The Community Development Financial Institutions Fund’s revised application process will make it difficult for many mission-focused CDFI banks to achieve recertification unless further changes are made, according to a joint letter by the American Bankers Association, Community Development Bankers Association and Independent Community Bankers of America.
The CDFI Fund last year released a “considerably revised” process for organizations to apply to become a CDFI or renew their certification. In their comments on the revisions, the associations highlighted several concerns about the new process along with suggested fixes. One suggestion was for the CDFI Fund to establish a cure or hold harmless period for recertification, ensuring CDFIs are not unfairly penalized for new standards applied retroactively.
Other fixes included amendments to the target market test used in considering applications, such as reinstating non-metro county eligibility for Customized Investment Areas, retracting the 85% qualified census tract requirement for CIAs, and allowing designation of a primary business location for business borrowers. The associations also recommended exempting interest-only loans for construction, bridge loans and certain HELOCs from the general prohibition in the primary mission test. The CDFI Fund should instead allow narrative explanations of the benefits of such loans, they said.
