The Mortgage Bankers Association (MBA) applauded bipartisan legislation introduced this week that clarifies and amends parts of the Basel III high volatility commercial real estate (HVCRE) banking regulation.
MBA said the bill (H.R. 2148) addresses some deficiencies in the agencies’ regulations governing what is an HVCRE loan. Specifically, it would clarify and adjust the line between loans that should and should not be classified as HVCRE loans. The current rule, which went in effect on January 1, 2015, requires banks to assign a 150 percent risk weighting to all acquisition, development or construction (ADC) loans unless the loan qualifies for an exemption from HVCRE treatment. The legislation does not eliminate the agencies’ ability to require banks to hold higher capital for HVCRE loans.
“Commercial and multifamily real estate finance is a nearly $4 trillion industry, which touches almost every segment of the economy,” Rodrigo López, chairman of MBA and executive chairman of NorthMarq Capital, said. “As our economy continues to recover, every industry in the American economy needs to build. Specifically, ADC loans represent commercial real estate investment in our country’s economic growth and job creation.”
The legislation was introduced in the House by U.S. Reps. Robert Pittenger (R-NC) and David Scott (D-GA).
“As the rule currently stands, banks are hindered in their ability to provide this financing. Through clarification from legislation, they will be able to better meet the needs of their borrowers, contributing to the greater overall commercial real estate finance ecosystem,” López said. “MBA commends Representative Pittenger and Representative Scott for their leadership on this important issue.”