Purchased Loans

Posted By: JUST CALL ME CRA

Purchased Loans - 08/19/11 06:40 PM

Am I correct that when a bank purchases a small loan to a farm or small loan to a business, that determining whether or not a loan fits the small business or small farm definition is based on the ORIGINAL amount of the loan, but the amount reported is the balance at the time of purchase.

Am I also correct that the Action Date is the Date of Purchase and the Revenue Code is 4 (NA)?
Posted By: JUST CALL ME CRA

Re: Purchased Loans - 08/25/11 12:32 PM

Just trying to verify that I interpreted this correctly.
Posted By: Kathleen O. Blanchard

Re: Purchased Loans - 08/25/11 12:39 PM

Yes, amount at origination not at time of purchase is what is considered to determine if the loan is a small business loan. But you also REPORT amount at origination, not purchase.

Examiners will however use amount at purchase to include in the bank's volume numbers. See the FAQ on this topic below.

From the CRA FAQ:

§ll.42(a)(2)—1: When an
institution purchases a small business
or small farm loan, in whole or in part,
which amount should the institution
collect and report—the original amount
of the loan or the amount at purchase?

A1. When collecting and reporting
information on purchased small
business and small farm loans,
including loan participations, an
institution collects and reports the
amount of the loan at origination, not at
the time of purchase. This is consistent
with the Call Report’s and TFR’s use of
the ‘‘original amount of the loan’’ to
determine whether a loan should be
reported as a ‘‘loan to a small business’’
or a ‘‘loan to a small farm’’ and in which
loan size category a loan should be
reported. When assessing the volume of
small business and small farm loan
purchases for purposes of evaluating
lending test performance under CRA,
however, examiners will evaluate an
institution’s activity based on the
amounts at purchase.
Posted By: JUST CALL ME CRA

Re: Purchased Loans - 09/09/11 07:11 PM

Thanks.