Customer is a mortgage company. Bank has a substantial line of credit to them that they use to fund the mortgage loans that they make. They then assign these loans to the bank as collateral for the loan. As they bundle and sell these loans, they substitute new loans for those they sell. There is some discussion as to whether the bank could obtain credit for those loans that were made by the mortgage company for loans in low to moderate areas. We don't see this as a community development loan on our part. It appears to be more of a commercial loan that may or may not include some properties that fall in low to moderate census tracts. Would appreciate other thought on this. Thank you.

Based on the limited facts as you have stated them, it doesn't sound like you could get CD credit for this activity. If the borrower was an organization that focused on funding affordable housing or loans aimed at LMI borrowers the answer would be different. But if the lending in LMI areas is merely incidental to their overall activity the loans would not qualify for CD credit based on the limited facts presented imo. I think your instincts are correct.

IMO you cannot take CD or CRA credit as the loans belong to the Mortgage Company. The mortgage company has done the processing, made the credit decision and actually funded the loan. Processes which I gather from your post the bank has played no part in.

The bank cannot take credit for what someone else has done just because they have been assigned as collateral.

If the L/C was to a mortgage company for the purpose of being able to fund housing in LMI areas then there is a possiblility the SINGLE line of credit loan to the mortgage company might be a CD loan, but not each loan the mortgage company originates.

Thank you both for your input. I forgot to look at the mortgage company issue which Don pointed out. This helped confirm our thoughts.