Q What is considered a reportable loan renewal for Community Reinvestment Act (CRA) data reporting purposes?
A For CRA purposes, a loan renewal involves an extension of the maturity date of the loan as provided in the loan agreement.
The FFIEC’s Guide to CRA Data Collection and Reporting and Section __.42(a) – 5 of the Interagency Q&A state, in relevant part, that “[a]n 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 refers to an extension of the term of a loan. However, for purposes of small business and small farm CRA data collection and reporting, it is not necessary to distinguish between the two.)” They also note that, in contrast, “…a demand loan that is merely reviewed annually is not reported as a renewal because the term of the loan has not been extended.”
The key is in whether the bank has extended the maturity date as provided for in the loan agreement, or instead, simply advanced what might otherwise represent an internal “maturity date” that’s established for review purposes. Some lenders use those terms interchangeably, but the difference is critical from a CRA perspective. For example, some loan agreements establish a hard maturity date where the loan becomes due and payable, or, for a term loan, when the final payment will be due. Other loan agreements might be written on a demand basis, with no specified maturity or term. The bank may choose to review these agreements on a periodic basis to determine, based on the borrower’s financial condition or other factors, whether to continue the availability of a line or even call a loan. In the latter case, some banks treat that internal date as a maturity date for tracking purposes, but any advancement of this internal date would not be considered a renewal for CRA data reporting purposes.
For more information, contact ABA’s Terry Hollinger.
Please note that this section is not a substitute for professional legal advice.
