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#1953915 - 08/17/14 04:23 PM Increase in business LOC - Different Year
Paradise Offline
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Joined: May 2008
Posts: 68
If a customer obtains a line of credit in 2013 and in 2014 they request and receive an increase in that LOC.

In 2014, would we only report the increase on our CRA LAR or the full amount of the LOC since it was made in a different year?

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#1953916 - 08/17/14 07:38 PM Re: Increase in business LOC - Different Year Paradise
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
Many questions are answered in the Q and A; this particular question is answered in the main Q and A, not the supplemental:

§ll.42(a)—5: Should institutions collect and report data about small business and small farm loans that are refinanced or renewed?

A5. An institution should collect information about small business and small farm loans that it refinances or renews as loan originations. (A refinancing generally occurs when the existing loan obligation or note is satisfied and a new note is written, while a renewal refers to an extension of the term of a loan. However, for purposes of small business and small farm CRA data collection and reporting, it is not necessary to distinguish between the two.) When reporting small business and small farm data, however, an institution may only report one origination (including a renewal or refinancing treated as an origination) per loan per year, unless an increase in the loan amount is granted. However, a demand loan that is merely reviewed annually is not reported as a renewal because the term of the loan has not been extended.

If an institution increases the amount of a small business or small farm loan when it extends the term of the loan, it should always report the amount of the increase as a small business or small farm loan origination. The institution should report only the amount of the increase if the original or remaining amount of the loan has already been reported one time that year. For example, a financial institution makes a term loan for $25,000; principal payments have resulted in a present outstanding balance of $15,000. In the next year, the customer requests an additional $5,000, which is approved, and a new note is written for $20,000. In this example, the institution should report both the $5,000 increase and the renewal or refinancing of the $15,000 as originations for that year. These two originations may be reported together as a single origination of $20,000.

§ll.42—4: Should renewals of lines of credit be collected and/or reported?

A4. Renewals of lines of credit for small business, small farm, consumer, or community development purposes should be collected and reported, if applicable, in the same manner as renewals of small business or small farm loans. See Q&A §ll.42(a)—5.

Institutions that are HMDA reporters continue to collect and report home equity lines of credit at their option in accordance with the requirements of 12 CFR part 203.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1953919 - 08/18/14 12:27 AM Re: Increase in business LOC - Different Year Paradise
Paradise Offline
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Joined: May 2008
Posts: 68
Thanks Kathleen. That was my first read as well and would believe if a LOC is originated in 2013 and receives an increase in 2014, that in 2014 we would report the entire amount, not just the increase.

Below is an excerpt from the 2013 CRA Guide. When I read this by itself it leads me to believe I would only report the increase in 2014. It does not differentiate or address different years so it's throwing me for a loop. Thoughts?


Lines of Credit
Institutions must collect and report data on lines of credit in the same way that they provide data on loan originations. Lines of credit are considered originated at the time the line is approved or increased; and an increase is considered a new origination.
Generally, the full amount of the credit line is the amount that is considered originated. In the case of an increase to an existing line, the amount of the increase is the amount that is considered originated and that amount should be reported.

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#1953920 - 08/18/14 12:37 AM Re: Increase in business LOC - Different Year Paradise
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Posts: 21,281
Within the same year, that is correct. That language is not new in the guide. The Q and A expands on the guide.

How was your line documented? A new note for the full amount with the increase?
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1953921 - 08/18/14 12:41 AM Re: Increase in business LOC - Different Year Paradise
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
FRB Webinar 2010:

http://www.philadelphiafed.org/bank-reso...2010/111710.pdf

Slide 28:

>May report only one origination (whether a refinance or renewal) per loan per year, unless an increase in the loan amount is granted
>If the loan amount increases when extending the term of the loan, always report the amount of the increase as a small business or farm loan
>Report only the amount of the increase if the original or remaining amount has already been reported (KB: or report once for total)
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1953923 - 08/18/14 01:01 AM Re: Increase in business LOC - Different Year Paradise
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
As with many regs, you cannot just read one part. You have to read all sections and piece the instructions together. Sad but true!
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1954233 - 08/18/14 08:53 PM Re: Increase in business LOC - Different Year Paradise
Paradise Offline
Member
Joined: May 2008
Posts: 68
You asked: How was your line documented? A new note for the full amount with the increase?

Yes, it was a new note for the full amount with the increase and the term was extended out beyond what was originally committed to in 2013.

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#1954241 - 08/18/14 09:01 PM Re: Increase in business LOC - Different Year Paradise
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
Then report the entire thing in the new year.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2238632 - 06/24/20 09:56 PM Re: Increase in business LOC - Different Year Paradise
Nickel0207 Offline
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Joined: Jul 2017
Posts: 30
Piggybacking off this thread-what if it isn't a new note, and rather they just signed a "change in terms" agreement?

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#2266483 - 02/16/22 07:20 PM Re: Increase in business LOC - Different Year Nickel0207
Compliance NABW Offline
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Joined: Oct 2015
Posts: 1,636
Originally Posted by Nickel0207
Piggybacking off this thread-what if it isn't a new note, and rather they just signed a "change in terms" agreement?

Doesn't sound like a renewal then or a refinancing.

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#2266484 - 02/16/22 07:33 PM Re: Increase in business LOC - Different Year Paradise
Compliance NABW Offline
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When dealing with increasing a line in the same year, do you consider any pay downs in determining what to report, i.e. you have an original line with a commitment and draw of $100,000. The lines pays down to $80,000 six months later, but the line is renewed and increased to a commitment of $125,000. Do you report a $25,000 origination for the renewal? It is my understanding that you would.

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#2266561 - 02/17/22 10:24 PM Re: Increase in business LOC - Different Year Paradise
Lori01 Offline
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Posts: 152
VT
If the original $100,000 and the later $125,000 were done in the same year and its a LINE OF CREDIT, I finder it easier to just report once, for the entire $125,000.

If it were a loan, I would report the $100,000 in one line item record and then the $25,000 in a second record.

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#2266694 - 02/22/22 07:30 PM Re: Increase in business LOC - Different Year Lori01
Compliance NABW Offline
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Joined: Oct 2015
Posts: 1,636
Makes sense because the Line is the same amount, while a closed end would likely get paid down some.

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