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Change Lending Wins Temporary Reprieve On Decertification

Christine Stuart
Sep 15, 2023

Judge allows major loan originator to maintain its offerings until December, challenging CDFI Fund's move based on alleged miscalculations.

U.S. District Judge James V. Selna has intervened to allow Change Lending, a major non-bank loan originator, to continue its mortgage offerings for underserved borrowers until at least early December. This decision comes in response to the Community Development Financial Institutions Fund's move to revoke Change's certification earlier this month.

While the Treasury Department has agreed to delay any formal opposition, a hearing on this issue has been set for Dec. 11.

Change Lending contested its decertification in a California federal court, asserting that the decision was based on incorrect calculations. According to reports, Change narrowly missed a financial threshold set by the fund. 

In an official statement, Change expressed gratitude for the court's intervention and emphasized its commitment to address what it termed the CDFI Fund's "flawed analysis and mathematical errors." The company also highlighted its significant lending to underserved communities.

Change Lending, with $4.2 billion in volume last year, has been associated with the fund since 2018. Steve Sugarman, previously with Banc of California, founded the company.

There have been controversies involving Change. In June, an ex-employee filed a lawsuit against the company, alleging misrepresentation of its clientele. 

Reports earlier this year highlighted Change's dealings with high-profile clients like Johnny Depp. At the same time, the company itself claims to have provided significant loans to low-income borrowers and areas of persistent poverty.

According to the complaint filed in federal court, the company has provided $6.8 billion in lending to low- to moderate-income borrowers, $1.3 billion in lending to persistent poverty areas, and $3.1 billion in lending to first-time homeowners. It says that over 60% of borrowers are minorities, low-income individuals, and borrowers in low-income communities. 

"The loss of regulatory flexibility that comes with the CDFI certification will severely and disproportionately impact these underserved communities," the company states. 

Change has blamed mathematical errors for its decertification, pointing to a limited number of loans that potentially led to the fund's decision. They argue that their data was misinterpreted, especially concerning income calculations for their borrowers.

Change says the CDFI terminating its status on Aug. 17 was "without due process, based on arbitrary and capricious grounds, and based on unsupported and incorrect findings." 

Sep 15, 2023
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