A bill to amend the Community Development Banking and Financial Institutions Act of 1994 to provide for capitalization assistance to enhance liquidity.
- Bill Number
- S. 2718
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2025-09-04: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- Last Updated
- 2026-03-22T23:36:13Z
AI-Generated Summary
Purpose
This bill aims to amend the Community Development Banking and Financial Institutions Act of 1994 to expand the ability of the Community Development Financial Institutions (CDFI) Fund—a federal program that supports financial institutions serving low-income and underserved communities—to provide financial assistance. The main goal is to improve liquidity (the availability of cash or easily convertible assets) for CDFIs, enabling them to originate more loans and support community development activities like affordable housing.
Key Provisions
- Assistance from the CDFI Fund: The Fund can provide money to organizations to:
- Buy loans, loan participations (shared interests in loans), or related assets originated by CDFIs.
- Offer guarantees (promises to cover losses), loan loss reserves (funds set aside for potential defaults), or other credit enhancements (tools to make loans more attractive to investors) to boost CDFI liquidity.
- Support other efforts to increase CDFI access to cash.
- Selection and Eligibility: The Fund decides which organizations receive help based on its own criteria. Eligible organizations must primarily focus on community development but do not need to be CDFIs themselves. Priority goes to groups with experience in loan purchases, ability to expand CDFI lending (especially by attracting private investment), and focus on broad geographic areas or underserved borrowers.
- Funding Limits: Raises the maximum assistance per organization from $5 million to $20 million, with no time limit (previously capped over any 3-year period).
- Use of Federal Funds: Clarifies that certain housing and community development funds count as federal money for this program.
- Emergency Capital Investment Funds: Redirects repayments, interest, and proceeds from emergency investments in CDFIs back into the Fund for liquidity assistance and technical support (waiving some prior restrictions).
- Regulations and Reporting: Authorizes the Treasury Secretary to issue rules for implementation. Requires annual reports to Congress from 2026 through 2028, detailing amounts spent on purchases and enhancements, effects on CDFI competitiveness, and impacts on liquidity.
Significant Changes to Existing Law
- Expands the CDFI Fund's role under Section 113 from limited technical assistance to broader financial tools like loan purchases and credit enhancements, directly targeting liquidity issues.
- Removes the 3-year rolling cap on assistance and increases the per-organization limit fourfold, allowing for larger and more sustained support.
- Alters Section 104A to recycle emergency fund proceeds specifically into liquidity and technical aid programs, rather than general use.
- Introduces mandatory annual reporting on program outcomes, adding transparency not previously required for these activities.
Potential Impacts
- On Government Agencies: The Treasury Department (via the CDFI Fund) will handle more complex financial transactions, potentially increasing administrative workload but also recycling funds to sustain the program without new appropriations.
- On Citizens: Could increase access to affordable loans for housing, small businesses, and services in underserved rural, urban, or low-income areas, benefiting borrowers who face capital shortages.
- On International Relations: Minimal direct impact, as the bill focuses on domestic community development finance.
- Overall, it may stimulate economic activity in disadvantaged communities by enabling CDFIs to lend more, though success depends on attracting private capital.
Main Stakeholders Affected
- Community Development Financial Institutions (CDFIs): Non-profit or mission-driven lenders serving underserved populations; they gain better liquidity to expand operations.
- Promoting Organizations: Non-CDFI groups focused on community development that can receive and manage funds for loan purchases or enhancements.
- Borrowers and Communities: Low-income individuals, small businesses, and areas with unmet financial needs, who may see more loan availability for housing and development.
- U.S. Treasury and CDFI Fund: Responsible for administering, selecting recipients, and reporting; they benefit from fund recycling.
- Congress: Receives reports to oversee program effectiveness through 2028.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens the CDFI Fund's statutory authority under existing federal banking laws, potentially reducing legal barriers to innovative liquidity tools like asset purchases. The new regulations provision allows flexible implementation without immediate congressional approval.
- Constitutional: Aligns with Congress's power to regulate commerce and spend for the general welfare (Article I, Section 8), supporting economic equity without raising federalism concerns, as it targets private financial institutions.
- Political: Bipartisan sponsorship (from senators across parties) suggests broad support for community development, but the focus on underserved areas could spark debates on federal spending priorities. Annual reporting enhances accountability, potentially influencing future funding decisions amid fiscal constraints. No major controversies evident in the bill text.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (6)
Sen. Crapo, Mike [R-ID], Sen. Smith, Tina [D-MN], Sen. Lummis, Cynthia M. [R-WY], Sen. Peters, Gary C. [D-MI], Sen. Hyde-Smith, Cindy [R-MS], Sen. Daines, Steve [R-MT]
Recent Actions
- 2025-09-04: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- 2025-09-04: Introduced in Senate
Bill Versions
- To amend the Community Development Banking and Financial Institutions Act of 1994 to provide for capitalization assistance to enhance liquidity. — issued 2025-09-04 — PDF (6 pages)