NCUA to open Streamlined CDFI Application Qualifying Round

The National Credit Union Administration (NCUA) last week announced it would open a streamlined CDFI Application Qualifying Round beginning on September 12 and running just over a month through October 15.

What is a CDFI Certification?

A CDFI (Community Development Financial Institution) Certification is granted by the CDFI Fund, and provides financial services to specialized organizations in low-income communities and to people who lack access to financing. Since 2016, the NCUA and CDFI have worked together to simplify and expedite both the qualification and application process for low-income credit unions interested in attaining the designation.

In 2020, as recorded in the CDFI Fund’s Award Book, a total of 357 organizations received $187.3 million in funding, with credit unions accounted for 108 of these institutions, just over 30%.

According to the NCUA’s online program guide, which outlines the steps a credit union must take in order both to qualify and apply, the grants allow institutions to “finance a wide range of activities—including mortgage lending for first-time homebuyers, flexible underwriting for community facilities, and commercial loans for businesses in low-income areas.”

The news was revealed in an NCUA press release, in which the Administration’s Chairman Todd M. Harper underlined the importance of the initiative. “CDFI certification is an important tool eligible credit unions can use to expand opportunity for their members and communities,” he said. “Credit unions can use CDFI funding to build capacity and develop new products and services to meet the credit and savings needs of consumers, especially those of modest means. I encourage all eligible credit unions to apply.”

How to Apply for CDFI Certification

In order to apply, interested credit unions must initiate the qualifying process by first registering with the NCUA’s Cyber Grants system followed by completing a participation form. The Administration’s Office of Credit Union Resources and Expansion will then evaluate all material before deciding if an institution meets the qualifying requirements.

While the grant decisions ultimately lie with the CDFI Fund itself, the NCUA will offer any qualifying credit union all necessary information in order to complete the application. For those institutions that do not meet the qualifying criteria, the NCUA still recommends applying through the standard application.

The Streamlined Approach Offers a Narrower Route to Success

It is further worth noting that while this streamlined round of applications may present an ideal opportunity for certain institutions, it is by no means a perfect fit for everyone, as indeed the majority of current CDFI-certified credit unions would likely fail to qualify. This is due to the highly specific criteria the NCUA uses when it comes to analyzing and reviewing the loan file of each institution.

Of particular importance is the qualification criteria tied to a credit union’s total loan activity within “eligible Target Market counties,” which, per the Administration’s definition, include only “the areas where a credit union has an office branch and the bordering counties to those branches.” As a result, the streamlined certification process is generally best-suited to smaller credit unions with members concentrated close to their branches.

Thus, for practical reasons, this will exclude many institutions from the streamlined process, but, as the NCUA makes clear, should by no means discourage them from seeking certification through the standard application.

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Regardless of approach, CUCollaborate can pre-qualify your credit union for either application and do so entirely free of charge. Contact us today to begin the process.