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#2253673 - 05/07/21 08:35 PM Lending Test - Determining the Weight
Mel in WA Offline
Diamond Poster
Joined: Mar 2013
Posts: 1,184
We are examined under the large bank exam procedures for CRA. In the past, examiners have always placed more weight on home mortgage activity under the lending test. In 2020, we reported a record number/dollar amount of small business loans because of PPP. Will this shift the weight at our next exam? What criteria goes into determining the weight?

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#2253689 - 05/09/21 12:46 AM Re: Lending Test - Determining the Weight Mel in WA
Karen Tucker Offline
Junior Member
Joined: Mar 2007
Posts: 39
Washington, DC
Generally, the examiners look at volume ($ and #) to determine which product gets the most weight. In fact, if volume is very very low, a product might be omitted from consideration. However, they are anticipating increased volume of small biz lending due to the PPP loans, but also some problems with the data, particularly due to PPP loans not requiring revenue data. Lack of revenue data will impact the analysis - and not in a good way. So, the agencies put out some Q&As May 27, 2020/updated March 8, 2021.

Of particular relevance is the following from question 7: When evaluating CRA performance, the agencies will take into account the unique circumstances affecting borrowers and banks resulting from the COVID-19 emergency and will not penalize a bank for making a large volume of loans for which gross annual revenue information is not available. The agencies will also take into account a bank’s good faith efforts demonstrably designed to support low- and moderate-income individuals and small businesses and small farms and its efforts to comply with applicable consumer protection laws.

See OCC Bulletin 2021-12

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