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Is CRA Purpose Driven or Collateral Driven?

Answered by: 

Question: 
Is CRA purpose driven or collateral driven?
Answer: 

CRA reporting for small business and small farm loans is totally driven by call report coding for Schedule RC-C1; some is collateral driven and some is purpose driven.

Call report instructions are available here:
http://www.fdic.gov/regulations/resources/call/crinst/2011-06/611RC-C1_063011.pdf

Small business loans are loans of $1,000,000 or less originated/refinanced/renewed during the reporting period that fall into the following lines on Schedule RC-C1 of the call report:

1.e.1 and 1.e.2 (secured by non-farm non-residential real estate) - these are collateral driven. 1.e.1 is owner occupied and 1.e.2 is non-owner occupied. The call report instructions/glossary provide instructions on determining occupancy.

and

4a (can be unsecured, secured by bank deposit accounts, business equipment, etc.). These are loans for commercial and industrial purposes and are purpose driven.

Small farm loans are loans of $500,000 or less originated/ refinanced/renewed during the reporting period that fall into lines:

1.b Loans secured by farmland (collateral driven) or

3 Loans to finance agricultural production and other loans to farmers - these are purpose driven and can be secured by various types of non-real estate collateral or unsecured.

It is important to become familiar with the call report instructions. For example, loans to non-profits that are secured by non-farm non-residential real estate are reported as small business loans. Loans to non-profits that are unsecured or secured by other collateral are NOT small business loans. This reporting is totally because of call report coding.

Community development loans are not governed by call codes but must meet Community Development purposes as outlined in Reg BB and explained further in the CRA Guide and FAQs both available at the FFIEC CRA site.

It is important to also understand how HMDA and CRA work together. Generally a loan cannot be both reported for both HMDA and CRA, just as a loan cannot generally be both small business or small farm and community development. If a loan falls into the categories small business and small farm, it must be reported there even if it also meets a community development purpose. (There is an exception for intermediate small banks.)

Exception for multi-family secured loans:

If a loan secured by a multi-family property is HMDA reportable, it can also be reported as a community development loan if it has a community development purpose.

Exception for HMDA Refinances:

If a loan is a small business loan that is reported in HMDA as a refinance because of residential real estate collateral, the loan can also be reported as a small business loan subject to normal reporting rules (if less than 50% secured by residential real estate, it will be CRA Type 1; if 50% or more secured by residential real estate, it will be CRA Type 3, which is optional CRA reporting).

First published on BankersOnline.com 12/5/11

First published on 12/05/2011

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