Sens. Cotton, Jones Introduce HVCRE Clarification Bill

Senate Banking Committee members Tom Cotton (R-Ark.) and Doug Jones (D-Ala.) yesterday introduced a bill that would clarify the regulatory treatment of high-volatility commercial real estate loans intended to address many banker concerns about capital requirements on HVCRE exposures.

The bill would specify that agencies may not impose higher capital standards on HVCRE exposures unless they are for acquisition, development or construction, and it clarifies what constitutes ADC status. The HVCRE ADC treatment would not apply to one-to-four-family residences, agricultural land, community development investments or existing income-producing real estate secured by a mortgage, or to any loans made prior to Jan. 1, 2015. It also specifies when banks may reclassify ADC loans as non-HVCRE.

The bill is a companion to a House measure introduced by Reps. Robert Pittenger (R-N.C.) and David Scott (D-Ga.) that passed the House in November 2017. It comes as the federal banking agencies are revisiting the treatment of HVCRE loans as part of a pending rulemaking that is intended to simplify capital rules.