Change Lending loses CDFI certification | SkipLeadPro

By Ashraful Islam Updated August 29, 2023 Reviewed by Ashraful Islam
Photo Credit: BiggerPockets
Photo: HousingWire

Non-bank originator Change Lending lost its Community Development Fund Institution (CDFI) certification, according to a report from Barron’s.

Change Lending was removed from the CDFI Fund’s list of certified program lenders last week, the outlet reported. Its parent company, The Change Company CDFI, remains as one of the certified program originators. 

The CDFI certification is a designation given by the U.S. Department of Treasury CDFI Fund to specialized organizations that provide financial services to low-income communities and people who lack financing. At least 60% of a lender’s financing must target low- and moderate-income borrowers or customers in underserved communities. 

Since becoming a CDFI in 2018, The Change Company has funded over $25 billion in loans to more than 75,000 families, according to the firm. 

Because CDFIs provide credit and financial services to underserved Black, Hispanic and low-income communities, they are exempt from certain mortgage regulations.

In particular, the CDFI designation exempts lenders from complying with the Consumer Financial Protection Bureau’s ability-to-repay rule, which requires mortgage lenders to document a borrower’s income, assets, employment and credit history. 

The Change Company faces a lawsuit by a former high-ranking employee accusing the firm of retaliation after he notified executives of employees “mischaracterizing loans” to apparently skirt federal reporting requirements. 

When Adam Levine – CEO Steven Sugarman’s former chief of staff – reported illegal activity by the company’s employees in 2023 to Sugarman and other executives and board members, leadership terminated his employment, according to a suit filed by Levine in Superior Court in Orange County, California in June.

Levine also accused The Change Company of false representations to investors about the underlying characteristics of the mortgages it securitizes.

The former chief-of-staff is seeking damages for alleged wrongful termination, whistleblower retaliation and breach of contract. 

Bloomberg reported that the Securities and Exchange Commission (SEC) is probing The Change Company over its mortgage-backed securities and the regulator is also looking into some of the actions of Sugarman, citing people with direct knowledge of the matter.

Sugarman was the former chairman and CEO of Banc of California before resigning amid a SEC probe in 2017. 

The SEC declined to comment on the existence or nonexistence of a possible investigation. The Change Company nor Change Lending responded to requests for comment. 

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