Agencies Issue Proposal on HVCRE Treatment of Single-Family Land Development Loans

In an effort to clarify their September 2018 proposal for high-volatility commercial real estate acquisition, development or construction loans, the banking agencies have issued an additional proposal to address the treatment of loans financing the development of land for one-to-four-family residential properties. The agencies are seeking input on whether such loans should be excluded from the definition of HVCRE in their regulatory capital rule.

The proposal would add language to the definition of HVCRE exposure providing that the one-to-four-family residential property exclusion would not include credit facilities that solely finance land development activities, such as the laying of sewers, water pipes and similar improvements to land without any construction of one-to-four-family structures. Comments on the proposal will be due 30 days after publication in the Federal Register.