CDFIs that lend in low-income areas report increased demand for their products, but these mission-driven institutions say they can't keep up with the demand for loans.
The New York Fed's Community Development Team is studying the role that a stronger secondary market for CDFI-financed loans could play in increasing the sources of capital available to CDFIs, such as lending funds, credit unions, and banks. Certified CDFIs are eligible for competitive federal grants to cover loans such as mortgages for first-time homebuyers.
The Community Development Team’s latest publication on CDFIs, “A Study of Loan Origination and Sales by Community Development Financial Institutions,” aims to benchmark the current state of loan origination and sales by CDFIs.
Lending by CDFIs is set to more than double between 2018 and 2022, reaching $67 billion, according to the report. The amount of lending by CDFIs also more than doubled over the same period, reaching $14.2 billion, the report noted.
Additionally, the report found that:
The 10 most active CDFIs lent more than 25% of total CDFI loan volume and nearly 75% of CDFI loans sold in 2022. This indicates that while many CDFIs sell loans, all but the most active CDFI sellers tend not to do so programmatically, the report states. CDFIs lent at least $32 billion in mortgage loans in 2022, which represents nearly half of total CDFI loan volume across collateral types for which the authors have data, the report states. Mortgages represented 90% of the total loan volume sold by CDFIs in the secondary market, the report states.
The number of CDFIs grew 40% in the five years ending in 2023, according to an August 2023 report by the Community Development Team, “Sizing the CDFI Market: Understanding the Growth of the Industry.”