I FUNDING STRATEGIES: USING COMMUNITY INVESTMENT ADVANCES TO “DOUBLE-DIP THE CHIP” BY JOHN BIESTMAN, FHLB DES MOINES In a famous 1993 “Seinfeld” episode, the character George Costanza faces an awkward moment in which a fellow party guest accuses him of “double-dipping” a chip. While the act of double-dipping in this instance is a flagrant transgression, there are situations in which double-dipping can represent a strong benefit to both communities and balance sheets! Enter the FHLB Des Moines Community Investment Advance (CIA) program that offers members a reduced rate on eligible advances whose terms can range from one to 30 years. Application of CIA drawn by members can take many forms: downtown revitalization, employment stability, rural broadband expansion, brownfield development, infrastructure, targeted affordable housing projects and more. Many members of FHLB Des Moines are already active in supporting these types of efforts through their day-to-day community lending and investing activities. GUEST ARTICLE ELIGIBLE LOANS AND INVESTMENTS CIAs may be classified as either Commercial Lending Advances or Residential Lending Advances. CIAs may be taken to support direct loans, purchased loan participations and the purchase of mortgage revenue bonds or mortgagebacked securities, provided all of the loans purchased or financed by such bonds or securities can be shown to meet the eligibility requirements of the CIA product. Here’s a synopsis of the types of loans that typically qualify for the two advances: Commercial Lending Advances • A loan to a small business or farm will qualify, per standards established by the Small Business Administration. • Direct or participation loans that fund i) commercial, mixed-use or agricultural loans from targeted areas or ii) those that fund small businesses. • Municipal bonds that fund public facilities and infrastructure projects. • Commercial, mixed-use and agricultural loans originated by a member. Loans may be new originations or refinancings of existing loans. Eligible loans include those that: i) fund the acquisition or expansion of a business, ii) real estate loans for purchase, construction or renovations, iii) equipment and vehicle loans, iv) livestock loans and v) loans for working capital and inventory. Common qualifiers for the Commercial Lending CIA Program are the small business standard in urban areas and target income parameters for rural areas. Residential Lending Advances • Newly-originated or refinanced loans that fund single or multi-family units or manufactured housing projects. 20 Community Banker
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