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#1601759 - 09/09/11 05:01 PM Community Development Loan
cra123 Offline
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Joined: Dec 2009
Posts: 13
We are looking at a warehouse line of credit for an NSP loan pool. We recognize that because it is part of the NSP program it has CD as a primary purpose but I'm wondering if the line must be greater than a $1 million to qualify as a CD loan. Borrower is a nonprofit and mortgages made under the line will be assigned to us until packaged and sold off to an investor pool to pay down the line. We are an OCC institution.

Any thoughts?

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CRA
#1602600 - 09/12/11 09:13 PM Re: Community Development Loan cra123
bOaty Offline
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bOaty
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What is the security for the line?
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#1606737 - 09/21/11 07:15 PM Re: Community Development Loan bOaty
cra123 Offline
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Posts: 13
Assignment of mortgages made under the line.

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#1606770 - 09/21/11 07:38 PM Re: Community Development Loan cra123
Princess Romeo Offline

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A loan with a CD purpose can be reported as a Community Development Loan unless it meets the definition of "small business loan" as found in the Call Report.

Quote:
For purposes of this schedule, "loans to small businesses" consist of the following:
(1) Loans with original amounts of $1 million or less that have been reported as “Loans secured by nonfarm nonresidential properties” (in domestic offices) in Schedule RC-C, part I, items 1.e.(1) and 1.e.(2), column B, and
(2) Loans with original amounts of $1 million or less that have been reported in Schedule RC-C, part I:
 On the FFIEC 041 for banks with less than $300 million in total assets, item 4, column B, "Commercial and industrial loans;"
 On the FFIEC 041 for banks with $300 million or more in total assets, item 4.a, "Commercial and industrial loans to U.S. addressees;" and
 On the FFIEC 031, item 4.a, column B, "Commercial and industrial loans to U.S. addressees” in domestic offices.


Loans to non-profits, unless secured by real estate, are not considered "small business loans" because they do not fit the requirements for line 4a of the Call Report. Any loan that has a CD purpose that is not otherwise reportable as a Small Business Loan can be reported as a Community Development loan.

Assignment of mortgages is not the same as being directly secured by real estate.

From the Call Report Instructions for Line 4(a):

Quote:
Exclude from commercial and industrial loans:
(1) Loans that meet the definition of a “loan secured by real estate,” even if for commercial and industrial purposes (report in Schedule RC-C, part I, item 1).
(2) Loans to depository institutions (report in Schedule RC-C, part I, item 2).
(3) Loans to nondepository financial institutions such as real estate investment trusts, mortgage companies, and insurance companies (report in Schedule RC-C, part I, item 9.a).
(4) Loans for the purpose of purchasing or carrying securities (report in Schedule RC-C, part I, item 9.b).
(5) Loans for the purpose of financing agricultural production, whether made to farmers or to nonagricultural businesses (report in Schedule RC-C, part I, item 3).
(6) Loans to nonprofit organizations, such as hospitals or educational institutions (report as all other loans in Schedule RC-C, part I, item 9), except those for which oil or mining
production payments serve as collateral which are to be reported in this item.
(7) Holdings of acceptances accepted by other banks (report in Schedule RC-C, part I,item 2).
(8) Holdings of the bank’s own acceptances when the account party is another bank (report in Schedule RC-C, part I, item 2) or a foreign government or official institution (report in Schedule RC-C, part I, item 7).
(9) Equipment trust certificates (report in Schedule RC-B, item 6, "Other debt securities").
(10) Any commercial or industrial loans held by the reporting bank for trading purposes (report in Schedule RC, item 5, "Trading assets").
(11) Commercial paper (report in Schedule RC-B, item 5, "Asset-backed securities," or item 6, "Other debt securities," or in Schedule RC, item 5, "Trading assets," as appropriate).



SOAPBOX MOMENT:
It really is absurd when a bank must go counting all these angels dancing on a pin in order to determine if the loan that clearly has a Community Development purpose can actually be REPORTED as Community Development. IMHO - those who drafted the "new" CRA regulation took the lazy way out when crafting definitions for what is small business - or at the very least, they should have carved out a Community Development exception.

I recall reading some Community Activist report that decried the fact that Bank's were "only" making Community Development loans of more than $1Million - to them a clear indication that banks did not want to get involved with smaller neighborhood efforts. crazy
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