HOPE Submits Comments and New Analysis to Inform CDFI Certification Process

November 6th, 2020

The CDFI Fund is currently reviewing its certification and annual reporting requirements. In its comments submitted to the Fund regarding its proposed changes, HOPE urges the Fund to use the opportunity to assess how well CDFIs and the CDFI Fund are serving communities of color, including CDFIs owned/controlled by people of color. HOPE brings the unique perspective of serving communities of color, particularly in rural communities and others in the Deep South.

In its comment, HOPE urges the CDFI Fund to:

1. Gather information on the race and ethnicity demographics of CDFI leadership, ownership, and borrowers and communities served by all certified CDFIs.

2. Preserve the geographic boundaries of the Target Market test, and preserve the 60% threshold for financial products even if financial services are also considered for depository institutions.

3. Ensure the quality of products and practices build and protect, rather than strip, wealth from borrowers and communities served by CDFIs.

HOPE also provided new research on how the CDFI Fund may fill existing gaps, both in data collection and resource allocation, to ensure CDFIs are meeting the needs of borrowers and communities of color.

For example, HOPE completed an analysis of CDFI Fund awardees over a 15 year period to assess racial disparities in CDFI asset sizes and growth. This expanded analysis, available in full here, finds among other things that, there has been no progress in closing the asset gap between white and minority-owned CDFIs. Every year, the median asset size of white-owned awardees has been at least twice the median asset size of minority-owned awardees. In some years, it was three times as high.

Additionally, the data gathered by the proposed CDFI certification application and annual report do not require any data about the race or ethnicity demographics of communities served by CDFIs. In places like Mississippi, the ability to rely just on serving low-income communities has allowed CDFIs to by-pass borrowers of color. Analysis of Home Mortgage Disclosure Data (HMDA) provides insight into how deeply CDFIs in Mississippi may or may not be lending to communities of color. As a brief example, HOPE analyzed 2019 HMDA mortgage lending data for 10 Bank CDFIs in Mississippi and found that 71% of mortgage loans went to white borrowers while only 14% went to Black borrowers.[1] By contrast, Hope Credit Union made 82% of its mortgage loans to Black borrowers, and less than 20% of its loans to white borrowers.

HOPE’s full comment and set of recommendations to the CDFI Fund is available here.

[1] Analysis of 2019 HMDA data, available at https://ffiec.cfpb.gov