Federal Reserve Board Governor Michelle Bowman recognized community banker concerns with proposed changes to the community development financial institution certification application.
Bowman Remarks: In a speech earlier this week, Bowman said that while CDFI certification is the sole purview of the Treasury Department’s CDFI Fund, she appreciates the implications the proposed revisions may have on nearly 200 bank CDFIs and the communities they serve. Community bank pushback against the proposal shows the need for robust public engagement of affected stakeholders, she said.
ICBA Advocacy: ICBA has repeatedly raised concerns with the CDFI Fund proposal, which among other things would rescind CDFI certification for banks that offer loans with annual percentage rates greater than 36% or that originate balloon mortgages. During a roundtable meeting last month with House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) and Treasury Department officials, ICBA reiterated its opposition to the proposal’s stricter approach to interest rates, underwriting standards, risk management tools, disclosure requirements, and target markets.
Congressional Pressure: Lawmakers have responded after ICBA and other groups previously requested a meeting with members of Congress to discuss the revisions. Senate Banking Committee members Mark Warner (D-Va.) and Mike Crapo (R-Idaho) earlier this year encouraged the Treasury Department to consider stakeholder concerns, while the Arkansas congressional delegation later warned Treasury that the proposed changes would result in many rural banks losing their CDFI status.
Delayed Launch: In the wake of ICBA’s opposition detailed in a comment letter and pressure from Congress, the CDFI Fund earlier this year delayed the launch of the changes and said it will revise the updated version of the certification application it released last fall. The CDFI Fund’s Community Development Advisory Board has since expressed concerns and issued recommendations to address several concerns with the proposal, including stricter rules on interest rates and underwriting standards.
Outlook: ICBA will continue working with the CDFI Fund, Treasury, and Congress to ensure any revisions to the CDFI certification application are not detrimental to community banks and the communities they serve.
