The recently enacted Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (H.R. 133) contained $12 billion for CDFIs and MDIs through three additional Treasury programs. The intent of the appropriation is to help communities struggling with the economic impacts of the COVID-19 pandemic. This overview describes the ECIP Program.
PURPOSE
The ECIP provides direct and indirect investments in the form of subordinated debt as secondary capital to eligible CDFI certified or Minority Depository (MDI) credit unions to, among other things, support their efforts to provide loans, grants and forbearance for small businesses, minority-owned businesses, and consumers, especially in low income and underserved communities, including Persistent Poverty Counties, that may be disproportionately impacted by the economic effects of the COVID-19 pandemic.
FUNDS AVAILABLE
The maximum amount available to any individual institution through ECIP is $250,000,000.
The maximum amount by asset size is:
Not more than 7.5 percent of total assets for an institution with total assets of more than $2,000,000,000;
Not more than 15 percent of total assets for an institution with total assets of not less than $500,000,000 and not more than $2,000,000,000; and
Not more than 22.5 percent of total assets for an institution with total assets of less than $500,000,000.
INTEREST RATE
The rate on the investment will not exceed 2% for 10 years.
No payments will be due during the first 24 months after investment.
If lending to underserved communities increases 200-400% of the amount of the capital investment, the rate is reduced to 1.25%.
If lending to underserved communities increases by more than 400% of the amount of the capital investment, the rate is reduced to 0.5%.
ELIGIBILITY
A credit union must be either CDFI certified or designated as a Minority Depository Institution (MDI), and federally insured to apply for funding.
A credit union must be Low Income Designated to count secondary capital toward its net worth.
INELIGIBILITY
A credit union is ineligible to participate in the ECIP if it is:
Considered to be in a Troubled Condition by the NCUA, which means that the credit union has been assigned a 4 or 5 composite CAMEL rating; or
Is subject to an NCUA formal enforcement action that addresses unsafe or unsound lending practices.
Formal enforcement actions are defined as LUAs, Administrative Orders or Consent Orders relating to unsafe lending.
Applicants that are uncertain regarding their eligibility status due to a formal enforcement action may contact the ECIP Program for further clarification.
TIMELINE/URGENCY
Applications will be reviewed and evaluated by the Treasury Department on an ongoing basis, in the order in which they are received. CU Strategic Planning has established an application cap and is focused on serving existing clients with current data on-file to ensure expedited submission of applications.
Funding pools are set by asset tiers. Treasury will carve out at least $4,000,000,000 of the appropriation for successful applicants who have total assets under $2,000,000,000, and will carve out at least $2,000,000,000 for successful applicants with total assets of less than $500,000,000.
APPLICATION
The application format is similar to a CDFI Financial Assistance (FA) Award Application. The content mirrors the FA application with community development specific needs, challenges, strategies, goals, quantitative and qualitative impacts, products, assumptions and financial projections.
COMPLIANCE REQUIREMENTS
There will be reporting requirements. They are unknown at this time.
Per the application, “Reporting requirements will be outlined in the final agreement and may be added to or modified at any time at the discretion of the Secretary.”
Requirements may be waived by the Secretary of the Treasury in his or her sole discretion to the extent permitted by law.
CU Strategic Planning will provide compliance reporting services. The cost of these services is not yet determined because the scope of work is unknown until the compliance requirements are released.
FAQ
Q: Will the NCUA review and approve the Emergency Capital Lending Plan in addition to the U.S. Treasury?
A: Yes.
Q: Do I need to apply without knowing the compliance requirements in order to be eligible to receive the funding?
A: Yes, the process is to apply. The reporting requirements will not be released until your credit union is approved and receives its Assistance Agreement.
Q: If the compliance requirements outlined in the Assistance Agreement are unfavorable to our credit union may we decline the funds?
A: Yes.
Q: Is it possible that the compliance requirements overlap with CDFI grant reporting requirements?
A: Yes. As part of CU Strategic Planning’s grant reporting and ECIP reporting, we will advise clients on success strategies to ensure compliance.
Q: Is CU Strategic Planning approaching the development of the ECIP application using the same process as the CDFI FA Application?
A: Yes. Beyond the application writing, CU Strategic Planning is providing consulting services to develop the strategies and goals collaboratively with credit union executive teams. CU Strategic Planning will leverage community and economic development research, market conditions, needs and challenges in line with a credit union’s existing strategic priorities, products and community development activities to inform the development of sustainable activities, successful strategies, operational goals and realistic financial projections.
CU Strategic Planning is the only provider of CDFI consulting services to credit unions that developed and submitted secondary capital plans to the U.S. Treasury through the CDCI Program in 2010. It is leveraging that experience to ensure that credit unions can access the historic $9,000,000,000 available in the Emergency Capital Investment Program. CU Strategic Planning exists to unlock opportunities for credit unions to change lives and their communities. Its ECIP services are comprehensive and will include compliance support based on terms outlined in the Assistance Agreement between the U.S. Treasury and each credit union. Contracts for that service are separate from the application to receive funds.