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amount of a loan to a qualified appli. authorized financing charges received cant.

by intermediaries operating relending (e) Loans or guarantees made by the programs may be used to pay for: (1) Department and/or intermediaries for The costs of administering the RDLF the purpose of purchasing land and relending program, (2) the provision of buildings may not be for a period in technical assistance to borrowers and excess of twenty-five years; those (3) the absorption of bad debts associmade for the purpose of purchasing ated with RDLF loans. No administramachinery and equipment may not be tive costs may be claimed without the for a period which exceeds the useful express written approval of the Delife of such items; those made for partment. Proposed budgets to cover working capital may not be for a the administrative costs of intermeperiod in excess of five years.

diaries must be submitted annually for (f) The terms of loan repayment will review and approval by the Departbe those stipulated in the loan agree ment. All proceeds in excess of those ment and/or promissory note, as needed to cover authorized expenses, agreed to and executed by the Depart as described above, must revolve back ment and borrowers.

into the RDLF and be available for re(g) Applicants proposing projects

lending to eligible applicants. Any that will result in new employment op

such excess proceeds shall be returned portunities must assure the Depart

to the Secretary at the end of the loan ment that a majority of the new em

period or upon repayment of the loan, ployees will be low-income rural resi

whichever occurs first. dents.

8 1076.50-9 Security. 8 1076.50-8 Interest on loans; allowable costs.

(a) As a Credit Factor. The availabil(a) Loans made by the Secretary

ity of collateral security normally

shall be considered as an important pursuant to this subpart shall bear interest at a rate determined by the Sec

factor in making loans or guarantees.

The types and amount of collateral seretary of the Treasury taking into consideration the average market yield on

curity required should be governed by outstanding Treasury obligations of

the relative strengths and weaknesses comparable maturity, plus such addi

of other credit factors. However, the tional charges, if any, toward covering

taking of collateral as security should other costs of the program as the Sec

be considered in each loan making or retary of Health and Human Services

guarantee transaction. Collateral secumay determine to be consistent with

rity should be sufficient to provide the its purposes, except that for the five

lender reasonable protection from loss years following the date on which the

in the case of adversity, but such secufunds are awarded to the borrower,

rity or lack thereof should not be used the rate of interest shall be 4 percent

as the primary basis for deciding age points below the rate established

whether to extend credit. . by the Secretary of the Treasury, but

(b) Security interests. Security internot less than 5 percent, whichever is

ests which may be taken by the lender higher.

or guarantor include but are not limit(b) Interest rates charged by inter

ed to liens on real or personal propermediaries to the ultimately intended ty, including leasehold interests, asborrowers shall be those negotiated

signments of income and accounts rebetween the intermediary and the bor ceivable, and liens on inventory or prorower. Intermediaries are encouraged ceeds of inventory sales as well as marto make loans to such borrowers at the ketable securities and cash collateral lowest possible rate, taking into ac accounts. count the cost of the loan funds to the (c) Motor vehicles. Liens ordinarily intermediary and the cost of adminis should be taken on licensed motor vetering the loan portfolio.

hicles or boats purchased hereunder in (c) Interest on loans, premiums order to be able to transfer title easily earned on guarantees, investment or should the lender need to declare a deinterest income, service fees and other fault or repossess the property.

ment periodically the extent to which increased employment, income and ownership opportunities are provided to low-income rural residents for each loan made by such intermediary.

(f) No intermediary may make a loan to a borrower who has applied for or received a loan from another intermediary unless the Department provides prior written approval for such loan.

(d) Additional security. The lender or guarantor may require collateral security or additional security at any time during the term of a loan or guarantee if after review and monitoring an assessment indicates the need for such security.

(e) Insurance on property secured. Ordinarily, hazard insurance up to the amount of the loan or the replacement value of the property secured (whichever is less) will be taken naming the lendor as beneficiary. Such insurance includes fire and extended coverage, public liability, property damage, and other appropriate types of hazard insurance.

(f) Appraisals. Real property serving as collateral security will be appraised by a qualified appraiser. For all other types of property, a valuation shall be made using any recognized, standard technique (including standard reference manuals), and this valuation shall be described in the loan file.

8 1076.50-10 Post award requirements.

(a) Borrowers receiving loans under this program shall be governed by these regulations, the loan agreement, the approved work program and any special conditions which the department may impose in awarding a loan.

(b) Unless otherwise specifically agreed to in writing by the Department loan proceeds and any interest thereon not immediately needed or disbursed by the borrower should be deposited in an interest bearing account or time deposit in a bank or other financial institution which can be fully covered by a form of federal deposit insurance.

(c) Any interest or income earned as a result of such deposits shall be used by the borrower only for purposes authorized by the statute, these regulations and officially approved loan agreement.

(d) Intermediaries operating relending programs must maintain separate ledgers and segregated accounts for RDLF funds at all times.

(e) Reporting requirements shall be those delineated in the loan agreement between the Department and a borrower and such subsequent communications as the Department deems appropriate. Intermediaries must docu

8 1076.50-11 Liquidation; default.

(a) Should the Secretary determine that it is necessary or desirable to take action to protect or further the interests of the Department in connection with any default or breach of conditions under any loan or guarantee made hereunder, the Secretary may:

(1) Declare that the loan is immediately due and payable.

(2) Assign or sell at public or private sale, or otherwise dispose of for cash or credit, in his/her discretion and upon such terms and conditions as he/ she shall determine to be reasonable, any evidence of debt, contract, claim, personal or real property or security assigned to or held by the Secretary in connection with financial assistance extended hereunder.

(3) Adjust interest rates, use fixed or variable rates, grant moratoriums on repayment of principal and interest, collect or compromise any obligations held by him/her and take such actions in respect to such loans and guarantees as are necessary or appropriate, consistent with the purpose of the Program and this subpart.

(b) Intermediaries shall report to the Department whenever a loan recipient is more than 90 days in arrears in the repayment of principal or interest.

(c) Failure by a borrower to comply with the provisions of these regulations and/or loan agreement shall constitute grounds for a declaration of default and the demand for immediate and full repayment of the loan.

(d) Failure by an intermediary to comply with the provisions of these regulations or to relend funds in accordance with an approved work plan or loan agreement shall constitute grounds for a declaration of default

8 1076.60–1 Applicability.

CDCU Revolving Loan Fund monies obligated prior to the effective date of this regulation are governed by 12 CFR 705.1 through 705.12. Funds obli. gated after the effective date of this regulation are governed by this subpart.

and the demand for immediate and full repayment of the loan.

(e) Failure of a lender making a guaranteed loan under this program to comply with the provisions of these regulations or guarantee agreement or to disburse and service a loan in accordance with the authorization approving the loan shall release the Department from obligation to purchase its share of the guaranteed loan. 8 1076.50-12 Conflict of interest.

No intermediary shall relend or guarantee funds to or for the benefit of:

(a) Any person who is a board member, employee, agent or consultant of such intermediary organization without specific prior written approval from the Department, given with full knowledge of the relationship involved, or

(b) Any organization which has on its governing board or as agent, consultant or employee, a person who is also a board member, employee, agent or consultant of the intermediary without specific prior written approval from the Department, given with full knowledge of the relationship involved. 8 1076.50-13 Application procedures.

(a) Applications for participation in this program will be accepted only pursuant to the terms of these regulations and under the conditions set out in a notice of the availability of funds published in the FEDERAL REGISTER.

(b) Following publication of a notice of availability of funds applicants may obtain forms and instructions regarding application procedures by writing to: Office of Community Services, Rural Development Loan Fund, 1200 19th Street, NW., Washington, DC 20506.

8 1076.60–2 Purpose and scope.

The purpose of this subpart is to implement the Community Development Credit Union (CDCU) Loan Program under the direct administration of the Office of Community Services (OCS) of the Department of Health and Human Services (HHS). Legislative changes in 1981 resulted in the assumption by HHS of federal administrative responsibility for the CDCU program as authorized by Sections 623, 633, and 681 of the Omnibus Budget Reconciliation Act of 1981 (Pub. L. 97-35).

8 1076.60-3 Definitions.

(a) Community Development Credit Union. For the purpose of this regulation, a Community Development Credit Union (CDCU) is a credit union chartered in accordance with $$ 1076.60-6 and 1076.60-7 of this subpart or an existing credit union which has as a basic purpose the stimulation of economic development activities and community revitalization efforts aimed at benefitting the community it serves, a majority of which must be low-income residents; and which has submitted an application and has been selected for participation in the CDCU program in accordance with the provisions of this regulation.

(b) Loans. For the purposes of this regulation, a loan from OCS to a CDCU may mean a loan to or a nonmembership deposit in a credit union selected and qualified for participation in this program, provided such deposits are permitted by the appropriate state regulatory authority, if the credit union is state-chartered.

Subpart 1076.60—Community Devel

opmont Credit Union Loan Program

AUTHORITY: Pub. L. 97-35, Secs. 623, 633, 681, 95 Stat. 494, 498, 42 U.S.C. 9812, 9822, 9910.

SOURCE: 48 FR 53561, Nov. 28, 1983, unless otherwise noted.

8 1076.60-4 Purpose of program.

The CDCU Loan Program is intended to support community based credit unions in their efforts to:

(a) Stimulate economic development activities in the community they service which result in increased income, ownership, and employment opportunities for low-income residents;

(b) To stimulate community revitalization efforts which result in improved community facilities, housing, transportation, etc., and

(c) To provide needed financial and related services to residents of their communities. 8 1076.60–5 Eligible applicants.

The CDCU Loan Program is avail. able to existing credit unions and organizations proposing to form a credit union, which meet the requirements of this regulation.

(1) Membership drives;

(2) Campaigns to encourage members to increase their share deposits through systematic savings, utilizing such methods as payroll deductions al. lotments, etc.

(3) Activities aimed at getting busi. nesses and other organizations serving the community to maintain share de posits or contribute financially in other ways to projects supported by the credit union.

8 1076.60–6 Program activities.

In order to meet the objectives of the CDCU Loan Program, an applicant selected for participation must provide a variety of financial and related services designed to meet the particular needs of the low income community served. These activities may include, but are not limited to, the following:

(a) Activities aimed at supporting and stimulating economic development and revitalization efforts within the low income community, such as:

(1) Efforts to improve housing conditions and increase home ownership through a variety of mechanisms including self-help and co-op housing development projects, assistance in securing and leveraging mortgages, site development and construction financing;

(2) Efforts to increase employment opportunities by aiding existing businesses and promoting the establishment of new businesses. Applicants are encouraged to use funds available through the CDCU Loan Program to serve as a catalyst to attract and stimulate the investment of capital from other private and public sources to promote economic development activities within the community;

(b) Activities aimed at providing member services such as financial counseling; and

(c) Activities aimed at increasing the membership and the capitalization base such as:

8 1076.60-7 Application for chartering.

Applications for chartering of new credit unions, to enable participation in the CDCU Loan Program, should be submitted to the appropriate Regional Office of the National Credit Union Administration or a state credit union regulatory agency. 8 1076.60-8 CDCU field of membership.

(a) A CDCU must serve a total community which is comprised

primarily of low income residents. Therefore, the CDCU's field of membership should correspond geographically to the designated program area described in an application, and may include employees who regularly work in the area, businesses located within the area, and the residents of the area.

(b) In particular cases, the communi. ty served may include a number of contiguous neighborhoods constituting a target area. A target area is de. fined as that area designated by the Economic Development Administration or another Federal agency or by a State or local government agency for special assistance to low-income residents such as special impact areas, enterprise zones, etc.

(c) A typical CDCU field of membership may read as follows: Persons who reside or work in that part of Small Town, Any State, designated (e.g. by the Economic Development Adminstration) as the “Special Impact Area" (SIA), bounded on the north by Baker Avenue, on the east by Interstate 85, on the south by First Street, and on the west by Grand Road; employees of this credit union and members of their immediate families; organizations of such persons; individual proprietorships, partnerships, or corporations lo

cated within the above SIA and active 8 1076.60-10 Loans to CDCU's. ly engaged in a business practice

(a) The Director of OCS will make within the community; and incorpo

loans to approved CDCUS in accordrated or unincorporated associations

ance with these regulations and the located in the above SIA.

provisions of a notice of availability of (d) An existing credit union may funds published in the FEDERAL REGISelect to participate in the CDCU Loan

TER. Program upon a majority vote of its

(b) Amount of Loans. The amount of board of directors and upon approval a loan will be based on financial need of its application for participation. and a demonstrated capability of an Any credit union field of membership applicant CDCU to provide financial change to conform with a target area and related services to the Community as previously described, must be ap as set forth in its application. Existing proved by the credit union's board of credit unions selected for participation directors and the appropriate State or will be eligible to receive up to Federal regulatory agency in accord $200,000 in loans and new credit ance with established procedures. unions up to $100,000 in loans. The

funds will be released to the partici8 1076.60-9 Community Development pating credit union when the requireCommittee.

ments of these regulations and associEach CDCU shall have a Communi.

ated notice of availability of funds are

met. ty Development Committee. The responsibilities of the Community Devel

(c) Matching Requirements. Loan

monies made opment Committee fall into two inter

available must be related categories: coordination (liai

matched by the participating credit son) and identification of community

union by increasing its member share

deposits by one dollar for every two needs.

dollars provided by OCS. Participating (a) Coordination. The Community

credit unions must meet this match reDevelopment Committee must estab

quirement within one year of the aplish and maintain liaison with all gov

proval of the loan application and ernment agencies and others having

must maintain the increase in the developmental projects in the commu total amount of member share deposnity. This liaison will insure a united its for the duration of the loan. effort at redeveloping the community (1) Drawdown of the funds to parwith a minimum of duplication.

ticipating credit unions may be made (b) Community Needs Plan. Within in a maximum of two payments only. 90 days after a credit union has been Upon approval of its loan application, notified by the Director of OCS of ap and before it meets its match requireproval of its participation in the ment, a participating credit union may CDCU Loan Program, the Community receive 50% of the loan committed. Development Committee of that credit The remainder of the funds commitunion will prepare and present to the

ted will be available to the participatCDCU's board of directors a CDCU ing credit union only after it has docuCommunity Needs Plan. This plan will

mented that it has met the match reset forth the coordination contacts es

quirement for the total amount of the tablished and the details of these ini

loan commitment. tiatives. The plan will also contain, in

(2) Failure of a participating credit priority sequence, a list of community

union to generate the required match needs which the credit union proposes

within one year of the approval of the to fulfill. The credit union's board of

loan will result in the reduction of the directors will make the decisions on

loan proportionate to the amount of what services can be provided and

match actually generated. Payment of

any additional funds initially approved when.

will be limited as appropriate to re(Approved by the Office of Management flect the revised amount of loan apand Budget under control number 0990 proved, and any funds already ad0123)

vanced to the participating credit

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