12 CFR Part 705

Pt. 705

12 CFR Ch. VII (1–1–18 Edition)

PART 705—COMMUNITY DEVELOPMENT REVOLVING LOAN FUND
ACCESS FOR CREDIT UNIONS
Sec.
705.1 Authority, purpose, and scope.
705.2 Definitions.
705.3 Eligibility requirements.
705.4 Permissible uses of loan funds.
705.5 Terms and conditions for loans.
705.6 Terms and conditions for technical assistance grants.
705.7 Application and award processes.
705.8 Urgency.
705.9 Reporting and monitoring.
705.10 Appeals.
AUTHORITY: 12 U.S.C. 1756, 1757(5)(D), and
(7)(I), 1766, 1782, 1784, 1785 and 1786.

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SOURCE: 76 FR 67587, Nov. 2, 2011, unless
otherwise noted.

§ 705.1 Authority, purpose, and scope.
(a) This part 705 is issued by the National Credit Union Administration
(NCUA) under section 130 of the Federal Credit Union Act, 12 U.S.C. 1772c–
1, which implements the Community
Development Credit Union Revolving
Loan Fund Transfer Act (Pub. L. 99–
609, 100 Stat. 3475 (Nov. 6, 1986)).
(b) This part describes how NCUA
makes money available to credit
unions from its Community Development Revolving Loan Fund (Fund).
NCUA administers the Fund and makes
both loans and technical assistance
grants to credit unions in accordance
with the eligibility criteria and other
qualifications, subject to the terms and
conditions set out in this part. All
loans and technical assistance grants
made under this part are subject to
funds availability and NCUA’s discretion.
(c) NCUA’s policy is to revolve the
loan funds to credit unions as often as
practical in order to achieve maximum
economic impact on as many credit
unions as possible.
(d) The financial awards provided to
credit unions through the Fund will
better enable them to support the communities in which they operate; pro-

vide basic financial services to low-income residents of these communities,
and result in more opportunities for
the residents of those communities to
improve their financial circumstances.
(e) The Fund is intended to support
the efforts of credit unions through
loans and technical assistance grants
needed for:
(1) Providing basic financial and related services to residents in their
communities;
(2) Enhancing their capacity to better serve their members and the communities in which they operate; and
(3) Responding to emergencies.
[76 FR 67587, Nov. 2, 2011, as amended at 81
FR 85112, Nov. 25, 2016]

§ 705.2 Definitions.
For purposes of this part, the following terms shall have the meanings
assigned to them in this section.
Application means a form supplied by
the NCUA by which a Qualifying Credit
Union may apply for a loan or a technical assistance grant from the Fund.
Loan is an award in the form of an
extension of credit from the Fund to a
Participating Credit Union that must
be repaid, with interest.
Low-income Members are those members defined in § 701.34 of this chapter.
Notice of Funding Opportunity means
the Notice NCUA publishes describing
one or more loan or technical assistance grant programs or initiatives currently being supported by the Fund and
inviting Qualifying Credit Unions to
submit applications to participate in
the program(s) or initiatives(s).
Participating Credit Union refers to a
Qualifying Credit Union that has submitted an application for a loan or a
technical assistance grant from the
Fund which has been approved by
NCUA. A Participating Credit Union
shall not be deemed to be an agency,
department, or instrumentality of the
United States because of its receipt of
a financial award from the Fund.
Program means the Community Development Revolving Loan Fund Program under which NCUA makes loans
and technical assistance grants available to credit unions.
Qualifying Credit Union means a credit union that may be, or has agreed to
be, examined by NCUA, with a current

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National Credit Union Administration

§ 705.5

low-income designation pursuant to
§ 701.34(a)(1) or § 741.204 of this chapter
or, in the case of a non-federally insured, state-chartered credit union, a
low-income designation from a state
regulator, made under appropriate
state standards with the concurrence
of NCUA. Services to low-income members must include, at a minimum, offering share accounts and loans.
Technical Assistance Grant means an
award of money from the Fund to a
Participating Credit Union that does
not have to be repaid.
[81 FR 85112, Nov. 25, 2016]

§ 705.3 Eligibility requirements.
To be eligible to receive a CDRLF
award, in the form of either a loan or
a technical assistance grant, a Qualifying Credit Union must, within the
timeframes specified in any Notice of
Funding Opportunity:
(a) Complete and submit an Application; and
(b) Meet the underwriting standards
established by NCUA, including those
pertaining to financial viability, as set
forth in the Application and any related materials developed by NCUA.

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§ 705.4 Permissible uses of loan funds.
NCUA may make loans from the
Fund to Participating Credit Unions
for various uses. The following is a
non-exhaustive list of permissible uses
or projects:
(a) Development of new products or
services for members, including new or
expanded share draft or credit card programs;
(b) Partnership arrangements with
community-based service organizations
or government agencies;
(c) Loan programs, including, but not
limited to, microbusiness loans, payday loan alternatives, education loans,
and real estate loans;
(d) Acquisition, expansion, or improvement of office space or equipment, including branch facilities,
ATMs, and electronic banking facilities; and
(e) Operational programs such as security or disaster recovery.
§ 705.5 Terms and conditions for loans.
(a) NCUA may make loans, in such
amounts and subject to such terms and

conditions as it may determine, from
the Fund to Participating Credit
Unions.
(b) Funding Limits. NCUA will publish
any applicable loan funding limits in
the applicable Notice of Funding Opportunity.
(c) Recording of a loan. At the discretion of NCUA, a loan will be recorded
by a Participating Credit Union as either a note payable or a nonmember
deposit.
(d) Interest rate. The rate of interest
on loans is governed by the CDRLF
Loan Interest Rate Policy, which can
be found on NCUA’s Web site or by contacting NCUA’s Office of Small Credit
Union Initiatives. The specific interest
rate for a particular funding will be announced in the related Notice of Funding Opportunity. The Board will announce changes, if any, to the CDRLF
Loan Interest Rate Policy and those
changes will apply to loans made under
future Notices of Funding Opportunities.
(e) Repayment and maturity. (1)
Awards made available through loans,
whether recorded as a note payable or
nonmember deposit, must be repaid to
NCUA. All loans will be scheduled for
repayment consistent with sound business practices and the objectives of the
Program, but in no case will the term
exceed five years.
(2) Interest payments will be required
semiannually beginning six months
after the initial distribution of a loan.
(3) NCUA may allow flexible repayment of loan principal. Details and specific provisions will be addressed in the
Notice of Funding Opportunity and
other program materials.
(f) Acceleration. The terms of each
loan agreement will provide for the immediate acceleration of the unpaid balance for breach or default in performance by the Participating Credit Union
of the terms or conditions of the loan.
Default and breach include misrepresentation; failure to make interest or
principal payments when due; failure
to file required reports; insolvency of
the Participating Credit Union; and, if
required by NCUA, failure to maintain
adequate matching funds for the duration of the loan. Other specific causes
of default and breach will be identified
in the loan documents between the

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§ 705.6

12 CFR Ch. VII (1–1–18 Edition)

Participating Credit Union and NCUA.
The unpaid balance will also be accelerated and immediately due if any part
of the loan funds are improperly used
or if uninvested loan proceeds remain
unused for an unreasonable or unjustified period of time.
(g) Matching requirements. At its discretion, NCUA may require a Participating Credit Union to develop and implement a plan to match all or a portion of the funds represented by loan
proceeds. Such requirement will be
based on the financial condition of the
Participating Credit Union, which will
be evaluated under criteria contained
in the related Notice of Funding Opportunity. Matching funds must be from
non-governmental member or nonmember share deposits. Participating
Credit Unions required to provide
matching funds are subject to the following general provisions and any
other conditions in the related Notice
of Funding Opportunity and agreements between the Participating Credit Union and NCUA:
(1) Loan monies made available generally must be matched by the Participating Credit Union in an amount
equal to the loan amount. Any loan
monies matched by nonmember share
deposits are not subject to the 20% limitation on nonmember deposits under
§ 701.32 of this chapter. Participating
Credit Unions must maintain the increase in the total amount of share deposits for the duration of the loan.
Once the loan is repaid, nonmember
share deposits accepted to meet the
matching requirement are subject to
§ 701.32 of this chapter.
(2) Upon approval of its loan application, and before it meets its matching,
if required, a Participating Credit
Union may receive the entire loan
commitment in a single payment. If, at
NCUA’s discretion, any funds are withheld, the remainder of the funds committed will be available to the Participating Credit Union only after it has
documented that it has met the match
requirement.
(3) Failure of a Participating Credit
Union to generate the required match
within the time specified in the loan
documents may result in the reduction
of the loan proportionate to the
amount of match actually generated.

Payment of any additional funds initially approved may be limited as appropriate to reflect the revised amount
of the loan approved. Any funds already advanced to the Participating
Credit Union in excess of the revised
amount of loan approval must be repaid immediately to NCUA. Failure to
repay such funds to NCUA upon demand may result in the default of the
entire loan.
(h) Other terms and conditions. Other
terms and conditions pertaining to
loans, including but not necessarily
limited to duration, repayment obligations, security agreements (if any), and
covenants, will be specified in the related Notice of Funding Opportunity or
applicable loan documents to be signed
by the Participating Credit Union.
[76 FR 67587, Nov. 2, 2011, as amended at 81
FR 85112, Nov. 25, 2016]
EFFECTIVE DATE NOTE: At 82 FR 60292, Dec.
20, 2017, § 705.5 was amended in paragraph (d)
by removing the term ‘‘Office of Small Credit Union Initiatives’’ and adding in its place
the term ‘‘Office of Credit Union Resources
and Expansion’’, effective Jan. 6, 2018.

§ 705.6 Terms and conditions for technical assistance grants.
(a) Participating Credit Unions must
comply with the terms and conditions
for technical assistance grants specified for each funding opportunity offered under a Notice of Funding Opportunity.
(b) NCUA will establish applicable
funding limits for technical assistance
grants in the Notice of Funding Opportunity.
[81 FR 85112, Nov. 25, 2016]

§ 705.7 Application and award processes.
(a) Notice of Funding Opportunity.
NCUA will publish a Notice of Funding
Opportunity in the FEDERAL REGISTER
and on its Web site. The Notice of
Funding Opportunity will describe the
loan and technical assistance grant
programs for the period in which funds
are available. It also will announce
special initiatives, the amount of funds
available, funding priorities, permissible uses of funds, funding limits,
deadlines, and other pertinent details.
The Notice of Funding Opportunity
will also advise potential applicants on

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National Credit Union Administration

§ 705.7

how to obtain an Application and related materials. NCUA may supplement the information contained in the
Notice of Funding Opportunity through
such other media as it determines appropriate, including Letters to Credit
Unions, press releases, direct notices to
Qualifying Credit Unions, and announcements on its Web site.
(b) Application requirements. A Qualifying Credit Union must demonstrate a
sound financial position and ability to
manage its day-to-day business affairs.
It also must show that its planned use
of proceeds is consistent with the purpose of the Program, the requirements
of this part, and the related Notice of
Funding Opportunity. The related Notice of Funding Opportunity may include additional details and requirements.
(1) Applications to participate and
qualify for a loan or technical assistance grant under the Program may be
obtained from the National Credit
Union Administration as outlined in
the related Notice of Funding Opportunity.
(2) With respect to loans, NCUA will
also require a Qualifying Credit Union
to develop and submit a narrative describing how the Qualifying Credit
Union intends to use the money obtained from the Fund to enhance the
products or services it provides to its
membership and how those enhanced
products or services support the membership and community served by the
Qualifying Credit Union.
(3) In addition to those items required in this section, a Qualifying
Credit Union that is a non-federally insured state-chartered credit union
must also include the following:
(i) A copy of its most recent external
audit report;
(ii) Proof of deposit and surety bond
insurance which states the maximum
insurance levels permitted by the policies;
(iii) A balance sheet, an income and
expense statement, and a schedule of
delinquent loans, for each of the four
most recent quarter-ends;
(iv) Documentation of the credit
union’s status as a low-income credit
union by the appropriate state supervisory agency consistent with NCUA

Rules and Regulations at §§ 701.34(a)
and 741.204(b); and
(v) An agreement to be subject to examination by NCUA.
(c) Evaluation and selection of Qualifying Credit Unions. NCUA will generally evaluate applications submitted
by Qualifying Credit Unions in accordance with the criteria described in this
section. Nothing in this section, however, precludes NCUA from considering
other criteria included in the related
Notice of Funding Opportunity that
NCUA determines to be necessary
based on the type of funding initiative,
economic environment, or other factors or conditions that warrant the
evaluation of additional or alternative
criteria. Generally, NCUA will evaluate
complete applications to determine if
the Qualifying Credit Union satisfies
the following:
(1) Financial and Performance. The
Qualifying Credit Union must exhibit a
safe and sound financial condition, including a demonstrated ability to perform the requirements associated with
the type of award being sought and
compliance with NCUA’s underwriting
standards. In this respect, NCUA will
consider the Qualifying Credit Union’s
long-term financial viability, including
absence of indicators suggesting the
Qualifying Credit Union is a candidate
for merger, a purchase and assumption
transaction, or conservatorship. NCUA
will also consider the Qualifying Credit
Union’s compliance with the provisions
of any previous loan or technical assistance grant received. NCUA may
also consider information concerning
the Qualifying Credit Union to which it
already has access, including information obtained through the examination
process and data contained in Call Reports.
(2) Compatibility. NCUA will evaluate
whether the stated objectives to be accomplished through the use of the loan
or technical assistance grant proceeds
conform to the broad purposes and rationale underlying the Fund. Specifically, NCUA will consider whether the
award will enable the Qualifying Credit
Union to provide basic financial products and related services to its members or enhance its capacity to better
serve its members and the community
in which it operates. NCUA will also

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§ 705.8

12 CFR Ch. VII (1–1–18 Edition)

consider whether the use of the financial award will conform to any applicable funding priority, special initiative,
or special instruction announced in the
related Notice of Funding Opportunity.
(3) Feasibility. NCUA will consider the
likelihood of the Qualifying Credit
Union’s success in accomplishing its
stated objectives, based on its Application and the factors NCUA determines
are relevant.
(4) Examination Information and Applicable Concurrence. In evaluating a
Qualifying Credit Union, NCUA will
consider all information provided by
NCUA staff or state supervisory authority staff that performed the Qualifying Credit Union’s most recent examination. In addition:
(i) NCUA will only provide a loan to
a qualifying federal credit union with
the concurrence of that credit union’s
supervising Regional Director; and
(ii) NCUA will only provide a loan to
a qualifying state-charted credit union
with the written concurrence of the applicable Regional Director and the
credit union’s state supervisory authority. A qualifying state-chartered
credit union should notify its state supervisory authority that it is applying
for a loan from the Fund before submitting its application to NCUA. However, a qualifying state-chartered credit union is not required to obtain concurrence before applying for a loan.
NCUA will obtain the concurrence directly from the state supervisory authority rather than through the qualifying state-chartered credit union. Additionally, before NCUA will provide a
loan to a qualifying state-charted credit union the credit union must make
copies of its state examination reports
available to NCUA and agree to examination by NCUA.
(d) Requests for additional information.
NCUA will make its funding determinations among the several qualified
Applications based on its discretion
and consideration of which best meet
the priorities and initiatives established and announced by NCUA. During
its evaluation process, however, NCUA
may request a Qualifying Credit Union
to provide additional clarifying or
technical information to support its
application. NCUA may determine not
to provide further consideration of any

Application failing to provide additional required information.
(e) Timing. NCUA will announce, in
the related Notice of Funding Opportunity, the deadline for Qualifying
Credit Unions to submit all required
documentation, including the Application. Failure to submit all of the requested information or to submit the
information within the timeframe
specified in the Notice of Funding Opportunity, or in the case of requests for
additional clarifying or technical information, within the time specified by
NCUA, may result in rejection of the
Application without further consideration.
(f) Notice of Award. NCUA will determine whether an application meets
NCUA’s standards established by this
part and the related Notice of Funding
Opportunity. NCUA will provide written notice to a Qualifying Credit Union
as to whether or not it has qualified for
a loan or technical assistance grant
under this part. A Qualifying Credit
Union whose application has been denied for failure of a qualification may
appeal that decision in accordance with
§ 705.10 of this part.
(g) Disbursement—(1) Loans. Before
NCUA will disburse a loan, the Participating Credit Union must sign the loan
agreement, promissory note, and any
other loan related documents. NCUA
may, in its discretion, choose not to
disburse the entire amount of the loan
at once.
(2) Technical Assistance Grants. NCUA
will disburse technical assistance
grants in such amounts, and in accordance with such terms and conditions,
as NCUA may establish. In general,
technical assistance grants are provided on a reimbursement basis, to
cover expenditures approved in advance by NCUA and supported by receipts evidencing payment by the Participating Credit Union.
[76 FR 67587, Nov. 2, 2011. Redesignated and
amended at 81 FR 85112, Nov. 25, 2016]

§ 705.8 Urgency.
On an emergency basis, subject to
funds availability, NCUA may consider
a funding request from a Qualifying
Credit Union experiencing an unplanned or unexpected expense that the
Qualifying Credit Union is unable to

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National Credit Union Administration

§ 705.10

meet with its own resources. The
Qualifying Credit Union must demonstrate a compelling need for immediate assistance without which its continued operations would be threatened
or severely disrupted. NCUA, in its discretion, will determine whether the situation constitutes an emergency and if
the Qualifying Credit Union is required
to submit any additional information
to show why the funds are needed on an
emergency basis. NCUA will determine
and substantiate any reason to expedite funding in such case. Requests for
loans or technical assistance grants
under this section will be addressed on
an ongoing basis and are outside the
scope of the related Notice of Funding
Opportunity.
Technical
assistance
grants and loans provided on this basis
must still demonstrate a purpose consistent with the goals of the Fund.
Loans and technical assistance grants
made under this section are not anticipated to be a regular source of funding
for any Qualifying Credit Unions.
[76 FR 67587, Nov. 2, 2011. Redesignated at 81
FR 85112, Nov. 25, 2016]

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§ 705.9

Reporting and monitoring.

(a) General. NCUA’s policy is to monitor Participating Credit Unions to assure that loan and technical assistance
grant funds awarded under this part
have been used in accordance with
their intended purposes and to determine whether anticipated outcomes
have been achieved. Particular emphasis will be placed on reviewing loan
funds earmarked for programs or initiatives proposed by the Participating
Credit Union to determine if the funds
have been used as represented and
whether the program or initiative has
had the impact anticipated by the Participating Credit Union.
(b) Reporting—(1) Reporting to NCUA.
A Participating Credit Union must
complete and submit to NCUA all required reports, at such times and in
such formats as NCUA will direct. Such
reports must describe how the Participating Credit Union has used the loan
or technical assistance grant proceeds
and the results it has obtained, in relation to the programs, policies, or initiatives identified by the Participating
Credit Union in its application. NCUA

may request additional information as
it determines appropriate.
(2) Reporting to Members—(i) Loans. A
Participating Credit Union that receives a loan under this part must report on the progress of providing needed community services to the Participating Credit Union’s members once a
year, either at the annual meeting or
in a written report sent to all members. The Participating Credit Union
must also submit to NCUA the written
report or a summary of the report provided to members.
(ii) Technical Assistance Grants. A
Participating Credit Union that receives a technical assistance grant
under this part should report on the
progress of providing needed community services to the Participating Credit Union’s members once a year, either
at the annual meeting or in a written
report sent to all members.
(c) Monitoring. At its discretion, for
verification purposes and as part of its
evaluation of the effectiveness of the
loan and technical assistance grant
programs, NCUA may elect to review
information concerning Participating
Credit Unions to which it already has
access, including information obtained
through the examination process and
data contained in Call Reports.
[76 FR 67587, Nov. 2, 2011, as amended at 81
FR 85113, Nov. 25, 2016]

§ 705.10

Appeals.

(a) Appeals of non-qualification. A
Qualifying Credit Union whose application for a loan or technical assistance
grant has been denied under § 705.7(f)
for failure to satisfy any of the conditions set forth in § 705.7(c), including
any additional criteria set forth in the
related notice of funding opportunity,
may request the Director of the Office
of Small Credit Union Initiatives to reconsider the denial and/or appeal that
decision to the NCUA Board in accordance with the procedures set forth in
subpart B to part 746 of this chapter,
subject to the following limitations:
(1) Scope. The scope of the Board’s review is limited to the threshold question of qualification and not the issue
of whether, among qualified applicants,
a particular loan or technical assistance grant is funded.

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12 CFR Ch. VII (1–1–18 Edition)
(2) Appeals procedures inapplicable.
The foregoing procedure applies during
an open period in which funds are
available and NCUA has called for applications. NCUA will reject any application submitted during a period in
which NCUA has not called for applications, except for applications submitted under § 705.8. Such rejections
are not subject to appeal or review by
the NCUA Board.
(b) Appeals of technical assistance
grant reimbursement denials. Pursuant to
NCUA Interpretative Ruling and Policy
Statement 11–1, any Participating
Credit Union may appeal a denial of a
technical assistance grant reimbursement to NCUA’s Supervisory Review
Committee. All appeals of technical assistance grant reimbursements must be
submitted to the Supervisory Review
Committee within 30 days from the
date of the denial. The decisions of the
Supervisory Review Committee are
final and may not be appealed to the
NCUA Board.

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[81 FR 85113, Nov. 25, 2016, as amended at 82
FR 50293, Oct. 30, 2017]

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