Clarifying Commercial Real Estate Loans
(Sec. 2) This bill amends the Federal Deposit Insurance Act to specify that a federal banking agency may not subject a depository institution to higher capital standards with respect to a high-volatility commercial real-estate (HVCRE) exposure unless the exposure is an HVCRE acquisition, development, or construction (ADC) loan.
An HVCRE ADC loan is a one that: (1) is secured by land or improved real property; (2) has the purpose of providing financing to acquire, develop, or improve the real property such that the property becomes income-producing; and (3) is dependent upon future income or sales proceeds from, or refinancing of, the real property for the repayment of the loan.
An HVCRE ADC loan does not include financing for a one- to four-family residential property, agricultural land, real property that would qualify as an investment in community development, existing income-producing real property secured by a mortgage, or certain commercial real-property projects. Furthermore, such a loan does not include any loan made prior to January 1, 2015.
A depository institution may reclassify a loan as a non-HVCRE ADC loan if the depository institution is satisfied that: (1) the acquisition, development, or improvement of real property being financed by the loan is complete; and (2) the cash flow being generated by the real property is sufficient to support the debt service and expenses of the real property.
[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2148 Introduced in House (IH)]
<DOC>
115th CONGRESS
1st Session
H. R. 2148
To amend the Federal Deposit Insurance Act to clarify capital
requirements for certain acquisition, development, or construction
loans.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 26, 2017
Mr. Pittenger (for himself and Mr. David Scott of Georgia) introduced
the following bill; which was referred to the Committee on Financial
Services
_______________________________________________________________________
A BILL
To amend the Federal Deposit Insurance Act to clarify capital
requirements for certain acquisition, development, or construction
loans.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as ``Clarifying Commercial Real Estate
Loans''.
SEC. 2. CAPITAL REQUIREMENTS FOR CERTAIN ACQUISITION, DEVELOPMENT, OR
CONSTRUCTION LOANS.
The Federal Deposit Insurance Act is amended by adding at the end
the following new section:
``SEC. 51. CAPITAL REQUIREMENTS FOR CERTAIN ACQUISITION, DEVELOPMENT,
OR CONSTRUCTION LOANS.
``(a) In General.--The appropriate Federal banking agencies may
only subject a depository institution to higher capital standards with
respect to a high volatility commercial real estate (HVCRE) exposure
(as defined under section 324.2 of title 12, Code of Federal
Regulations, as in effect on the day before the date of the enactment
of this section) if such exposure is an HVCRE ADC loan.
``(b) HVCRE ADC Loan Defined.--For purposes of this section and
with respect to a depository institution, the term `HVCRE ADC loan'--
``(1) means a credit facility secured by land or improved
real property that, prior to being reclassified by the
depository institution as a Non-HVCRE ADC loan pursuant to
subsection (d)--
``(A) finances or has financed the acquisition,
development, or construction of real property;
``(B) has the purpose of providing financing to
acquire, develop, or improve such real property into
income-producing real property; and
``(C) is dependent upon future income or sales
proceeds from, or refinancing of, such real property
for the repayment of such credit facility;
``(2) does not include a credit facility financing--
``(A) the acquisition, development, or construction
of properties that are--
``(i) one- to four-family residential
properties;
``(ii) real property that would qualify as
an investment in community development; or
``(iii) agricultural land;
``(B) the acquisition or refinance of existing
income-producing real property secured by a mortgage on
such property;
``(C) improvements to existing income-producing
improved real property secured by a mortgage on such
property, if the cash flow being generated by the real
property is sufficient to support the debt service and
expenses of the real property, as determined by the
depository institution, in accordance with the
institution's applicable loan underwriting criteria for
permanent financings; or
``(D) commercial real property projects in which--
``(i) the loan-to-value ratio is less than
or equal to the applicable maximum supervisory
loan-to-value ratio as determined by the
appropriate Federal banking agency; and
``(ii) the borrower has contributed capital
of at least 15 percent of the real property's
appraised, `as completed' value to the project
in the form of--
``(I) cash;
``(II) unencumbered readily
marketable assets;
``(III) paid development expenses
out-of-pocket; or
``(IV) contributed real property or
improvements; and
``(iii) the borrower contributed the
minimum amount of capital described under
clause (ii) before the depository institution
advances funds under the credit facility, and
such minimum amount of capital contributed by
the borrower is contractually required to
remain in the project until the credit facility
has been reclassified by the depository
institution as a Non-HVCRE ADC loan under
subsection (d);
``(3) does not include any loan made prior to January 1,
2015; and
``(4) does not include a credit facility reclassified as a
Non-HVCRE ADC loan under subsection (d).
``(c) Value of Contributed Real Property.--For purposes of this
section, the value of any real property contributed by a borrower as a
capital contribution shall be the appraised value of the property as
determined under standards prescribed pursuant to section 1110 of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(12 U.S.C. 3339), in connection with the extension of the credit
facility or loan to such borrower.
``(d) Reclassification as a Non-HVCRE ADC Loan.--For purposes of
this section and with respect to a credit facility and a depository
institution, upon--
``(1) the completion of the development or construction of
the real property being financed by the credit facility; and
``(2) cash flow being generated by the real property being
sufficient to support the debt service and expenses of the real
property,
in either case to the satisfaction of the depository institution, in
accordance with the institution's applicable loan underwriting criteria
for permanent financings, the credit facility may be reclassified by
the depository institution as a Non-HVCRE ADC loan.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Hearings Held by the Subcommittee on Financial Institutions and Consumer Credit Prior to Referral.
Committee Consideration and Mark-up Session Held.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by the Yeas and Nays: 59 - 1.
Reported (Amended) by the Committee on Financial Services. H. Rept. 115-392.
Reported (Amended) by the Committee on Financial Services. H. Rept. 115-392.
Placed on the Union Calendar, Calendar No. 288.
Mr. Huizenga moved to suspend the rules and pass the bill, as amended.
Considered under suspension of the rules. (consideration: CR H8547-8550)
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line
DEBATE - The House proceeded with forty minutes of debate on H.R. 2148.
Passed/agreed to in House: On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote.(text: CR H8547-8548)
On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote. (text: CR H8547-8548)
Motion to reconsider laid on the table Agreed to without objection.
Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.