WASHINGTON-Funding legislation approved by Congress last month will allow community development credit unions and other CDFIs to issue federally guaranteed bonds to finance a variety of development activities, helping to boost capital and lending capacity of the CDCUs.
The maximum maturity of the bonds is 30 years and the bonds are taxable. Qualified Issuers will lend the bond proceeds to Eligible CDFIs. The CDFI program has been a major source of funding for CDCUs, providing more than $200 million in grants and low-interest loans for more than 200 credit unions over the past 15 years.
The Treasury Department is still developing final rules for participation in its CDFI Bond Guarantee program. Since the bonds will be issued in minimum amounts of $100 million, the program is expected to be limited to potential aggregators such as the National Federation of CDCU.
The Federation, in a comment letter submitted to Treasury, urged that the final rules allow proceeds from the bonds be able to be used by CDCUs for secondary capital or to buy loans from other CDFIs, particularly mortgages. CDCUs, or those designated as "low income," are the only credit unions permitted to accept outside capital.
