October 18, 2017
A bill to change the High Volatility Commercial Real Estate (HVCRE) rule is making its way through the the House Financial Services Committee. The bill to create a single standard passed the committee by a bipartisan vote of 59-1.
The Clarifying Commercial Real Estate Loans Act was originally proposed in April. The modified legislation is seeking to more clearly define HVCRE loans, clarify aspects of the contributed capital exemption, define conversion from HVCRE to permanent loans status, and implement a grandfathering provision.
An amendment adopted does three things:
- Clarifies that the bill still applies, even if the definition of “high volatility commercial real estate (HVCRE) exposure is changed” to “high volatility acquisition, development, or construction (HVADC) exposure;
- Adopts the “primarily finances” test in the regulators’ proposed rule;
- Aligns the bill’s two “income-producing” exclusions with the “permanent loan” exclusion in the regulators’ proposed rule, by applying a debt service requirement to the acquisition of existing, income-producing property.
For comments, questions or concerns, please contact Dennis Kaiser