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#2044785 - 10/16/15 09:39 PM Loan Modification: Reportable?
CRAJake Offline
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CRAJake
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Chicago
Hi folks,

I have a loan modification that came up in my data pull for Q3. The item in question was a modification wherein the maturity date of the loan is the same, but the principal amount was reduced. Should we include this in our CRA LAR? I am thinking no because there was no change to the maturity, but the change to the principal amount has my wires crossed a bit.

Thanks!

Jake
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#2044790 - 10/16/15 09:51 PM Re: Loan Modification: Reportable? CRAJake
Kathleen O. Blanchard Offline

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You would only have something to report if there was new money and/or a maturity extension.
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#2044894 - 10/19/15 05:46 PM Re: Loan Modification: Reportable? CRAJake
KelliD Offline
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Do you have a specific code for modifications so they are easy to recognize on the reports? Like a purpose code?

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#2045070 - 10/20/15 01:03 PM Re: Loan Modification: Reportable? Kathleen O. Blanchard
CRAJake Offline
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CRAJake
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Chicago
Ok. This is what I thought. No new money or change in maturity, just a reduction in principal.

Thanks!
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#2045076 - 10/20/15 01:17 PM Re: Loan Modification: Reportable? KelliD
CRAJake Offline
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CRAJake
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Chicago
We don't. The call report code for this one is consistent with a CRA Small Business type 01, but I wanted to make sure I wasn't inaccurately deleting the modification transaction from my reporting. They literally renewed the loan one month, and then made a modification the next month where the principal was reduced (no other changes).

I know we can't double report, but I wasn't sure if I should take the most recent transaction (the modification) or the actual renewal for the action on the loan this year. Because the modification didn't have a change to the maturity date of the loan, or an increase in the amount (in that case, we'd only report the increase), I was pretty sure I would not report it.

The principal reduction is what is throwing me off.

Jake
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#2105638 - 11/02/16 02:16 PM Re: Loan Modification: Reportable? CRAJake
BoomCat Offline
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Indiana
Hi Everyone - after reading the thread above,( and a few others as well) I think I am correct in pushing back about a "modification" where the loan officer extends the maturity date for 90 days or so. Wouldn't this fit the definition of a renewal under CRA and therefore be reportable?

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#2105644 - 11/02/16 02:36 PM Re: Loan Modification: Reportable? CRAJake
Kathleen O. Blanchard Offline

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Yes!
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#2105649 - 11/02/16 02:51 PM Re: Loan Modification: Reportable? CRAJake
BoomCat Offline
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Thank you SO much!

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#2105687 - 11/02/16 04:35 PM Re: Loan Modification: Reportable? CRAJake
Kathleen O. Blanchard Offline

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The different treatment under CRA and HMDA often causes confusion.
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#2105720 - 11/02/16 06:37 PM Re: Loan Modification: Reportable? CRAJake
Moman Offline
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WA
Wait - I don't want to hijack this, but I have always drawn a distinction between renewals and extensions - a renewal requires new underwriting, whereas a simple extension does not (at least in my world at 2 institutions). Both are technically modifications. Here's why I am questioning - from the CRA guide page 12 - it doesn't mention extensions:

Refinances and Renewals
An institution should collect information about small business and small farm loans that it refinances or renews as loan originations. 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.

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#2105783 - 11/02/16 10:38 PM Re: Loan Modification: Reportable? CRAJake
Kathleen O. Blanchard Offline

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If you extend, you either have a new note or a modification agreement, whatever you might call it internally.
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#2105784 - 11/02/16 10:38 PM Re: Loan Modification: Reportable? CRAJake
Kathleen O. Blanchard Offline

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I doubt you will find extension mentioned anywhere. It is a term your institution uses.
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#2105789 - 11/02/16 11:28 PM Re: Loan Modification: Reportable? CRAJake
Moman Offline
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So, then, all changes in terms agreements for covered loans create a reportable event. Most "extensions"are then "renewed", however a few are paid off (so under this scenario would not have been listed on the CRA LR). This will make a difference in how I structure reporting once we are a Large Bank. In my past life, I hate to say, what we called extensions were not reported; probably resulted in under-reporting a few, but not all SBLs.

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#2105791 - 11/02/16 11:53 PM Re: Loan Modification: Reportable? CRAJake
Kathleen O. Blanchard Offline

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Well, changing an interest rate would not trigger reporting. Changing the maturity date is reportable.

Let's say there is a loan booked last year, maturing in November 2016. It is "extended" until November 2017. Report it. You provided financing to a small business or small farm.

Or if you have a line of credit on the books for $100,000 originated this year and mid year you add $50,000. You could report $100,000 and then a second for $50,000 or just report once for $150,000.

If a line was originated last year for $100,000 and this year extended at maturity and an additional $50,000, report with extension date for $150,000.

If a loan is "extended" but pays off mid year you do not remove it from your reporting, just like if a new loan is originated but pays off before year end, you still report it. But perhaps I misunderstood what you are saying about the payoffs.
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#2105860 - 11/03/16 04:07 PM Re: Loan Modification: Reportable? CRAJake
Moman Offline
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Thanks, KB - The referral to paying off was some off the wall thinking around under-reporting. Loans could be extended, then paid off shortly after that, within the same year. If a bank were to not report extensions, and only report renewals (based on what I defined above), then it would result in some under-reporting. Normally an extension would be renewed later the same year and reported at that time. The loans then not reported would be those that paid off in the interim.

As I pull together reporting, I'll be sure to include what we consider extensions as well as full renewals. We are not a reporter for now, but headed in that direction quicker than this Baby Boomer can retire!

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#2105874 - 11/03/16 05:12 PM Re: Loan Modification: Reportable? CRAJake
GuitarDude Offline
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So Cal
We had a debate a couple of years ago at my bank about when to report extensions (short-term). My strong recommendation was to report (record on the LR) at the time of the extension rather than wait until the longer-term renewal. For our process it is much easier to catch potential duplicates than try to follow those pending renewals in the event it doesn't actually get renewed for another term. Also, when it's this late in the year the full renewal will actually take place next year, which means the extension gets reported this year and the renewal next year.
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#2105884 - 11/03/16 06:11 PM Re: Loan Modification: Reportable? GuitarDude
Kathleen O. Blanchard Offline

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Originally Posted By GuitarDude
We had a debate a couple of years ago at my bank about when to report extensions (short-term). My strong recommendation was to report (record on the LR) at the time of the extension rather than wait until the longer-term renewal. For our process it is much easier to catch potential duplicates than try to follow those pending renewals in the event it doesn't actually get renewed for another term. Also, when it's this late in the year the full renewal will actually take place next year, which means the extension gets reported this year and the renewal next year.


I agree. Easier to capture everything and clean it up than run around after the fact trying to figure out what happened. And I never like to under report. I want credit for every loan and every dollar.
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#2114323 - 01/14/17 12:42 AM Re: Loan Modification: Reportable? Kathleen O. Blanchard
run4fun Offline
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Our loan modifications are recorded via Change in Terms Agreement and are used to alter an interest rate, an amoritization term, loan amount, and maturity. We have never recorded modifications on our CRA LAR and have never been criticized. Based on the Guide to CRA Data Collection, do you believe this is a violation?

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#2114571 - 01/18/17 04:57 PM Re: Loan Modification: Reportable? CRAJake
Kathleen O. Blanchard Offline

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Review the FFIEC Interagency Q and A for CRA. They should be reported. In addition, you are underreporting and short changing yourselves.
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#2137343 - 07/10/17 01:41 PM Re: Loan Modification: Reportable? Kathleen O. Blanchard
run4fun Offline
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We are still talking about this. How do you view short term modifications, for example 90 day maturity extensions that result in either a new note or a longer-term change in terms agreement? During this short term extension period, the bank is continuing to gather underwriting documentation (appraisal, financial information, etc.) to use in underwriting the loan for refinance or change in terms. Are the modifications for shorter term maturity extensions reportable on the CRA loan register? Thanks!

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#2155180 - 11/28/17 08:59 PM Re: Loan Modification: Reportable? CRAJake
fretzer Offline
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Pennsylvania
So if a loan is renewed for another 5 year term, no new note, just a modification agreement, this would be CRA reportable?

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#2177635 - 05/10/18 04:57 PM Re: Loan Modification: Reportable? CRAJake
fretzer Offline
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Pennsylvania
Wow, it seems many have questions when it comes to these situations. I have one as well.

A payable on demand line of credit originated in 2016 and in 2018 the borrower increases the line. A debt modification is created versus a new note, since the line of credit does not have a maturity date. Would only the increase be reported in 2018?

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#2189136 - 08/15/18 12:14 PM Re: Loan Modification: Reportable? CRAJake
fretzer Offline
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Joined: Dec 2008
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Pennsylvania
This is a repeat post due to no response from the initial. Appreciate feedback. Thank you!

A payable on demand line of credit originated in 2016 and in 2018 the borrower increases the line. A debt modification is created versus a new note, since the line of credit does not have a maturity date. Would only the increase be reported in 2018?

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#2189224 - 08/15/18 05:10 PM Re: Loan Modification: Reportable? fretzer
mrogersfib Offline
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@fretzer

Increases are considered originations even if a new note is not created. If the original line of credit is considered for community development you would only count the portion of the increase. Otherwise, if it is a small business loan you would then again only report the amount of the increase as the new origination, unless the increase pushes the total dollar value over the 1MM mark where you would then include that in your "Other Data" submission, unless the primary purpose of the loan has a CD purpose where then the increase would be considered as a community development loan since the original loan was reported as small business.

To answer the questions above, you can only count the entire amount of the loan if it is a refinance or a new loan number is created. As for extensions and modifications you only count them if there is an extension of maturity or an increase in the loan amount. Also, short term modifications, or extensions of maturity that have only a short term benefit must not be counted for Community Development especially if the last origination happened in the same calendar year. For instance, corporate cards (Pcards, Corporate Credit Cards, Demand Lines of Credit) have to be reviewed every year and approved, or declined depending on the borrowers financials. Usually those types of accounts are renewed with a 1 year modification to the maturity; is this reportable, or is it not reportable? The answer is that it is not reportable because the original line of credit was reported and approved (originated), and that the modifications are an expected and agreed upon provision of the life of the loan. Taking credit for every renewal would be seen as padding your numbers by an examiner.

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#2268653 - 04/04/22 08:22 PM Re: Loan Modification: Reportable? mrogersfib
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Must there be a formal modification, note/amendment or extension agreement document signed by the borrower in order to qualify as a reportable extension? Sometimes our relationship managers will request approval for a short term (e.g. 90 day) extension, the request will go through loan committee, and if approved, the extension is processed on the system. There may not be a new note, amendment or modification agreement. Would this still be considered a reportable extension?

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