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| CIP/Community Economic Development Program |
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The Community Economic Development Program, which includes the Community Investment Program (CIP), offers discounted
advances and letters of credit to help develop and revitalize
communities. Funds are available on an ongoing basis to member
financial institutions holding stock in the Chicago Federal Home
Loan Bank (Chicago FHLB) and making qualified loans to private for profit,
not for profit or public entities to finance commercial and
economic development projects. Members' loans qualify for the
program if the entity they are financing:
- is located in an eligible geographic area (Geographic Beneficiaries);
- qualifies as a small business per the Small Business Administration's definitions (Activity Beneficiaries); or
- serves or employs income-eligible individuals (Individual Beneficiaries).
Members are encouraged to provide favorable rates and terms to borrowers on qualifying
activities.
The Community Economic Development Program is governed by the
Community Investment Cash Advance (CICA) Regulations, 12
CFR Part 952. Community Economic Development Advances and
Standby Letters of Credit can qualify under the CIP, Urban Development
Advance (UDA) or Rural Development Advance (RDA) provisions
indicated in the CICA regulations. The Chicago FHLB uses median
income guidelines published annually by the Department of
Housing and Urban Development to determine income eligibility.
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| Advances |
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| Community Economic Development Advances (CEDAs) are priced
at the Chicago FHLB's cost of funds for similar maturities.
CEDAs provide the flexibility lenders need to link these assets
with matching liabilities by offering both a preferential rate
and a term from one month to ten years. CEDA rates are listed
on the Chicago FHLB's Daily
Rate Indications under the CIP column. All advances fall
under the credit and collateral policies of the Chicago FHLB.
The maximum advance amount is based on qualifying loan balances.
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| Standby Letters of Credit |
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| Letters of Credit (LOCs) can be used to collateralize public unit
deposits and provide credit enhancement for the issuance of taxable
bonds for community development related activities. CIP LOCs are offered
at a fee of 8 basis points per annum plus an upfront administrative
fee. Use of the standby LOC may result in a more favorable interest
rate for the bonds, reducing the overall cost of the project. (LOCs
are also governed by Federal Regulation 12 CFR Part 960.) |
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| Eligible Uses |
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| Economic development projects may qualify for CIP rates under any one of the following: |
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| Geographical Beneficiaries |
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The project/property is located in any one of the following areas:
- A census tract where median income is at or below 100% of the area
median income in urban areas, and 115% of AMI in rural areas;
- A Champion Community and Empowerment Zone or an Enterprise Community, as
designated by the Secretary of USDA or the Secretary of HUD;
- An Indian area as defined by the Native American Housing Assistance and
Self-Determination Act, Alaskan Native Village, or Native Hawaiian Home Land;
- An area affected by a military base closing and is a "community in the
vicinity of the installation" as defined by the Department of Defense;
- A designated community under the Community Adjustment and Investment Program; or
- A Federally or state declared disaster area.
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| Activity Beneficiaries |
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| Individual Beneficiaries |
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- At least 51% of the annual salaries of the permanent full and
part-time jobs computed on a full-time equivalent basis, created or
retained by the project, other than construction jobs, must be at or
below 100% (in urban areas) or 115% (in rural areas) of the area
median income for a 4-person household;
- At least 51% of households who otherwise benefit (other than
through employment) or are provided services by the project must have
incomes at or below 100% (in urban areas) or 115% (in rural areas) of
the area median income for a 4-person household;
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| Examples of Eligible Projects |
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- Commercial Loans - retail stores, offices, hotels, wholesale suppliers
- Agricultural Loans - farm refinance/expansion, equipment acquisition
- Public Infrastructure Loans - water and sewer system upgrades, bridges, roads
- Loans for Public/Community Facilities - healthcare facilities, schools, and recreation, daycare, and social service centers
- Industrial/Manufacturing Loans
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| Application Process |
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To apply for the Chicago FHLB's Community Economic Development
Program, members must submit a completed CEDA
Application and provide documentation to verify that the loan(s)
qualify for the CIP rate. Acceptable documentation includes:
- The project/property address - to verify location in an income-qualifying census tract.
- Salary information for FTE (full time equivalent) employees (e.g. payroll records) -
to verify that 51% or more of FTE employees earn salaries at or below the applicable income limit.
- Income information for households served by the project - to verify that 51% or more of
beneficiaries served by the project earn salaries at or below the applicable income limit.
- Documentation of number of employees or annual gross receipts - to verify that the business
meets the SBA's definition of a small business.
Applications for advances are generally approved within 2 business days.
Applications for LOCs are referred to the Chicago FHLB's legal counsel following
confirmation of CEDA eligibility. Legal counsel will contact the member directly to
complete the LOC process.
All CEDA-eligible loans must be originated within 90 days prior to
drawing funds with the Chicago FHLB. After the application for CEDA
funding is approved, credit is extended for the lesser of 30 days
from CEDA approval date or 90 days from the loan's orgination date.
If an underlying loan has not been originated, funding with the customer
and the Chicago FHLB must take place within 90 days of application
approval. If a credit application is not funded within this time frame,
it expires.
To fund advance applications, members must notify Community Investment staff and submit an
Application for Advance signed by two authorized signatories. Community Investment
staff can provide you with the names of the individuals authorized by your
institution to sign for advances.
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NORBCO, Inc., a dairy equipment manufacturer, operated out of a small warehouse in upstate New York.
NORBCO opened a state-of-the-art facility in rural Tomah, Wisconsin in 2000, positioning
itself to better serve the large Midwestern dairy operations. After three successful years
in Tomah, NORBCO again needed room to grow.
In 2003, NORBCO approached Acuity Bank of Tomah, Wisconsin in search of nearly
$800,000 in fixed-rate financing for this expansion. Acuity Bank obtained
a Community Economic Development Advance (CEDA) from the Chicago FHLB, which
enabled it to provide fixed-rate resources to NORBCO at a competitive
interest rate.
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Click here for complete story.
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