I 

111TH CONGRESS 

2D SESSION H. R. 5816 

To establish a commercial real estate credit guarantee program to empower 

community banks and other lenders to make loans while stabilizing 

the value of small denomination commercial real estate assets, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 22, 2010 

Mr. MINNICK (for himself, Mr. SHULER, Mr. SIMPSON, Ms. KOSMAS, Mr. 

LATOURETTE, Mr. HEINRICH, and Mr. MARSHALL) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL 

To establish a commercial real estate credit guarantee program to empower community banks and other lenders 

to make loans while stabilizing the value of small denomination commercial real estate assets, and for other purposes. 

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 ‘‘Commercial Real Es5 tate Stabilization Act of 2010’’. 


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1 SEC. 2. OVERSIGHT BOARD. 

2 (a) IN GENERAL.—There is hereby established the 

3 Oversight Board (hereinafter in this Act referred to as the 

4 ‘‘Board’’) to provide advice to the Secretary of the Treas5 ury (hereinafter in this Act referred to as the ‘‘Secretary’’) 

6 with regard to the implementation, operation, and over7 sight related to, and in accordance with, the Commercial 

8 Real Estate Credit Guarantee Program established under 

9 section 3. The Board is hereby charged particularly in ad10 vising the Secretary with regard to the development of ap11 propriate underwriting guidelines and credit risk assess12 ments in connection with the Program, subject to the pro13 visions of section 3(e)(4), and is further charged with the 

14 design and operation of the Program in such ways as to 

15 encourage both participation by eligible institutions as well 

16 as the prompt displacement of the Program by private 

17 market interests. 

18 (b) MEMBERSHIP.—The Board shall consist of the 

19 following 9 members: 

20 (1) The Secretary. 

21 (2) The Chairman of the Board of Governors of 

22 the Federal Reserve System. 

23 (3) The Chairman of the Securities Exchange 

24 Commission. 

25 (4) The Chairperson of the Federal Deposit In26 surance Corporation. 


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1 (5) The Director of the Federal Housing Fi2 nance Agency. 

3 (6) Four members to be appointed by the Presi4 dent, from among individuals who have comprehen5 sive and practical experience in the financial indus6 try. 

7 (c) REPORTS.—Not later than the end of the 3-month 

8 period beginning on the date of the enactment of this Act, 

9 and quarterly thereafter, the Board shall issue reports to 

10 the Secretary, the Committee on Financial Services of the 

11 House of Representatives, and the Committee on Banking, 

12 Housing, and Urban Affairs of the Senate on— 

13 (1) the Program; and 

14 (2) the current state of the credit system in the 

15 United States with respect to commercial lending, 

16 including small business and commercial real estate 

17 lending. 

18 (d) TERMINATION.—The Board shall terminate on 

19 the date that is the end of the 1-month period following 

20 the program termination date. 

21 SEC. 3. COMMERCIAL REAL ESTATE CREDIT GUARANTEE 

22 PROGRAM. 

23 (a) IN GENERAL.—The Secretary shall establish a 

24 Commercial Real Estate Credit Guarantee Program (hereVerDate Mar 15 2010 20:52 Jul 26, 2010 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5816.IH H5816

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1 inafter in this Act referred to as the ‘‘Program’’) in ac2 cordance with this section. 

3 (b) APPLICATION PROCESS.— 

4 (1) IN GENERAL.—A sponsor may apply to have 

5 a credit instrument guaranteed under the Program 

6 by submitting an application to the Secretary in 

7 such form and manner as the Secretary may require. 

8 (2) APPLICATIONS APPROVED IN ORDER OF RE9 CEIPT.—The Secretary shall approve applications 

10 submitted pursuant to paragraph (1) by a sponsor 

11 for a guarantee of an eligible credit instrument in 

12 the order they are received by the Secretary, as long 

13 as the guarantees issued under the Program do not 

14 relate to credit instruments having an aggregate, cu15 mulative principal balance in excess of 

16 $25,000,000,000 (exclusive of interest). 

17 (3) FIFTY PERCENT OF PROGRAM TO BE USED

18 FOR SMALL- AND MID-SIZED INSTITUTIONS.—Not19 withstanding paragraph (2), not less than 50 per20 cent of the credit instruments guaranteed under the 

21 Program, by principal balance, shall be for credit in22 struments created by eligible institutions specified in 

23 subparagraph (A) of the definition of eligible institu24 tion, as of the credit instrument issuance date. No 

25 more than 50 percent of the credit instruments 


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1 guaranteed under the Program, by principal balance, 

2 shall be for credit instruments created by eligible in3 stitutions specified in subparagraph (B) of the defi4 nition of eligible institution, as of the credit instru5 ment issuance date. 

6 (4) GUARANTEE FEE.—In exchange for receiv7 ing a credit guarantee under the Program, the re8 lated issuer shall pay to the Secretary an up-front 

9 or periodic guarantee fee at the rate specified by the 

10 Secretary with respect to that specific credit guar11 antee. Each guarantee fee shall be at least 200 basis 

12 points per annum, and shall be the sum of the fol13 lowing three components: 

14 (A) The risk component, which shall be no 

15 less than 100 basis points per annum, 100 

16 basis points per annum being that level used by 

17 the risk assessment entities in determining the 

18 investment grade status of the related credit in19 strument (or portion thereof) to be covered by 

20 the guarantee; the Board may, or the Secretary 

21 may, increase the risk component above such 

22 100 basis point per annum level with respect to 

23 any individual credit guarantee, in their discre24 tion. 


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1 (B) An overhead component, which shall 

2 be no less than zero, and which shall be deter3 mined by the Secretary as being the amount 

4 (expressed in basis points per annum) which, in 

5 the aggregate when assessed across the Pro6 gram, will be at least sufficient to fund in full 

7 the reasonably estimable costs to the govern8 ment of staffing and administering the Pro9 gram, including without limitation, the costs of 

10 the Board, the costs of processing applications, 

11 the costs (including the costs of the risk assess12 ment entities involved) of developing the under13 writing guidelines described in subsection (f) 

14 and the costs of legal, accounting and other 

15 professional advisors as may be retained by the 

16 Board. 

17 (C) The market component, which shall be 

18 no less than zero, and which shall be deter19 mined by the Board, with respect to any indi20 vidual credit guarantee, as being an amount 

21 (expressed in basis points per annum) which, 

22 when added to the other two components of the 

23 guarantee fee, will encourage the participation 

24 of the private market in the provision of credit 


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1 as an alternative to the guarantees provided 

2 under the Program. 

3 (c) GENERAL PROGRAM DETAILS.— 

4 (1) CREDIT GUARANTEE.— 

5 (A) IN GENERAL.—With respect to a credit 

6 instrument that is approved for the Program 

7 under subsection (b), the Secretary shall guar8 antee payments of interest and principal on 

9 such credit instrument. 

10 (B) CREDIT INSTRUMENT DEFINED.—The 

11 term ‘‘credit instrument’’, as used in this Act, 

12 means each and all of the following: a mortgage 

13 loan or a participation therein, a bond or cer14 tificate backed by one or more mortgage loans 

15 or participation interests therein, a guarantee 

16 other than a guarantee issued under the Pro17 gram, or any other lending arrangement (in18 cluding aggregation facilities) approved by the 

19 Secretary upon recommendation of the Board, 

20 provided that the ultimate collateral for any 

21 such credit instrument is commercial real estate 

22 described in subsection (d). In no event shall a 

23 credit instrument be eligible for a guarantee 

24 under the Program if such credit instrument 


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1 was issued prior to the effective date of this 

2 Act. 

3 (C) RECOVERIES.—The payment by the 

4 Secretary under a guarantee shall not discharge 

5 the liability of the related issuer with respect to 

6 the defaulted payment, and the Secretary shall 

7 be fully subrogated to the rights of the owner 

8 of the credit instrument to receive the full 

9 amount of such defaulted payment from the re10 lated issuer, and shall be entitled to receive 

11 such amounts from such issuer, subject to the 

12 availability of funds thereof. 

13 (D) SUNSET.—No credit instrument shall 

14 be eligible for a guarantee under the Program 

15 if such credit instrument is issued after the ear16 lier to occur of— 

17 (i) the date that is the end of the 3- 

18 year period beginning on the date on which 

19 the first guarantee is issued under the 

20 Program; and 

21 (ii) the date on which the Board has 

22 delivered a certification to the Secretary 

23 that the commercial real estate credit mar24 ket has recovered to such an extent that 

25 the Program is no longer necessary. 


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1 (2) TIMESPAN OF GUARANTEE.—A credit in2 strument guarantee under the Program shall expire 

3 at the end of the 10-year period beginning on the 

4 date on which the credit instrument is issued. 

5 (3) USE OF PROFITS.—All profits made from 

6 the Program shall be used for deficit reduction. 

7 (d) ISSUE REQUIREMENTS.—In order to be an eligi8 ble credit instrument for purposes of the Program, the 

9 credit instrument must be a performing commercial real 

10 estate loan, or be backed by one or more performing com11 mercial real estate loans which, in either case, at the time 

12 of the issuance of such credit instrument, are performing 

13 commercial real estate loans— 

14 (1) where each loan is either— 

15 (A) newly originated, including a new loan 

16 on a commercial property which was REO; or 

17 (B) a refinancing of an existing loan made 

18 by the same borrower; 

19 (2) for which payments of interest and principal 

20 are not past due; 

21 (3) which has a loan term of 10 years or less, 

22 and which amortizes over its terms; 

23 (4) which was originated within the past 180 

24 days (or other similar time period, to be determined 

25 by the Board based on the applicable asset class) 


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1 preceding the issuance date of such credit instru2 ment; and 

3 (5) which complies with such other require4 ments as the Board may specify to ensure that the 

5 Program is not used in a manner that was not in6 tended. 

7 (e) ADDITIONAL REQUIREMENTS.—A loan relating to 

8 a credit instrument, as described in subsection (d), shall 

9 meet the following criteria: 

10 (1) LOAN ORIGINATORS.—Such loan shall have 

11 been originated by an eligible institution as defined 

12 in section 5. 

13 (2) MAXIMUM AMOUNT.—The principal amount 

14 of such loan must be $10,000,000 or less. 

15 (3) NO REQUIREMENT FOR OWNER-OCCUPIED

16 PROPERTY.—Such a loan may be with respect to ei17 ther owner-occupied or nonowner-occupied commer18 cial real estate. 

19 (4) RISK ASSESSMENTS AND UNDERWRITING

20 GUIDELINES.— 

21 (A) RISK ASSESSMENT.—No guarantee 

22 shall be issued under the Program unless the 

23 application submitted to the Secretary dem24 onstrates that the guarantee fees associated 

25 with such guarantee, based upon the credit risk 


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1 associated with the related credit instrument, 

2 shall create reserves sufficient, with regard to 

3 that individual credit instrument, to meet the 

4 anticipated claims by paying for any related 

5 losses and to ensure that the Secretary and the 

6 taxpayers are fully protected, based on 2 risk7 assessment analyses conducted by 2 inde8 pendent third-party risk assessment entities. 

9 (B) Each such risk assessment shall be 

10 conducted by an independent third party ap11 proved by the Board. With respect to bonds or 

12 certificates backed by pools of commercial real 

13 estate assets, or aggregation facilities relating 

14 to such assets, such third party may be any na15 tionally recognized statistical rating organiza16 tion approved by the Board, or any other third17 party entity which, upon application to the 

18 Board and approval by the Board, has a de19 monstrable expertise in the assessment of credit 

20 risk involving pools of commercial real estate 

21 assets. With respect to individual commercial 

22 real estate loans, such third party may be any 

23 entity, including any nationally recognized sta24 tistical rating organization, which, upon appli25 cation to the Board and approval by the Board, 


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1 has a demonstrable expertise in the assessment 

2 of credit risk involving individual commercial 

3 real estate assets. 

4 (C) No guarantee shall be issued under the 

5 Program unless each of the related independent 

6 third-party risk assessment entities shall have 

7 concluded in writing that the related risk to the 

8 Secretary, after taking into account the reserves 

9 created by the related guarantee fee, the Sec10 retary’s subrogation rights, and the credit char11 acteristics of the related credit instrument, is 

12 not less than investment grade, where the term 

13 ‘‘investment grade’’ shall have its generally un14 derstood meaning in the context of the fixed-in15 come investments rated by nationally recognized 

16 statistical rating organizations. No guarantee 

17 shall be issued under the Program covering a 

18 portion or tranche of any credit instrument. 

19 Such investment grade risk assessment shall be 

20 required on a guarantee-by-guarantee basis, 

21 and shall not take into account the ‘‘cross22 collateralization’’ resulting from Program-wide 

23 reserves as may be accounted for by the Sec24 retary relating to the Program as a whole. 


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1 (D) Any third-party risk assessment entity 

2 shall be independent of the issuer, sponsor, 

3 placement agent, arranger, or underwriter (if 

4 any) of the related credit instrument. In ap5 proving third-party risk assessment entities, the 

6 Board shall, to the maximum extent practicable 

7 ensure the inclusion and utilization of minority, 

8 women-, and veteran-owned businesses. The 

9 cost of each risk assessment shall be paid by 

10 the related issuer or the related sponsor, and 

11 shall in no event be a cost borne by the Sec12 retary or by the Board. 

13 (E) All risk assessments shall be evaluated 

14 on the basis of the underlying credit instru15 ments, the level of the guarantee fee and the 

16 Secretary’s subrogation rights, but shall not 

17 take into account the credit support provided by 

18 the guarantee itself. 

19 (f) UNDERWRITING GUIDELINES.—The Board shall, 

20 within 60 days of the effective date of this Act, issue 

21 standardized underwriting guidelines for participation in 

22 the Program for credit instruments which are individual 

23 commercial mortgage loans. 

24 (1) Such guidelines shall seek to— 


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1 (A) make the Program a profitable invest2 ment for the Government; 

3 (B) provide a safety net for more conserv4 ative borrowers; and 

5 (C) promote the reestablishment of the pri6 vate credit market for commercial real estate. 

7 (2) Such guidelines shall be developed with the 

8 assistance of not fewer than 3 independent risk as9 sessment entities approved by the Board, which shall 

10 have each concluded that bonds or certificates 

11 backed by pools containing performing commercial 

12 real estate loans meeting such underwriting guide13 lines would be rated at least investment grade if the 

14 risk of the related guarantee fee were 100 basis 

15 points per annum. 

16 (g) RISK RETENTION.—The Board shall, within 60 

17 days of the effective date of this Act, by regulation, require 

18 the related issuer or sponsor or a third-party purchaser 

19 that has specifically negotiated for the purchase of such 

20 economic interest and has conducted due diligence on such 

21 loan or pool of loans, in each case to retain an economic 

22 interest in a portion of the credit risk for each loan or 

23 pool of loans as prescribed in section 941(b) of the Dodd24 Frank Wall Street Reform and Consumer Protection Act. 

25 For the avoidance of doubt, the forms of such economic 


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1 interest shall include, but are not limited to, subordinated 

2 excess interest strips, subordinated principal, and subordi3 nated securities. Such regulations shall further provide 

4 that the owner of such economic interest not directly or 

5 indirectly hedge or otherwise transfer the required credit 

6 risk, and shall specify the minimum duration of the risk 

7 retention required under this subsection. 

8 (h) REPORTING.— 

9 (1) IN GENERAL.—Not later than the end of 

10 the 180-day period beginning on the date of the en11 actment of this Act, and quarterly thereafter, the 

12 Secretary shall issue a report to the Congress con13 taining a review of credit instruments being guaran14 teed under the Program and information on the 

15 loans and properties backing such credit instru16 ments, including the number of loans and properties, 

17 the value of the loans and properties, and informa18 tion on the performance of the loans and properties. 

19 (2) PUBLIC AVAILABILITY.—The Secretary 

20 shall make all reports made under paragraph (1) 

21 available to the public, including on a Web site. 

22 (i) STATUS OF GUARANTIES.—All guarantees issued 

23 pursuant to this section shall constitute general obliga24 tions of the United States, for which the full faith and 

25 credit of the United States is pledged. All such guarantees 


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1 shall be treated as ‘‘loan guarantees’’ under section 502(3) 

2 of the Federal Credit Reform Act of 1990. 

3 SEC. 4. FUNDING. 

4 (a) IN GENERAL.—There is hereby authorized to be 

5 appropriated, out of funds in the Treasury not otherwise 

6 appropriated, in addition to such amounts as may be nec7 essary for the reasonable costs of administering the Pro8 gram, such sum as may be necessary to issue guarantees 

9 of credit instruments having an aggregate, cumulative 

10 principal balance not in excess of $25,000,000,000, as de11 termined in a manner consistent with the Federal Credit 

12 Reform Act of 1990. 

13 (b) GUARANTEES NOT UNDER TARP.—The guaran14 tees provided for hereunder are established as a separate 

15 and distinct program from the guarantees described in 

16 section 102 of the Emergency Economic Stabilization Act 

17 of 2008. No eligible institution, sponsor, or issuer shall 

18 be considered a recipient of the Troubled Asset Relief Pro19 gram solely by virtue of participation in the Program. 

20 (c) PROGRAM UTILIZATION TO BE ENCOURAGED.— 

21 (1) The Congress finds that, with respect to the 

22 smaller insured depository institutions, the lingering 

23 financial crisis and lack of liquidity and leverage in 

24 the commercial real estate market has resulted in a 

25 substantial number of small bank failures, with the 


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1 result that the FDIC and its Deposit Insurance 

2 Fund have absorbed many of the resulting losses. 

3 The Congress has concluded that the Program es4 tablished under this Act is, under certain cir5 cumstances, a preferred approach to this problem, as 

6 opposed to continued reliance on the FDIC’s resolu7 tion authority, which was never intended to provide 

8 liquidity and leverage to the commercial real estate 

9 markets. 

10 (2) The Congress further finds that the utiliza11 tion of this Program by smaller depository institu12 tions may be inhibited due to concerns that the cred13 it issuance transactions contemplated by this Act 

14 may, under current rules and regulations governing 

15 loss recognition, regulatory capital, and related ac16 counting matters, result in unfavorable regulatory 

17 accounting treatment to such institutions, notwith18 standing the other benefits accruing to such institu19 tions, the commercial real estate markets and the 

20 economy at large by the utilization of this Program. 

21 In addition, the Congress specifically finds that the 

22 requirements of FAS 166/167 shall not be applicable 

23 to the Program, provided that any assets or liabil24 ities created by the issuance of securities under the 


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1 Program shall be reasonably and adequately dis2 closed. 

3 (3) Consequently, it is the intent of the Con4 gress that this Program be utilized when such utili5 zation otherwise proves beneficial, and that, in such 

6 cases, utilization not be unduly inhibited by concerns 

7 related to potential unfavorable regulatory account8 ing treatment. In furtherance of such Congressional 

9 intent, the Board is directed to confer with the 

10 Chairperson of the FDIC, representatives of the 

11 Conference of State Banking Supervisors, represent12 atives of the Financial Accounting Standards Board, 

13 and representatives of the community banking in14 dustry, with the result that the FDIC shall issue, 

15 within 60 days of the enactment of this Act, such 

16 rules and regulations as are consistent with such 

17 Congressional intent stated herein. 

18 (4) Additionally, in order to ensure that State 

19 foreclosure laws do not contravene the mechanics 

20 and operational efficiency of this Program, all loans 

21 backing bonds issued under this Program shall be 

22 subject to an expedited Federal court foreclosure 

23 process should such loans default. The underlying 

24 documentation need not specify foreclosure remedies, 

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1 scribed above, such foreclosure action instituted in 

2 Federal court shall be subject to removal to State 

3 court. No such foreclosure action shall be stayed as 

4 a result of the bankruptcy of the related borrower. 

5 SEC. 5. OTHER DEFINITIONS. 

6 For purposes of this Act: 

7 (1) BOARD.—The term ‘‘Board’’ means the 

8 Oversight Board established under section 2. 

9 (2) COST.—The term ‘‘cost’’ has the meaning 

10 given such term under section 502(5)(A) of the Fed11 eral Credit Reform Act of 1990, as amended. 

12 (3) EFFECTIVE DATE.—The term ‘‘effective 

13 date’’ shall mean the date on which the provision of 

14 this Act becomes law. 

15 (4) ELIGIBLE INSTITUTION.—The term ‘‘eligi16 ble institution’’ means, for purposes of this Act, ei17 ther— 

18 (A)(i) any insured depository institution, 

19 which— 

20 (I) is not controlled by a bank holding 

21 company or savings and loan holding com22 pany that is also an eligible institution; 

23 (II) has total assets of equal to or less 

24 than $10,000,000,000, as reported in the 

25 call report as of the end of the fourth 


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1 quarter of the most recently ended year for 

2 such fourth-quarter call report is available; 

3 and 

4 (III) is not directly or indirectly con5 trolled by any company or other entity that 

6 has total consolidated assets of more than 

7 $10,000,000,000, as so reported; 

8 (ii) any bank holding company which has 

9 total assets of equal to or less than 

10 $10,000,000,000; 

11 (iii) any savings and loan holding company 

12 which has total assets of equal to or less than 

13 $10,000,000; or 

14 (B) any entity not described in subpara15 graph (A) above and which the Board has not 

16 determined is ineligible to participate in the 

17 Program. 

18 (5) INSURED DEPOSITORY INSTITUTION.—The 

19 term ‘‘insured depository institution’’ has the mean20 ing given such term under section 3(c)(2) of the 

21 Federal Deposit Insurance Act (12 U.S.C. 

22 1813(c)(2)). 

23 (6) ISSUER.—The term ‘‘issuer’’ means ei24 ther— 


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1 (A) with respect to a credit instrument 

2 which is an individual mortgage loan or a par3 ticipation interest in an individual mortgage 

4 loan (including a new loan on a commercial 

5 property which was REO or a refinancing of an 

6 existing loan made by the same borrower), or a 

7 guarantee of an individual mortgage loan, the 

8 related borrower; or 

9 (B) with respect to a credit instrument 

10 which is a bond or certificate, or with respect 

11 to a guarantee relating to a pool of mortgage 

12 loans, participation interests in mortgage loans 

13 (including a new loan on a commercial property 

14 which was REO or a refinancing of an existing 

15 loan made by the same borrower), a ‘‘special 

16 purpose vehicle’’ entity (such as a trust or lim17 ited liability company) that issues such a credit 

18 instrument; 

19 in each case that is guaranteed under the Program. 

20 (7) PROGRAM.—The term ‘‘Program’’ means 

21 the commercial real estate credit guarantee program 

22 established under section 3. 

23 (8) REO.—The term ‘‘REO’’ means, with re24 spect to an eligible institution, any real property to 

25 which such eligible institution holds title pursuant to 


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1 foreclosure, a deed of lieu of foreclosure, assignment, 

2 conveyance, or any other action in connection with 

3 a mortgage made, held, insured, guaranteed, or 

4 securitized by such eligible institution. 

5 (9) SPONSOR.—The term ‘‘Sponsor’’ ‘‘’’ means, 

6 in the case of a securitization or aggregation ar7 rangement, an entity that— 

8 (A) securitizes commercial real estate loans 

9 and that has met the Board’s expertise require10 ments for participation in the Program, pro11 vided that the Sponsor’s management expertise 

12 and previous bond performance will be strongly 

13 considered as part of the Sponsor’s approval 

14 process; 

15 (B) forms an issuer; and 

16 (C) creates the credit instruments issued 

17 by the issuer under the Program (and the spon18 sor described herein may also be an eligible in19 stitution with respect to the related loans). 

20 (10) PROGRAM TERMINATION DATE.—The term 

21 ‘‘program termination date’’ means the date on 

22 which the last credit instrument has been paid in 

23 full (disregarding for this purpose any amounts 


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1 owed to the Secretary on account of the Secretary’s 

2 subrogation rights). 

Æ 


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