§4713a Guarantees for Bonds and Notes Issued for Community or Economic Development Purposes

Summary

The law lets the Treasury guarantee bonds or notes from approved issuers so those issuers can make loans to certified community development financial institutions for community or economic development, including work in low-income or underserved rural areas. The guarantee can cover principal, interest, and call premiums, is backed by the U.S. government, can last up to 30 years, and the Treasury may make no more than 10 guarantees each calendar year. Each guarantee must be at least $100,000,000 and the total guaranteed in any fiscal year cannot exceed $1,000,000,000. Key defined terms: eligible community development financial institution (a certified CDFI that gets a loan); eligible community or economic development purpose (projects allowed under the law, including low-income or rural work); guarantee (the written Treasury promise to cover losses); loan (credit made under the program); master servicer (entity approved to oversee servicers); Program (the guarantee program); program administrator (issuer’s admin agent); qualified issuer (an approved CDFI or its issuing agent); Secretary (the Treasury Secretary); servicer (entity that handles loan servicing). Important rules: at least 90% of the guaranteed bond or note principal must go to loans (measured each year starting one year after issuance); up to 10% may be kept in a relending account under limits; participants must fund a risk-share pool equal to 3% of the outstanding guaranteed amount; issuers must fix shortfalls within 90 days after the annual check. The Treasury will bar certain uses (such as political activity, lobbying, travel, and paying issuer or recipient salaries or administrative costs). Servicers, master servicers, and program administrators may handle loan billing, collections, reporting, oversight, and fund movement. Issuers pay an annual fee equal to 10 basis points of unpaid principal to cover Treasury costs. The Treasury had to write rules within 1 year after September 27, 2010, and put the program in place within 2 years after that date. The authority ends on September 30, 2014.