HB 2148 Clarifying Commercial Real Estate Loans

About HB-2148

Clarifying Commercial Real Estate Loans

Section 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.