My underwriting team tends to include securing residential real estate as part of the collateral for small business loans. I believe often times they are doing this as an abundance of caution, but they don't actually state it that way.

In a perfect world I would get them to spell it out....if only we lived in a perfect world!

As an example: loan for a restaurant sources of repayment: 1. Cash Flow; 2. guarantor liquidity (large 401k) 3. collateral liquidation.
The cash flow, if maintained, is enough to handle the loan, and the 401k is over 3 times the value of the loan. So the chances of ever taking the collateral are fairly low. However, because they don't say "abundance of caution", I'm assuming I can NOT assume abundance of caution. Would you agree?

I agree that if you had a clear indication of abundance of caution you would be in great shape. However, all is not lost. I've made the argument that when a loan to a corporation is supported by a guarantee and the guarantee is secured in part by residential collateral, the residential collateral indirectly secures the loan to the business and therefore does not disqualify the loan from being reported. The reason for proscribing loans secured by residential real estate is to prevent double counting such loans because they potentially would be reported under HMDA. But HMDA itself says not to report loans that are indirectly secured by residential collateral. I have mentioned this to examiners and they say I have a point. This is not legal advice, of course, but based on the foregoing if the residential mortgage secures a guarantee and not the business loan itself you have a good case to recognize it as a small business loan. Otherwise you can collect the loans under CRA loan type 3, "Other loans/lines for business purposes" and voluntarily submit the loans for CRA examination purposes.