Investing in the CIC Multifamily Loan Program
Service Area – CIC’s Multifamily Loan Program provides loans for the acquisition and rehab of multifamily rental housing in the Illinois counties of Cook, McHenry, Lake, DuPage, Will, and Kane. Most of the loans are located in low- and moderate-income communities, areas in which private multifamily lending has dramatically declined since 2005.
CIC Borrowers – CIC generally lends to hands-on entrepreneurs, who own 90% of the rental housing and 75% of the low-cost rental housing in the U.S. Often, these apartment building owners are among the strongest and most stable local businesses.
Residents in CIC Financed Buildings – While CIC-financed buildings are not income- or rent-restricted, virtually all of the apartments are affordable to, and most are occupied by, households at or below 80% of Area Median Income. Median income for renter households in Cook County is $31,000.
Banks Participation – Banks participate in the Multifamily Loan Program by purchasing Limited Recourse Collateral Trust Notes that are issued by CIC and secured by mortgages on the properties. To facilitate loan servicing and collections, CIC retains ownership of the loans and mortgages with individual borrowers. A multiyear “Note Purchase Agreement,” signed by CIC and all investors, governs program operations.
Loan Approvals – A Loan Committee, whose members represent at least 51% of investor commitments, approves all loans. Approval of loans less than $300,000 is delegated to CIC management. The Loan Committee sets the interest rate and terms for the loans.
Note Sales – A loan becomes eligible for sale to investors when construction is complete and stabilization has been achieved. Approximately once every three months, CIC pools eligible loans and conducts a note sale, in which each investor purchases a portion of the notes equal to its overall share of outstanding investor commitments. Current investor commitments range from $1 million to $72 million.
Loan Servicing – CIC services its own loans. Each month, CIC remits to investors their proportional share of loan repayments, less a charge for loan servicing (0.375%) and payment into the investor Loan Loss Reserve (currently set at 1%).
Reporting – CIC reports to investors on loan delinquencies on a monthly basis, and updates the risk ratings on the loans every six months. Once a year, CIC reports on the physical condition, net income, and debt service coverage ratio for the properties in the portfolio.
Loan Losses – Loan losses are covered first by the investor Loan Loss Reserve. In the event that a loss exceeds the balance in the Reserve, the loss would be borne proportionally by the investors on the specific loan. Since 2001, CIC has not passed on any losses to participating investors.
Community Reinvestment Act (CRA) Consideration – Because CIC is certified by the Community Development Financial Institutions (CDFI) Fund of the U.S. Treasury Department as a CDFI, and because CIC makes loans for affordable housing that is predominately occupied by households under 80% of median income, banks receive CRA consideration for participating in the Multifamily Loan Program. Depending on a bank’s needs and structure, its participation can be treated as a loan or as an investment. Most banks choose to book their CIC participation as an investment.