Page 813 of the final rule does have a table with Register count, Sample size, Tolerance Threshold # and %

Wow - that is pretty unusual - I stand corrected.

We qualify for CRA due to our asset size. However, in 2022 we had under 100 small business loans, this year so far in the first quarter only 1. In 2021 we did 500 PPP, so what would be my scenario as far as reorting.

HMDA, if you did not meet the threshold, in the prior 2 years there was not reporting, Would this mean that come 12/31/2023 we may not be a reportable bank, until we reach the 100 threshold in two consequetive years?

Appreiate your input.

Love Cruising, yes, you must hit that 100 mark in each of the two preceding calendar years before you would have to report.

Thank you for your response. I'll have time to prepare.

The dollar amount of $1 million remained unchanged,correct?

Do you mean the gross annual revenue of the business? If so, that's $5 million or less in the prior fiscal year.

I have not been able to find if the dollar amount for CRA Small Business continues to remain at $1 million, I know the revenues went up to $5 million, but not clear on the loan amount.

Appreciate a response.
Thanks,

No the dollar amount that has always been up to $1 million, did it remain unchanged?

There is no loan amount ceiling for reportable loans..

Love Cruising, I think you are confusing CRA reporting and 1071 reporting. They are two different things with two different requirements.

We are a small bank and a majority of our commercial loans are Ag loans. When trying to determine coverage we only count loans made to business entities correct? So if a farm operating LOC was made to John Doe, that loan would not count, but if it was made to John Doe Farms LLC then it would? I just want to make sure I understand correctly.

In the final rule, these are the definitions:

§ 1002.106 Business and small business.
(a) Business has the same meaning as the term “business concern or concern” in 13 CFR 121.105.

(b) Small business definition—(1) Small business has the same meaning as the term “small business concern” in 15 U.S.C. 632(a), as implemented in 13 CFR 121.101 through 121.107. Notwithstanding the size standards set forth in 13 CFR 121.201, for purposes of this subpart, a business is a small business if its gross annual revenue, as defined in § 1002.107(a)(14), for its preceding fiscal year is $5 million or less.

(2) Inflation adjustment. Every 5 years after January 1, 2025, the gross annual revenue threshold set forth in paragraph (b)(1) of this section shall adjust based on changes to the Consumer Price Index for All Urban Consumers (U.S. city average series for all items, not seasonally adjusted), as published by the United States Bureau of Labor Statistics. Any adjustment that takes effect under this paragraph shall be rounded to the nearest multiple of $500,000. If an adjustment is to take effect, it will do so on January 1 of the following calendar year.

If you cross reference 13 CFR 121.105, the definition of "business" includes "A business concern may be in the legal form of an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust or cooperative, except that where the form is a joint venture there can be no more than 49 percent participation by foreign business entities in the joint venture."

1071 retains the definition of business credit from the existing Reg. B, which states, "Business credit refers to extensions of credit primarily for business or commercial (including agricultural) purposes, but excluding extensions of credit of the types described in § 1002.3(a)–(d)."

Putting those definitions together, I would conclude that the farm operating LOC made to John Doe in your example is reportable under 1071 because it is made primarily for commercial purposes, unless Mr. Doe had annual revenues in excess of $5 million.

Our portfolio is filled with mainly ag loans, we are expecting 99% of those loans to fall under the $5 million gross revenues for our sole props. All are reportable.

If you're like me, the incomplete and withdrawn apps are going to be a concern. It's something that wasn't tracked in the past.

What's your best estimate of how many of these loans you are originating annually? Your "start" date could be 10/1/24, 4/1/25, or as late as 1/1/26. But you can start implementing and training (and retraining -- commercial lenders are often not attuned to this sort of data gathering) before your start date.

We'll have to start reporting 10/1/24. We'd need a sizable decline in 2023, which I'm not anticipating. Implementation is dependent on technology. Until we know for sure when the various solutions we use will be ready, it's hard to set training dates and implementation timeframes. I already know I'll need to add staff as I'm anticipating approximately 1800 hours of additional work based on loan volume for validation not including the withdrawals/incomplete applications.

Here's another concern:

"The CFPB intends to use its enforcement and supervisory authorities to focus on covered lenders’ compliance with these requirements relating to the rule’s prohibition against discouraging applicants from submitting responsive information. The CFPB intends to pay particular attention to covered lenders’ response rates for data requested from applicants.8 As appropriate, the CFPB intends to consider how a lender’s response rates compare to financial institutions of a similar size, type, geographic reach, or other relevant factors, because, as noted in the rule, low response rates may indicate discouragement or other failure by that lender to maintain proper collection procedures consistent with the rule.9 Similarly, the CFPB intends to consider, among other things, irregularities in a particular response (for example, very high rates, relative to similar lenders, of an applicant response of “I do not wish to provide this information” or similar) because that may indicate steering, improper interference, or other potential discouragement or obstruction of applicants’ preferred responses."

CB#3, I'm with you on a couple points. First, the Ag loans tend to be one loan for seed, another for a new piece of equipment, and another loan over there to buy the neighbor's Ag land that came up for sale, and on and on. That drives our figures well past the threshold, past & future.

And your second point, I'd put it this way: The Ag landscape is notoriously suspicious of DC. "Mr. Lender, you've dealt with me for 5 (or 10, or 20) years, you know who I am. Why does the government suddenly need to know my ethnicity, when they've been paying me subsidies for (5, 10, or 20) years?" Out there for 2025, very high rates of "I do not wish to provide," looks like an iceberg from 2023.

Since most Ag folks are locked into their banks, and the banks find one way or another to extend the credit, I'm not all that concerned with withdrawn & incomplete apps. But that's only if everything stays the same in the national banking system, where the horizon looks a little cloudy.

I'm still digging into the rule, but i want to ask this while i'm thinking about it.....so HMDA reportable transactions are exempt from 1071 reporting. What about temporary financing loans exempt from HMDA? They are now reportable under 1071, since they are not HMDA reportable? (This is of course assuming that that the loan is a covered transaction under 1071 and made to a small business as defined in the rule.)

I guess that ^^^^ IS the case...it was just striking me as odd yesterday. Doesn't strike me as so odd today, if you look at it as them just not making you double report...so if it's not on the HMDA LAR, i guess you must consider it for the small business LAR.

Another coverage question - we're trying to figure out where to draw the line (if there is one) for real estate mortgages. We are not a HMDA reporter, so no relief there. At this point, we think we'll have to report on all 2-4 unit loans (regardless of occupancy) as well as any single unit home that's non-owner occupied. That could be really broad though - trying to get "business" information from a borrower who's buying a house to rent back to his son? Or just as a personal investment?

Anyone have any insight here?

Raitchjay, that is my understanding as well - no temporary financing exclusion for small business reporting.

I have not dug deep yet, but so far my understanding is that if it is business purpose it will be reported for 1071 UNLESS it was already reported for HMDA or the borrower has gross revenues exceeding $5 million/year.

I don't want to answer this authoritatively yet, but my understanding so far is that if the transaction would be HMDA reportable (regardless of whether you actually are a HMDA reporter), then it's NOT reportable under 1071.

Don't forget that they also have to meet the definition of a "small business". Not every loan to an individual for a non-owner occupied dwelling is going to meet that definition, especially consumer investments, which aren't business purpose at all.

Does the SBA clarify the difference between "consumer investments" and "small business"? Can anyone point me toward where to look for SBA's definition of small business? I tried researching the site, but could only come up with size thresholds, not a general definition.