CRA and Reporting Subsequent Loan Renewals

Issue/Inquiry

The Bank originated a small business loan in 2011, which was reported on the CRA Loan Register (“CRA LR”). Subsequently, the loan term was extended and then, later that same year, the loan was modified and new money with a sum of $33,000 was provided. Should the term extension and the new money have been reported on the CRA LR?

Response Summary

Under Interagency guidance, both the extension and the increase would be reported as loan originations on the CRA LR. As the extension, which would be considered a renewal for CRA purposes, had already been reported, only the amount of the increase would be reported.

Response Detail

Under Interagency guidance, an institution should collect information about small business 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 the loan. However, the institution may only report one origination per loan per year, including a refinancing or renewal treated as an origination, unless an increase in the loan amount is granted.

If an institution increases the amount of a small business loan when it extends the term of the loan, it should always report the amount of the increase as an origination. Only the amount of the increase would be reported if the original or remaining amount had already been reported that year. If the increase was made the following year as part of a refinancing, then both the refinancing and increase would be reported as originations that year, and could be reported as a single transaction in the total amount (i.e., the original or remaining amount together with the increase). Interagency Questions and Answers Regarding Community Investment, §___.42(a)—5.

In this case, the origination of the loan would have been reported on the CRA LR in 2011. If the loan was extended in a subsequent year, the extension would be considered a renewal for CRA purposes and thus a reportable loan origination. This would be reported on the CRA LR for that year. The loan increase later that year would also be considered a loan origination, but since a renewal had already been reported, only the amount of the increase would be reported.

This means that, if the balance of the loan was $100,000 when it was extended, a loan origination of $100,000 would be reported. The increase in the loan amount later that year would be reported as a loan origination of $33,000.

This entry was posted on Monday, January 28th, 2019 at 6:00 am.