The National Federation of Community Development Credit Unions is helping CDCUs organize themselves to take advantage of any opportunity to obtain more government support.
The source of the support is the CDFI bond program, an element of the Small Business Jobs Act which was passed in 2010. Under the program, administered by the Treasury’s Community Development Financial Institutions Fund, Treasury will guarantee bonds and other notes issued by community development financial institutions provided the notes are used for community or economic development projects.
But while the opportunity has arisen, the National Federation is working hard to alert CDCUs to the work they will need to do to take advantage of it.
“The scope of this opportunity is really quite unprecedented,” said federation CEO Cliff Rosenthal during a conference call with CDCU executives called to discuss the opportunity. Not only will the loan guarantees be possibly quite long–up to 30 years–they also appear to be at current extraordinarily low interest rates.
CDCU’s first task will be to voice their comments to the CDFI Fund about how the bond program should be administered. The fund has asked for comments from CDFIs, including credit unions about the sorts of things the bonds should be issued to support, what sorts of institutions should be eligible and what their minimum qualifications should be, how the bonds should be underwritten and how the fund should monitor the institutions for compliance in the use of the bond proceeds. Comments are due to the fund by Aug. 15.
A second factor CDCUs face is how they will be able to take advantage of the opportunity. According to Rosenthal, the minimum size of a bond that will be eligible for federal guarantee is $1 million, an amount which would be out of the range of many community development credit unions.
“Because the minimum bond amount that can be guaranteed is $100 million, we anticipate that there will be very few CDCUs or even CDFIs which may be initially able to participate on their own,” said Rosenthal. “So we’re exploring how the federation could serve as an aggregator of funds for participating CDCUs.”
During the meeting, Rosenthal emphasized that the Treasury’s CDFI Fund has not finished writing regulations that will govern the program and said the federation was exploring how the program could be structured to do the most good. Rosenthal and other executives urged CUs that wish to participate to contact the federation and to join a council of CDCUs. The relative lack of knowledge about the program has had an influence on the comments and level of participation. Questions from CDCU participants in the online meeting were relatively light as institutions mulled over whether and how they might take advantage of the money.