The House bill's purpose is to clarify how an HVCRE loan is classified, according to Trepp Talk. It writes:

The HVCRE rule increased the risk weighting of a loan held on a bank's balance sheet by 50%, so banks are required to hold capital totaling 12% against such loans, up from 8% for most commercial mortgages. But the rule didn't exactly spell out what would cause a loan to be classified as HVCRE.

The notice of proposed rulemaking addresses the same problem and offers up a new framework for HVCRE loans, CRE Finance Council Executive Director Lisa Pendergast tells GlobeSt.com. Here too, the goal is to create some clarity around the rule.

For instance, she said, the regulation seems to require ongoing monitoring of all acquisition, development and construction loans throughout their lives because they might become subject to HVADC treatment at anytime. That's, needless to say, a huge burden for banks.

Trepp Talk makes a similar point in its explanation of the House legislation:

The rule led to a mish-mash of interpretations by lenders, and threw a proverbial monkey wrench into the loan syndication business, simply because one bank might interpret the rule differently than another. In addition, some banks shied away from lending (even against income-producing properties) if they included any sort of redevelopment or construction component.

Between the bill and the proposed rulemaking, Pendergast says there is hope there will be relief for the banks.

Save

Save

Save