Eligible Financial Products
Yes, a deferred loan with the payment due on sale, even if no other prior payment is made, is an eligible Financial Product and should be included in the activity presented in connection with the Financing Entity and Target Market requirements for CDFI Certification. To be considered an eligible Financial Product, a loan (including a deferred loan) must include an expectation of repayment, regardless of the timing of that repayment.
Yes. There are two instances where forgivable loans can be considered as eligible Financial Products and can be counted for Target Market activity.
The first instance is a forgivable loan with at least one payment within twelve (12) months of the loan closing date.
The second instance is a forgivable loan that meets each of the following seven (7) conditions:
- Purpose of the debt is for the purchase of a single-family, owner-occupied residence and is in a subordinate position;
- Debt is subject to a credit contract requiring repayment if certain terms specified in the contract are not met and full forgiveness of the loan may not be made until the end of the loan period. The creditor has verified that the borrower has sufficient income or assets (other than the value of the property being purchased) to repay the debt according to its terms;
- Loan term of five (5) years or longer;
- Borrower has pledged adequate security
- Debt is documented by a valid and enforceable promissory note, and security interests are properly perfected;
- Interest (even a nominal amount) is charged at least annually (may be accrued and capitalized); and
- Debt is reflected as a loan on the creditor’s balance sheet.