Community development financial institutions (CDFIs) found themselves in the housing spotlight over the past week, with legislation introduced that would provide a crucial backstop to their continued viability.

The bipartisan Access to Fair Financing for Opportunity and Resilient Development (AFFORD) Act, introduced Feb. 26 by U.S. senators Steve Daines, R-Mont., and Mark Warner, D-Va., would provide Congress with enhanced oversight of the CDFI Fund, extend the reach of the fund’s bond guarantee program and increase CDFI lending capacity to reach more communities.

“It’s critical we improve transparency surrounding the operations of the CDFI Fund to ensure its programs continue to serve the vital role of increasing economic development and helping Montana communities thrive,” Daines said in a joint press release announcing the bill.

Added Warner: “CDFIs are critical in bringing capital and financial services to rural, tribal, and underserved communities, and they can be significant partners for local governments to battle rising costs and affordability.”

CDFIs are private financial institutions certified by the U.S. Department of the Treasury to provide financing to underserved and financially distressed communities. The CDFI Fund, established in 1994 as part of the Treasury Department, provides grant funding to those entities.

As of Jan. 13, credit unions accounted for 446 of the 1,383 certified CDFIs nationwide, representing the largest depository institution type, according to the trade association America’s Credit Unions, which sent a letter to the senators last week supporting the AFFORD Act.

CDFI Fund survives RIF attempt

The CDFI Fund was targeted by the Trump administration last year as part of its wave of mass layoffs during the 43-day federal government shutdown in October and November.

That attempted reduction in force (RIF) action, which would have effectively ceased CDFI operations, received significant pushback from both banking and housing industry associations and Republican lawmakers, more than 100 of whom signed on to a letter sent to Treasury Secretary Scott Bessent and White House budget director Russell Vought, urging the reinstatement of CDFI Fund staff.

The administration ultimately backtracked after the government resumed operations, rescinding the CDFI Fund layoff notices on Nov. 17.

President Donald Trump had previously taken steps to neuter the funding mechanism for the statutorily mandated program in an executive order issued March 14, 2025, in which he lumped the CDFI Fund with several other government entities that he believed should have their non-statutory components “eliminated to the maximum extent consistent with applicable law.”

Policy brief touts CDFI benefits

Citing the “severe shortage of affordable housing” in the United States, a policy brief released Monday by the National Association of Affordable Housing Lenders (NAAHL) and the Center for Affordable Housing Lending highlights what the groups call the “superpower” of community development financial institutions.

“CDFIs make possible investments that would otherwise never happen, creating economic opportunity in places the conventional market cannot profitably reach,” the brief states.

Expanding on that position, the NAAHL paper explains that CDFIs “provide the specialized infrastructure necessary to reach ‘the last mile’ of community development” that banks often cannot reach alone.

The analysis also highlights the risk management role CDFIs play when providing subordinate capital or credit enhancements to enable banks to make senior loans they otherwise couldn’t underwrite.

“This risk-sharing allows projects to move forward while maintaining prudent underwriting standards for the bank’s direct lending,” the policy brief states, adding that CDFI dollars are often “first-in” for structured deals, meaning “they are the predevelopment dollars that have to be invested before the project can approach traditional lenders for construction loans and then permanent financing.”

Additionally, the NAAHL brief underlines how CDFIs “bridge the gap between mainstream lending standards and the reality of creditworthy low- to moderate-income borrowers” by providing affordable mortgage products with flexible underwriting criteria and partnering with banks to access downpayment assistance programs and affordable housing funding through Federal Home Loan Bank programs.

Noted NAAHL CEO Sarah Brundage in a press release: “CDFIs play a critical role in bridging the gap in capital for communities that have historically been marginalized in the financial system.”