Say we are a Large Bank and we decided to purchase consumer real estate and automobile loans:
I know the HMDA reportable real estate would factor into our CRA evaluation but the consumer auto loans would not UNLESS we choose to have them looked at........right?

Does it make any difference if we do NOT purchase the servicing rights on these real estate loans? If they are outside of our assessment area whether we purchase servicing rights or not, this could hurt us CRA wise......right?

I appreciate any help.

Right On Mama Always wanted to say that. If you pruchase loans outside the AA it will effect the percentage of loans made inside the AA. The next thing is, can you justify why the funds are not being expended to service the community inside the AA. If you find affordable housing loans outside that are not available inside, you can see if examiners buy the reasoning. The economic and market situation in your AA can also have an effect on your reasoning

If you elect to report auto loans and they are a good portion of your portfolio, then you would do the normal checks to see the number dollars and percent of loans to low, mod, med, and upper income areas AND BORROWERS, inside vs outside the AA just to be sure its in your best interest to report them.

Consumer loans are not considered unless requested by the bank. So you need to know ahead of time whether your consumer loans are to primarily LMI borrowers. And then make sure you don't have any evidence of predatory lending if they are.
Servicing rights on SFR loans have no impact on HMDA. Its ownership of the loan. If you are buying a substantial amount of product out of your assessment area, you will need to track that so it can be explained to the examiner.

So basically......you spend the dollars outside your assessment area and you could suffer CRA rating. Doesn't matter about purchasing servicing rights or not.

Now, next question. If you purchased small business loans......am I correct in thinking that the originator is the one who reports them OR would we have to do small business reporting as a large bank?

I have no idea if this is right or not, but I pick up our small business loans for CRA reporting off the RC-C section of the Call Report. I have been told by the Call Report gurus that purchased commercial loans would be reported as if they were originated, so therefore when I go to report CRA small business and small farm, I wouldn't know the difference and I would report all small business loans for large bank CRA reporting. This doesn't make sense to me, it results in double reporting. But we don't buy small business loans so it is only theoretical at this point. I hope someone responds that has purchased small business loans so you get a better asnwer than mine. Where is Dawnie when you need her ?

I've always thought the same when it came to reporting HMDA loans purchased.......it's double reporting.

Don't you just love HMDA and CRA? The one bright spot in CRA is the news of the proposal to change the threshold to $500 million for small banks. I hope and pray that goes for my sake since we have just reach the present threshold and changing over is a major project for me this year.

I despise it, but it is job security I suppose. I do hope they raise the asset size, but more like $10 billion would be good.

Yes! 10 billion would be perfect!

OK, same questions as above......what if it were a pool of loans...not individual loans. We don't even see the individual loans......

Well, here I am out of my area of "subject matter expertise", but if you bought a pool and did not get assignments of the individual loans, and do not get detailed reports on individual loans, then I would guess you have bought something that has the characteristics of a security, rather than a loan. In this case, you could not get HMDA and CRA credit. But, if all the underlying collateral for this security type investment you made was known be from low to moderate income areas, then you should be able to get credit under the Investment Test of the large bank CRA Evaluation. Under the small bank evaluation test you wouldn't get any credit, but who cares, you wouldn't need it either. Goodnight, HMDA and CRA are crazy.

Thanks! Have a good weekend.

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Where is Dawnie when you need her ?

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Her head exploded because shes been so busy the last few weeks. I'm just using her keyboard while the hazard folks clean up the mess!

Purchased loans of any type are reportable if you choose to report that category of loan. (Of course you don't have a choice about reporting HMDA or CRA loans, but on the consumer side you do have that option). If they're going to be a significant portion of your portfolio it could have detrimental effects on your CRA inside/outside ratio, but really, that's not a terribly important part of the CRA test to be worrying about. IF you want to get really technical you could always mention that the OCC says 51% is a "majority" of loans in your AA to your FDIC examiner when he/she whines about your ratios changing

Honestly though, the make up of the purchased loans would be more my worry than the inside/outside ratio. If you could pick up enough that had value in a tract in need close to yours you could expand your AA, or you could show your handy examiner how much this program is doing for the broader statewide/regional area you serve. Without your purchases of these loans the bank serving the low income population wouldn't be able to book so many deals....ya da ya da ya da

If you buy a pool of loans (an investment by the way) the only benefit to CRA would be that they're serving targeted populations (low or mod or small business).

Now just for my take on purchased small business loans and double counting. If the bank that made the loan couldn't offer additional loans to the small business market without selling this deal off the benefit of their lending to the targeted population would be nominal. If they can sell them off to you big banks, thereby allowing them to do more and more deals, well the CRA benefit is obvious. This is to me what the value of the suposed "double" reporting is. You might not buy without the ability to report the deal for CRA or CD credit. Giving you the ability to report the deal as well keeps the cycle going strong.