II 

113TH CONGRESS 

1ST SESSION S. 1002 

To enable Federal and State chartered banks and thrifts to meet the credit 

needs of home builders in the United States, and to provide liquidity 

and ensure stable credit in order to meet the need for new homes 

in the United States. 

IN THE SENATE OF THE UNITED STATES 

MAY 21, 2013 

Mr. MENENDEZ (for himself and Mr. ISAKSON) introduced the following bill; 

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To enable Federal and State chartered banks and thrifts 

to meet the credit needs of home builders in the United 

States, and to provide liquidity and ensure stable credit 

in order to meet the need for new homes in the United 

States. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Home Building Lend5 ing Improvement Act of 2013’’. 

6 SEC. 2. PURPOSE. 

7 It is the purpose of this Act to— 


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1 (1) immediately provide authority and guidance 

2 that Federal and State bank regulators can use to 

3 ensure that Federal and State chartered banks and 

4 thrifts that provide financing to America’s home 

5 builders are permitted to make loans, provide ongo6 ing liquidity, and ensure stable financing; and 

7 (2) enable Federal and State chartered banks 

8 and thrifts to provide initial and ongoing credit in 

9 a sound manner to America’s home builders to aid 

10 in restoring liquidity and vitality to the housing 

11 market. 

12 SEC. 3. COORDINATED RULEMAKING. 

13 (a) INITIATION OF PROCEEDINGS.—Not later than 3 

14 months after the date of enactment of this Act, the appro15 priate Federal banking agencies shall each initiate guid16 ance or rulemaking with respect to financial institutions 

17 under their respective jurisdictions that make real estate 

18 loans to home builders. Such guidance or rulemaking shall 

19 provide for the following: 

20 (1) ADJUSTMENT OF THE 100 PERCENT OF

21 BANK CAPITAL MEASUREMENT.— 

22 (A) LOAN ORIGINATION.—Notwithstanding 

23 any other provision of law, the measurement of 

24 construction loans that triggers additional scru25 tiny of real estate loans in the lending portfolio 


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1 of any qualified financial institution shall be 

2 125 percent of bank capital. The Federal bank3 ing agencies shall not treat the 125 percent 

4 measurement as a hard cap beyond which loans 

5 cannot be made, but shall consider other rel6 evant factors besides the concentration of such 

7 loans, such as whether the financial institution 

8 has in place effective risk management practices 

9 that are appropriate for the level and nature of 

10 the risk of such loans. 

11 (B) LENDING DECISIONS.—The appro12 priate Federal banking agency shall not prevent 

13 a qualified financial institution from making a 

14 real estate loan to a home builder in good 

15 standing that is secured by a viable project, un16 less there is a legitimate supervisory or ac17 counting reason to do so. 

18 (2) PROHIBITION ON COMPELLING LENDERS TO

19 CALL LOANS IN GOOD STANDING.— 

20 (A) HOME BUILDERS IN GOOD STAND21 ING.—The appropriate Federal banking agency 

22 shall not compel a financial institution to call a 

23 real estate loan of a home builder that is in 

24 good standing. 

25 (B) WORKOUT ACTIVITIES.— 


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1 (i) IN GENERAL.—In any case in 

2 which a home builder is in good standing 

3 on a real estate loan, but the collateral of 

4 the home builder with respect to that loan 

5 has decreased in value, based on a pro6 jected valuation of a project as completed, 

7 the appropriate Federal banking agency 

8 shall permit a financial institution to en9 gage in workout activities with the home 

10 builder to improve the prospects for repay11 ment of principal and interest in a manner 

12 that is consistent with safe and sound 

13 banking principles and the need for credit 

14 for home building. 

15 (ii) PERIOD OF WORKOUT ACTIVI16 TIES.—Workout activities authorized under 

17 clause (i) may be undertaken during the 

18 24-month period following the date of 

19 issuance of final guidance or regulations 

20 under subsection (c). 

21 (iii) EFFECTS.—No real estate loan 

22 may be required to be charged off during 

23 the period established in clause (ii) until 

24 the appropriate Federal banking agency 

25 has determined that— 


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1 (I) the financial institution hold2 ing such loan has worked in good 

3 faith to consider reasonable workout 

4 activities and has adequately provided 

5 for any impairment in such loan; or 

6 (II) the financial institution has 

7 not considered reasonable workout ac8 tivities in a timely manner. 

9 (C) RECLASSIFICATION OF LOANS.—The 

10 appropriate Federal banking agency shall not 

11 require a financial institution to reclassify any 

12 real estate loan to a homebuilder in good stand13 ing on the balance sheet of such institution, un14 less there is a legitimate supervisory or ac15 counting reason to do so. 

16 (3) NO WAITING PERIOD.—If the provisions of 

17 paragraph (2) help to improve the CAMEL com18 posite rating of a financial institution under the 

19 Uniform Financial Institutions Rating System from 

20 3, 4, or 5 to 1 or 2 in the next occurring examina21 tion of the financial institution that begins after the 

22 date on which final guidance or regulations are 

23 issued pursuant to subsection (c), such improved 

24 rating shall take effect immediately after the date on 

25 which such rating was received. 


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1 (b) COORDINATION, CONSISTENCY, AND COM2 PARABILITY.—Each Federal banking agency shall consult 

3 and coordinate with the other Federal banking agencies 

4 for the purpose of assuring, to the extent possible, that 

5 the guidance or regulations by each of the agencies and 

6 authorities are consistent and comparable with those pre7 scribed by the other agencies and authorities. 

8 (c) DEADLINE.—Each Federal banking agency shall 

9 issue final guidance or regulations to implement this Act 

10 not later than the earlier of— 

11 (1) 6 months after the date of enactment of 

12 this Act; or 

13 (2) 3 months after the guidance or regulations 

14 are proposed. 

15 (d) AGENCY AUTHORITY.—The guidance and regula16 tions issued under this Act shall be enforced by the appro17 priate Federal banking agencies. 

18 (e) EFFECT ON STATE LAW.—The guidance and reg19 ulations issued under this Act shall not supersede the law 

20 of any State, except to the extent that the State law is 

21 inconsistent with the guidance and regulations, and then 

22 only to the extent of the inconsistency. 

23 SEC. 4. DEFINITIONS. 

24 In this Act, the following definitions shall apply: 


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1 (1) APPROPRIATE FEDERAL BANKING AGENCY; 

2 FEDERAL BANKING AGENCY.—The terms ‘‘appro3 priate Federal banking agency’’ and ‘‘Federal bank4 ing agency’’ have the same meanings as in section 

5 3 of the Federal Deposit Insurance Act (12 U.S.C. 

6 1813). 

7 (2) FINANCIAL INSTITUTION.—The term ‘‘fi8 nancial institution’’ means an entity regulated by, 

9 and under the supervision of, any Federal banking 

10 agency. 

11 (3) GOOD STANDING.—The term ‘‘good stand12 ing’’ means the borrower has made all payments on 

13 a real estate loan and any other extensions of credit 

14 to the borrower or any affiliated entities in accord15 ance with the agreements for the loans. 

16 (4) REAL ESTATE LOAN.—The term ‘‘real es17 tate loan’’ means any indebtedness secured by a 

18 mortgage, deed of trust, or other equivalent consen19 sual security interest on real property, for— 

20 (A) land acquisition for residential con21 struction projects; 

22 (B) land development for residential con23 struction projects; or 

24 (C) residential construction projects. 


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1 (5) TOTAL CAPITAL.—The term ‘‘total capital’’ 

2 means the total risk-based capital of a financial in3 stitution as reported periodically by the financial in4 stitution in the Call Report or Thrift Financial Re5 ports of the Federal Financial Institutions Examina6 tion Council, as applicable. 

7 (6) VIABLE PROJECT.—The term ‘‘viable 

8 project’’ means a real estate project that continues 

9 to have a reasonable prospect of reaching completion 

10 and sale within a reasonable timeframe, and at a 

11 market price that provides for the orderly and timely 

12 repayment of the real estate loan. 

13 (7) WORKOUT ACTIVITIES.—The term ‘‘workout 

14 activities’’ means techniques to prevent default on a 

15 real estate loan, including a renewal or extension of 

16 loan terms, extension of additional credit, restruc17 turing, loan write downs, or flexibility on using re18 appraisal methods that still provide credible value 

19 conclusions. 

20 (8) QUALIFIED FINANCIAL INSTITUTION.—The 

21 term ‘‘qualified financial institution’’ means a finan22 cial institution that received, in the most recent ex23 amination of the institution, a CAMEL composite 


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1 rating of 1 or 2 under the Uniform Financial Insti2 tutions Rating System. 

Æ 


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