I am pretty sure I know the answer to this but want to double check with my BOL friends. We have a loan that booked January 2005, no new money, and replaced an older loan originated in 2003. The older loan was not maturing until 2008. Borrower simply wanted name change for tax reasons. Old loan paid off, was not reported last year in LR (originated in 2003) new loan booked with no new money, same terms kept (rate, maturity, am/term). I don't think it should be reported since it did not mature. Comments??

We look to see if there was a credit decision made and in this case, there wasn't. Chances are we wouldn't have caught this loan unless it was brought to our attention. It would have been coded to be reported but if I knew what you stated, I would not report it.

This comes straight from the FFIEC's "Guide to CRA Data Collection and Reporting":

Data collected in 2001 and
subsequent years. An institution
should collect information about
small-business and small-farm loans
that it refinances or renews as loan
originations. (A refinancing generally
occurs when the existing loan
obligation or note is satisfied and a
new note is written, while a renewal
is an extension of the term of a loan.
However, for purposes of smallbusiness
and small-farm CRA data
collection and reporting, it is no
longer necessary to distinguish
between the two.) When reporting
small-business and small-farm data,
however, an institution may report
only one origination (including a
renewal or refinancing treated as an
origination) per loan per year, unless
an increase in the loan amount is
granted.

So, I must respectfully disagree with you guys. I would report it on the LR.

Quote:

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This comes straight from the FFIEC's "Guide to CRA Data Collection and Reporting":

Data collected in 2001 and
subsequent years. An institution
should collect information about
small-business and small-farm loans
that it refinances or renews as loan
originations. (A refinancing generally
occurs when the existing loan
obligation or note is satisfied and a
new note is written, while a renewal
is an extension of the term of a loan.
However, for purposes of smallbusiness
and small-farm CRA data
collection and reporting, it is no
longer necessary to distinguish
between the two.) When reporting
small-business and small-farm data,
however, an institution may report
only one origination (including a
renewal or refinancing treated as an
origination) per loan per year, unless
an increase in the loan amount is
granted.

So, I must respectfully disagree with you guys. I would report it on the LR.

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I am not convinced that we should report it. The borrower asked us into his second year of making payments on a term loan that didn't mature until 2008 if he could change the name of the borrowing entity. The only legal way we could achieve this was to issue a new note to the name entity and pay off the old note. Since there was no change in amortization, original maturity, payment amt, existing balance, and no new money it should not be reported. I think of it this way, examiner comes in reviews the data and cracks files where the new loan reported was simply a change in the name of the borrower. Could that be construed as inflating numbers if we had several loans or more like that?

No matter the reason why the loan was done and the lack of new funds, what you've described fits the definition of refinance as it's described in the passage I've provided. Same thing is true on the HMDA side.....a refinance is where a dwelling-secured loan replaces a dwelling-secured loan. It doesn't matter why the borrower is refinancing, nor does it matter if additional monies are being loaned. Granted, HMDA and CRA are different animals, but I believe the analogy fits. If an examiner were to question this, I would refer them to the FFIEC CRA reporting guidelines. In my last DI review, I had to refer them to it a couple of times.

The new interpretation implemented in 2001 was intended to clarify what had been a very confusing situation. Prior to that year, the regulation distinguished between "refinancing" and "renewals". Refinancings were reportable and renewals were not. Supposedly the difference was based on a new credit decision being made or not made. The problem was that many commercial lenders used the term "renewal" routinely with respect to lines of credit. But the way "renewal" is normally used in commercial lending and lines of credit fit the refinancing definition. The FFIEC decided to do away with the distinction. Now lines of credit that are "renewed" are reported in the same way a refinancing would be reported. So it would seem to me that the new loan should be reported. In fact, the fact that the old loan was satisfied would appear to reinforce that interpretation. By the way, if the same original entity was the borrower wuoldn't the obligation continue in spite of the name change (the legal entity still existed if I understand the situation correctly)? If there were UCC filings, those filings would have to be amended to protect the security interest, but it doesn't seem that the legal obligation should be exterminated by merely a name change of a continuing legal entity. Moreover, if the obligation were perfected by UCC filings, the need to file new UCC forms opens up the possibility of intervening liens achieving priority of security interest wheras amended UCC statements would protect an on-going perfected security interest all things being equal. I guess I've gone off on a tangent.

I'm going to agree with Len (just to freak him out) It should be reported.

Think of this in the most basic of terms. You had a loan to X borrower. You now have a loan to Y borrower. They may belong to the same guy, and may be just a reflection of a legal change in his business designation, but in the eyes of the government, X business is NOT Y business. They're two seperate entities (which is why he changed them in the first place).

I would have no question about reporting this one. It's quite clearly reportable and if it wasn't on my LR, I'd have added it (and then beat the lender who didn't mention it to me)

Thank you all for the help!!!! I'm glad I asked the question, this board is the greatest