IB 

Union Calendar No. 288 

115TH CONGRESS 

1ST SESSION H. R. 2148 

[Report No. 115–392] 

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 

NOVEMBER 6, 2017 

Additional sponsors: Mr. WALKER, Mr. ROSS, Mrs. WAGNER, Mr. BARR, Mr. 

TIPTON, Mr. STIVERS, Mr. GOTTHEIMER, Mr. FITZPATRICK, Mr. COFFMAN, Mr. BUDD, Mr. MESSER, Mr. LUETKEMEYER, Mr. LOUDERMILK, 

Mr. EMMER, and Mr. DAVIDSON

NOVEMBER 6, 2017 

Reported with amendments, committed to the Committee of the Whole House 

on the State of the Union, and ordered to be printed 

[Omit the part struck through and insert the part printed in italic] 


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A BILL 

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

or construction loans. 


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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: 

11 ‘‘SEC. 51. CAPITAL REQUIREMENTS FOR CERTAIN ACQUISI12 TION, DEVELOPMENT, OR CONSTRUCTION 

13 LOANS. 

14 ‘‘(a) IN GENERAL.—The appropriate Federal bank15 ing agencies may only subject a depository institution to 

16 higher capital standards with respect to a high volatility 

17 commercial real estate (HVCRE) exposure (as defined 

18 under section 324.2 of title 12, Code of Federal Regula19 tions, as in effect on the day before the date of the enact20 ment of this section) (as such term is defined under section 

21 324.2 of title 12, Code of Federal Regulations, as of October 

22 11, 2017, or if a successor regulation is in effect as of the 

23 date of the enactment of this section, such term or any suc24 cessor term contained in such successor regulation) if such 

25 exposure is an HVCRE ADC loan. 


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

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

3 the term ‘HVCRE ADC loan’— 

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

5 improved real property that, prior to being reclassi6 fied by the depository institution as a Non-HVCRE 

7 ADC loan pursuant to subsection (d)— 

8 ‘‘(A) finances or has financed primarily fi9 nances, has financed, or refinances the acquisi10 tion, development, or construction of real prop11 erty; 

12 ‘‘(B) has the purpose of providing financ13 ing to acquire, develop, or improve such real 

14 property into income-producing real property; 

15 and 

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

17 sales proceeds from, or refinancing of, such real 

18 property for the repayment of such credit facil19 ity; 

20 ‘‘(2) does not include a credit facility financ21 ing— 

22 ‘‘(A) the acquisition, development, or con23 struction of properties that are— 

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

25 properties; 


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1 ‘‘(ii) real property that would qualify 

2 as an investment in community develop3 ment; or 

4 ‘‘(iii) agricultural land; 

5 ‘‘(B) the acquisition or refinance of exist6 ing income-producing real property secured by 

7 a mortgage on such property, if the cash flow 

8 being generated by the real property is sufficient 

9 to support the debt service and expenses of the 

10 real property, as determined by the depository 

11 institution, in accordance with the institution’s 

12 applicable loan underwriting criteria for perma13 nent financings; 

14 ‘‘(C) improvements to existing income-pro15 ducing improved real property secured by a 

16 mortgage on such property, if the cash flow 

17 being generated by the real property is suffi18 cient to support the debt service and expenses 

19 of the real property, as determined by the de20 pository institution, in accordance with the in21 stitution’s applicable loan underwriting criteria 

22 for permanent financings; or 

23 ‘‘(D) commercial real property projects in 

24 which— 


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

2 or equal to the applicable maximum super3 visory loan-to-value ratio as determined by 

4 the appropriate Federal banking agency; 

5 and 

6 ‘‘(ii) the borrower has contributed 

7 capital of at least 15 percent of the real 

8 property’s appraised, ‘as completed’ value 

9 to the project in the form of— 

10 ‘‘(I) cash; 

11 ‘‘(II) unencumbered readily mar12 ketable assets; 

13 ‘‘(III) paid development expenses 

14 out-of-pocket; or 

15 ‘‘(IV) contributed real property 

16 or improvements; and 

17 ‘‘(iii) the borrower contributed the 

18 minimum amount of capital described 

19 under clause (ii) before the depository in20 stitution advances funds under the credit 

21 facility, and such minimum amount of cap22 ital contributed by the borrower is contrac23 tually required to remain in the project 

24 until the credit facility has been reclassiVerDate Sep 11 2014 23:06 Nov 06, 2017 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2148.RH H2148

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1 fied by the depository institution as a Non2 HVCRE ADC loan under subsection (d); 

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

4 January 1, 2015; and 

5 ‘‘(4) does not include a credit facility reclassi6 fied as a Non-HVCRE ADC loan under subsection 

7 (d). 

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

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

10 contributed by a borrower as a capital contribution shall 

11 be the appraised value of the property as determined 

12 under standards prescribed pursuant to section 1110 of 

13 the Financial Institutions Reform, Recovery, and Enforce14 ment Act of 1989 (12 U.S.C. 3339), in connection with 

15 the extension of the credit facility or loan to such bor16 rower. 

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

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

19 a credit facility and a depository institution, upon— 

20 ‘‘(1) the completion of the development or con21 struction of the real property being financed by the 

22 credit facility; and 

23 ‘‘(2) cash flow being generated by the real prop24 erty being sufficient to support the debt service and 

25 expenses of the real property, 


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1 in either case to the satisfaction of the depository institu2 tion, in accordance with the institution’s applicable loan 

3 underwriting criteria for permanent financings, the credit 

4 facility may be reclassified by the depository institution 

5 as a Non-HVCRE ADC loan.’’. 


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Union Calendar No. 288 

115TH CONGRESS 

1ST SESSION H. R. 2148 

[Report No. 115–392] 

A BILL 

To amend the Federal Deposit Insurance Act to 

tion, development, or construction loans. clarify capital requirements for certain acquisiNOVEMBER 6, 2017 

Reported with amendments, committed to the Committee 

dered to be printed of the Whole House on the State of the Union, and orVerDate Sep 11 2014 23:06 Nov 06, 2017 Jkt 079200 PO 00000 Frm 00010 Fmt 6651 Sfmt 6651 E:\BILLS\H2148.RH H2148

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