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#1611144 - 09/30/11 04:01 PM CIP on purchased SBA guaranteed portion of loan?
Chocaholic Offline
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We have just begun purchasing some USDA & SBA guaranteed portion of loans and are trying to determine if we must request CIP information from the originating bank. What is our risk if we don't, and is this likely to be an exam comment?

We do obtain information on our participations purchased however, senior management feels it is a gov't backed investment, and they did the due diligence and we should be able to rely on that.. your thoughts would be appreciated.

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#1611161 - 09/30/11 04:16 PM Re: CIP on purchased SBA guaranteed portion of loan? Chocaholic
Princess Romeo Offline

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Review the CIP regulation on what does and does not constitutes an "account" wherein CIP is required:

ยง 1020.100 Definitions.
Quote:
(2) Account does not include:

(i) A product or service where a formal banking relationship is not established with a person, such as check-cashing, wire transfer, or sale of a check or money order;

(ii) An account that the bank acquires through an acquisition, merger, purchase of assets, or assumption of liabilities; or

(iii) An account opened for the purpose of participating in an employee benefit plan established under the Employee Retirement Income Security Act of 1974.
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#1611167 - 09/30/11 04:21 PM Re: CIP on purchased SBA guaranteed portion of loan? Chocaholic
Elwood P. Dowd Offline
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As noted, the whole "government backed" thing is irrelevant...the regulation simply doesn't apply. That's fine for BSA purposes, but in a safety and soundness environment, it's a good thing when you can identify the borrower.
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#1611200 - 09/30/11 05:03 PM Re: CIP on purchased SBA guaranteed portion of loan? Elwood P. Dowd
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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As a banker, for BSA and S&S purposes on participations, we obtained and reviewed copies of the lead banks CIP procedures and required an attestation of compliance.

If we wanted more, we asked for it.
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#1611254 - 09/30/11 05:58 PM Re: CIP on purchased SBA guaranteed portion of loan? Kathleen O. Blanchard
Chocaholic Offline
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Northwest
Thank you, we also require CIP information on Participation loans from the lead bank, but somehow, sr. mgmt. figured this was different.

Thank you for your thoughts.

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#1618537 - 10/21/11 01:52 PM Re: CIP on purchased SBA guaranteed portion of loan? Chocaholic
Chuck Finley Offline
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Chuck Finley
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Question... Since participation loans are exempt, do we have to put CIP language in the contract and receive annual certifications from the lead bank? If participations are exempt, what are our obligations for CIP with participation loans?

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#1618591 - 10/21/11 03:23 PM Re: CIP on purchased SBA guaranteed portion of loan? Chuck Finley
Elwood P. Dowd Offline
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Per the definition provided by the Princess, purchased loans are exempt. That includes some, but not all participation loans. If your bank was involved in the initial credit decision on a participation loan you have no argument that the loan was purchased.

If it's a purchased loan CIP simply doesn't apply. Kaybee's requirements for certifications etc. simply reflect an abundance of caution.
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

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#1618604 - 10/21/11 03:34 PM Re: CIP on purchased SBA guaranteed portion of loan? Elwood P. Dowd
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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We required such information as part of understanding with whom we were doing business - were all of their processes up to snuff such that we were willing to join in on a deal with that bank in the lead position.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1618662 - 10/21/11 04:30 PM Re: CIP on purchased SBA guaranteed portion of loan? Kathleen O. Blanchard
Chuck Finley Offline
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Chuck Finley
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Thank you both for your responses!

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