WASHINGTON–A new review of the federal Community Development Financial Institutions certification process by CU Strategic Planning has found a sharp decline in the number of credit unions listed as certified CDFIs, though the company cautioned that the recertification process remains incomplete and the latest figures should not be viewed as final.
According to an analysis by CU Strategic Planning, the U.S. Treasury Department’s Community Development Financial Institutions Fund released an updated list of certified CDFIs on June 10, the first such update since January. The revised list added 38 organizations and removed 168 organizations that had appeared on the previous roster, CUSP said.
Credit unions experienced the largest decline among CDFI categories, according to CU Strategic Planning’s review. The firm found that 88 certified credit unions were removed from the list, while just five credit unions were added.
The June 10 list reflects only those applications the CDFI Fund has completed reviewing thus far, with reviews continuing on a rolling basis. The update includes revised applications submitted by existing CDFIs that were required to reapply under certification standards that took effect in December 2023.
Clear Picture Offered
CU Strategic Planning said the new list offers the clearest picture of the certification roster since January but emphasized that it does not represent the final outcome of the recertification process.
Among the credit unions the firm said it is assisting with recertification, slightly more than 10% have received decisions from the CDFI Fund on their applications, according to the analysis.
The consulting firm said many of the removals likely involve institutions that either chose not to seek recertification or were unable to complete the revised application process because their lending data did not support certification under the updated standards.
The Certification Requirements
Under CDFI certification requirements, organizations must demonstrate that at least 60% of their lending activity, measured by both the number of loans and the dollar amount of loans, serves their approved target market.
CU Strategic Planning said the decline among credit unions appears larger than expected when compared with other types of CDFIs, suggesting the revised standards may affect organizations differently depending on the composition of their loan portfolios.
The analysis noted that nonprofit loan funds often concentrate their lending activities within specific populations or geographic areas, while credit unions typically maintain more diversified portfolios that include mortgage and small-business lending.
Factors in the Data
As a result, some credit unions may satisfy the target-market requirement based on the number of loans made but fail to meet the threshold when measured by total loan dollars. The firm cited housing affordability as one possible factor, noting that in some markets low- and moderate-income members may be unable to afford available homes, resulting in larger mortgage loans being concentrated among higher-income borrowers outside the institution’s approved target market.
CU Strategic Planning said the CDFI Fund’s list is expected to continue changing as additional application reviews are completed.
The firm added that credit unions that successfully documented compliance with the updated target-market requirements and submitted revised applications should not interpret their absence from the June 10 list as evidence that their applications have been denied or are at risk of denial. Reviews remain ongoing, and additional certification decisions are expected in the coming months, according to the analysis.
