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#2221638 - 09/16/19 05:00 PM Community Development loans
Mona_San Offline
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I am looking at the OCC fact sheet on community developments issued in January 2019. I have a couple of questions on the purposes of community development loans as follows:

1. One of the purposes of CD is stated as “promote economic development by financing businesses or farms that have gross annual revenues of $1 million or less or that meet the size eligibility requirements of the U.S. Small Business Administration’s (SBA) ….” Does this mean that any loan to a business that has gross annual revenues of $1 million of less can be considered a CD loan (even if it is not in a LMI)? Also, does this mean that, any loan to a business that meets the size eligibility requirements of the SBA can be considered a CD loan (even if it is not in a LMI)?

2. Another purpose of the CD is to “support affordable housing for low- or moderate-income (LMI) individuals, including multifamily rental housing”. Do you know what is affordable housing? Is there a regulatory definition of what is affordable housing?

Can anyone help me out?

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#2221820 - 09/18/19 02:50 PM Re: Community Development loans Mona_San
Tennismom Offline
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Posts: 762
RE: # 1 – The economic development qualifying must meet both the “size” and “purpose” test. Per the Q and As, https://www.govinfo.gov/content/pkg/FR-2016-07-25/pdf/2016-16693.pdf Page 48526.
To meet the purpose test it should: support permanent job creation, retention, and/or improvement for persons who are currently LMI or support permanent job creation, retention and improvement in either LMI geographies or in areas targeted for redevelopment by Federal, State or tribal governments. In addition any investment in or loan to a SBDC, SBIC, Rural Business Investment Company, New Market Venture Capital Company or New Markets Tax Credit-eligible Community Development Entity.

RE: #2 – We use the Fair Market Rent Documentation System https://www.huduser.gov/portal/datasets/fmr.html to determine if rent is affordable. If the rent charged is above the rate(s) listed we do not consider it affordable housing. Also, it has been suggested that even if a property’s rent is within the fair-market rent range, we need to evidence that low-and-moderate-income individuals and/or families are actually benefiting – not middle-or upper-income individuals or families paying at or below market rate rent.

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#2221914 - 09/19/19 05:54 PM Re: Community Development loans Tennismom
Mona_San Offline
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Joined: Feb 2019
Posts: 9
Thank you this response and links are extremely helpful!! Appreciate it smile

In regards to response #2, can a mixed used property be considered and if so is there a limit to how many residential units the building has to contain? Lastly, lets say we give a loan to a borrower for 65 unit apartment building located in a low and moderate income area and some of the units are above the rates listed but overall over 50% of units meet the market rate rent. Can it still be consider a CD loan?

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#2221961 - 09/20/19 12:36 PM Re: Community Development loans Mona_San
Tennismom Offline
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Tennismom
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Per the Q and As https://www.govinfo.gov/content/pkg/FR-2016-07-25/pdf/2016-16693.pdf Page 48530.
This section talks about pro rata consideration as it pertains to affordable housing. It even provides an example similar to the scenario you cite above.

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#2222086 - 09/23/19 03:10 PM Re: Community Development loans Tennismom
Mona_San Offline
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Joined: Feb 2019
Posts: 9
Thank you!

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