Loans under a guidance line/master approval line

Can someone please help me? Are individual loans, that are under a guidance line/master approval line, reportable as small business loans for CRA? The guidance line may be over $1,000,000 but the individual loans are under that amount. Thank you in advance!

I have never reported a GLOC, because the way we handled them it was basically a pre-approval for a builder for a certain amount. Rather than having to take each loan to committee every single week, they just approved a large amount and then reported the smaller loans made under the GLOC however those loans were styled.

If each of those individual loans are on separate notes, then yes, they are reported (assuming they fit the classification requirements).

Thank you so much!!

Yes, agree with KB. I forgot to mention that part.

Guidance lines are not legally binding. They are an internal control mechanism. Therefore, advances under a guidance line are considered separate credit extensions for purposes of determining small business qualifications. Each advance would be separately determined for its small business qualifications.

I am being told that the guidance line amounts are to be reported, not the loans themselves. I am being told this is what FDIC auditor is saying. I don't agree with this. But am being told the reason is because we give a formal commitment letter to the customer for the full amount, rather than an informal commitment, whatever that means.

I know CRA data is driven by the the Call report. So tell why would a guidance line would be reported hen the loans themselves are not supposed to be? Can someone point to me any written info that specifies how to correctly report guidance lines? Thanks

What is generally known as a guidance line would not have a legal commitment or note. It is an internal tracking and efficiency mechanism to speed up individual borrowings during the year. It is not a loan.

Does your "guidance line" have a note? How (or is) this line reported on the call report?

I am trying to sort out a similar situation in our commercial lending area. There are a variety of arrangements called umbrella lines, master lines, guidance lines, and floor plan lines. They all look like lines of credit when set up on our loan system. Then there are term loans booked that draw on the line.

However I am finding that, in some cases, there is a note executed with the line and the "term" loans do not have associated notes. They are essentially draws we book for ease of administering the loan. In this case I believe that I should book the line as a small business loan (assuming less than or equal to $1MM) and not book the term loans. If there is a business agreement executed with the approved line, but no note, I would count the term loans, which have individual notes. I am following the rule: "Follow the note". Does that sound like the right approach?

We have a commitment letter and a note, so guess that would then require us to count the line, I guess.

If there is an actual master note under which draws and payments are made (call it what you will...master note, guidance line, etc.....that note is what is reported assuming it falls under the correct collateral/purpose categories and dollar amount. This note is a standalone legal obligation and reported on the call report and is a loan for CRA purposes (subject to caveats mentioned).

A dealer floorplan loan is generally the legal obligation; individual draws for each vehicle are repaid under terms of that note.

If on the other hand a "line of credit"" or "facility" is booked to track availability and individual notes with their own repayment terms are booked under that facility, those "subnotes" notes are what are captured for call report and CRA, subject to purpose/collateral/dollar thresholds.

Thanks for your help.

We have two borrowers where there is a master line of credit note (in this case both loan amounts are greater than $1 million) that the borrower has signed. The "subnotes" do not have individual notes. The master notes are on our core system and only track the availability on the line. The principal balance remains at zero. So, the master notes are never reported with a balance on the call report, however the subnotes are reported on the call report but don't have a promissory note. If I am understanding correctly the above comments in this thread, I should not report the subnotes because they don't have a promissory note even though they are being reported on the call report because they are part of a larger commitment that does have a promissory note.

Bump

It sounds like there needs to be a discussion with whoever decided not to post the master line balance for the call report. If they are approved commitments backed by promissory notes, then we would report those as small business loans if under $1 million. What you are calling a subnote, is actually a draw on the line that we wouldn't report, since there is no note.

We have some arrangement like that, but others where the master line is a commitment without a note, and the "draws" have individual notes. In those cases we report the draws/subnotes and not the master line.

Doing this requires some sort of coding or reporting when the loans are booked to provide you with the ability to tell which is which.