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#710511 - 04/03/07 04:27 PM Revenue Code 3 (Safety & Soundness)
Ninky Offline
Gold Star
Ninky
Joined: Nov 2002
Posts: 357
I would like to ask others'experience regarding revenue codes. It has always been our understanding that if there are a significant number of revenue code 3 on your LAR that the regulators could consider this a safety and soundness issue. We have a new small business streamline product that uses strictly credit scores, as opposed to financials, for express underwriting. Accordingly, we will be reporting a higher number of code 3s than in the past. As long as we can mitigate these percentages of code 3s with our documented loan program and underwriting, should this be an issue at our next CRA exam?

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#710531 - 04/03/07 04:44 PM Re: Revenue Code 3 (Safety & Soundness) Ninky
Mrs. Rizzo Offline
10K Club
Mrs. Rizzo
Joined: Mar 2006
Posts: 10,392
Curled up by the fire...
I'd address it upfront...I think as long as you justify it you shouldn't have a problem
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#710572 - 04/03/07 05:17 PM Re: Revenue Code 3 (Safety & Soundness) Mrs. Rizzo
CRAatBOK Offline

Power Poster
Joined: Mar 2004
Posts: 6,172
Further South than I wanna be.
I can speak on this since we are in the middle of an exam and the examiners made us change a huge number of revenue codes from 1 to 3. This was because we accept what the borrower tell us verbally and don't require them to always provide new financial info. This is on certain loans with very established borrowers. The reg says we don't have to verify but the regulator says we do. Anyway, we were told that the number of NA/3 shouldn't affect our rating because we can show it is a low/doc program we offer. These are primarily rural ag or small biz loans with tons of collateral.

We do have another small business program that is also low/doc but the borrower does write the revenues on the application. The regulator wasn't going to count that at first but since it is in writing and signed by the borrower as true, we are not having to change those.

Like Rizzo says, address it up front.
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Life is not the way it's supposed to be. It's the way it is. The way you cope with it is what makes the difference.

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