What kind underwriting guideslines does anyone have regarding "abundance of caution" loans? Are the guidelines written or maybe a part of your credit lending policy?

This isn't going to help you...but my 2 cents worth...ABC loans are a compliance NIGHTMARE! They are worthless and do nothing but cause trouble, IMHO!

Wanted: Can you give us some more details? For instance, is a home being taken as abundance of caution (ABC)? If so, all compliance disclosures/requirements still applies. The only exemption for a TRUE ABC loan is that you don't need a certified or licensed appraisal.

Yes,the compliance/disclosure requirements are done. An appraisal is not obtainded because loan is approved as ABC. Now for sticky. Maybe the officer did not want to charge the borrower for an appraisal or maybe the abundance of caution is keeping the transaction out of the basket when it comes to supervisory LTV limits. Thus, the need for underwriting guidelines. Appears we need some clear documentation of why a loan is ABC Also, are ABC loans put on the Call Report as unsecured loans?

A loan would be ABC if you would make the loan to the customer without taking the real estate as collateral. Taking real estate as ABC is for tax purposes, tying up the collateral, taking all the customers assets or for physological (sp) reasons.

1. If you can't underwrite/justify the loan within policy when you disregard what the real estate adds to the collateral base, then you cannot consider it ABC.

2. We don't put the loan on the system as unsecured, we still code as real estate for 1098 purposes.

3. If you cannot justify ABC based on underwriting per loan policy the appraisal/evaluation guidelines come into play.

I agree with Okie B. Ignore the real estate and throw the loan against your loan policy. If it sticks, you can add the real estate as ABC with some degree of confidence. Your regulator, of course, may have a different opinion of whether or not the loan meets your policy guidelines. Also, if you use this enough, they will eventually assume you are doing so to avoid regulatory guidelines and are practicing unsafe and unsound lending.

I'm not aware of any exemption from title work for ABC loans.

Thanks for the question about title work. We do not exempt title work or hazard insurance on ABC's althought we had one person who thought we should.
We put the loans on the Call Report as unsecured. Is this correct?

I'm not so sure my bank has ever made an ABC loan with the home being the only collateral, at least not since I have been here. We normally take the borrower's home as ABC in addition to equipment, inventory, cattle, etc. However, if the borrower's home was the only collateral, we would probably still clasify as R/E.

We allow exemption of Title Insurance or Title Opinion but at a minimum require a Title Search on ABC real estate.

Quote:

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We put the loans on the Call Report as unsecured.
Is this correct?

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From the call report instructions:Only in transactions where a lien on real property has been taken as collateral solely through an abundance of caution and where the terms as a consequence have not been made more favorable than they would have been in the absence of the lien, would the loans not be considered to be secured by real estate and not be classifiable as loans secured by real estate in the Report of Condition.