Three-Year CIP/EDF Rates Nearing 1%! Can You Afford Not to Take Advantage?

As prominently displayed at the top of the Seattle Bank’s “Rates” page, Community Investment Program (CIP) / Economic Development Fund (EDF) advance rates are currently at their lowest levels since 2003. As an example, on August 10, 2010, respective rates for three-, four-, and five-year qualifying advances were 1.05%, 1.45%, and 1.82%. Rates this low offer Seattle Bank members a great opportunity to fund qualifying affordable housing and economic development activities in the communities they serve.

The Seattle Bank’s CIP offers reduced-rate funding for affordable single- and multi-family housing, including manufactured housing. The Economic Development Fund (EDF) offers reduced-rate funding for community economic development. Many members originate loans that support affordable housing and/or economic development initiatives and can use the CIP/EDF program to qualify for discounted advance funding. With intermediate-term rates this low, at the very least, it’s a best practice to inventory your pending and immediately past production of qualifying loans. Any qualifying loan that a member has funded within the past 90 days may qualify for discounted rates. Additionally, advances must have a minimum term of three years, and “sell-side” option advances, including putable advances, are excluded from the program. You can submit details on these originations to the Seattle Bank on either an individual or a pooled basis.

Proceeds of CIP/EDF advances are typically used to support loans and investments that benefit multiple eligible purposes, including:

  • Affordable housing, including manufactured homes and rental housing
  • Single-family and multi-family rental and owner-occupied housing
  • Low Income Housing Tax Credits
  • Eligible mortgage revenue bonds and mortgage-backed securities
  • Small business loans
  • Roads, bridges, and other infrastructure types
  • Commercial developments that promote employment

Accessing the program and discounted funding is easy. With just a small amount of effort to pre-qualify an asset’s eligibility for CIP/EDF, you may find that your loans are eligible for wholesale funding that is typically 30 basis points below standard rates. CIP/EDF funding is applicable to most Seattle Bank advance structures (including bullet, amortizing, variable rate, and variable rate with an interest rate cap), and along with the low-cost funding advantage, you can also obtain CRA credits and enhance your visibility within your market. Assessing the eligibility of a loan or investment and submitting an application for funding is easier than you may think.

EDF Loan Qualification

EDF loans and investments for economic development activities, such as business, infrastructure, and commercial developments, may be used to support activities in neighborhoods with incomes up to 100% of area median income in urban areas, and up to 115% of area median income in rural areas.

To determine if a project is eligible for an EDF loan, you can use an online tool provided by the Federal Financial Institutions Examination Council (FFIEC).

Simply enter the property’s address into the form provided. If the “Tract Median Family Income” is at or below 100% of area median in an urban area or 115% of area median income in a rural area, the project is eligible for a discounted advance.

If the project is not located in an eligible census tract, it may still be eligible for an EDF advance if:

  • The advance supports a small business loan—regardless of the income level served.
  • The advance supports a project that creates or sustains jobs where at least 51% of annual salaries are at or below 100% of area median income in an urban area and 115% of area median income in a rural area.
  • At least 51% of the families who otherwise benefit from (other than through employment) or are provided services by the project have incomes at or below 100% of area median in an urban area and 115% of area median in a rural area.
  • The project is located in a qualified area—regardless of the incomes served—such as an Alaska Native Village, Native Hawaiian Homeland, state or federal disaster area, a Champion Community, an Enterprise Community, an Empowerment Community, a military base closing, or a Brownfield tax credit area.

Figure 1 provides an example of the information provided by the FFIEC’s tool for a specific location.

Figure 1. Sample Output of FFIEC Summary Census Demographic Information

MSA Code: 42644 State Code: 53 County Code: 033 Tract Code: 0107.00
Summary Census Demographic Information
Tract Income Level Low Tract Population 6,140
Underserved or Distressed Tract No Tract Minority % 71.03
2010 HUD Estimated MSA/MD/non-MSA/MD Median Family Income $85,600 Minority Population 4,361
2009 Est. Tract Median Family Income $31,689 Owner-Occupied Units 660
2000 Tract Median Family Income $23,675 1-4 Family Units 1,612
Tract Median Family Income % 37.02

CIP Advance Qualification

Loans and investments for affordable housing, including rental and owner-occupied projects, must benefit households that earn no more than 115% of an area’s median income. To find out if a project is eligible, simply complete and submit a CIP/EDF Application. The application form is short and easy to complete, requiring basic information about the project to be funded, including the rent of each bedroom size in the project. Once you submit the application, the Seattle Bank will respond, generally within a few days, regarding the project’s eligibility.

Loan Approval Coding and Tracking

Seattle Bank members that have been the most active users of CIP/EDF advances have typically developed screening capabilities within their loan approval tracking and coding systems, so that each loan or investment, once originated, is readily evaluated for eligibility. If you are interested in setting up a similar system, you can use the checklist included in the CIP/EDF Application as a source for the queries you’ll need for your loan approval system. Your relationship manager can also help you implement a system to routinely track qualifying assets.

Look for Competitive Rates Daily on the Seattle Bank’s Rates Page

CIP/EDF funding is continuously available through a noncompetitive application process. Take the time to review our CIP/EDF advance criteria and application. We think you’ll find that reducing your cost of funds may be just a small application form away!

Jennifer Ernst is Vice President/Community Investment Officer and John P. Biestman, CFA, is Director of Business Development at the Federal Home Loan Bank of Seattle.