37. Can an Applicant seek flexibility regarding any of the standards for responsible financing practices?

The current standards for responsible financing practices allow for certain circumstances under which an otherwise disqualifying practice might serve an acceptable community development purpose. For example, Applicants that offer consumer loans that exceed an MAPR of 36% may still be determined eligible for certification if certain conditions are met, such as a default rate no greater than 5%, limits on fees to refinance the loan, substantially equal loan payments that amortize to a zero balance, among other conditions. Similarly, certain otherwise disqualifying residential real estate mortgage loan characteristics are allowable for the purposes of CDFI Certification if the Applicant meets additional criteria. In some cases, Applicants may have the opportunity to offer an explanation as to how an otherwise disqualifying practice is consistent with a community development mission.

Applicants seeking to engage in financing activities that do not currently meet the standards for responsible financing practices of the Primary Mission test may also seek amendment to the standards that allows for additional activity that serves a community development purpose. To do so, Applicants must provide the following information⁶ for the CDFI Fund’s consideration in advance of an Application submission:

• Description of the financing activity;
• Current standard that the financing activity does not meet;
• Reasons the Applicant believes the financing activity serves a community development purpose;
• Protections that ensure the financing activity does not harm consumers;
• Evidence that consumers are not harmed (e.g., if discussing a Financial Product characteristic, the rate of successful repayment under the original rates, terms, and conditions of the Financial Product);
• Conditions or parameters under which the financing activity should be considered an acceptable community development activity (e.g., limits on rates charged, purpose, borrower characteristics, etc.); and
• Any additional relevant information.

The CDFI Fund will not approve individual exceptions to the Primary Mission test and any amendment to the standards for responsible financing practices will be made available to all CDFIs and future Applicants.

⁶ See question OD02 of the “Obtaining Determination for Responsible Financing Practices, Similar Financial
Products, Similar Financial Services, Disregarded or Included Assets/Staff Time, Targeted Populations, and Target
Market Assessment Methodologies” section of the Application.