- By Chez Oxendine
Native Community Development Financial Institutions (CDFIs) are breathing a sigh of relief after the Treasury released long-awaited final revisions to the CDFI certification application late last week.
The new application, released last Thursday by Treasury’s CDFI Fund, looks quite different from a draft released in late 2022 that threatened to shut out Native CDFIs from issuing mortgage loans with balloon payments or terms longer than 30 years, or any interest-only loan. Following the release of the controversial draft, the CDFI Fund received more than 250 comment letters and 1,000 comments, according to a Treasury official who spoke at an event for Native CDFIs earlier last week.
In its final form, the CDFI Fund application relaxed some of the items that gave Native CDFI executives pause. Pete Upton, CEO of the nonprofit Native CDFI Network (NCN), called the final certification rules “workable” and lauded both Native CDFIs and Treasury officials for the outcome.
“I think (CDFI Fund) truly did listen to NCN and its membership,” Upton told Tribal Business News. “In my opinion we didn’t get everything necessarily down to the T that we wanted, but enough to make it all workable.”
Some of the changes are compromises, rather than outright reversals of the concerns NCN listed in its communications with the CDFI Fund, Upton said. He pointed to balloon payments, which can now be considered on a case-by-case basis through application to the CDFI Fund, and comprehensive strategic plan requirements, which have been lowered for Native CDFIs in particular.
“It’s not 100 percent win/win, but it’s better than being automatically ruled ineligible,” Upton said.
The remaining concern lies with non-subordinate interest-only, long-term home mortgages, which have been ruled ineligible for funding through federal support from the CDFI Fund. Those loans represent a small portion of many Native CDFIs’ current portfolios, and NCN plans to work with members to find alternatives, Upton said.
Chrystel Cornelius, president & CEO of Oweesta Corporation, the longest-standing Native CDFI intermediary, expressed concerns about other potential challenges posed by the newly introduced changes. The required focus on financial products may limit staff from assisting borrowers in developing essential money management skills, and the disqualification of youth-focused services could force Native CDFIs to self-fund or discontinue programs, she wrote in an email to Tribal Business News.
Additionally, the removal of the option for unstructured one-on-one conversations with clients and new accountability exclusions could impact personal relationships and pose challenges for Native CDFIs in rural areas.
Despite the challenges, Cornelius acknowledged some positive aspects of the changes, including the CDFI Fund allowing non-certified organizations to apply for a Financial Assistance award in fiscal year 2024 as well as improvements in the identification process for tribal members.
With the newly released application, only non-certified organizations will be able to apply for certification when the CDFI Fund’s submission portal opens on Dec. 20, 2023.
All currently certified CDFIs will be given a one-year grace period and will be required to reapply for certification by Dec. 20, 2024.
“When we open the certification application, the first applications that we're going to review are for those that are uncertified. Why? Because we have been closed for quite a while, and people have been waiting to apply for certification so that they can apply for (financial assistance grants), or NACA, or some of these other programs,” Marcia Sigal, acting director of the CDFI Fund told executives at the Native CDFI Network annual policy summit last week. “So we're going to prioritize those that have been waiting … those that are new or uncertified.”
The CDFI Fund also announced on Friday that it opened the fiscal 2024 funding round for the CDFI Program and NACA — the Native American CDFI Assistance program. Pending final Congressional appropriations, the CDFI Fund plans to award approximately $462 million in fiscal 2024 awards.
That amount includes $43.7 million in NACA FA and TA awards specifically for Native CDFIs, as well as $6.3 million in persistent poverty country-financial assistance awards (PPC-FA) set aside for Native CDFIs.
NACA Program applicants can also apply for funding through the $48 million healthy food financing initiative-financial assistance and the $20 million disability funds-financial assistance awards, though neither of those programs have set-asides for Native organizations.
The $50 million total in NACA awards for FA, TA and PPC-FA in fiscal 2024 reflects the fact that none were given in fiscal 2023, Upton said. By comparison, NACA funded roughly $23 million for the same awards in fiscal 2022. The increase on an annualized basis represents “a steady incline, nothing to jump up and down about,” Upton said, calling for more funds to increase access to capital in Indian Country.
“There’s a strong need for at least $50 million annually for Native CDFIs right now,” Upton said. With 64 certified Native CDFIs and about two dozen emerging Native CDFIs, there isn’t a lot of money to go around at the current funding levels, he said.
There could be more competition among Native CDFIs for the funding this year, as the CDFI Fund has implemented one-time process changes that will allow pending CDFI certification applications to apply for an FA award in fiscal 2024. The CDFI Fund usually requires FA applicants to be Certified CDFIs as of the date the NOFAs are published in the Federal Register. This shift allows organizations seeking CDFI Certification to apply for an FA award while they also apply for CDFI Certification, utilizing the new CDFI Certification Application, according to a Treasury statement.
Upton also called for the CDFI Fund to create a NACA advisory committee, preferably composed of executive directors from Native CDFIs.
“I think until they truly hear the needs from those that are in the weeds daily and have their boots on their ground in Indian Country, they’re going to be missing something,” Upton said.
The certification application process opens Dexc. 20, and the first deadline approaches Jan. 16 for creating an Awards Management Information System (AMIS) account, entering identifying information, and submitting a Grants.gov application cover sheet. Final certification applications are due March 5.
More information on application materials, scheduled assistance webinars, and due dates can be found here.
Editor's Note: This story has been updated to correct the number of certified Native CDFIs as 64 and to add comments from Chrystel Cornelius, CEO of Oweesta Corporation.