U.S. Treasury - Press Releases - Financial Markets
Financial Markets

• Treasury Announces New Round of Tax Credit Competition to Help Low Income Communities
  

  December 18, 2007
  hp-744

  6th Round of New Markets Tax Credit Competition Kicks Off;
  Credits Available for $3.5 Billion in Investments to Help Low-Income Communities

  Washington - The U.S. Department of the Treasury announced today the opening of the sixth round of competition for tax credits on $3.5 billion of equity investments under the New Markets Tax Credit (NMTC) Program.  The NMTC Program attracts private-sector capital investment into the nation's urban and rural low-income areas to help finance community development projects, stimulate economic growth and create jobs.

  "I am very impressed with how this program is making significant impact in low-income communities across the nation," said CDFI Fund Director Donna Gambrell.  "Capital is being raised and invested into projects many thought of as just a dream – from critically needed community facilities and charter schools to grocery stores and other businesses."

  To date, the organizations awarded tax credits on $12.1 billion in equity investments in the first four rounds have already raised $8.84 billion in equity from investors. Through fiscal year 2006, these allocatees reported deploying a total of $5.45 billion in qualified loans and investments in low-income communities across the nation. Since the program's inception, these allocatees have reported:

  • Developing or rehabilitating over 46 million square feet of commercial real estate;
  • Creating 146,000 full-time construction jobs;
  • Creating or maintaining 20,000 full-time jobs through loans or investments supporting businesses operating in low-income communities; and
  • Providing Financial Counseling and other related services to 1,200 businesses.

  This year's NMTC allocation round will include an emphasis on placing investments in underserved rural communities. The allocation application deadline is March 5, 2008.

  To Learn More

  Guidance and application materials on the sixth round of the NMTC Program are available on the New Markets Tax Credit Program webpage of the CDFI Fund's website at www.cdfifund.gov.

  The CDFI Fund will be conducting six Application Workshops on the NMTC Program around the country in January 2008. The purpose of these workshops is to describe how the NMTC Program works, including how to apply for certification as a CDE and how to apply for an allocation of NMTCs in the upcoming round.

  The Application Workshops will be held in the cities listed below. To learn more detailed information about these workshops or to register, please visit the CDFI Fund's website at www.cdfifund.gov.

  Charleston, WV

  January 15, 2008

  Detroit, MI

  January 7, 2008

  Miami, FL

  January 18, 2008

  Oklahoma City, OK

  January 9, 2008

  Portland, OR

  January 8, 2008

  Sioux Falls, SD

  January 10, 2008

  Background on NMTC Program

  The NMTC Program, established by Congress in December of 2000, permits individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in investment vehicles known as Community Development Entities (CDEs). The credit provided to the investor totals 39 percent of the cost of the equity investment and is claimed over a seven-year period. Substantially all of the taxpayer's investment must in turn be used by the CDE to make qualified investments in low-income communities.  Successful applicants are selected only after a competitive application and rigorous review process that is administered by Treasury's Community Development Financial Institutions (CDFI) Fund.

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• Paulson Remarks at Housing Town Hall Meeting in Stockton
  

  December 18, 2007
  hp-743

  Secretary Paulson Prepared Remarks
  Before Stockton Housing Town Hall Meeting

  Stockton, Cali. -Good afternoon. Thank you, Governor, and thanks to all of you for joining in a discussion of the current housing market.
  

  After years of unsustainable home price appreciation and an abundant supply of easy credit, the U.S. housing market is experiencing an inevitable downturn. Here in Stockton, house prices increased by an average of over 17 percent a year from 2001 to early 2006. That trend has now reversed and house prices declined 10 percent in the last year. Your city has been particularly hard-hit by foreclosures.

  Although the housing market downturn is a significant challenge, homeownership remains a vital and positive aspect of American life --- 68 percent of American households own their own home and 93 percent of Americans pay their mortgages every month, right on time.

  We do expect that the housing market turbulence will take some time to work through, and that there will be some penalty on our short-term economic growth. Stockton is facing these difficulties with a somewhat weaker economy than other parts of the country, with an unemployment rate about five percentage points above the national average.

  Overall, the U.S. economy will continue to grow and is fundamentally sound. Core inflation is contained, continued job gains are providing a good foundation for household spending, corporate balance sheets remain healthy overall, and strong growth abroad is supporting U.S. exports. Our economy is operating against the backdrop of a strong global economy.

  We want, when possible, to minimize the housing market downturn's impact on the national economy, California's economy and cities like Stockton. A spike in home foreclosures can pose costs for whole neighborhoods, causing property values to decline and crime to increase. This can undermine the financial stability of neighboring families and communities.

  Foreclosure isn't only expensive for homeowners. Investors – the owners of the mortgage – also get hit with steep losses. Investors would rather find a solution other than foreclosure, if there is one.

  In any normal business situation where both sides see that they are going to suffer losses, they would get together and strike a deal to minimize those losses. But this situation isn't normal; the company that made your mortgage may no longer hold it. Instead, mortgage investors are spread all over the world, making it very difficult for them to reach an individual decision on each troubled mortgage.

  Until recently, our system has been able to shoulder the burden of this complexity because the volume of struggling borrowers was manageable in a period when home prices were generally increasing. But today, there are a rising number of subprime borrowers who will face a problem when their mortgage interest rate resets and their monthly payments increase. We anticipate that 1.8 million owner-occupied subprime mortgage resets will occur in 2008 and 2009. This rising volume makes it impossible for the investors who own the mortgages to deal with them in the usual way.

  The government acted to prevent a market failure and to try to avoid unnecessary harm that would result from a cumbersome, difficult decision-making process due to a coming wave of struggling subprime borrowers. We developed a solution that involves no government funding or subsidies for industry or homeowners.

  Our solution centers on bringing mortgage market participants together in the HOPE NOW alliance. The alliance is a coalition of mortgage servicers - the people who collect your payments - counselors and investors that are working to avoid preventable foreclosures.

  As I see it, subprime borrowers fall into three broad categories. There are those who can afford their adjusted interest rate; these homeowners need no assistance. There are homeowners who haven't even been making payments at the loan's starter rate and may not have the financial wherewithal to