and flexibility in identifying projects to further CMF objectives, § 1807.501(a) is revised to establish that pursuant to § 1807.301, the use of a CMF Award must be Committed for Use by Recipients to one or more Eligible Uses within two years of the date designated in the Recipient's Assistance Agreement. The content in §§ 1807.501(b)(1) through (3) is deleted in its entirety and the new content in § 1807.501(b) provides that the Recipient must achieve Project Commitment within three years of the date designated in the Recipient's Assistance Agreement, resulting in a longer timeframe to identify viable projects. The content in § 1807.501(c) is deleted in its entirety and new content in the newly designated §§ 1807.501(c)(1) through (3) describes the Commitment requirements for real estate projects, and replaces “commitment” with “Project Commitment,” a newly defined term in the revised interim rule. The newly designated §§ 1807.501(c)(4) through (6) set forth the following new, expanded Commitment requirements: For Secondary Market Mortgage Purchase, the Recipient must evidence an agreement with a third party lender to purchase the qualified mortgages and demonstrate that such mortgages would not have been otherwise originated by the third party lender; for a qualified Homeownership Program, the Recipient must evidence that a commitment has been made by the action of the Recipient's Board or Directors; and for a Project comprised of a Loan Guarantee or Loan Loss Reserves, the Recipient must enter into a guarantee agreement or have established a cash reserve, escrow, or accounting-based accrual reserve with a lender or investor. These revisions are a recognition of the breadth of CMF activities and differing criteria in meeting Project Commitment. Section 1807.501(c) is deleted in its entirety due to redundancy, as similar content appears in § 1807.901 and in the NOFA. Section 1807.501(d) is deleted in its entirety, as this content is set forth in the NOFA and/or Assistance Agreement.

Section 1807.503(a) is revised by adding “for Affordable Housing Activities and Economic Development Activities” after “Project Completion” to fully capture the Project Completion requirements for all types of CMF activities. Section 1807.503(a)(4) is revised by clarifying that for Preservation, Project Completion occurs when the refinancing of the loan is closed and the underlying real estate is compliant with all CMF requirements, subject to any additional program requirements for Rehabilitation as applicable. Section 1807.503(a) adds new content at §§ 1807.503(a)(5) through (7) in the revised interim rule to expand the Project Completion requirements to include Secondary Market Mortgage Purchase, Loan Loss Reserve and Loan Guarantee activities. Section 1807.503(b) is revised by deleting “which must be met for a period of at least 10 years after the Project Completion date” with respect to property standards based on the new definition of “Affordability Period,” which could be extended to more than 10 years. Section 1807.503(b)(1) is revised by adding a subheading “Code requirements.” Section 1807.501(b)(2) is revised by adding a subheading “Other requirements.” Section 1807.503(b)(2)(i) is revised by adding “Title VIII of the Civil Rights Act of 1968” before “Fair Housing Act” for clarity and making editorial changes to clarify that “Multi-family housing” as used in this section is equivalent to “covered multifamily dwellings,” as defined in 24 CFR 100.201.

Section 1807.503(b)(3)(i) is revised by replacing “10-year period of affordability” with “Affordability Period” to incorporate the new term.

Subpart F—Tracking Funds; Uniform Administrative Requirements; Nature of Funds

Section 1807.602 is revised by deleting “CMF Award proceeds retain their Federal character until the end of the Investment Period” as this or similar requirement will be set forth in the Assistance Agreement and/or other CDFI Fund guidance.

Subpart H—Evaluation and Section of Applications

Section 1807.800(a) is revised by deleting “on a merit based and” and adding “based on the criteria outlined in the NOFA” as an editorial change for clarity.

Section 1807.801(b) is revised by deleting §§ 1807.801(b)(1) through (b)(4) in their entireties for redundancy, as they are included in other CDFI Fund guidance materials. Section 1807.801(c) is revised by designating this subsection as “Other Factors” with no change to content.

Subpart I—Terms and Conditions of CMF Award

Section 1807.900(a)(2) is revised by replacing “uses” with “Eligible Uses” for clarity. Section 1807.900(c) is revised to clarify that the CDFI Fund will provide a Recipient with reasonable notice and opportunity to cure any instances of noncompliance prior to determining whether the Recipient has failed to comply substantially with the Act, these regulations or an Assistance Agreement.

Section 1807.902(b) is redesignated as “Beneficiary Demographic Data” for clarity and revised by deleting “must” and replacing it with “may be required to” to reflect a change in the program requirements.

Section 1807.902(d) is revised by adding “and the applicable NOFA” at the end for clarity.

Section 1807.902(e)(iii) is revised by updating financial reporting criteria for regulated financial institutions ( i.e., Insured Depository Institutions, Depository Institution Holding Companies, and Insured Credit Unions) to align with the CDFI Fund compliance requirements with respect to completing a Financial Statement Audit report.

Section 1807.902(f) is deleted in its entirety as the requirement is included in the applicable NOFA and/or the Assistance Agreement.

V. Rulemaking Analysis

A. Executive Order (E.O.) 12866

It has been determined that this interim rule is not a significant regulatory action under Executive Order 12866, as amended. Accordingly, a regulatory impact assessment is not required.

B. Regulatory Flexibility Act

Because no notice of proposed rulemaking is required under the Administrative Procedure Act (5 U.S.C. 553), or any other law, the Regulatory Flexibility Act does not apply.

C. Paperwork Reduction Act

The collections of information contained in this interim rule will be reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 and assigned the applicable, approved OMB Control Numbers associated with the CDFI Fund under 1559-XXXX. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by OMB. This document restates the collections of information without substantive change.

D. National Environmental Policy Act

This interim rule has been reviewed in accordance with the CDFI Fund's environmental quality regulations (12 CFR part 1815), promulgated pursuant to the National Environmental Protection Act of 1969 (NEPA), which requires that the CDFI Fund adequately consider the cumulative impact proposed activities have upon the human environment. It is the determination of the CDFI Fund that the interim rule does not constitute a major Federal action significantly affecting the quality of the human environment and, in accordance with the NEPA and the CDFI Fund's environmental quality regulations (12 CFR part 1815), neither an Environmental Assessment nor an Environmental Impact Statement is required.

E. Administrative Procedure Act

Because the revisions to this revised interim rule relate to loans and grants, notice and public procedure and a delayed effective date are not required pursuant to the Administrative Procedure Act, 5 U.S.C. 553(a)(2).

F. Comment

Public comment is solicited on all aspects of this revised interim rule. The CDFI Fund will consider all comments made on the substance of this revised interim rule, but it does not intend to hold hearings.

G. Catalogue of Federal Domestic Assistance Number

Capital Magnet Fund—21.011.

List of Subjects in 12 CFR Part 1807

• Community development
• Grant programs—housing and community development
• Reporting and record keeping requirements

For the reasons set forth in the preamble, 12 CFR part 1807 is revised to read as follows:

PART 1807—CAPITAL MAGNET FUND

Subpart A—General Provisions

Authority: 12 U.S.C. 4569.

Subpart A—General Provisions

Subpart B—Eligibility

Subpart C—Eligible Purposes; Eligible Uses; Restrictions

Subpart D—Qualification as Affordable Housing

Subpart E—Leveraged Capital; Eligible Project Costs; Commitments; Project Completion

Subpart F—Tracking Funds; Uniform Administrative Requirements; Nature of Funds

Subpart G—Notice of Funds Availability; Applications

Subpart H—Evaluation and Selection of Applications

Subpart I—Terms and Conditions of a CMF Award