Q: § __.22(a)(2) – 7: How are refinancings of small business loans, which are secured by a one-to-four family residence and that have been reported under HMDA as a refinancing, evaluated under CRA?
A: A loan of $1 million or less with a business purpose that is secured by a one-to-four family residence is considered a small business loan for CRA purposes only if the security interest in the residential property was taken as an abundance of caution and where the terms have not been made more favorable than they would have been in the absence of the lien. (See Call Report Glossary definition of “Loan Secured by Real Estate.”) If this same loan is refinanced and the new loan is also secured by a one-to-four family residence, but only through an abundance of caution, this loan is reported not only as a refinancing under HMDA, but also as a small business loan under CRA. (Note that small farm loans are similarly treated.)
It is not anticipated that “double-reported” loans will be so numerous as to affect the typical institution’s CRA rating. In the event that an institution reports a significant number or amount of loans as both home mortgage and small business loans, examiners will consider that overlap in evaluating the institution’s performance and generally will consider the “double-reported” loans as small business loans for CRA consideration.
The origination of a small business or small farm loan that is secured by a one-to-four family residence is not reportable under HMDA, unless the purpose of the loan is home purchase or home improvement. Nor is the loan reported as a small business or small farm loan if the security interest is not taken merely as an abundance of caution. Any such loan may be provided to examiners as “other loan data” (“Other Secured Lines/Loans for Purposes of Small Business”) for consideration during a CRA evaluation. See Q&A § __.12(v) – 3. The refinancings of such loans would be reported under HMDA.
This Interagency Q&A, and others, was released in July 2016.
The 2016 Q&As consolidates and supersedes all previously published “Interagency Questions and Answers Regarding Community Reinvestment,” and were noted as being effective immediately. They may be found here: http://www.ffiec.gov/cra/qnadoc.htm