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Federal Register / Vol. 86, No. 41 / Thursday, March 4, 2021 / Notices
collateralization of the loan portfolio, trends in changes to asset quality, and other relevant attributes;
C Management: Attributes such as documented best practices in governance, strategic planning and board involvement, robust policies and procedures, tenured and experienced management team, organizational stability, infrastructure and information technology systems, and other relevant attributes;
D Earnings and Performance:
Attributes such as net operating margins, deployment of funds, selfsufficiency, trends in earnings, and other relevant attributes;
E Liquidity: Attributes such as unrestricted cash and cash equivalents, ability to access credit facilities, access to grant funding, covenant compliance, affiliate relationships, concentration of funding sources, trends in liquidity, and other relevant attributes;
F Sensitivity: The CDFI Fund will stress test each Eligible CDFIs projected financial performance under scenarios that are specific to the unique circumstance and attributes of the organization. Additionally, the CDFI
Fund will consider other relevant criteria that have not been adequately captured in the preceding steps as part of the due diligence process. Such criteria may include, but not be limited to, the size and quality of any thirdparty Credit Enhancements or other forms of credit support.
G Overcollateralization: The commitment by an Eligible CDFI to overcollateralize a proposed Bond Loan with excess Secondary Loans is a criterion that may affect the viability of a Guarantee Application by decreasing the estimated net present value of the long-term cost of the Guarantee to the Federal Government, by decreasing the probability of default, and/or increasing the recovery rate in the event of default.
An Eligible CDFI committing to overcollateralization may not be required to deposit funds in the Relending Account, subject to the maintenance of certain unique requirements that are detailed in the template Agreement to Guarantee and Bond Loan Agreement.
H Credit Enhancements: The provision of third-party Credit Enhancements, including any Credit Enhancement from a Controlling CDFI
or any other affiliated entity, is a criterion that may affect the viability of a Guarantee Application by decreasing the estimated net present value of the long-term cost of the Guarantee to the Federal Government. Credit Enhancements are considered in the context of the structure and
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circumstances of each Guarantee Application.
I On-Site Review: The CDFI Fund may request an on-site review of an Eligible CDFI to confirm materials provided in the written application, as well as to gather additional due diligence information. The on-site reviews are a critical component of the application review process and will generally be conducted for all applicants not regulated by an Appropriate Federal Banking Agency or Appropriate State Agency. The CDFI
Fund reserves the right to conduct a site visit of regulated entities, in its sole discretion.
J Secondary Loan Asset Classes:
Eligible CDFIs that propose to use funds for new products or lines of business must demonstrate that they have the organizational capacity to manage such activities in a prudent manner. Failure to demonstrate such organizational capacity may be factored into the consideration of Asset Quality or Management criteria as listed above in this section.
3. Credit subsidy cost. The credit subsidy cost is the net present value of the estimated long-term cost of the Guarantee to the Federal Government as determined under the applicable provisions of the Federal Credit Reform Act of 1990, as amended FCRA.
Treasury has not received appropriated amounts from Congress to cover the credit subsidy costs associated with Guarantees issued pursuant to this NOGA. In accordance with FCRA, Treasury must consult with, and obtain the approval of, OMB for Treasurys calculation of the credit subsidy cost of each Guarantee prior to entering into any Agreement to Guarantee.
E. Guarantee approval; Execution of documents.
1. The Guarantor, in the Guarantors sole discretion, may approve a Guarantee, after consideration of the recommendation from the CDFI Bond Guarantee Programs Credit Review Board and/or based on the merits of the Guarantee Application. The Guarantor shall approve or deny a Guarantee Application no later than 90 days after the date the Guarantee Application was advanced for substantive review.
2. The Guarantor reserves the right to approve Guarantees, in whole or in part, in response to any, all, or none of the Guarantee Applications submitted in response to this NOGA. The Guarantor also reserves the right to approve any Guarantees in an amount that is less than requested in the corresponding Guarantee Application. Pursuant to the Regulations at 12 CFR 1808.504c, the Guarantor may limit the number of
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Guarantees made per year to ensure that a sufficient examination of Guarantee Applications is conducted.
3. The CDFI Fund will notify the Qualified Issuer in writing of the Guarantors approval or disapproval of a Guarantee Application. Bond Documents and Bond Loan documents must be executed, and Guarantees will be provided, in the order in which Guarantee Applications are approved or by such other criteria that the CDFI
Fund may establish, in its sole discretion, and in any event by September 30, 2021.
4. Please note that the most recently dated templates of Bond Documents and Bond Loan documents that are posted on the CDFI Funds website will not be substantially revised or negotiated prior to closing of the Bond and Bond Loan and issuance of the corresponding Guarantee. If a Qualified Issuer or a proposed Eligible CDFI does not understand the terms and conditions of the Bond Documents or Bond Loan documents including those listed in Section II.G., above, it should ask questions or seek technical assistance from the CDFI Fund. However, if a Qualified Issuer or a proposed Eligible CDFI disagrees or is uncomfortable with any term/condition, or if legal counsel to either cannot provide a legal opinion in substantially the same form and content of the required legal opinion, it should not apply for a Guarantee.
5. The Guarantee shall not be effective until the Guarantor signs and delivers the Guarantee.
F. Guarantee denial. The Guarantor, in the Guarantors sole discretion, may deny a Guarantee, after consideration of the recommendation from the Credit Review Board and/or based on the merits of the Guarantee Application. In addition, the Guarantor reserves the right to deny a Guarantee Application if information including any administrative error comes to the Guarantors attention that adversely affects the Qualified Issuers eligibility, adversely affects the evaluation or scoring of an Application, or indicates fraud or mismanagement on the part of the Qualified Issuer, Program Administrator, Servicer, and/or Eligible CDFIs.
Further, if the Guarantor determines that any portion of the Guarantee Application is incorrect in any material respect, the Guarantor reserves the right, in the Guarantors sole discretion, to deny the Application.
V. Guarantee Administration A. Pricing information. Bond Loans will be priced based upon the underlying Bond issued by the
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