Anonymous because my regulator knows that I use this site!
Here is my issue:
I have a number of small business loans which we do not collect financial statements from the borrower. These are mom and pop shops dba and we are a small rural community so we know the customer and the business and know that they have revenue under $1 million. My problem is that in many cases because it is a small loan and we know the customer we don't require financials so when doing a data integrity review I can not confirm that revenues are under $1 million.
We are an OCC regulated bank and upon their last data integrity review they suggested a form to put in the file with the customer's name and two check boxes, one for revenue over a million and one for revenue under a million which the customer is supposed to date and sign. They said that this would be confimation as to the revenue.
During my recent review. I have just over 5% of the loans I reviewed which are missing this revenue form.

Me again. I forgot to ask my question...
What do I do now? I don't think that this should require a complete overhaul of the data, everything else seems to be in order.
Anyone else have any thoughts? Anyone have any other ways that they use to verify GAR of these small businesses?

The real problem is the banks decision to not obtain a financial statement, or verify income, and inventing short cuts to circumvent sound lending practices. These so called short cuts are causeing you more problems than they are worth.

The problem as described is of the banks own makeing and
The solution is simply to follow the banks procedure and get your borrower to sign the form the examiners very kindly suggested.

I would mail them out to the borrower and get your file documented, rather than looking for another way to circumvent a process.

And to add to Don's comment

I would not use this form if I was not asking the revenue question. (Of course I'm not the type of lender to not ask for financials either so you have to factor that in). If my lenders were allowed this type of discression, my reporting as a CRA LR manager would be a revenue code 3, since obviously if you're not asking about financials, you can't be relying on them.

You're lucky your examiners gave you a chance to fix this. I personally would go change all the 1's that you really didn't know to 3's and leave it at that. If your lenders are too lazy to ask for financials (Not prudent lending mind you) then you should not be bothering your clients for that information later.

We are lucky that we can get by with this I guess.
I don't make up commercial lending policy. I just have to deal with it. I guess I was hoping that someone else from a small town bank would have some insight as to how they deal with these types of loans.
(Don...this is a real question, from a real registered BOL poster. I am not playing a game, just so you know)

And just to clear up the waters I'm a small town bank too. Credit quality is important to all of us, if we're $200 million or $5 billion, we still have to sit through credit quality exams. This is the type of thing a junior lender might try to get away with, but even in a small town, it's a bad credit policy and will eventually get you in hot water.

But if your bank does not listen to your advice in that area, they can at least listen to CRA compliance issues, of which this is an important one. Not obtaining financial statements leads to a lot of rev code 3's, which will be an issue in a data integrity exam.

I must have been having a bad day. The big thing in Las Vegas these days is the scams pulled on new home owners by fly by night contractors. I spent most of the day trying to find ones that don't fly by day or night. So my mind set in viewing posts was probably not in the right place.

I apologize for doubting you.

BUT please get the financial statements or a copy of a tax return. Its really not unreasonable to ask a borrower to provide one. Besides you may know they make less than 1 million but how do you know they make enough to pay the loan?

Dawnie,

I would love to attend. Unfortunately (or fortunately), I will have to settle on the webinar. Currently my bank relies on a whole slew of people to do CRA reporting, entry, audits and evaluations. Yet not one person could tell me what a CRA loan was. Perhaps no one wanted to speak up in the event they were wrong, but had a good idea of what CRA is.

Is there any cheat sheet anyone has made that will help with what normally qualifies as CRA? What exeptions exist and what is definately not CRA?

Well good news is, when you finally have a CRA exam and fail miserably, your management will decide to make a real effort, unlike what is happening now. I've seen it time and time again unfortunately Bad news is...heads often roll, and they're often folks like you, so CYA!

Is there a cheat sheet No. You need to combine call report definations as well as CRA Getting it Right to figure out what is reportable for CRA and what is not. Your purpose codes should be defined to specific CRA options, which you'll be able to decipher after reading the call report section on reporting. For instance, A purpose code 191 at my bank can only choose a 3 or a 9 type code for CRA. Our system spits out all type 1 with a 191 purpose code. (Tax exempt loans). Hopefully you have something similar in place and only need to add the CRA piece.

If you are looking for a general "cheat sheet", try this from the Dallas Fed - you can access it from the FFIEC website at:

http://www.ffiec.gov/cra/pdf/cra_loandatagrid.pdf

There are a couple of other useful items at:

http://www.ffiec.gov/cra/reference.htm

That reference sheet Bonnie was kind enough to provide is a nice training tool for beginning lenders I didn't provide that because it's not nearly complete enough to be using for data integrity purposes, so be sure you use it in the right context.