For this year and future years, we have to record the renewal of CRA small business loans

Questions on several fields

1. Amount -- Do we record the original balance of the loan or the balance at renewal ?

2. Action Date -- the date or the renewal of the loan as reflected in the loan history on our mainframe or the legal date of the document - in this case an allonge ?

Thanks

Record the renewal date. You get to report it again because you re-extended the credit. That makes the decision to renew the important time. Of course, your files should show the loan's full history.

Also, report the amount of credit when renewed. This is the amount of credit in question for this year's CRA report.

Additional Question:
If I have a Small Business loan (not a line of credit)originated at $50,000 and it is paid down to $30,000, and in the first quarter of this year it was renewed at $50,000. I now count this as the one renewal for CRA reporting purposes as $50,000.

Now in the third quarter of this year the borrower comes back and wants to increase the loan to $90,000 and the balance has again been paid down to $30,000. Is the amount of increase reportable as the $40,000 amount over the original amount of $50,000, or is it $60,000 as the balance has been paid down, and I am actually putting another $20,000 back in the community in addition to the $40,000 increase over the original amount?

This year, you would would report the $50,000 original note, the $40,000 increase, then next year, you could report the $90,000.

My question is, how are you working your systems to just recognize the increase amount mid-year?

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The opinions expressed are not necessarily those of my employer.

I called a regulatory agency, and was advised strongly that I should report the amount from the balance renewed to the increased amount, or the $60,000. My comment was that in order to do this I would need to know the balance at renewal on all reportable loans. To track this increases labor and cost and I would prefer to take a more conservative approach and report just the $40,000. I was told I was short changing the bank, but probably not in violation of a regulation.

It seems you could report the $60,000 but I don't think regulators have thought through what it would take to do this.

I was wondering what other are doing and appreciate your comments.

We will be keeping track of increases manually until I can figure out a way to do it on ITI. If there are any ITI users out there that have figured this out, I would love to hear from you.

Dolly Nugent
VP/Compliance Officer
Citizens Business Bank

I too am at a loss to figure out how our Bank’s system is supposed to accurately capture the renewal and extension loan data. We just converted to Jack Henry in March of this year. Like Dolly, I am tracking our extensions manually for the time being—since no one else here seems to know how to do it using the system either.

I really can’t believe that more banker’s didn’t comment on how complicated it would be to collect this renewal data under the new rules. It is absolutely ridiculous. I mean, they act like they are doing banks a favor by allowing them to report it; but the way they structured the collection rules makes it one of the most complicated tasks imaginable.

If there are other Jack Henry users out there, I could sure use any advice on how to do this.

Thanks everybody. I’ll get off my soapbox now.

I'm not sure about the Jack Henry system, but we have ITI. We have built a "pull-file" that runs the first Monday of each month that we then download into CRA Wiz.

With CRA Wiz, I can tag all loans that have the same loan number. If we do a renewal, or a renewal for a larger amount, I can build a querry for loans that have the same loan number but a different amount.

If you have CRA Wiz, contact the folks at PCi - they are usually very helpful in helping you build import formats and database querries that can help automate a lot of scrubbing.

I am working on a very detailed, click by click procedure for our monthly download of loans. Our pull file is cumulative for the year, so if we made a loan in January, and then increased the loan in July, I should be able to catch the increase in a normal course of scrubbing the data.

Otherwise, if two files with the same loan number have the same action date and the same loan amount, I can delete one as a duplicate record.

If you don't have CRA Wiz, see if your IT department can help you out with a database management program such as Access or FoxPro. It's really a matter of downloading the information from your data processor into a database and then doing some basic database management "scrubs" to get where you want to be.

Would you please clarify the reporting of renewals:

Scenario #1
If I make a new $50,000 loan today (May 15, 2001) and renew the $50,000 loan on August 15, 2001, would only the origination be reported or both the origination and renewal?

Scenario #2
If I make a new $50,000 loan today and renew the $50,000 loan and add an additional $10,000 ($60,000 total) on August 15, 2001, would the $50,000 origination be reported and the $10,000 in new money?

Scenerio 1: Only the original $50,000 would be reported - no new money at renewal so nothing to report at that time. (If the renewal occurs in 2002, then the entire amount is reported again at that time).

Scenerio 2: Count the original $50,000 and then $10,000 for the new money.

What if in Abel's scenario #2 the balance at renewal was $25,000?

The $50,000 loan was made on 5-15-01. On
8-15-01 the balance is $25,000. At that time the bank renews the remaining balance of $25,000 and increases it another $10,000 (total note=$35,000). I know the $50,000 new loan would be reported as an origination on 5-15-01. Would the $10,000 increase be reported on 8-15-01?

Here's another situation. The bank originates a $100,000 line of credit on 5-1-01. On 12-1-01 the bank renews the current balance of $50,000 and advances the borrower an additional $50,000 (total note= $100,000). The $100,000 would be reported on 5-1-01, but what would be reported as of 12-1-01...the $50,000 increase?

Thanks for the clarification!

Bonnie M. this is a question for you, or anyone else who is using ITI. Does ITI do your geocoding for CRA data? We just went through an exam and found out that ITI only geocodes the address of the business. They are not using the address of the collateral. We process thousands of loans. I can't afford to look each one up by hand!
How do you do it? HELP!!!!!!!!!

I don't rely on ITI for geo-coding. I use CRA Wiz, and use the sort and filtering tools within Wiz to help in my data scrub.

I am only concerned with collateral address if the loan is secured by real estate. I download additional fields of information from ITI including Call Code, Purpose Code, and collateral description. A real estate loan will show the address in the collateral description field.

Here is my protocol for dealing with RE loans:

 Revue all loans with a Purpose Code 190 since these are reported on the Call Report as Non-Farm, Non-Residential Real Estate Loans.
 Check if the Real Estate Collateral Address is the same as the address that was geo-coded.
 If the Real Estate Collateral Address is different, then determine if the loan proceeds were used at the business address on ITI or at the Collateral Address.
 If the funds were used at the Collateral Address, then change the geocoded address on the Submission Register accordingly and re-geocode.

I use the Wiz geocoder to geo-code or re-geocode records. I print out a report that lays the geo-coded address field next to the collateral field so I can quickly scan if the address is the same or different.

If the address is different, I do a manual input of the address into the field that Wiz uses for Geocode and hit "single record geo-code" to correct the data.

Using the sorting, filtering, and replacement commands in Wiz, I can take care of about 90% of any issues that may arise in the data. The other 10% still requires manual follow-up for clarification, usually with the account officer.

Scott in answer to your first question:

If you renew a loan (not a line of credit) you report the $50,000 on 5/15 and on 8/15 you repot $10,000.

If you are renewing a line of credit, but instead of renewing it at the original limit of $50,000, you reduce the credit line to $35,000--you only report the $50,000.00. This applies if the renewal and the origination take place in the same year.

In answer to your second question:

You can only report the credit line once a year -- unless you actually increase the amount of the line. The balance left available or owed at the time of the renewal is not relevant because it is a line of credit.

Bonnie,

You stated, "I am working on a very detailed, click by click procedure for our monthly download of loans. Our pull file is cumulative for the year, so if we made a loan in January, and then increased the loan in July, I should be able to catch the increase in a normal course of scrubbing the data. Otherwise, if two files with the same loan number have the same action date and the same loan amount, I can delete one as a duplicate record."

Since two files can have the same loan number how would you handle the situation where loan #123 is originated for $50,000 on 1/01. Then, on 7/01 the borrower renews the $30,000 remaining balance of loan #123 plus the borrower obtains an additional $50,000. Loan #123 is now $80,000. Would you report Loan #123 for $80,000 with an action date of 7/01 (since it is the larger) OR would you report two loans. If two loans are reported then I am assuming that would require two different loan numbers. I would appreciate your response.

Scott - fair enough question - and here's my protocol:

The first loan is reported as $50,000.

The renewal is reported as $30,000 and I add an "A" at the end of the loan number.

The reason the second loan is reported as $30,000 is this: If the renewal had been done for the original balance amount of $50,000, I would not report the renewal in the same year as the original loan since there was no increase in the total credit facility. The fact that the borrower had paid the loan balance down to $30,000 is not relevant. Therefore, for an increase with renewal, I would only report the amount that exceeded the original credit facility.

Now if that same loan renews NEXT year for $80,000 - I would only report one loan at $80,000.