New CDFI Funds Could Plug Capital Hole Left by Stabilization Expenses
While the recently increased appropriations for the U.S. Treasury's Community Development Financial Institutions Fund have reversed years of administration-led cuts, they have also made clear how relatively few credit unions are prepared to take advantage of the additional funds.
The National Federation of Community Development Credit Unions is pushing hard for more CDFI Fund participation now because, with the corporate stabilization plan expenses, it may be more important than ever for CDCUs to get as much capital on their books as possible.
CDFI-designated community development credit unions have been among the strongest program supporters and received millions since the fund got underway.
The CDFI Fund announced that it has $145 million available to award in financial assistance grants for the balance of this year and into next. CDFIs that have already filed applications will be able to reopen them and request additional money from the new funds. CDFIs that have not applied for any money yet will be allowed to file applications.
The CDFI Fund said it anticipates having a call for applications for its funding programs published in the Federal Register within a month. The call for applications will include deadlines for the new or revised applications.
"We are delighted with the speed that the fund has used in getting itself up to speed with moving the funds out the door," said Cliff Rosenthal, CEO of the National Federation and a long-term CDFI Fund supporter, "but its not yet really clear just how many of our members are going to be able to take advantage of the opportunity."
The National Federation has scheduled a Webinar close to press time to try to answer their member credit unions' questions and to find out how many plan on making applications.
Rosenthal pointed out that it's not possible to file a Freedom of Information Act request to find out, for example, how many credit unions might be among the CDFIs who have already applied for funds and might want to reopen their applications.
He also noted that relatively few CDCUs are certified as CDFIs. "This is going to be a major focus of ours for the balance of this year," said Rosenthal. "We have always promoted CDFI certification, but it's always been a challenge, particularly for our smaller members. Now we are going to really push it and make as much of our staff as possible available to help."
One of the questions the National Federation would like to get resolved is if a CDCU can apply to be certified as a CDFI at the same time it applies for a CDFI Fund grant. "That's a bit up in the air because the CDFI Fund has done both in its history," Rosenthal said. "Obviously allowing the simultaneous applications would make it easier for our members."
The National Federation has also not stopped lobbying the NCUA regarding the corporate stabilization plan on behalf of their members. The organization is concerned that, despite what the NCUA might say now, if CDCU capital falls below 7% or even 6% because of the corporate stabilization plan expenses, the agency may close some CDCUs.
One thing the NCUA could do to help would be to allow CDCUs with community development revolving loans to move the booking of those loans to capital. That would help them replace some of the money they will have to pay into the corporate stabilization plan.
As of February, the NCUA reported $10.1 million in the community development revolving loan funds outstanding. As of press time the agency has not returned calls seeing comment on the loans or the National Federation proposal.