MBA Commends Bipartisan Legislation to Clarify Rules on Commercial Real Estate Lending

The Mortgage Bankers Association commended introduction yesterday of H.R. 2148, bipartisan legislation that clarifies and amends parts of Basel III high-volatility commercial real estate (HVCRE) banking regulation.

The bill, introduced by Reps. Robert Pittenger, R-N.C., and David Scott, D-Ga., addresses several specific deficiencies in the agencies’ regulations governing what constitutes 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 in 2015, requires banks to assign a 150 percent risk weighting to all acquisition, development or construction 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.

“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,” said MBA Chairman Rodrigo López, CMB, Executive Chairman of NorthMarq Capital, Omaha, Neb. “MBA commends Representative Pittenger and Representative Scott for their leadership on this important issue.”

López noted commercial and multifamily real estate finance is a nearly $4 trillion industry, which touches almost every segment of the economy. “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.”