United States:
House Passes Bill Addressing Industry Concerns Regarding The Capital Treatment Of High Volatility Commercial Real Estate (HVCRE) Exposures
29 November 2017
Morrison & Foerster LLP
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On November 7, 2017, the House passed H.R. 2148, the Clarifying
Commercial Real Estate Loans Act, with broad bipartisan support.
The Bill has been referred to the Senate Committee on Banking,
Housing, and Urban Affairs. If enacted, the Bill would add a new
Section 51 to the Federal Deposit Insurance Act to clarify the
capital treatment of acquisition, development, and construction
(ADC) loans characterized as high volatility commercial real estate
(HVCRE) exposures. The capital rules require that, under the
"standardized approach," HVCRE exposures must be
risk-weighted at 150% rather than the 100% risk weighting accorded
to other commercial loans. Banks and industry groups have express
concerns about the complexity of the current rule as it concerns
HVCRE exposures, its uncertain application, and the burden it
imposes on ADC lending. The Bill seeks to address those
concerns.
Read our
client alert.
Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.
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