Independent Banker - July 2024 - 35

CDFIs support small businesses and
consumers in their communities
amid pandemic-era dislocations.
Through ECIP, the Treasury invested
more than $8.5 billion in CDFIs and
MDIs, and that money was delivered
as investment in preferred stock
or subordinated debt issued by the
participating institutions.
Beginning two years after issuance,
the investments pay a dividend or
interest rate of 2%, though this can be
reduced if participating institutions
increase their " qualifi ed " or " deep
impact " lending to minority, rural,
urban low-income and underserved
communities and borrowers. The
additional credit recognizes that the
kind of lending that will be most
eff ective often requires more time and
resources from the lender.
Report shows lending's
positive eff ect
The Treasury Department reported
in April that lenders participating
in ECIP initiated $17.8 billion in
loans to business and individuals
in need during 2022, showing the
impact of these investments on
local communities.
For example, participating
institutions originated 1,157
construction and land development
loans worth $911 million that
fell into the " qualifi ed " lending
category. That means they
went to LMI borrowers, small
businesses or farms, or they funded
aff ordable housing or other such
community investments.
Another 1,642 loans worth
just over $1 billion fell into the
" deep impact lending " category,
which means they went to lowincome
borrowers, underserved
businesses or residents of " persistent
poverty counties " or they funded
deeply aff ordable housing or
similar projects.
While CDFI certification offers access to
federal programs and some regulatory
benefits-such as a CDFI exemption from
certain Qualified Mortgage requirements-
these designations are underutilized by
qualifying community banks.
ECIP has also strengthened
MDIs' and CDFIs' ability to
expand aff ordable home mortgage
programs, provide more robust
fi nancial literacy platforms,
build relationships with new
fi nancial partners, and implement
technology enhancements.
Streamlining CDFI certification
While CDFI certifi cation off ers
access to federal programs and some
regulatory benefi ts-such as a CDFI
exemption from certain Qualifi ed
Mortgage requirements-these
designations are underutilized by
qualifying community banks.
An ICBA study identifi ed
several hundred ICBA member
community banks that do not have
CDFI designation but are likely
eligible to receive it based on their
location in LMI census tracts.
Given the burden and complexity
of the certifi cation process, ICBA and
its Minority Bank Advisory Council
continue to advocate for policies
that will provide more opportunities
for community banks-and the
communities they serve-to benefi t
from these designations.
For example, ICBA successfully
fought back against proposed
updates to the CDFI certifi cation
that would have strictly prohibited
CDFI banks from originating balloon
mortgages. And we're pushing for
a memorandum of understanding
between banking regulators and
the CDFI Fund to streamline the
application process, similar to an
existing agreement with the National
Credit Union Administration.
Getting certified as a CFDI or MDI
Community bank leaders can
fi nd more information on CDFI
certifi cation at cdfi fund.gov,
and the FDIC explains how to be
recognized as an MDI at fdic.gov.
We encourage qualifi ed members to
pursue CDFI and MDI designation,
which will help community banks
fulfi ll their missions of making a
deep and meaningful diff erence in
their communities.
Kianga Lee is ICBA vice president
of government relations and
administrative operations.
Michael Emancipator is ICBA
senior vice president and senior
regulatory counsel.
independentbanker.org // 35
https://www.cdfifund.gov/ http://www.fdic.gov http://www.independentbanker.org
Independent Banker - July 2024

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