HMDA/CRA

Can a HMDA reportable loan also be reported as CRA for small business or community development?

The only situation in which you can double count a loan is if it is for a multifamily dwelling and meets the definition of a CD loan. If it does, it will be reported on the HMDA LAR and as a CD loan.

Actually, there may be many more situations with double reporting now that the new definition of loans secured by real estate for Call Report purposes has been implemented. The new definition states that the residual collateral value of real estate must exceed 50% of the value of the loan it is securing to be reported as a real estate secured loan. In many situations small business loans have been partially secured by residential real estate which disqualified those loans as reportable small business loans unless the real estate was taken as an abundance of caution. Now however, many of those loans may be reportable as C&I loans which means they no longer are disqualified as reportable small business loans. Unlike CRA, HMDA-reportable loans are not related to Call Report instructions. So you may have loans that have been refinanced using residential real estate as part of the collateral(which would be HMDA reportable if the previous loan was dwelling secured and satisfied) but the value of the real estate is not sufficient to make it real estate secured thereby allowing the loan to be recognized as a C& loan for Call Report purposes.

So you'd report those loans on both LARs?

Yes, if a business loan has a residence as collateral and is refinanced, making it subject to HMDA reporting, but also is still a small business loan under CRA it is reported on both.

The FAQs for CRA discuss this situation.

Did that only come about since the Q&A's were released last year? I remember questioning that when the new definition of refinances for HMDA came about in 2004, and we were told that those loans belong on the HMDA LAR only.

You can track business purpose loans secured by residential RE if you choose to do so for possible credit on your CRA exam.
However, if it meets the definition of a HMDA reportable loan, you would include it on your LAR.

From the CRA Q&A (note, where it says "abundance of caution" for CRA, that is now replaced in call report instructions with "primarily":

§ll.22(a)(2)–7: How are
refinancings of small business loans,
which are secured by a one-to-four
family residence and that have been
reported under HMDA as a refinancing,
evaluated under CRA?

A7. For banks subject to the Call
Report instructions: A loan of $1 million
or less with a business purpose that is
secured by a one-to-four family
residence is considered a small business
loan for CRA purposes only if the
security interest in the residential
property was taken as an abundance of
caution and where the terms have not
been made more favorable than they
would have been in the absence of the
lien. (See Call Report Glossary
definition of ‘‘Loan Secured by Real
Estate.’’) If this same loan is refinanced
and the new loan is also secured by a
one-to-four family residence, but only
through an abundance of caution, this
loan is reported not only as a
refinancing under HMDA, but also as a
small business loan under CRA. (Note
that small farm loans are similarly
treated.)

It is not anticipated that ‘‘doublereported’’
loans will be so numerous as
to affect the typical institution’s CRA
rating. In the event that an institution
reports a significant number or amount
of loans as both home mortgage and
small business loans, examiners will
consider that overlap in evaluating the
institution’s performance and generally
will consider the ‘‘double-reported’’
loans as small business loans for CRA
consideration.

The origination of a small business or
small farm loan that is secured by a oneto-
four family residence is not
reportable under HMDA, unless the
purpose of the loan is home purchase or
home improvement. Nor is the loan
reported as a small business or small
farm loan if the security interest is not
taken merely as an abundance of
caution. Any such loan may be provided
to examiners as ‘‘other loan data’’
(‘‘Other Secured Lines/Loans for
Purposes of Small Business’’) for
consideration during a CRA evaluation.
See Q&A §ll.12(v)–3. The
refinancings of such loans would be
reported under HMDA.

I sure have messed this one up. I remember before the 2004 Reg C changes thinking that loans would end up on both LARs, but this BOL article, among others, indicated that double-counting was not permitted. I ran it by the FRB, and they agreed that the loans would belong on the HMDA LAR and not the CRA LAR going forward. So that's what I've done for the past 6 years. Granted, that advice was given in 2003. I totally missed the announcement that the loans should appear on both LARs. So for 2009, am I right that I should renenter all loans that I've deleted from my CRA LAR just because they were also on my HMDA LAR?

What should dictate what you code as a small business loan for CRA purposes is how you have coded the loan for Call Report purposes. The new Call Report instructions about real estate secured loans and the example provided with the instructions demonstrates that a loan partially secured by residential real estate may be reported as a C&I loan in the Call Report and if so, that means it may be qualified as a small business loan. The new instructions took effect April 1, 2009. The two issues, HMDA-reportable and CRA-reportable are resolved by different rules.

And this is why we all get large headaches. Make sure your call report coding is correct; that is very important.