NEW YORK—The Federal Reserve Bank of New York today released a report quantifying sales of loans by Community Development Financial Institutions (CDFIs). The report, “Examining the Origination and Sale of Loans by Community Development Financial Institutions,” finds the amount of loans originated by CDFIs more than doubled between 2018 and 2022, reaching $67 billion. The amount of loans sold by CDFIs also more than doubled during the same period, reaching $14.2 billion, the report finds.
CDFIs, which provide financing in low-income communities, are certified by a sub-agency of the U.S. Department of Treasury. Institutions with CDFI certification—which include loan funds, credit unions, and banks—are eligible for competitive federal awards to finance lending including mortgages for first-time homebuyers and commercial loans for businesses in low-income areas.
Three out of four CDFIs surveyed in 2023 reported an increased demand for their products over the past year; a similar share said they anticipated this growth would continue. Less than half of CDFIs that experienced growth in demand reported they were able to fully meet the existing demand, the survey found.
“A more robust secondary market for CDFI-originated loans could play a role in helping CDFIs meet increasing demand,” said Jake Scott, a community development analyst at the New York Fed and an author of the report.
The report finds that the ten most active CDFIs accounted for over 25% of the total dollar volume of CDFI loan origination and nearly 75% of the dollar volume of CDFI loans sold in 2022. This suggests that while many CDFIs sell loans, they tend not to do so programmatically, except for the most active CDFI sellers, the authors said.
CDFIs originated at least $32 billion of residential loans in 2022, representing nearly half the total volume of CDFI loan originations across the collateral types for which the authors have data, the report finds. Residential loans made up to 90% of the total volume of loans sold by CDFIs on the secondary market, the report finds.
The report is the second in an ongoing series released by the New York Fed’s Community Development team about the CDFI industry. An August 2023 report, “Sizing the CDFI Market: Understanding Industry Growth,” found that the number of CDFIs grew 40% over the five years ending in 2023. The Community Development team also wrote about creating a more robust secondary market for CDFIs in The New York Fed publication The Teller Window in January 2024.
