We have made a loan to a 87 room hotel in a LTM neighborhood. We cannot figure out the number of jobs it created for LTM people. What else can I do to show it is a CRA community development loan?

What does LTM mean?

I believe Anon 1 means Low to Moderate. Have you spoken to the developer or owner? I would assume they would know how many people they plan to employ and what the pay rates will be.

You're going to have to call the hotel to find this information out if you're going to take the "Creating jobs" tact on the deal.

But...was it reportable? I can't tell if you're talking a refi, construction, etc., from the brief question.

When writing up a loan for job creation or retention, you have to be careful not to run afoul of the reg's intention. It is not the intention to increase below market wage jobs for poor people. It's the intention to give them an ability to step up, not sideways. So, if you have a loan in a tract where there are plenty of low wage jobs, and this motel will also pay low wage jobs I would not even consider it as a CD deal. You'd embarress yourself in the eyes of any intelligent examiner. If however, there are just no jobs anywhere, so even a low wage job is a step up, go ahead and make your case, but if that is the case, back it up with information about the joblessness issue in the area so you don't look like an idiot.

So if you happen to make a loan for a hotel in low income area, how do you document it as community development loan?

http://www.bankersonline.com/tools/tools_compliance.html#cdforms

You can use the forms at the link to document CD lending for your examiners. One of the qualifying areas needs to be met though. Are they serving LMI people or geographies? Providing stability or revitalization? Housing? Jobs, (covered above) etc. If not then it's not a CD loan.

Your description of "a loan for a hotel in a low income area" is not something that would lead me to think CRA CD loan on a normal basis. Why do you think it's a community development loan? What does that motel do that causes the benefit?

Also, as mentioned before, is this a reportable loan? Is it over one million? Is it a non-profit? Is it operating cash? Is it construction? You need to clairfy what type of loan this is to determine reportability first, then move from there to think about CD.

The loan is in a low income neighborhood and our loan benefits that neighborhood. We are refinancing the deal which will enable it to continue to operate successfully and continue to provide jobs to people in the area

It sounds like a type 1 loan, which would be reportable on your annual LAR. IS this the case? (What specifically is your collateral and loan size?)

I'm also not sold yet on the value. Answer the first question (above) and if it still qualifies we can discuss the second.

The loan is over $1MM and secured by the hotel. It is not being reported for CRA/HMDA.

Ok then, sell us (because you're going to have to sell your examiner) your reasons it benefits the LMI community.

You mention that it will now be able to continue to offer jobs and operate successfully. Was it in danger of not doing so? If so, how are you quantifying that? Were they denied by another bank and are moving to your bank because you will offer the financing they so desperately need? Or is this just an annual renewal? Saying they would close if you didn't provide the debt isn't quite enough. They have other lenders they can seek to continue operations...unless you have more to share with us

And again....look at those jobs and the jobless rates in the community. What do they pay? What is the need? If the people working at the motel at below market wages could go find similar jobs in the community as similar wages, you have nothing to support your CD claim. If you can show that they were in imminent danger of closing, AND that there were no other job opportunities (or few) for the employees, or that they were in imminent danger of closing and the "high paying" jobs weren't available (I'd doubt in a motel they're high paying) you might have something.

A straight loan to any business in an LMI geography is not a CD loan. You have to support your case in a much stronger fashion.

Thank you for your support. I raised similar issues with the lenders but since I am new at this bank, I didn't want to make it personal. I agree with your questions and thanks a lot for your help.

If it helps any I rule out about 90% of the loans that my lenders think may be CD. I don't tell them this, because I don't want to discourage the little darlings

I then find the deals on my own by reviewing the portfolio. Typical year...they'll find about $2MM to $3MM and I rule out most then I find $25MM to $35MM on my own from the real CD deals they did, but didn't realize were CD

That is the truth. They are so busy counting the pennies, we can find the $$$ for them. Do you contact the borrower to get information to support your reasoning or do you just do your own research (I typically don't have much luck with borrower - they just want to impress me on how strong their credit is)

I always do my own research unless I have a relationship with the borrower. I would say that I may talk with a borrower (over a glass of wine...very casual) maybe once a year at the MOST to justify a CD deal. Most of the time I am involved prior to the bigger deals, because our lenders get a little "bonus" point in committee when I give them the CD nod of approval. If the information isn't in the file, and wouldn't be needed for a ending approval...AND isn't available on the net, I would pass on reporting it as a CD loan. This is for a few reasons, primarily because I can make a case without any effort on behalf of the clients. Secondarily because if I tell them I'm "reporting" their loan to the goverment they freak out and last but not least, I like to drink wine, but we do so many CD loans I'd be toast at the end of the week

CD loans are very competitive and hard to find in our market. So not much wine here! I scramble for anything that smells or remotely looks CD.