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#2118968 - 02/21/17 05:55 PM CD Secured Loans
KelliD Offline
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Joined: Jun 2015
Posts: 62
Per our loan policy, we do not require income information on loans that are 100% cash secured as in the case of CD (Certificate of Deposit) Loans. On a recent audit it was noted that we should report our GAR on these types of loans as a "3" since we do not rely on income for the credit decision. Per the Q&A below I thought we were suppose to use any financial info in the file to report. Has anyone run into a problem with this?

§ll.42(a)(4)—4: When indicating the gross annual revenue of small business or small farm borrowers, do institutions rely on the gross annual revenue or the adjusted gross annual revenue of their borrowers?
A4. Institutions rely on the gross annual revenue, rather than the adjusted gross annual revenue, of their small business or small farm borrowers when indicating the revenue of small business or small farm borrowers. The purpose of this data collection is to enable examiners and the public to judge whether the institution is lending to small businesses and small farms or whether it is only making small loans to larger businesses and farms. The regulation does not require institutions to request or consider revenue information when making a loan; however, if institutions do gather this information from their borrowers, the Agencies expect them to collect and rely upon the borrowers’ gross annual revenue for purposes of CRA. The CRA regulations similarly do not require institutions to verify revenue amounts; thus, institutions may rely on the gross annual revenue amount provided by
borrowers in the ordinary course of business. If an institution does not collect gross annual revenue information for its small business and small farm borrowers, the institution should enter the code ‘‘revenues not known.’’ See Q&A §ll.42(a)(4)–2.

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#2119082 - 02/22/17 03:03 PM Re: CD Secured Loans KelliD
RR Jen Offline
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RR Jen
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I've not ran into that issue. You mentioned "income information"...they didn't site you for using any personal income vs business revenue did they? I'm guilty of using "income" when I really mean revenue, so I wanted to check.

We don't require any revenue information on CD loans either, so they are almost always 3. However, if we happen to have the GAR from another loan that year and my lender "knows his borrower", I've asked them to include it.
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#2119090 - 02/22/17 03:35 PM Re: CD Secured Loans KelliD
KelliD Offline
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Joined: Jun 2015
Posts: 62
They sited us for reporting GAR on the business when we don't require financial info for the credit decision. Our understanding is if we have financial information then we CAN and should use it.

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#2119120 - 02/22/17 05:07 PM Re: CD Secured Loans KelliD
RR Jen Offline
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RR Jen
Joined: May 2003
Posts: 3,759
Running and riding everywhere ...
That was my understanding as well...I'd like to see Kathleen weigh in on this.
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I don't need any more negativity in my life...be positive and helpful people or I will kick you in the shins!!!

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#2119123 - 02/22/17 05:37 PM Re: CD Secured Loans KelliD
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
If you know the revenue of the business, you should use it. You don't re-ask revenue for each loan request...it is what it is. Last year they made x in sales to customers (could be a store, a lawyer, a factory, whatever). You have that info and you use that to classify the loan by revenue.
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#2119402 - 02/24/17 03:33 PM Re: CD Secured Loans KelliD
KelliD Offline
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Joined: Jun 2015
Posts: 62
Thank you Kathleen!

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