I 

115TH CONGRESS 

1ST SESSION H. R. 2148 

To amend the Federal Deposit Insurance Act to clarify capital requirements 

for certain acquisition, development, or construction loans. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 26, 2017 

Mr. PITTENGER (for himself and Mr. DAVID SCOTT of Georgia) introduced 

the following bill; which was referred to the Committee on Financial Services 

A BILL 

To amend the Federal Deposit Insurance Act to clarify capital requirements for certain acquisition, development, 

or construction loans. 

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 ‘‘Clarifying Commercial 

5 Real Estate Loans’’. 

6 SEC. 2. CAPITAL REQUIREMENTS FOR CERTAIN ACQUISI7 TION, DEVELOPMENT, OR CONSTRUCTION 

8 LOANS. 

9 The Federal Deposit Insurance Act is amended by 

10 adding at the end the following new section: 

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1 ‘‘SEC. 51. CAPITAL REQUIREMENTS FOR CERTAIN ACQUISI2 TION, DEVELOPMENT, OR CONSTRUCTION 

3 LOANS. 

4 ‘‘(a) IN GENERAL.—The appropriate Federal bank5 ing agencies may only subject a depository institution to 

6 higher capital standards with respect to a high volatility 

7 commercial real estate (HVCRE) exposure (as defined 

8 under section 324.2 of title 12, Code of Federal Regula9 tions, as in effect on the day before the date of the enact10 ment of this section) if such exposure is an HVCRE ADC 

11 loan. 

12 ‘‘(b) HVCRE ADC LOAN DEFINED.—For purposes 

13 of this section and with respect to a depository institution, 

14 the term ‘HVCRE ADC loan’— 

15 ‘‘(1) means a credit facility secured by land or 

16 improved real property that, prior to being reclassi17 fied by the depository institution as a Non-HVCRE 

18 ADC loan pursuant to subsection (d)— 

19 ‘‘(A) finances or has financed the acquisi20 tion, development, or construction of real prop21 erty; 

22 ‘‘(B) has the purpose of providing financ23 ing to acquire, develop, or improve such real 

24 property into income-producing real property; 

25 and 

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1 ‘‘(C) is dependent upon future income or 

2 sales proceeds from, or refinancing of, such real 

3 property for the repayment of such credit facil4 ity; 

5 ‘‘(2) does not include a credit facility financ6 ing— 

7 ‘‘(A) the acquisition, development, or con8 struction of properties that are— 

9 ‘‘(i) one- to four-family residential 

10 properties; 

11 ‘‘(ii) real property that would qualify 

12 as an investment in community develop13 ment; or 

14 ‘‘(iii) agricultural land; 

15 ‘‘(B) the acquisition or refinance of exist16 ing income-producing real property secured by 

17 a mortgage on such property; 

18 ‘‘(C) improvements to existing income-pro19 ducing improved real property secured by a 

20 mortgage on such property, if the cash flow 

21 being generated by the real property is suffi22 cient to support the debt service and expenses 

23 of the real property, as determined by the de24 pository institution, in accordance with the inmstockstill on DSK30JT082PROD with BILLS

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1 stitution’s applicable loan underwriting criteria 

2 for permanent financings; or 

3 ‘‘(D) commercial real property projects in 

4 which— 

5 ‘‘(i) the loan-to-value ratio is less than 

6 or equal to the applicable maximum super7 visory loan-to-value ratio as determined by 

8 the appropriate Federal banking agency; 

9 and 

10 ‘‘(ii) the borrower has contributed 

11 capital of at least 15 percent of the real 

12 property’s appraised, ‘as completed’ value 

13 to the project in the form of— 

14 ‘‘(I) cash; 

15 ‘‘(II) unencumbered readily mar16 ketable assets; 

17 ‘‘(III) paid development expenses 

18 out-of-pocket; or 

19 ‘‘(IV) contributed real property 

20 or improvements; and 

21 ‘‘(iii) the borrower contributed the 

22 minimum amount of capital described 

23 under clause (ii) before the depository in24 stitution advances funds under the credit 

25 facility, and such minimum amount of capmstockstill on DSK30JT082PROD with BILLS

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1 ital contributed by the borrower is contrac2 tually required to remain in the project 

3 until the credit facility has been reclassi4 fied by the depository institution as a Non5 HVCRE ADC loan under subsection (d); 

6 ‘‘(3) does not include any loan made prior to 

7 January 1, 2015; and 

8 ‘‘(4) does not include a credit facility reclassi9 fied as a Non-HVCRE ADC loan under subsection 

10 (d). 

11 ‘‘(c) VALUE OF CONTRIBUTED REAL PROPERTY.— 

12 For purposes of this section, the value of any real property 

13 contributed by a borrower as a capital contribution shall 

14 be the appraised value of the property as determined 

15 under standards prescribed pursuant to section 1110 of 

16 the Financial Institutions Reform, Recovery, and Enforce17 ment Act of 1989 (12 U.S.C. 3339), in connection with 

18 the extension of the credit facility or loan to such bor19 rower. 

20 ‘‘(d) RECLASSIFICATION AS A NON-HVCRE ADC 

21 LOAN.—For purposes of this section and with respect to 

22 a credit facility and a depository institution, upon— 

23 ‘‘(1) the completion of the development or con24 struction of the real property being financed by the 

25 credit facility; and 

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1 ‘‘(2) cash flow being generated by the real prop2 erty being sufficient to support the debt service and 

3 expenses of the real property, 

4 in either case to the satisfaction of the depository institu5 tion, in accordance with the institution’s applicable loan 

6 underwriting criteria for permanent financings, the credit 

7 facility may be reclassified by the depository institution 

8 as a Non-HVCRE ADC loan.’’. 

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