Banking Traditions: HVCRE Regulatory Update

Articles / Publications

In an article published in Volume 29, Issue 3 of Banking Traditions magazine, Lindsey Cochran discusses President Trump's recent signing of the Economic Growth, Regulatory Relief, and Consumer Protection Act, otherwise known as the "Reform Bill."

The bill modifies the existing Basel III capital rules adopted as a response to the financial crisis of 2008 and beyond and adapts these regulations to fit the current economy, providing additional clarity with respect to the treatment of high volatility commercial real estate loans.

Cochran outlines important aspects of the Reform Bill: It provides that heightened risk weighting applies only to HVCRE loans that are also classified as "HVCRE ADC" loans, permits the appreciated value of real property to be considered in a project's contributed capital requirement, and permits reclassification of loans as "Non-HVCRE ADC" upon the project's completion and generation of sufficient cash flow to support debt service and project expenses.

According to Cochran, "The Reform Bill's intent was to promote economic growth, and with the introduction of the more narrowly tailored HVCRE ADC applicability, an uptick in the commercial lending market should follow."

Read the full article, "HVCRE Regulatory Update."

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