Banking Regulators Issue Updated Proposed Rules Regarding HVCRE

Copyright: Bjoern Wylezich

Reform of the High Volatility Commercial Real Estate (HVCRE) regulations is a top priority for NMHC/NAA and to that end we have taken a two-track approach to improving the rule that is starting to bear fruit.

First, following years of NMHC/NAA advocating for greater clarity and sensible changes to the original HVCRE regulations, the Federal Reserve Bank, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (the Banking Regulators) issued a proposed rule last week updating and modifying the HVCRE regulation that impacts all bank lending for acquisition, development and construction loans (ADC) on commercial real estate.

The proposed rule clarifies the definition of an HVCRE loan and will make it more straight-forward for banks to apply the rule. The rule also addresses a number of the modifications that NMHC/NAA fought for, including the elimination of the 15 percent contributed equity provision, exemption of income producing rehab loans, allowance of internally released capital and an earlier conversion to permanent loan status.

NMHC/NAA will provide comments on the proposed rule to the Banking Regulators during the 60-day open comment period ending in early December. If you are interested in providing feedback, comments can be submitted here.

Second, NMHC/NAA has also worked with industry partners to support Congressional efforts to reform HVCRE. A bipartisan bill, HR 2148, was approved this week by the committee in a vote of 59 to 1. The bill would clarify the language and address certain deficiencies in the original rule. NMHC/NAA and other real estate trade associations submitted a letter supporting efforts by the Committee on Financial Services to improve clarity regarding HVCRE regulations.