WASHINGTON -- Community Development Credit Unions that are have been certified as community development financial institutions will be eligible to receive capital in the form of subordinated debt at an interest rate of 2% for eight years, Obama Administration officials explained today.
Under the terms of the program, which the officials stressed was totally separate from the small business lending initiative the administration launched yesterday, CDCUs would need the approval of NCUA to participate in the program and would need to be considered strong institutions. The officials said the Treasury has reached out to the NCUA and that the agency supports the program.
CDCUs that might not have sufficiently strong capital positions to participate will be able to approach private investors or foundations for half of the capital they would need. The other half of the necessary capital would come from TARP funds the officials said.
Similar requirements were put into place for bank and thrift CDFIs.
Requiring institutions in a weaker capital position to get support from investors or foundations was one way the Treasury could feel more certain that they are viable institutions going forward, the officials added.
The CDFI Fund will publish formal guidelines to program participation and expects to begin taking applications from CDFIs who wish to participate by the end of the month, one official said.