Congressmen Scott and Pittenger Introduce Bipartisan Legislation to Clarify Commercial Real Estate Lending Rules

Today, Congressman David Scott (D-GA) and Congressman Robert Pittenger (R-NC) introduced bipartisan legislation to clarify and improve certain regulations which have created confusion and unnecessary costs in commercial real estate lending.

In January 2015, the Federal Reserve and Office of the Comptroller of the Currency adopted regulatory capital rules related to “high volatility commercial real estate” (HVCRE).  Despite repeated requests from community banks, other financial institutions, and real estate developers, federal regulators failed to clearly define the types of loans and projects to which the rules are meant to apply.  As a result, many banks have pulled back from commercial real estate lending, leading to fewer jobs and slower economic growth.

“There is no doubt that in my district, the state of Georgia, and our country as a whole we are just now getting back on our collective feet after the financial crisis,” said Congressman Scott (GA-13).  “As an original cosponsor of Dodd-Frank and avid supporter of keeping our banking system safe, I recognized, in the aftermath of the crisis, the need for dramatic changes to how regulations work in finance.  However, with any law or regulation, nothing is perfect and we now have years of real-world experience that shows us what’s working and what isn’t.  Mr. Pittenger’s bill is exactly the type of technical fix our economy is hungry for, but moreover, this bill is carefully crafted so we aren’t sending ourselves back to a time when financial regulation resembled the Wild West.”

“Regulation is necessary for an orderly economy, but when regulators fail to provide clarity or address the real-world problems created by their rules, then Congress must act,” said Congressman Pittenger.  “This is a highly-technical bill, but it directly impacts the local economy.   Without access to capital, entrepreneurs can’t create jobs or build housing or generate economic activity.  Thank you to Congressman Scott for working with me on this important reform.”

Congressman Scott and Congressman Pittenger’s bipartisan legislation, Clarifying High Volatility Commercial Real Estate Loans (H.R. 2148), better defines which types of loans must comply with the HVCRE regulations. 

  • Provides a specific, legal definition for “high value commercial real estate acquisition, development, or construction loan” (HVCRE ADC loan), correcting an overly broad definition which currently forces many stable loans to remain in the HVCRE category and unnecessarily increases costs. 

  • Restores common sense standards for the amount and type of equity required to include the appraised value of the land and not just the purchase price.

  • Eliminates the all-cash equity requirement which currently makes it difficult for small-to-medium sized developers and entrepreneurs to compete.

  • Clarifies when the loan on a completed development may exit the HVCRE requirements.

  • Adds an exemption from HVCRE requirements for refinancing or acquiring an existing, income-producing development.

H.R. 2148 is supported by more than a dozen trade associations, including the Independent Community Bankers Association, National Apartment Association, National Association of Home Builders, Mortgage Bankers Association, National Association of Realtors, The Real Estate Roundtable, National Multifamily Housing Council, National Association of Real Estate Investment Trusts, NAIOP Commercial Real Estate Development Association, International Council of Shopping Centers, Institute of Real Estate Management, Commercial Real Estate Finance Council, CCIM Institute, and Building Owners and Managers Association International.