© 2024 Arizent. All rights reserved.

House approves bill easing regulation on construction lending

The House Financial Services Committee approved a bill Thursday easing regulation on construction lending.

Introduced by Representative Robert Pittenger, the “Clarifying Real Estate Loans” bill passed on a 59-to-one vote.

It provides clarity to capital requirements for certain acquisition, development, or construction loans by permitting the appraised value of real property to count toward a 15% equity threshold in order to be exempted from a High Volatility Commercial Real Estate (HVCRE) designation as otherwise required under Basel III.

construction-fotolia.jpg

The bill also provides an off-ramp from HVCRE designation when a loan matures and qualifies for underwriting standards for permanent financing. The bill also exempts loans made prior to January 1, 2015, when the Basel III rule took effect.
Lisa Pendergast, executive director of the CRE Finance Council, said the bill would create significant clarity around what is a high volatility commercial real estate loan.

“The lack of clarity around the original HVCRE rule coming out of Basel III, not to mention the difficulties that the introduction of a parallel version for small to mid-sized banks from the regulators last week, created significant uncertainty about the regulatory treatment of these types of loans,” she said in an emailed statement.

“The effect thus far has been to quell the liquidity traditionally provided by the banks for the construction and development of commercial and multifamily properties, a vital component of the U.S. economy.”

The measure now moves to the full House for a vote.

For reprint and licensing requests for this article, click here.
CMBS Multifamily
MORE FROM ASSET SECURITIZATION REPORT