Understanding the HVCRE Bill
ByReps. Robert Pittenger (R-N.C.) and David Scott (D-Ga.) recently introduced H.R. 2148 in an attempt to clarify what qualifies as a high volatility commercial real estate (HVCRE) loan and what doesn’t. The bipartisan bill, titled Clarifying High Volatility Commercial Real Estate Loans, has since been co-sponsored by Republican representatives for North Carolina, Ohio, Florida, Kentucky, Missouri and Colorado. On July 12, a subcommittee of the House Financial Services Committee held hearings to examine nine pieces of legislation that would provide regulatory relief for community financial institutions, including H.R. 2148.
Under new regulations effective since the beginning of 2015, HVCRE loans are assigned a risk rating of 150 percent. That means banks are required to set aside 50 percent more capital in reserve when dealing with HVCRE loans. That constitutes a significant increase from the 12 percent that lenders were previously required to reserve. Because a loan can be classified as high-risk after closing, traditional lenders are becoming reluctant to provide acquisition, construction and development (ACD) loans…
