I am trying to determine the FED CRA Type Code for a Commercial Non Permanent Construction Loan in a loan amount that is less than $1 Million.

Proceeds are used to construction a single family residence. The loan will be paid off with the proceeds of the sale.

I have always used Fed CRA Type 09 - Other Loan Data as this would be a construction loan under $1 Million that is not community development.

It came up recently that Fed CRA Code 03 - Other Business Loan could be used because the loan is under $1 Million and the collateral is residential property.

Is this correct? I was under the impression that code 03 could not be used for construction loans?

Except for small business and small farm loans other loan categories 3-9 are voluntarily captured. Those loans are never reported with your annual filing. They are maintained in your micro-data files and if you elect to include them in your CRA Performance evaluation you may do so if you have edit checked and scrubbed the data. So I wouldn't get hung up on the idea that you are doing something wrong with the voluntary data.

But it is important to have that data be captured in a meaningful way so its impact on your performance can be analyzed. The best thing is to collect the data into loan types that are uniform. If you try to put 4 different type loans into category 9 it makes analysis difficult. Some examiners have told me that you can even use a loan type such as credit card loans (type 6) for a different type of loan. The important thing is avoid commingling different loan portfolios into 1 loan type and if you use the standard loan type for a different type of loan notify examiners that you don't maintain credit cards so you used that loan type for "XX loans" (construction or whatever). I think this is especially appropriate for banks that extend significant volume of lines of credit using demand notes for the line (UCC type of situations for example). Because the loan maturity is not being modified the bank's annual renewals of these facilities won't be recognized for CRA performance even though its omission understates true lending to the small business community. In the meantime, the bank down the street that uses time notes for its lines will be reporting all that activity which distorts the comparisons (I have been harping on the regulators to change this arbitrary definition - they rightfully demand your data be accurate but they insist on using loan definitions that distort real lending activity).

So the long and the short of it is - BE CONSISTENT WHEN RECORDING AND CAPTURING YOUR LOAN DATA

Thank you for your response. Just to make sure I understand your response correctly, Fed CRA code 03 or 09 can be used for the construction scenario I noted above.

If you are not using 3 for its traditional definition.

Yes, the only time that data is reviewed by the regulators is during your CRA PE. If the data were being reported like small business loans or HMDA mortgages then you wouldn't have the flexibility to modify loan types. Just make certain that the examiners know what loan data is contained within the loan type. Anything that can help examiners get an accurate and complete picture of your bank's performance "meeting the need for credit services" within your community is appropriate to provide to examiners. Just be certain the data is clear, accurate (data scrubbed) and segregated and identified into distinct categories.

Thank you both for your replys. Currently we use the 03 code for loans under $1 million secured by residential property that are any loan type other then construction loans. We have been coding all construction loans regardless of the loan amount in the 09 code.

To remain consistent I believe we should continue to use code 09.

Thanks again for your help!

Quick revision to the above. We use the 09 code as long as the loan is not a construction loan with a community development purpose. Then we would use 00.