There have been a number of posts that state ANY loan secured by a SFR on an SBA does not qualify and should not be reported as a Small Business Loan.

I have read Len's post, engaged in a few e-mail discussions with Bonnie M and others and am now publicly stateing that I am changing my mind on this issue.

There is a problem in that this issue is not clearly defind by Q & A, and regulation verbiage leaves it open to best guess. Another problem is the field examiners have different opinions on this. An OCC examiners has indicated that SBA loans (unless they are 501 loans) are 4a on the call report and therefore counted as Small Business loans for CRA purposes. Call Report instruction indicate Call Code 4 are Commercial and Industrial loan NOT SECURED BY REAL ESTATE. A conflict exists

It makes sense to me that SBA loans should be CRA Loan Type 1's Small Business. This is a large number of loans that the banking industry is not getting CRA credit for, that can have a significant impact not only on CRA SmBus numbers but on LMI lending. It seems foolish to not report them because a 2nd on a principal's residence was taken. Especially as the SBA usually requires it.

My position now, until I learn otherwise, is to recommend that you contact your examiner and ask them what their position is on this. Because some are saying no, and some are saying yes, I don't think a definate stance should be taken. If you can get them counted go for it.

The problem with this and reporting Gross Annual Revenue/ Income on non business entities, is you can justify a do it or don't do it answer. I am strongly recommending that regulators get flooded with requests to better define whats reportable. We could be very well short changing ourselves

Don, why don't you be a prince and write in for an opinion in an official Q & A?

Don,
I think the FFIEC with the recent revisions to HMDA has created an opening here. They explicitly distinguish situations in which residential real estate is "indirectly" (i.e., securing a guarantee rather than the loan directly) securing a loan and state that a refinanced mortgage is not a reportable refinancing if the mortgage is "indirect" collateral. It would seem that the same distinction would apply to small business loans too. I discussed this with a Fed field attorney who confirmed this (but won't put it in writing of course). Based on my consulting experience with numerous banks, I believe that many banks are reporting these loans while many others are not. There should be clarification to make certain that all reporters are handling this issue consistently and I believe, like you apparently do, that it would seriously understate small business lending to exclude these loans.