InfoBytes Blog
New York Fed reports on community development financial institutions
On May 8, the New York Fed released a report examining both the origination and sale of loans by community development financial institutions (CDFIs) and found that loans of both types more than doubled from 2018 to 2022. According to the report, in 2022, CDFIs originated $67 billion and sold $14 billion of loans, which was a major increase since 2018, where CDFIs originated $29 billion and sold $6 billion of loans. This doubling also contributed to some market concentration: The 10 most active CDFIs in 2022 originated over 25 percent of the total origination volume and 75 percent of the total sold loan volume. The report stressed “nearly all loan sales to Ginnie Mae and life insurance companies” were sold from the most active sellers.
On breakdown, the New York Fed found residential (single family) loans as the highest volume collateral data type, far outpacing lines of credit, multifamily, commercial real estate, and business. There were also a high number of CDFI originations in California and Florida, and credit unions were the most active originators over banks, thrifts, or loan funds.
On May 14, a member of the Fed Board of Governors Lisa Cook spoke on how CDFIs impact communities positively and some of the challenges CDFIs face. Cook noted specifically that CDFIs often “continue their work with borrowers even after loans are made… helping them through rough spots, should borrowers experience difficulty repaying loans,” which were unique among the CDFI borrower-banking relationship. On challenges, Cook noted how demand for capital was outpacing the current supply: Federal funding tied to past pandemic relief programs have dried up, leading to the challenge of building out long-term capital sources for future CDFI demand. She closed by emphasizing the importance of the CDFI industry and her continued support of CDFIs.