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#2229515 - 01/23/20 07:04 PM How often can I count renewals?
M&M Offline
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Posts: 527
Midwest
We have a number of businesses within a local moderate income tract. We do a number of working lines of credit for these businesses, usually 1-yr in length. These have been previously counted as CD loans because they are revitalizing or stabilizing low- or moderate-income areas and providing jobs to the employees of these businesses.

The person who managed CRA previously was only counting renewals and refinances of these loans once per exam period, but I believe these can be counted once per year without regard to the exam period (and increases could be counted in addition to). For instance, in a 3-yr exam period, I could count an origination and 2 renewals as 3 loans on my CD loan log. Am I correct?

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#2229551 - 01/23/20 09:00 PM Re: How often can I count renewals? M&M
EB Korz Offline
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Joined: Aug 2017
Posts: 1
I would say it would depend on how the loan was written.

If a working line has a maturity date, we only report it the year it is originated. If a working line is a demand note, which is then reviewed by our credit dept on an annual basis and then renewed (i.e. collect updated financials), then we report it each year it is renewed.

So if we had a demand line originate last year, we reported it. If our credit dept collects updated financials and documents the renewal for this year, we will report it.

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#2229566 - 01/24/20 01:59 AM Re: How often can I count renewals? M&M
Len S Offline
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Joined: Oct 2004
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Connecticut
You can report a "renewed" loan subject to the once-per-year rule. But be sure the loan is qualified as a "renewal" which for CRA purposes is technically different from the usage of the word in the industry (this is a big complaint of mine that I've asked the regulators to revisit because it results in undercounting many loans).
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#2229570 - 01/24/20 01:20 PM Re: How often can I count renewals? M&M
M&M Offline
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Joined: Nov 2003
Posts: 527
Midwest
So what's the definition of a renewal for CRA purposes and how does that differ from the industry version of a renewal?

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#2229575 - 01/24/20 02:36 PM Re: How often can I count renewals? M&M
Len S Offline
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Joined: Oct 2004
Posts: 1,859
Connecticut
A "renewal" according to CRA is an extension of the maturity date of the note. Many banks renew lines of credit evidenced by demand notes, especially loans secured by UCC filings to avoid disruption of the continuity of the lien. Since the loans are callable on demand, they are not considered to be renewals under CRA although common usage in banking would call them "renewed" lines of credit, for example.
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#2229863 - 01/29/20 06:35 PM Re: How often can I count renewals? M&M
M&M Offline
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Joined: Nov 2003
Posts: 527
Midwest
So, we extend the maturity date, keep the same loan number, pull financials, and re-write the loan on new paper with a new note. Is this a "renewal" under CRA? Am I understanding the difference correctly?

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#2229880 - 01/29/20 09:05 PM Re: How often can I count renewals? M&M
Len S Offline
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Joined: Oct 2004
Posts: 1,859
Connecticut
A "refinance" is when you replace an old note with a new note and a "renewal" as defined for CRA purposes is when you extend the maturity date on the note.
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#2229887 - 01/29/20 10:24 PM Re: How often can I count renewals? M&M
M&M Offline
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Joined: Nov 2003
Posts: 527
Midwest
Thanks Len. So can we count our "refinances"?

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#2229936 - 01/30/20 04:43 PM Re: How often can I count renewals? M&M
Len S Offline
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Joined: Oct 2004
Posts: 1,859
Connecticut
subject to the once per year rule
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