Given the difficulty of having lenders notify you when a community dev ln is made...would some of you share your methods of identifying these loans in your portfolio. Any help would be greatly appreciated!! Thanks!

I start with all loans secured by multi family dwellings, all loans to non-profits that are not coded HMDA or CRA and all Tax Exempt Loans also not coded HMDA or CRA. These are just loans that can be LOOKED at, they do not automatically qualify.

Depending upon your portfolio size you can start by excluding all HMDA and CRA coded loans and consumer loans, then work from there. If you are large bank this might not be feasible.

I would start with non-consumer loans that do not qualify to be reported as a "small business loan" and focus first on the ones located in low- and moderate-income census tracts.

You shouldn't exclude the HMDA loans since multi-family loans reported on HMDA can also be reported as Community Development IF the loans meet the Community Development criteria.

Unless you have a pro-activer program to develop community development loans and investments you are not very likely to uncover any hidden jems. Why? Because much community development lending and investing is not profitable! In the Northeast (and in many other areas I suspect) the genuine community development loan and investment opportunites are gobbled up by the mega-banks who blow the competition away with extremely attractive rates to the point that virutally all my bank clients complain there is not a drop of profit in most CD activities. CD loans and invesments don't happen by accident. They happen by design! Most commercial loan officers are not even trying to develop these opportunities. And this is another dimension of the real cost of CD activities for most banks - the hidden cost of below-market rates and terms. Furthermore, I can tell you that many a CRA officer has been surprised by how many CD loans and investments have been disqualified by examiners! You absolutely must have plenty of documentation to substantiate the CD qualifications of your loan or investment or you will be in for a rude awakening. So have some cushion in the volume of your CD activities if you are an ISB.
I am not trying to debunk Bonnie's or Rie's advice or experience. I have read many of Bonnie's posts, and she knows what she is talking about. By all means, if you have little or no documented CD activity you had better start digging! You might get lucky and find a hidden jem somewhere. But that is a heck of a way to develop a level of CD activity that will muster a "satisfactory" on a CRA PE.

One area where CD lending is profitable are the Working Capital Lines of Credit over $1Million to businesses located in an Enterprise Zone or other type of zone that has been delineated by a local, state, or federal agency as being in need of revitalization.

The other area to look at is the construction loans, especially condo/townhouse type projects where a certain portion of the units are set aside for low/mod-income residents. Many cities mandate this when approving certain zoning changes and/or tract map applications because the cities are under a federal mandate to provide affordable housing.

The Commentary was changed a few years back so that banks could receive pro-rated credit for the percentage of units that will be dedicated to low/mod residents.

The hard part is to make certain you have something in the file that points out the "set-asides" as being a salient part of the loan.

Q&A's:
§§ll.12(i) & 563e.12(h)–7
§ll.22(b)(4)–1

Len does bring up a point in that is is discouraging how many loans are "tossed out" by examiners, and it may simply be because the credit write-up did not state community development as the "primary purpose" for making the loan. This is the part that tears me - if the BENEFIT to the community is the same, what difference does it make what we call it?

A rose by any other name......

Great points Bonnie!