How to Successfully Mine for Community Development Loans

A woman wondering how to mine for community development loans

You’ve probably heard the term before: community development loan mining. Ugh. What a chore.

But as a CRA Officer or CRA Analyst, it’s your job to identify all CRA-eligible loans originated by your bank.

But that doesn’t mean this job is easy. Or fast. Nope, mining for community development loans may be the most difficult and subjective part of the CRA. It takes a lot of time and energy, something you have precious little of as a CRA team of only one or two people. Even if you’re part of a larger team, you still have very little time!

So how do you find the time and resources to mine for community development loans? And why should you spend this time anyway?

What does it mean to mine for community development loans?

Community development loans are loans that have community development as their primary purpose. In other words, they support one of the community development hooks, which include affordable housing, community services, economic development, and revitalization or stabilization. You might want to download this community development hooks PDF reference to keep these elements top of mind and to help you properly identify your bank’s community development loans.

Mining for community development loans simply means taking the time to go through each eligible commercial loan originated by your bank and determining whether or not it counts towards the CRA (i.e. supports your community). It also means training your team to identify and pass these loans along to you. Everything is easier with some help, after all.

Why mine for community development loans?

There are several reasons you should take the time to mine for community development loans. The more community development loans you’ve identified, the higher your chances are of achieving your desired rating on the CRA exam. Want that coveted Outstanding rating? Having a robust portfolio of community development loans across all of your assessment areas will help you get there.

Mining for loans will also help you train your lending team. As you mine for loans, you’ll likely find some that count towards the CRA but that lenders didn’t tell you about. If you haven’t taken the time to train your lending department to watch for community development loans, this will be no surprise and will act as a good starting point for future training. If you have trained lenders on how to identify potential community development loans, then finding these unidentified loans will serve as a reminder to retrain and show them exactly what they’re missing. Now you can take these specific loans and say, “Congratulations on originating a community development loan! If you find more loans in your pipeline with similar characteristics, send them my way.” If you do this right, loan mining may become an easier chore in the future. Still a chore, yes. But an easier one.

How to mine for community development loans

Expand your CRA team

One way to ensure that you have the resources to review each loan originated by your bank is by hiring another member of your CRA team whose main responsibility is to mine for loans.

While this isn’t always feasible for smaller financial institutions, if your bank has the budget and necessary support, go ahead and hire that extra team member! This won’t only help with loan mining, but will also help clear your plate of other responsibilities as this extra team member takes some of those on. (Just remember to have them focus on community development loan mining if this is the primary reason you’ve hired them.)

If you can’t afford to hire another team member, don’t worry. There are other ways to mine for community development loans.

Hire an intern

A cheaper alternative to hiring a full-time team member is hiring an intern. Having an intern can be an amazing way to take some responsibilities off your plate (specifically, loan mining).

That’s right. You can hire an intern to mine for community development loans. Interns are a great first wave in community development loan mining and can help make your work easier down the line. Just keep in mind that you’ll still need to train and oversee your interns since mining for community development loans is difficult and quite technical. While an intern may be able to do some of the initial research to identify loans, you’ll still need to prove that the primary purpose of the loan is community development and fully document everything you need.

While some interns are willing to work for the experience (i.e. free), it’s always best to pay your interns, while also mentoring and preparing them for their own futures in banking and community development. If you had a mentor of your own, you know how wonderful it can be to get that inside look and help you need. And if you didn’t have a mentor, don’t you wish you had?

Now you can be someone else’s mentor.

Outsource some work

If neither hiring a new team member or an intern is an option, you might consider outsourcing your loan mining work. You could take a look at some CRA consulting firms and pass on many of your loan mining tasks to them. However, while these consulting firms can be very helpful, you know your community and your bank best, so you should always review the loans they identify and ensure that the information accurately captures your story.

Train each bank department

Mining for loans is a chore, but if you train each bank department to identify loans and send them your way, you’ll have much less work to do. Simply teaching your commercial lenders how to spot potential community development loans can make a huge difference.

But you don’t need to stop there. You’ve probably heard that you should aim to get in front of each department at least three times each year. This might look like a formal CRA presentation, an email, or a quick how-to video. No matter what you do, make sure to include loan mining training. The more people on your team keeping an eye out for potential community development loans, the more likely you are to identify loans and score well on your CRA exam.

Split loans into segments

Seeing a list of hundreds or even thousands of commercial loans can be overwhelming. And knowing that you’re in charge of going through as many as possible and determining whether they count as community development loans is daunting.

Instead of drowning in a giant list of loans, try splitting them into segments and tackling these segments separately. This should make the work go by quicker and won’t be nearly as overwhelming. A good place to start is by splitting commercial loans into:

Loans to nonprofit organizations
Small Businesses Administration (SBA) 504 loans
Renewals and major modifications
Loan officer/system identified loans
LMI areas/redevelopment districts

One way to sort your loans into segments is with Kadince. Kadince makes it easy to sort loans and view all the related information, such as what organization received the loan, if you’ve given to them before, who the loan helps, etc. Kadince makes your loan mining process much less manual.

Block off some time

Maybe the reason you haven’t been able to mine for community development loans is because you haven’t given yourself the time to do so. We’re all busy, and it’s so easy to lose track of time. Rather than adding community development loan mining to your ever-growing list, try blocking some time on your calendar specifically for loan mining tasks.

And once you’ve blocked this time, don’t let anything else overrun it. This can be extremely difficult, especially with all the different responsibilities you have to answer to. But this is your time to mine those loans, gosh darn it! Nothing else should stand in your way.

And maybe once you’ve stuck to your schedule and mined some loans, reward yourself with a nice treat or much-needed break. You deserve it.

Use Kadince to mine for community development loans

Kadince makes it easier to mine for community development loans. All your community development services, loans, and investments are kept in one place, so now you can see the full picture of what your bank is doing in the community.

As you go through the loans in your system, you can mark them as “CRA eligible” or “Not CRA eligible.” And since all the information about the loan is right at your fingertips (including who the loan is to, what it’s for, who it benefits, whether you’ve originated loans to this business before, etc.), this process is easier than ever.

By staying on top of these loans, you won’t fall behind and have to play catch-up the rest of the year. Now you can relax, knowing that your Kadince system is an accurate representation of the amazing work you do in your community.

To learn more about mining for community development loans with Kadince, schedule a personalized demo.

*This article has been peer-reviewed by Linda Ezuka, CRA expert and owner of CRA Today.

None of Kadince, Inc., its affiliates, or its respective employees, directors, officers, and agents (collectively, “Kadince”) are responsible or liable for any content or information incorporated herein. Read full disclosure.