What is the Economic Development Program?
The Economic Development Program (EDP) is a program offered by the FHLB Cincinnati designed to encourage Members to increase their involvement in economic development projects in the communities they serve. The EDP provides a discount off regular Advance products to assist Members in providing favorable financing terms for the purchase, construction, rehabilitation, refinancing of, or predevelopment funding for eligible projects.
The Economic Development Program will remain open as long as funds are available.
Effective immediately, the following changes have been made to this program for members' usage associated with COVID-19.
- Total funding for this program has been increased to $1.50 billion from $1.25 billion through September 30, 2020.
- The Advance maturity requirement of one-year or greater will be temporarily suspended to allow for maturities of less than one-year for any activity initiated by September 30, 2020.
- The current individual member limitations, other than a per-member maximum of $25 million, will be waived through September 30, 2020, if the program’s usage is specific to COVID-19.
- Funds utilized under the programs for maturity terms of six-months or less will not be subject to a prepayment fee.
- Maximum Advance term of five years.
Examples of COVID-19 eligible uses include:
- Funding Small Business Administration loans as prescribed under the CARES Act to the pandemic.
- Assisting mortgage servicers with required investor remittances during borrower forbearance periods.
- Supplementing other delays in payments and facilitating other activities to supplement cash flow disruption of members and their customers.
- Insurance companies may use the Advances for activities such as deferring premium payments.
- Providing working capital to small businesses for needs such as lease payments and payroll expenses.
- Other COVID-19 related activities.
What is an Eligible Project?
EDP funding is available for use in qualifying economic development or mixed-use projects, where economic development projects are defined as commercial, industrial, manufacturing, social service, and public facility projects and activities, and public or private infrastructure projects, such as roads, utilities, and sewers.
The EDP provides financing for economic development projects that meet one of the following criteria:
- The project is located in a rural neighborhood with a median income at or below 115 percent of Area Median Income (AMI) or in an urban neighborhood with a median income at or below 100 percent of AMI; or,
- The project is located in a Champion Community, an Empowerment Zone, an Enterprise Community, an Indian area, an Alaskan Native Village, a Native Hawaiian Home Land, a Brownfield Tax Credit-eligible area, an area affected by a military base closing, a Community Adjustment and Investment Program (CAIP)-designated community, or a Federally or State Declared Disaster area; or,
- The annual salaries of at least 51 percent 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) are at or below 115 percent of AMI for a family of four in a rural area or 100 percent of AMI for a family of four in an urban area; or,
- At least 51 percent of the families who otherwise benefit from (other than through employment), or are provided services by, the project have incomes at or below 115 percent of AMI for a family of four in a rural area or 100 percent of AMI for a family of four in an urban area; or,
- The project qualifies as a small business concern as defined by section 3(a) of the Small Business Act (15 U.S.C. 632(a)).
For mixed-use projects, only the economic development component(s) of the project must meet the appropriate targeted income level for the project to be eligible for this program.
What is the Member’s Role?
A Member may submit an online EDP application for the financing of qualified economic development projects on which the financing transaction was closed within the last three months. In such instances, the Member should complete the application as normal, documenting the details of the project and noting when the project was closed.
Pricing and Member Limits
EDP Advances are priced daily at rates below the price of Advances of similar amounts, maturities, and terms. Typically, EDP Advances are priced four basis points over the FHLB’s cost of funds, adjusted for reasonable administrative costs. The FHLB reserves the right to alter its pricing to reflect current market conditions. EDP Advances are made on a secured basis only, subject to the normal underwriting and collateral policies of the FHLB as outlined in the FHLB’s Credit Policy Manual. All Members are eligible to receive at least $1 million annually under the EDP. Beyond that, a Member’s usage in a given calendar year is limited to the lesser of: the Member’s Additional Borrowing Capacity; $50 million in annual EDP approvals (Advances and Letters of Credit); 25 percent of the Member’s outstanding Advances and Letters of Credit (excluding any discounted Advances or Letters of Credit), with an original maturity of at least one year, as of the previous day’s close of business; or, the unused portion of the $1.25 billion aggregate CIP and EDP revolving loan fund.
Types of Eligible Advances
An EDP rate is available on the following fixed-rate, mortgage-related Advances:
- Balloon Payment Advance
- Regular Fixed Rate Advance
- Callable Advance
- Select Payment Mortgage Matched Advance
- Constant Monthly Payment Advance
- Mortgage Matched Advance
A minimum term of one year is required, and any exceptions will be evaluated on an individual basis, subject to the FHLB’s discretion.
Letters of Credit
Under the EDP, a Member may also apply for a discounted Standby Letter of Credit (SLC) or a Direct Pay Letter of Credit (DPLC). A normal SLC has a minimum charge of $100 plus 15.0 basis points on the amount requested, plus any additional fees or charges outlined in the Credit Policy Manual. Under the EDP, a SLC has a reduced fee of $50 plus 10.0 basis points on the amount requested, plus any additional fees or charges outlined in the Credit Policy Manual.
Similarly, a DPLC has a minimum charge of $250 plus 37.5 basis points on the amount requested, plus any additional fees outlined in the Credit Policy Manual. Under the EDP, a DPLC has a reduced charge of $100 plus 20.0 basis points on the amount requested, plus any additional fees outlined in the Credit Policy Manual.
In order to apply for a SLC or DPLC, a Member needs to indicate the request for a SLC or DPLC in the Project Information section of the EDP application.
Application Guidelines and Processing
Member institutions applying for EDP Advances should complete an online EDP application that describes the eligible activity for which the funds will be used to the Housing & Community Investment Department. Applications are typically processed within two business days of the online submission. After approval and the Member’s receipt of an approval letter, the transaction is treated as a normal credit transaction that requires the completion of the appropriate Advance application for submission to the Credit Services Department. All transactions are subject to the FHLB’s collateral and capital stock requirements as outlined in the FHLB’s Credit Policy Manual. Funds are disbursed into the Member’s Demand Deposit Account with the FHLB. EDP funds must be drawn, or the EDP rate locked, within 12 months of approval.
Members submitting an online EDP application must certify on the form that the project being funded meets the requirements of the program. In instances where the project receives funds from another targeted Federal economic development program that has income targeting requirements that are the same as, or more restrictive than, the targeting requirements of the EDP, the Member may certify that compliance with the criteria of the Federal program meets the criteria for this program and include documentation of the alternative targeting requirements.
All applications must specify the complete project address(s) and activity for which the funds will be used.
Additional Information and Technical Assistance
For more information on the EDP please see the program definitions or for assistance, contact the Housing & Community Investment Department at (513) 852-7680 or toll-free at (888) 345-2246 or email us at firstname.lastname@example.org.
For FHLB's Members Only assistance, please contact our Service Desk at (800) 781-3090.
Economic Development Program resources