The following eight vehicles are among the most common community development investments. Click the links for an expanded summary of the vehicle and a longer article explaining its use and place in the market.

Debt Instruments

Community Development Municipal Bonds (CDMB)
CD Muni bonds are securities issued by states, cities, towns, counties and special districts that have
community development as their primary purpose and the interest on them is generally exempt from
federal income taxation and, in some cases, state income taxation.

Equity Equivalent Investments (EQ2)
The EQ2 product is a long-term deeply subordinated loan to a non-profit community development
organization with features that make it function like equity.

Low-income Housing Tax Credits (LIHTC)
These tax credits provide investors in low-income rental housing with a dollar-for-dollar reduction in their
federal tax liability.

New Markets Tax Credits (NMTC)
NMTCs provide taxpayers with a credit against federal income taxes for making qualified equity
investments in community development entities.

Targeted Mortgage-backed Securities (MBS)
A targeted MBS is a pool of mortgages to low- and moderate-income individuals that represent the
collateral for a security, the cash flow of which is determined by the payment of the individual mortgage
loans underlying the security.

Equity Instruments

Community Development Real Estate Investment Trusts (CD REIT)
CD REITs are mutual funds that invest in affordable housing.

Community Development Venture Capital (CDVC)
CDVC funds invest equity in businesses that create jobs, wealth and entrepreneurial capacity to benefit
low-income people and distressed communities.

Small Business Investment Companies (SBIC)
SBICs, which are licensed and regulated by the US Small Business Administration, are privately owned and
managed investment firms that provide venture capital and start-up financing to small businesses.

Additional Information

Regulatory Resource FRBSF Community Investments (pdf, 55 kb)

Special Insert on CRA Investments FRBSF Community Investments (pdf, 127 kb)

Qualified Investments: How to Make Investing in Your Communities Really Count! (FRBSF Community Investments)

Micropolitan Community Reinvestment Trusts FRBSF Community Investments (pdf, 546 kb)

OCC’s National Bank Community Development Investments

OCC’s Community Development Investment Quick Reference Guide