We are collecting data on our consumer loans for examiners to evaluate during our next exam. If we make a loan to an individual to purchase rental property, this is a business purpose loan secured by residential rental property, would we report the income from the rental property only or would we include the individual’s gross annual income as well?

Here is an excellent data collection/reporting tool from the Dallas FRB. You may also want to look around here and elsewhere for similar tools.

Andy, thanks for the grid. Let me see if I I've got it right..........a short term loan secured by residential property for purpose to construct or renovate the dwelling
for rental or resale (business purpose) would NOT be reported as a small business loan.......am I correct?

Yes, Loans secured by a SFR will not qualify as a Small Business loan. Check your Fed Call Code instructions for reporting Small Business loans.

Thanks Don. Now on to the task of determining if any of those NOT reported as HMDA or Small Business Loans would meet the definition of Community Development. No small task, right!

So in a large bank exam you would have to request that these be considered else examiners would look at HMDA and CRA reportable loans only?

The decision to have the type 3's considered should rest on your small business portfolio. If your numbers are strong there is no need to consider reviewing (and doing additional data integrity) on these deals. If you post weak figures and using the type 3's as additional support would help, well then by all means do your homework and include them.

Type 3's are not going to be the major determining factor in an exam though. You're much better off spending time mining your portfolio for CD deals than spending time on the type 3's in my opinion. They just aren't of enough value in comparison.

You mentioned determining if these were CD. I would highly doubt that you're going to have much success qualifying this type of deal as a CD loan unless you've got a real doozie of a deal out there. Again, spend time on the bigger deals and save these for desperate times When desperate measures become more important to your survival.

We have always include the type 3 loans as part of our small business loans for our strategic plan. We do a lot of them and they help our numbers. We can group our type 1, 2 and 3s together and set our goals accordingly. Up until this year it has been pretty clear what a type 3 is. Now we have the problem of the HMDA Refi definition messing things up.

Has it been decided if you can count a type 3 loan for CRA and HMDA (because it has been renewed)? We have one right now that is absolutely a small business loan, all proceeds are for the operating capital of the business. However, we took a residence as extra collateral. Last year it was a type 3. This year we renewed it and it has to count as HMDA. I want to continue to count it as a Type 3 also. Any opinions out there? (other than the fact the renewal definition for HMDA stinks.)

Sounds like this falls under the refinance clause of HMDA/CRA? According to the HMDA help line it's both a type 3 and HMDA. Renewed lines or loans for small business would be reportable so I think you'd be on both with this renewal as well.

Goofy system! Gad love those darned examiners....

That's what I am saying. The compliance department say no, but I am sticking to my opinion. I want it on both. The regulators made this mess, let them fix it.

GIR discusses business line renewals specifically (after 2001) on page 11 & 12 (Gad I actually knew that without looking it up!) The new HMDA guidelines are all over the place but you could email HMDA help to get the definative answer as well. (I did which is why I answered this question )