The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) has released a revised Community Development Financial Institution (CDFI) Certification Application Frequently Asked Questions (FAQs) document and recorded webinars.
The FAQs supersede those published September 6, 2024, by adding, revising, or updating select questions from the earlier edition.
Complete and updated FAQ information can be found on the CDFI Fund’s website at www.cdfifund.gov/cdficert. All CDFI Certification Application FAQs can be found on the CDFI Fund’s website under Step 2: Apply. All webinars can be found under Step 1: Webinars.
Key Updates to Note
Q 5) Are forgivable loans considered eligible Financial Products?
Yes. There are two instances where forgivable loans can be considered as eligible Financial Products and can be counted for Target Market activity. The first instance is a forgivable loan with at least one payment within twelve (12) months of the loan closing date. The second instance is a forgivable loan that meets each of the following seven (7) conditions:
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Purpose of the debt is for the purchase of a single-family, owner-occupied residence and is in a subordinate position;
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Debt is subject to a credit contract requiring repayment if certain terms specified in the contract are not met and full forgiveness of the loan may not be made until the end of the loan period. The creditor has verified that the borrower has sufficient income or assets (other than the value of the property being purchased) to repay the debt according to its terms;
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Loan term of five (5) years or longer;
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Borrower has pledged adequate security;
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Debt is documented by a valid and enforceable promissory note, and security interests are properly perfected;
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Interest (even a nominal amount) is charged at least annually (may be accrued and capitalized); and
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Debt is reflected as a loan on the creditor’s balance sheet.
Q 39) My CDFI provides grants through funds we’ve received from a Federal, State government, or municipal public assistance program – like the EPA’s Greenhouse Gas Reduction Fund. Do I need to include this grant making activity when calculating our organization’s predominant financing activity for the Financing Entity test?
An Applicant or Certified CDFI may disregard grant funds provided through a Federal, State government, or municipal community development-focused or public assistance program for the purposes of the Financing Entity predominance test if the following conditions are met:
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The majority of the funds were awarded to the Applicant/Certified CDFI for a community development, public assistance, or other purpose approved by the CDFI Fund.
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The grant funds are intended for and are ultimately delivered to an approved Target Market or Eligible Market in the form of grants, Financial Products and/or Financial Services, or other acceptable form of assistance or support as approved by the CDFI Fund.
If these conditions are met, grant funds received in a specific fiscal year may be disregarded for the next two subsequent fiscal years that serve as the basis for the relevant Financing Entity criteria review. For example, funds received in FY 2023 can be disregarded as financing activity for FYs 2023, 2024, and 2025, for a total of three fiscal years. All disregarded funds are subject to final approval by the CDFI Fund. The CDFI Fund may grant an extension to the three-year period in the case of a Federal or Presidential declared disaster. Although these funds may be disregarded for the purposes of the Financing Entity test, Certified CDFIs must still report on their grant making activities annually in the ACR.