11. Under what circumstances would an organization need to create an eligible spin-off entity for the purposes of Certification?

An organization may choose to create a spin-off entity for the purposes of Certification when the organization’s predominant activity is non-financing or non-eligible financing and the organization is therefore unable to meet the Financing Entity criterion for Certification. To be eligible for Certification, the newly created entity (i.e., the spin-off entity):

• must have received a transferred (not purchased) Financial Product portfolio from one or more separate entity(ies) that were Affiliates of the entity at the time the transfer took place and for which the portfolio consists of arm’s-length Financial Product transactions closed by the Affiliate(s); and
• must continue Financial Product activity of the same type as received from the Affiliate(s).

Entities seeking to participate in the CDFI Bond Guarantee Program also may create an Affiliate spin-off entity to do so as part of a proposed Bond Issue. Such entities may need to meet additional parameters and restrictions established via an applicable Notice of Guarantee Availability (NOGA) for a CDFI BG Program application round (see 12 CFR 1805.201(b)(2)(ii)).