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#2106647 - 11/09/16 05:16 PM CRA reportable small business loan
Somer Offline
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Joined: May 2013
Posts: 43
I have to 2 loan scenarios that I would like help in clarifying if they are reportable as small business loans:

1. Loan request for $675,000 to purchase and rehab a commercial property. $525,000 will be used to purchase the property and $328,950 will go towards modifying and updating property from veterinary space to medical office space. Is this considered a construction loan and reportable under section 1.a of the call report; therefore not reportable as a small business loan?

2. Loan request for $291,250 to purchase and rehab commercial property that is only 80% complete. $191,250 will be used to purchase the property and $100,000 will go towards completing the rehab on the building. The building will be sold upon completion of the rehab. Again, is this loan considered a construction loan and reportable loan under section 1.a of the call report; therefore not reportable as a small business loan?

Thanks

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CRA
#2107096 - 11/12/16 04:19 AM Re: CRA reportable small business loan Somer
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Posts: 21,292
How is lending classifying these on the Call Report? Finance and lending should be classifying the loans and then they are small business or they are not.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2107144 - 11/14/16 03:11 PM Re: CRA reportable small business loan Somer
Somer Offline
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Joined: May 2013
Posts: 43
They are listed on the call report as construction loans and therefore are not reportable as small business loans.

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#2107171 - 11/14/16 04:35 PM Re: CRA reportable small business loan Somer
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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If the loans happen to go to the permanent phase in the same calendar year as the construction phase began, the call report category can change and the loan would then be reportable.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2108183 - 11/21/16 09:46 PM Re: CRA reportable small business loan Somer
MarieR Offline
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Joined: Nov 2005
Posts: 614
So a construction-perm loan is not reportable during the construction phase, but when it moves into the permanent phase and the call report category is changed, we then have to report it or only if the call report category changes in the same year (assuming it is classified as small business/farm)? We will become a large bank and will begin collecting CRA data in January so I'm working on training materials. We do several construction/perm commercial and farm loans so I want to make sure the staff, and myself understand the requirement. Thank you
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#2108238 - 11/22/16 01:51 PM Re: CRA reportable small business loan Somer
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,292
It hinges on when the loan moves to a Call Report category that makes it small business reportable. A construction loan is not in 1e1 or 1e2 or 4/4a.

When it does move (likely to 1e1 or 1e2), it is reportable.

Review the Call Report instructions. https://www.fdic.gov/regulations/resources/call/call.html

Or discuss with the finance area that prepares your Call Report.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2178111 - 05/15/18 02:26 PM Re: CRA reportable small business loan Kathleen O. Blanchard
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San Antonio, TX
While we have come to a consensus on how to report One-time Closes for HMDA, which is at the inception of the loan, we are trying to determine how we would approach OTC's for the CRA LAR. We use to report such loans when they went to perm for both HMDA and CRA, but it was determined that this was not the best practice (confirmed by Bankers Online as it often crosses calendar years), at least when it comes to HMDA. We thought about reporting CRA reportable OTC's at inception as we are now doing HMDA, but then how would we report the FDIC Call code as they are 101's (1.a.(2)'s) until they go to perm, in which case they would then become reportable 102's or 107's (1.b.'s or 1.e.(1/2)'s). When it comes to the FDIC code, I don't know if we can so readily report what these loans will be in the future, so do we stick with reporting CRA LAR OTC's only when they go to perm? If we do, then we can't always report due to crossing over years, right? How is everyone else approaching this? Obviously, numbers are much less than HMDA due to loan amounts having to be less than or equal to $1 million.

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#2201835 - 01/02/19 01:18 PM Re: CRA reportable small business loan Somer
Comply13 Offline
Member
Joined: Nov 2013
Posts: 53
USA
We have a business construction-perm loan that originated in 2017. In 2018 the loan amount increased from $500,000 to $1,000,000 during the construction phase. Later in the year, the loan (and the call code) converted to the permanent phase. Do we report the increase as a small business loan even though it happened during the construction phase?

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#2202329 - 01/08/19 05:49 PM Re: CRA reportable small business loan Somer
Comply13 Offline
Member
Joined: Nov 2013
Posts: 53
USA
Bump

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#2202375 - 01/08/19 09:33 PM Re: CRA reportable small business loan Somer
mrogersfib Offline
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Posts: 116
First and foremost, when we talk about data collection and reporting our chief concern is double counting or reporting except for multifamily housing, or in some instances mortgage data for smaller institutions. So if you report a loan during the calendar year for CRA that also ends up being HMDA reportable we have double dipped, or when a loan is considered small business. That is why it is important to know when the loan will be switching to permanent.

In the case of @Comply13's scenario in 2017 the loan would be considered temporary financing thus not reported for HMDA, but eligible for CRA no matter the dollar amount. In 2018 the loan was increased making it a new origination in the eyes of an examiner, but in the same calendar year the loan is then converted to perm making it no longer reportable for the year as CD.

Let's map this in an IF and Then statement for visualization:

IF loan is for (Construction OR development OR temporary financing) AND secured by (Nonfarm nonresidential real estate OR Residential Real Estate) AND the loan possesses a Community Development Purpose AND loan does not convert to perm within the calendar year THEN loan is CRA Reportable.

IF loan is for (Construction OR development OR temporary financing) AND secured by (Nonfarm nonresidential real estate OR Residential Real Estate) AND the loan possesses a Community Development Purpose AND loan is refinanced at the end of its term during the same calendar year THEN both the temporary and permanent financing are reportable if the permanent loan is greater than 1MM OR no dollar limit if multifamily housing.

For example let's say a housing developer buys a plot of land and subdivides the project into 100 subplots for development of homes and a majority of the homes will be sold at 20% below the median home price in the area in a moderate-income census tract. We would say that the loan qualifies because it promotes affordable housing no matter the dollar limit because the loan is for development, or we would say that the loan revitalizes/stabilizes the area as it is attracting residents to an LMI area or the project is likely to attract LMI people. Now let's say the loan rolls over to perm halfway through the year--then the loan must be greater than 1MM otherwise it would be reportable as small business. Now let's say the loan is refinanced halfway through the year--we would report both loans as each is a separate origination with separate loan numbers so long as the permanent loan is greater than 1MM.

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#2202409 - 01/09/19 01:47 PM Re: CRA reportable small business loan Somer
Comply13 Offline
Member
Joined: Nov 2013
Posts: 53
USA
Thank you so much for all the good info. So, in my scenario we originated a construction-to-perm loan for a commercial building (not multi-family) in 2017 for $500,000. It was not reported on the CRA LAR, because the loan was not funneling into any of the applicable call report codes (being that it was construction) and in addition, it did not qualify for a community development loan. In 2018, the loan amount was increased to $1 million (still during the construction phase) but then later in the year converted to permanent financing. I'm confused because I think what you said and other prior comments in this thread to mean that I would report the entire loan if it originated and converted to permanent financing in the same year. Based on that, it sounds like I should report at least $500,000 increase (new money in 2018) even though the loan didn't convert to permanent financing until later in the year or should I report the entire $1 million?

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#2202474 - 01/09/19 07:38 PM Re: CRA reportable small business loan Somer
mrogersfib Offline
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Joined: Aug 2018
Posts: 116
I apologize as I think I missed the point of your first question about small business reporting for whether or not to include the loan into your CD Test. You are correct that the loan is not recorded while in the construction phase, which is why it is available for consideration under the CD Test. During the year that the loan converted to perm the entire amount would be reported for small business since the previous amount had not been counted before.

When the underwriter of the loan gets their tickler to convert the classification of the loan to perm the dollar amount of the loan would transition from construction to Commercial owner/nonowner occupied on the next call report.

Refer to the Loan Data Collection Grid: https://www.dallasfed.org/~/media/documents/cd/pubs/craloan.pdf
Last edited by mrogersfib; 01/09/19 07:43 PM.
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