Under the new HMDA rules, if a commercial refinance is secured by a dwelling, it must be reported under HMDA and can't be used also as a community dev. loan under CRA. If a bank isn't a large bank and only needs to demonstrate it is lending within its assessment area to low-mod and small businesses, can this HMDA reportable loan be counted in the business loans the bank made. For example: The bank has taken a home as additional security on a business loan. The loan gets refinanced so that the business owner can purchase another commercial property - annual gross revenue for the business is less than $1million - it's a small business. We have to report this under HMDA because it's dwelling secured, but the bank should be able to get credit under CRA for making a small business loan. I can' find anything in the regulation that deals with this.

I don't think you can receive credit for the same loan twice. That would be double dipping.

I agree Don, but it seems wrong. I have no choice but to report it as a REFI under HMDA. I'd much rather get credit for it under CRA because it is a small business loan - the type of lending we're supposed to be doing. It's HMDA by mistake - the definition of REFI scooped all the commercial loans in which is not what HMDA is all about.

One way to deal with this issue is to make certain the residential property doesn't directly secure the loan. In other words, if the property secures the guarantee of the loan, then under the new HMDA rules it is not reportable under HMDA because only residential real estate that directly secures the loan qualifies for refinancing definition. If there is a business purpose to the loan and it is reportable as a small business loan on the Call Report, then you would be able to report it as a small business loan and get credit for it under CRA.

Now I'm confused - like this is something new! If I read this correctly, if the bank reports a commercial loan as a refinance on the LAR, does that mean it can't call it a commercial loan on the CALL report? These two reports aren't done by the same people and I'm pretty sure the call is completed from info in the mainframe where the commercial refinance will be logged as a commercial loan - small or not small business. And, do we still have to collect loan information for CRA after we become a HMDA reporter, or is all that information taken from the government report of our HMDA lending?

Yes, the CRA Small Business LAR is separate from the HMDA LAR, so you have to collect and submit both.

For Anon #2, you don't need to collect CRA information if you're not a CRA reporter.

The link to the call report is a valid point. The call report is the guide for the CRA LR and so the two should match. If they don't you're probably reporting in error somewhere.

As to the first post. I want to clairfy a couple of issues from your post. First, you state it's a small business loan because revenue size is below one million. While you may already know this, I'm going to say it again because many bank's make a mistake here. CRA LR reporting for small business lending is NOT defined by revenue size. It's by loan size. So if the loan was below a million in size, it would possibly qualify for the LR, not if it was to a business with revenues below one million.

Now to the actual loan data. You are allowed to collect and submit during examination, loan type 3's. These are small business loans (size below one mill) that are secured by residential real estate. This is some of the additional data that is considered in your exam, and if the change in the reg substantially changed your small business lending, by all means, gather the data and share it with your examiners.

Examiners are going to look at the number of small loans to businesses (loan size) as well as percent of those loans that are loans to small businesses (revenue size). If the type 1 and 2 deals aren't enough to make your bank look good, you then pull the type 3's and share them with the examiner...but do be sure you're doing data integrity on them if this is the case!

Confused again! By CRA reporter, do you mean large banks? We are a small bank and don't have to analyse our data, but we choose to because examiners say they'll spend weeks in our files if we don't and we'd rather avoid that.
2) Is the CRA LR only prepared in you're a CRA reporter? I'm sorry to be so dense, but I just don't get this.

There is a large bank test for CRA and a Small Bank test. If you are required by your regulatory agency to file a CRA Loan Register by March 1st, than you are a CRA reporter. (The LR is your "report")

Are you required to file a CRA Loan Register? If not...why would your examiners want to spend weeks in your files????

We are a small bank - $150M. The FDIC doesn't force us to analyze our CRA data, but we choose to in order to understand where we are lending and to keep them out of our vault for what they say would take 2 weeks. Our CRA exams have gone well - generally take just a few days and we have an outstanding rating. It's because we do the work. But we are a small bank, so does that mean we don't have to do a CRA LAR, just a HMDA LAR. WE are new to HMDA and that's why I'm terribly confused.

No, you do not have to do a CRA LR, but if you want to keep one for your own purposes, you should at least classify the loans correctly so the info will be valid.

You do have to keep a HMDA LAR if you are a reporting bank (which I assume you are by your comments.)

OK, I think I'm getting it. We are a small bank, so we don't have to do a CRA LR, which is where the double dipping comes into play. A loan can't appear on the CRA LR AND a HMDA LR. That makes sense. But can I call the above business loan a "business" loan on the CALL and use it as a business loan in my compilation of cra data even thouhg it's been reported on the HMDA LR as a "refinance?" If you can direct me to a place where I can research it, I will. I've tried CRA, HMDA and the CALL instructions, but it's all very confusing. Thank you.

I'm not sure why you're analyzing your CRA loans if you don't have to, but if you are, and you're including loans secured with residential realestate you're not really analyzing on a CRA basis. A business loan secured with residential real estate is a type 3 loan. For CRA purposes, we report type 1 and 2's (small business....not residential real estate secured) and small farm loans.

If you feel a need to do a CRA analysis, you should do so based on the same rules we all follow (this week...thanks FDIC and OTS) and leave the type 3 loans out.

Thanks Dawnie. I think I understand it now.