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#1788039 - 02/21/13 05:57 PM
Loans under a guidance line/master approval line
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New Poster
Joined: Mar 2011
Posts: 22
Texas
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Can someone please help me? Are individual loans, that are under a guidance line/master approval line, reportable as small business loans for CRA?
The guidance line may be over $1,000,000 but the individual loans are under that amount.
Thank you in advance!
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#1788068 - 02/21/13 06:36 PM
Re: Loans under a guidance line/master approval line
BeachBum-nxtlife
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Gold Star
Joined: Nov 2011
Posts: 378
Texas ...
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I have never reported a GLOC, because the way we handled them it was basically a pre-approval for a builder for a certain amount. Rather than having to take each loan to committee every single week, they just approved a large amount and then reported the smaller loans made under the GLOC however those loans were styled.
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#1788363 - 02/22/13 03:21 PM
Re: Loans under a guidance line/master approval line
BeachBum-nxtlife
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Gold Star
Joined: Nov 2011
Posts: 378
Texas ...
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Yes, agree with KB. I forgot to mention that part.
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Can't is not an option.
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#1788561 - 02/22/13 07:43 PM
Re: Loans under a guidance line/master approval line
BeachBum-nxtlife
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Diamond Poster
Joined: Oct 2004
Posts: 2,084
Connecticut
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Guidance lines are not legally binding. They are an internal control mechanism. Therefore, advances under a guidance line are considered separate credit extensions for purposes of determining small business qualifications. Each advance would be separately determined for its small business qualifications.
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#1831383 - 07/09/13 07:20 PM
Re: Loans under a guidance line/master approval line
Len S
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Gold Star
Joined: Nov 2007
Posts: 437
Nevada
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I am being told that the guidance line amounts are to be reported, not the loans themselves. I am being told this is what FDIC auditor is saying. I don't agree with this. But am being told the reason is because we give a formal commitment letter to the customer for the full amount, rather than an informal commitment, whatever that means.
I know CRA data is driven by the the Call report. So tell why would a guidance line would be reported hen the loans themselves are not supposed to be? Can someone point to me any written info that specifies how to correctly report guidance lines? Thanks
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#1831434 - 07/09/13 08:20 PM
Re: Loans under a guidance line/master approval line
BeachBum-nxtlife
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Gold Star
Joined: Jun 2002
Posts: 255
Southeast Michigan
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I am trying to sort out a similar situation in our commercial lending area. There are a variety of arrangements called umbrella lines, master lines, guidance lines, and floor plan lines. They all look like lines of credit when set up on our loan system. Then there are term loans booked that draw on the line.
However I am finding that, in some cases, there is a note executed with the line and the "term" loans do not have associated notes. They are essentially draws we book for ease of administering the loan. In this case I believe that I should book the line as a small business loan (assuming less than or equal to $1MM) and not book the term loans. If there is a business agreement executed with the approved line, but no note, I would count the term loans, which have individual notes. I am following the rule: "Follow the note". Does that sound like the right approach?
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#1831437 - 07/09/13 08:23 PM
Re: Loans under a guidance line/master approval line
BeachBum-nxtlife
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Gold Star
Joined: Nov 2007
Posts: 437
Nevada
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We have a commitment letter and a note, so guess that would then require us to count the line, I guess.
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#2129586 - 05/08/17 05:52 PM
Re: Loans under a guidance line/master approval line
BeachBum-nxtlife
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Member
Joined: Nov 2013
Posts: 54
USA
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We have two borrowers where there is a master line of credit note (in this case both loan amounts are greater than $1 million) that the borrower has signed. The "subnotes" do not have individual notes. The master notes are on our core system and only track the availability on the line. The principal balance remains at zero. So, the master notes are never reported with a balance on the call report, however the subnotes are reported on the call report but don't have a promissory note. If I am understanding correctly the above comments in this thread, I should not report the subnotes because they don't have a promissory note even though they are being reported on the call report because they are part of a larger commitment that does have a promissory note.
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#2130355 - 05/12/17 07:54 PM
Re: Loans under a guidance line/master approval line
Comply13
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Gold Star
Joined: Jun 2002
Posts: 255
Southeast Michigan
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It sounds like there needs to be a discussion with whoever decided not to post the master line balance for the call report. If they are approved commitments backed by promissory notes, then we would report those as small business loans if under $1 million. What you are calling a subnote, is actually a draw on the line that we wouldn't report, since there is no note.
We have some arrangement like that, but others where the master line is a commitment without a note, and the "draws" have individual notes. In those cases we report the draws/subnotes and not the master line.
Doing this requires some sort of coding or reporting when the loans are booked to provide you with the ability to tell which is which.
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My comments and opinions are my own, not my employer's.
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