I have a loan to construct a duplex in a low to mod AA.

I cannot take the loan for HMDA purposes do to the construction exemption. AND, the loan does not qualify under small business because it is secured by the property.

So, my question is.....can I qualify the above as a CD loan. (I'm worried that it doesn't meet the MULTI-family definition. )

Is the purpose of the duplex to provide housing affordable to low or moderate income individuals? If so, you should be able to count it as such.

In our assessment area we have one low income census tract that recently had half-million dollar condos built in it. Again, in a low income area, but definately doesn't qualify as affordable housing.

For CRA purposes, does my duplex (they are only building) fit the definition of MULTI family?

No, multi family must have 5 or more units. If you can show the duplex will have income restrictions for the renters then it could be community development.

As affordable housing?

Thanks all! This CRA qualification is still too new to me...

If the property is affordable housing for Low and Moderate income individuals it can qualify as a Community Development Loan.

A direct benefit to LMI individuals must be shown and you must document evidence that the property will be rented to such individuals.

Just saying its afordable housing in Low of Modertate Income classified census tract is not enough to qualify the loan as CD.

Otherwise it will not qualify as a CD loan

Sorry to keep asking questions.....does the fact that this is a construction loan hurt the affordable housing qualification?

No, it is the end use that qualifies it. If the borrower is building a home or homes that will qualify, you can count the loan.

Not to be redundant, but you need to document that the end use will be a direct benefit to an LMI individual or individuals.

One of the 4 categories that qualify as Community Development is "Affordable Housing (including multiple family housing) for low and moderate income individuals."

Eventually you will be asked to show that LMI individuals received a direct benefit from this project.

If you cannot show that LMI individuals were able to rent or purchase the homes, then it probably will not be approved as a Community Development Loan.

Ask yourself, Can I document that the builder is specifically constructing these homes so Low and Moderate Income individuals can live in them? Have the rents already been set, and are they at a level that LMI individuals in the area can afford them? Do I know the median Family income of LMI individuals in the area, and what rents are affordable to them?

Not trying to make this complicated. But its not as simple as believing because a home is being built in a Low or Moderate classified census tract that it becomes "Affordable Housing for CD credit. I am told that examiners disqualify 60% -_70% of loans banks have listed for CD credit. Mainly because of assumptions and lack of supportable documentation.

The key is to document like crazy. If you think a loan has a chance, and you can document well, the odds are in your favor of getting credit.

Don, you are absolutely correct as far as documentation is concerned. I've seen many a community development loan disqualified during an exam for lack of documentation. You not only should have internal documents explaining the CD qualifications you should have third party documents substantiating the qualifications. By laws and charter of the organization showing it is focused on rendering community services to LMI people and statements from the borrower explaining the use of funds and how the proceeds or project will benefit the LMI community or any reasonable independent source of information are strongly recommended.

Thank you all sooooo much! This is the information I'm looking for.