No, the modification of a borrower’s mortgage loan to include interest-only payments to keep a borrower in their home does not affect an Applicant’s eligibility for CDFI Certification.

Question PM19.2 asks Applicants whether they offer covered mortgage loans that include interest-only payments. If Yes, the Applicant is not eligible for CDFI Certification. However, the scope of this question excludes any transaction made for the purpose of foreclosure avoidance or prevention.

PM19.3 asks whether an Applicant offers covered mortgage loans that include balloon payments, i.e., a payment that is more than two times a regular periodic payment. If yes, the Applicant must indicate:

No, an Applicant that offers adjustable-rate mortgages with a rate that may adjust in less than five years may do so and remain eligible for CDFI Certification so long as it underwrites the mortgage at no less than the maximum rate permitted by the loan in the first five years. For examples of how to determine a mortgage loan product’s maximum interest rate during the first five years, see CFPB’s official interpretation of Paragraph 43(e)(2)(iv) of 12 CFR § 1026.43.

Question PM19.6 asks whether an Applicant verifies the income or assets of the borrower of a covered mortgage loan product. For purposes of CDFI Certification eligibility, an Applicant that offers covered mortgage loan products must verify the borrower’s income or assets using third-party records that provide reasonably reliable evidence of the borrower's income or assets. The Applicant may verify the consumer's income using a tax-return transcript issued by the Internal Revenue Service (IRS).

Yes. Question PM21 ask whether an Applicant sells its charged-off consumer or small business debt to debt buyers. An Applicant that sells its charged-off consumer debt – including owner-occupied residential mortgages – or small business debt to debt buyers is ineligible for CDFI Certification.

Question PM26 asks Applicants to describe certain features related to the fees associated with any of an Applicant’s overdraft programs. If an Applicant charges overdraft fees that can exceed the amount of the item being cleared (see PM26.2a), or if an account holder of the Applicant may be charged overdraft fees on more than six occasions in a rolling 12-month period (see PM26.4a), Applicants are asked to explain how such practices should be considered consistent with an acceptable community development mission.

Question PM27 asks Applicants to describe certain features related to any NSF fees their customers may be charged. If an Applicant charges NSF fees that can exceed the amount of the item returned unpaid (see PM27.2a), or charges NSF fees more than once for the same transaction, regardless of whether the item is re-presented (see PM27.4a), it must explain how such practices should be considered consistent with an acceptable community development mission.

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.

The CDFI Fund’s regulations state that a “CDFI shall be an entity whose predominant business activity is the provision, in arms-length transactions, of Financial Products and/or Financial Services.”⁷ To be predominant, the provision of Financial Products and/or Financial Services does not have to be the majority of the Applicant’s overall activity, but must be the activity that reflects the greatest use of the Applicant’s assets and staff time when compared to any other separate and distinct type of activity in which the Applicant engages.

An Applicant or Certified CDFI may disregard grant funds provided through a Federal, State government, or municipal community development-focused or public assistance program for the purposes of the Financing Entity predominance test if the following conditions are met: