Is this a CD loan?

Posted By: CRA Padawan

Is this a CD loan? - 02/21/19 08:47 PM

We are financing a loan to purchase a building that will be used for worship and other community events for a community of Marshallese Islanders. The loan officers says this should be a 'no brainer' and qualify as Community Development loan to LMI. I am trying to determine what documentation I can get. Any recommendations?
Posted By: Norman Paperman

Re: Is this a CD loan? - 02/21/19 08:59 PM

The loan is likely to be to a group that is LMI, but how does it benefit them? If they are strictly meeting there for worship, I don't see your case. Is the church providing career training, ESL classes, etc.?

What's the community development purpose?
Posted By: mrogersfib

Re: Is this a CD loan? - 02/21/19 10:22 PM

What your lender is trying to get at I am imagining is the community facility aspect of CRA under RS. USDA defines an essential community facility as such: "An essential community facility is defined as a facility that provides an essential service to the local community for the orderly development of the community in a primarily rural area, and does not include private, commercial or business undertakings." Minus the rural aspect since that is the primary driver behind USDA.

I would say that the primary purpose of the loan is lacking since the majority of the buildings use will be for private use (religious). I would argue that this only helps a portion of the community and is generally not freely available to all in the area.
Posted By: CRA Padawan

Re: Is this a CD loan? - 03/13/19 06:30 PM

Thanks. I was kind of thinking the same.
Posted By: bcompliance

Re: Is this a CD loan? - 04/24/19 06:17 PM

I have nothing to add, but do have a scenario i'd like some input on.

We are an intermediate small bank and have a loan to tear down an existing structure and put up a 80+ room hotel. The gross revenue of the business and loan amount are both over $1,000,000. The property is not in a low-moderate income area. We got this loan through a local county improvement corporation that’s mission statement states that it “serves as the lead economic development agency by advancing, encouraging, and promoting the industrial, economic, commercial, and civic development of this County”. Assuming that this loan will create permanent jobs that are paying low-moderate wages, is this a loan that we should submit to our examiners for consideration to obtain CRA credit as a community development loan?
Posted By: mrogersfib

Re: Is this a CD loan? - 04/24/19 11:40 PM

If the loan is to the agency, and not the Hotel itself then yes, but I don't see the primary purpose of the loan providing a stabilizing effect to the geography. Unless there is an adjacent LMI tract, or tract within a reasonable distance.
Posted By: Moman

Re: Is this a CD loan? - 04/25/19 08:52 PM

I would check out the job creation aspect; request a payroll proforma and see how many full-time equivalent jobs you have and determine if the wages for each fits the LMI definition. There should also be proxy data you can use online for average hotel worker salaries if none is available relating to the specific loan. Sometimes just asking for the info will lead you toward qualification. We have had several hotels in our area recently; all have been in LMI areas. Couple that with lower-income jobs, and I am presenting them as CDLs!