The CDFI Fund Crisis: What’s Actually Happening and What to Do Now

The Trump Administration intends to lay off every employee of The CDFI Fund. Here’s what that means for community lenders, and what it doesn’t.

The termination notices hit every inbox at once. All 102 staff members at the Treasury’s Community Development Financial Institutions Fund received reduction-in-force notices, with terminations effective December 13. It’s the first mass federal layoff during a government shutdown in modern history.

But let’s be clear about what’s happening on the ground: CDFIs are still making loans. They’re still serving their communities. Their certifications remain valid. The immediate crisis isn’t about CDFIs shutting down. It’s about losing the infrastructure that keeps new capital flowing and provides critical guidance during one of the busiest funding cycles of the year.

The Operational Reality: Making Hard Work Harder

CDFIs must continue to fulfill their annual compliance, certification, and other reporting obligations during the federal government shutdown. The online systems remain accessible. Applications in process can still be submitted. But here’s the catch: The AMIS Help Desk can only respond to technical issues. They cannot answer questions about programs, compliance, or certification.

Think about what that means for a CDFI loan officer in rural Southwest Georgia trying to navigate a complex compliance issue. Or a young CDFI working through their first certification renewal. The expertise they rely on has vanished overnight.

Jim Nussle from America’s Credit Unions put it plainly: “Cutting this staff would effectively cease the operations of the fund.” Not the CDFIs themselves, but the Fund. That distinction matters less when you realize there’s $348 million in already appropriated funding waiting to be distributed, including $100 million specifically earmarked for housing production.

Why the Timing Couldn’t Be Worse

The Federal Reserve’s 2025 CDFI Survey tells a story that should alarm anyone who cares about economic opportunity. Nearly 75% of CDFIs saw demand increase in 2024 and expect continued increases throughout 2025. This surge isn’t abstract. 88% of CDFIs said increased demand came from new customers, while 68% reported expanded needs from existing customers. In general, these aren’t folks shopping for better rates. Inability to afford loan terms was the most cited borrower qualification challenge, affecting 65% of respondents. These are families and small businesses who’ve been told “no” everywhere else, turning to CDFIs as their last hope for fair financing.

Meanwhile, nearly half of CDFIs report that they lack the staff capacity to offer the development services their clients need. The financial coaching, business planning support, and technical assistance that often make the difference between success and failure. Now they’re losing their federal partners who help coordinate resources and funding to address these gaps.

Here’s what makes this decision economically baffling: CDFIs catalyze at least $8 in private funding for every federal dollar. Treasury Secretary Scott Bessent himself acknowledged that all CDFI programs are statutorily mandated. They can’t legally be abolished through executive action.

Cathie Mahon from Inclusiv called this move “not only improper, as the Fund has a statutory mandate to fulfill,” but “incredibly shortsighted and harmful economic policy.” The math backs her up. CDFIs provide over $300 billion in financial services annually. Cutting 102 federal positions to save perhaps $15 million in salaries puts at risk an ecosystem that generates billions in community investment.

Investors & CDFI supporters can sign on to a Letter of Support by Wednesday, October 29th.

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What’s Really at Stake: A View from the Ground

Let me paint you a picture of what this means in practical terms. In Louisville, Kentucky, entrepreneurs who can’t get traditional bank loans turn to LHOME, a CDFI loan fund. “We work with those small businesses that are simply not in a position to go to traditional banks,” CEO Keith Talley told Marketplace. Usually, because of credit issues. “Service businesses, retail, restaurants, trucking firms. You name it and we’ll take a look at it.” LHOME’s story is mirrored here in Georgia, where dozens of CDFIs throughout the state are working under increasingly strained conditions.

Here’s what many people miss. It’s not just about the federal grants. Talley explains that CDFI certification itself opens doors: “That certification helps when we are applying for loans from other funders. They like knowing that there is a third party that’s making sure that we, as a CDFI, are lending in the neighborhoods and doing the type of lending that we said we were going to do.” Without that federal validation, raising capital for Louisville entrepreneurs gets exponentially harder.

In Native communities, where Pete Upton leads the Native CDFI Network, the stakes are even higher. “It would be devastating,” he told Marketplace. The Fund represents the only federal program designed specifically to support Native financial institutions serving tribal communities. Institutions that cater to Native borrowers’ needs in ways commercial banks simply won’t.

For the 750,000 federal workers on unpaid leave, credit unions are already stepping up. Valley Strong Credit Union rolled out 0% interest loans. AmeriCU offers penalty-free loan postponements, but these emergency measures address symptoms, not the disease. The deeper risk, as TurmaFinTech CEO Adam Turmakhan warned, is systemic: “Slashing capacity at key regulators will only leave more room for risk.” We saw what happened in 2023 with Silicon Valley Bank and Signature Bank. Now imagine that vulnerability spreading to institutions serving our most economically fragile communities.

This isn’t just about 102 federal jobs or even the $348 million in pending awards. It’s about whether we believe underserved communities deserve access to fair, affordable capital.

Michael Swack, the University of New Hampshire expert who helped create the CDFI Fund during the Clinton administration, points to an inconvenient truth for those making this a partisan issue: “States that get the most per capita support are rural and red.” This has never been about politics. It’s been about communities that markets have failed.

Without anyone to run the CDFI Fund, Swack warns that “some newer and smaller lenders that rely on it would fold. Others would have to scale back in communities where capital is already hard to come by.” These aren’t abstract projections. They’re based on 30 years of watching how community finance actually works.

The demand data confirms what practitioners already know. Nearly 75% of CDFIs saw demand increase in 2024 and expect continued increases throughout 2025. In 2025, 95% of CDFIs plan to grow their customer base, 87% want to increase financing, and 57% aim to expand geographically. They see the need. They have the tools. They just need the federal partnership to remain intact.

On October 22, the National Association of Affordable Housing Lenders (NAAHL) sent a letter to Treasury Secretary Bessent and the Office of Management and Budget Director Russell Vought calling for the reinstatement of CDFI Fund staff. Additionally, NAAHL, American Bankers Association, Community Development Bankers Association, the Independent Community Bankers of America, the Mortgage Bankers Association, and the National Bankers Association issued a joint letter urging that The CDFI Fund maintain necessary staff and funding to carry out its mission effectively.

What Happens Next & What We Can Do Before December 13

Update: A federal judge has temporarily blocked the Trump administration from firing thousands of federal workers during the shutdown, including the CDFI Fund staff. This gives us breathing room, but the fight isn’t over. The lawsuits by federal workers’ unions and pushback from Republicans in Congress offer hope, but we can’t rely on courts alone.

If December 13 arrives without intervention, the immediate impact will be operational chaos. Pending applications will stall. Compliance questions will go unanswered. The FY 2025 funding round with its innovative $100 million housing production initiative will freeze.

But CDFIs won’t disappear. These institutions have survived for decades, through multiple administrations, economic crashes, and natural disasters. They’re embedded in their communities in ways that transcend federal funding cycles. The question is whether we’ll force them to work harder with less support at precisely the moment when demand for their services has never been higher. Whether we’ll dismantle an 8 to 1 return on investment to save what amounts to a rounding error in the federal budget.

MD|DC Credit Union Association president John Bratsakis captured what’s happening on the ground: “From day one, even hour one, credit unions were putting members first. That’s what credit unions do every day.” That spirit won’t change, regardless of what happens on December 13. But imagine what these institutions could accomplish if we stopped making their jobs harder and started giving them the tools they need to meet this moment of unprecedented demand.

The clock is ticking. The bipartisan coalition is mobilizing. The economic case is clear. Now it’s on us to act before December 13 turns from a deadline into a death knell for community finance infrastructure that took three decades to build.

The CDFI Fund Crisis: What’s Actually Happening and What to Do Now

The Operational Reality: Making Hard Work Harder

Why the Timing Couldn’t Be Worse

What’s Really at Stake: A View from the Ground

What Happens Next & What We Can Do Before December 13

If You Run or Work at a CDFI

If You’re a Bank or Corporate Partner

If You’re an Investor, Business Owner, Etc.

If You’re a Policymaker or Advocate

The CDFI Fund Crisis: What’s Actually Happening and What to Do Now

The Operational Reality: Making Hard Work Harder

Why the Timing Couldn’t Be Worse

What’s Really at Stake: A View from the Ground

What Happens Next & What We Can Do Before December 13

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