I 

111TH CONGRESS 

2D SESSION H. R. 6317 

To amend Federal law, including the Internal Revenue Code of 1986, to 

reform and encourage investment in commercial real estate, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 29, 2010 

Mr. BRADY of Texas introduced the following bill; which was referred to the 

Committee on Financial Services, and in addition to the Committee on 

Ways and Means, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL 

To amend Federal law, including the Internal Revenue Code 

of 1986, to reform and encourage investment in commercial real estate, 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 ‘‘Investment in Com5 mercial Real Estate Act of 2010’’. 

6 SEC. 2. SERVICER SAFE HARBOR. 

7 (a) SAFE HARBOR.— 


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1 (1) LOAN MODIFICATIONS AND WORKOUT

2 PLANS.—Notwithstanding any other provision of 

3 law, and notwithstanding any investment contract 

4 between a servicer and a securitization vehicle or in5 vestor, a servicer shall not be liable for entering into 

6 a loan modification or workout plan with respect to 

7 any commercial mortgage loan that meets all of the 

8 criteria set forth in paragraph (2)(B) to— 

9 (A) any person, based on that person’s 

10 ownership of a commercial mortgage loan or 

11 any interest in a pool of commercial mortgage 

12 loans or in securities that distribute payments 

13 out of the principal, interest and other pay14 ments in loans on the pool; 

15 (B) any person who is obligated to make 

16 payments determined in reference to any loan 

17 or any interest referred to in subparagraph (A); 

18 or 

19 (C) any person that insures any loan or 

20 any interest referred to in subparagraph (A) 

21 under any law or regulation of the United 

22 States or any law or regulation of any State or 

23 political subdivision of any State. 

24 (2) ABILITY TO MODIFY MORTGAGES.— 


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1 (A) ABILITY.—Notwithstanding any other 

2 provision of law, and notwithstanding any in3 vestment contract between a servicer and a 

4 securitization vehicle or investor, a servicer— 

5 (i) shall not be limited in the ability 

6 to modify mortgages, the number of mort7 gages that can be modified, the frequency 

8 of loan modifications, or the range of per9 missible modifications; and 

10 (ii) shall not be obligated to repur11 chase loans from or otherwise make pay12 ments to the securitization vehicle on ac13 count of a modification, workout, or other 

14 loss mitigation plan for a commercial mort15 gage or a class of commercial mortgages 

16 that constitute a part or all of the mort17 gages in the securitization vehicle, 

18 if any mortgage so modified meets all of the cri19 teria set forth in subparagraph (B). 

20 (B) CRITERIA.—The criteria under this 

21 subparagraph with respect to a mortgage are as 

22 follows: 

23 (i) Default on the payment of such 

24 mortgage has occurred or is reasonably 

25 foreseeable. 


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1 (ii) The property securing such mort2 gage is occupied by the mortgagor of such 

3 mortgage. 

4 (iii) The servicer reasonably and in 

5 good faith believes that the anticipated re6 covery on the principal outstanding obliga7 tion of the mortgage under the particular 

8 modification or workout plan or other loss 

9 mitigation action will exceed, on a net 

10 present value basis, the anticipated recov11 ery on the principal outstanding obligation 

12 of the mortgage to be realized through 

13 foreclosure. 

14 (3) APPLICABILITY.—This subsection shall 

15 apply only with respect to modifications, workouts, 

16 and other loss mitigation plans initiated before Jan17 uary 1, 2012. 

18 (b) DEFINITION OF SECURITIZATION VEHICLES.— 

19 For purposes of this section, the term ‘‘securitization vehi20 cle’’ means a trust, corporation, partnership, limited liabil21 ity entity, special purpose entity, or other structure that— 

22 (1) is the issuer, or is created by the issuer, of 

23 mortgage pass-through certificates, participation cer24 tificates, mortgage-backed securities, or other similar 


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1 securities backed by a pool of assets that includes 

2 commercial mortgage loans; and 

3 (2) holds such mortgages. 

4 SEC. 3. RECOVERY PERIOD FOR RESIDENTIAL RENTAL 

5 PROPERTY AND NONRESIDENTIAL REAL 

6 PROPERTY. 

7 (a) IN GENERAL.—The table in subsection (c) of sec8 tion 168 of the Internal Revenue Code of 1986 (specifying 

9 applicable recovery period) is amended— 

10 (1) by striking ‘‘27.5 years’’ and inserting ‘‘20 

11 years’’, and 

12 (2) by striking ‘‘39 years’’ and inserting ‘‘20 

13 years’’. 

14 (b) DEPRECIATION RULES FOR RESIDENTIAL RENT15 AL PROPERTY AND NON-RESIDENTIAL REAL PROPERTY

16 FOR PURPOSES OF EARNINGS AND PROFITS.—Paragraph 

17 (3) of section 312(k) of the Internal Revenue Code of 

18 1986 (relating to exception for tangible property) is 

19 amended by adding at the end the following new subpara20 graph: 

21 ‘‘(C) TREATMENT OF RESIDENTIAL RENT22 AL PROPERTY AND NONRESIDENTIAL REAL

23 PROPERTY.—In the case of any residential rent24 al property or nonresidential real property 

25 (within the meaning of section 168(c)), the adVerDate Mar 15 2010 00:56 Oct 13, 2010 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H6317.IH H6317

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1 justment to earnings and profits for deprecia2 tion for any taxable year shall be determined 

3 under the alternative depreciation method 

4 (within the meaning of section 168(g)(2)), ex5 cept that the recovery period shall be 20 

6 years.’’. 

7 (c) CONFORMING AMENDMENT.—Subparagraph (A) 

8 of section 312(k)(3) of the Internal Revenue Code of 1986 

9 is amended by striking ‘‘subparagraph (B),’’ and inserting 

10 ‘‘subparagraphs (B) and (C),’’. 

11 (d) EFFECTIVE DATE.—The amendments made by 

12 subsection (a) shall apply to property placed in service on 

13 or after the date of the enactment of this Act. 

14 SEC. 4. NET OPERATING LOSS CARRYBACK INCREASED TO 

15 5 YEARS. 

16 (a) IN GENERAL.—Clause (i) of section 172(b)(1)(A) 

17 of the Internal Revenue Code of 1986 (relating to years 

18 to which loss may be carried) is amended by striking ‘‘2 

19 years’’ and inserting ‘‘5 years’’. 

20 (b) ALTERNATIVE MINIMUM TAX.—Subclause (II) of 

21 section 56(d)(1)(A)(i) of such Code is amended by striking 

22 ‘‘90 percent of’’. 

23 (c) CONFORMING AMENDMENTS.— 


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1 (1) Section 172(b)(1) of such Code is amended 

2 by striking subparagraphs (F), (G), (H), (I), and 

3 (J). 

4 (2) Section 56(d)(1)(A) of such Code is amend5 ed— 

6 (A) in clause (i)(I) thereof by striking 

7 ‘‘(other than the deduction described in clause 

8 (ii)(I))’’, and 

9 (B) by amending clause (ii) to read as fol10 lows: 

11 ‘‘(ii) alternative minimum taxable in12 come determined without regard to such 

13 deduction and the deduction under section 

14 199 reduced by the amount determined 

15 under clause (i),’’. 

16 (3) Section 56(d) of such Code is amended by 

17 striking paragraph (3). 

18 (d) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years ending after the 

20 date of the enactment of this Act. 

21 SEC. 5. DYNAMIC PROVISIONING OF INVESTMENT AND 

22 LOAN LOSS RESERVES. 

23 (a) IMPLEMENTATION REQUIREMENT.—The Federal 

24 banking agencies shall implement a system of dynamic 

25 provisioning for investment and loan loss reserves (hereVerDate Mar 15 2010 00:56 Oct 13, 2010 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H6317.IH H6317

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1 after in this section referred to as the ‘‘dynamic reserve 

2 system’’) that meets the requirements of this section and 

3 is applicable to all depository institutions before January 

4 1, 2011. 

5 (b) TOTAL PROVISIONING.—For each depository in6 stitution during any accounting period, the total provision 

7 for investment and loan loss reserves shall equal the sum 

8 of— 

9 (1) the general provision for investment and 

10 loan loss reserves, as determined under subsection 

11 (c); and 

12 (2) the specific provision for investment and 

13 loan loss reserves, as determined under subsection 

14 (d). 

15 (c) GENERAL PROVISION.— 

16 (1) CATEGORIES.—The Board of Governors of 

17 the Federal Reserve System shall establish major 

18 categories of loans and investment to be used by de19 pository institutions for purposes of the dynamic re20 serve system. 

21 (2) PUBLICATION OF AVERAGE HISTORICAL

22 SPECIFIC LOSSES AND WRITE-DOWNS.— 

23 (A) IN GENERAL.—For each major cat24 egory established pursuant to paragraph (1), 

25 the Board shall calculate and publish the averVerDate Mar 15 2010 02:21 Oct 13, 2010 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H6317.IH H6317

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1 age historical specific losses and write-downs as 

2 a percentage of total loans and investments 

3 over a period determined by the Board. 

4 (B) LIMITS ON PERIOD.—The period de5 termined by the Board under subparagraph (A) 

6 may not be less than 10 years and shall include 

7 at least 1 full business cycle. 

8 (3) MINIMUM PERCENTAGE.—For each major 

9 category established pursuant to paragraph (1), the 

10 Board shall establish a minimum percentage that 

11 shall be the larger of— 

12 (A) the average historical specific losses 

13 and write-downs, in such category, as a percent14 age of total loans and investments, in such cat15 egory, of all United States depository institu16 tions over the period determined by the Board; 

17 or 

18 (B) a percentage determined by the Board. 

19 (4) PROVISION.— 

20 (A) IN GENERAL.—During each accounting 

21 period, each depository institution shall make a 

22 general provision to the investment and loan 

23 loss reserves of the institution for each major 

24 category established pursuant to paragraph (1). 


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1 (B) MEASURE OF PROVISION.—The gen2 eral provision to the investment and loan loss 

3 reserves of a depository institution under sub4 paragraph (A) for each major category shall 

5 consist of the sum of— 

6 (i) the product of— 

7 (I) the total amount of the loans 

8 and investment in such category in 

9 such depository institution at the be10 ginning of the accounting period; and 

11 (II) the average historical specific 

12 credit losses and write-downs in such 

13 category as a percentage of total loans 

14 and investments in such category of 

15 all depository institutions over the pe16 riod determined by the Board minus 

17 the amount of any specific provisions 

18 made by such depository institution 

19 during such accounting period with 

20 respect to such category; and 

21 (ii) the product of— 

22 (I) the difference between the 

23 total amount of the loans and invest24 ment in such category in such deposi25 tory institution at the end of the acVerDate Mar 15 2010 00:56 Oct 13, 2010 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H6317.IH H6317

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1 counting period and the total amount 

2 of the loans and investment in such 

3 category in such depository institution 

4 at the beginning of the accounting pe5 riod; and 

6 (II) the minimum percentage de7 termined by the Board under para8 graph (3) for such category. 

9 (d) SPECIFIC PROVISIONS FOR GENERAL CAT10 EGORIES OF INVESTMENTS AND LOANS.— 

11 (1) ESTABLISHMENT OF CATEGORIES.—The 

12 Board shall establish the general categories of in13 vestments and loans for all depository institutions. 

14 (2) CALCULATION OF HISTORICAL SPECIFIC

15 PROVISIONS AND AVERAGE AMONG OF CREDIT

16 LOSSES.—The Board shall calculate, publish and 

17 make available to the public— 

18 (A) the average historical specific provi19 sions for each category of investment and loans 

20 in all depository institutions over a period of 

21 such number of years as the Board may deter22 mine to be appropriate, subject to paragraph 

23 (3); and 

24 (B) the average historical amount of credit 

25 losses and write-downs for each major category 


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1 of investment and loans in all depository insti2 tutions over a period of such number of years 

3 as the Board may determine to be appropriate, 

4 subject to paragraph (3). 

5 (3) PERIOD OF YEARS SHALL ENCOMPASS BUSI6 NESS CYCLE.—The period of years determined under 

7 subparagraphs (A) and (B) of paragraph (2) shall 

8 be of such duration as to at least comprise a com9 plete business cycle. 

10 (e) OTHER REQUIREMENTS AND AUTHORITY.—The 

11 Board may establish a cap on the accumulation of general 

12 provision for investment and loan losses at any depository 

13 institution expressed as percent of total investment and 

14 loans at such depository institution. 

15 (f) BASEL ACCORD SUPERSEDES THIS SECTION.— 

16 If the Basel Committee on Banking Supervision agrees 

17 upon an alternative method for dynamic provisioning be18 fore December 31, 2010, the Board may implement such 

19 an agreement in lieu of implementing the requirements of 

20 subsections (c) and (d). 

21 (g) DEFINITIONS.—For purposes of this section, the 

22 following definitions shall apply: 

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

24 Board of Governors of the Federal Reserve System. 


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1 (2) OTHER BANKING DEFINITIONS.—The terms 

2 ‘‘depository institution’’ and ‘‘Federal banking agen3 cies’’ have the same meaning as in section 3 of the 

4 Federal Deposit Insurance Act. 

5 SEC. 6. REPORT TO THE CONGRESS ON NON-RENEWALS OF 

6 COMMERCIAL MORTGAGE LOANS. 

7 (a) IN GENERAL.—Each qualified financial institu8 tion shall, before the end of the 30-day period beginning 

9 at the end of each calendar quarter beginning after the 

10 date of the enactment of this Act, submit to the Board 

11 with respect to such calendar quarter the aggregate 

12 amount of permanent commercial mortgage loans that— 

13 (1) matured during the quarter, but did not 

14 fully amortize; 

15 (2) were current prior to maturity; 

16 (3) had adequate cash flows from the mort17 gaged properties to continue paying interest and 

18 principal payments in a timely manner if such loans 

19 were renewed on substantially the same terms and 

20 conditions; and 

21 (4) as a result of a suggestion or urging of, or 

22 a requirement by, a Federal regulator that the insti23 tution reduce its exposure to commercial mortgage 

24 loans or the determination by the institution to reVerDate Mar 15 2010 00:56 Oct 13, 2010 Jkt 099200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H6317.IH H6317

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1 quire a reduction in the loan-to-value ratio upon any 

2 renewal of such loans, either— 

3 (A) were not renewed at maturity under 

4 substantially the same terms and conditions; or 

5 (B) were renewed at a lower principal bal6 ance. 

7 (b) PUBLICATION OF REPORT.— 

8 (1) IN GENERAL.—Not later than 60 days after 

9 the end of each calendar quarter for which informa10 tion is submitted pursuant to subsection (a), the 

11 Board shall publish a report of the— 

12 (A) the total amount of all permanent 

13 commercial mortgage loans described in sub14 section (a) reported to the Board under such 

15 subsection with respect to such quarter; and 

16 (B) the ratio, expressed as a percentage, 

17 which such loans in each of the following cat18 egories bear to the average permanent amount 

19 of all commercial mortgage loans outstanding in 

20 each such category: 

21 (i) The United States as a whole. 

22 (ii) Each State (as defined in section 

23 3 of the Federal Deposit Insurance Act). 

24 (iii) Each type of qualified financial 

25 institution. 


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1 (iv) Each depository institution hold2 ing company (as determined on a consoli3 dated basis). 

4 (v) Each qualified financial institution 

5 that is not controlled by or under common 

6 control with a depository institution hold7 ing company. 

8 (2) REPORT TO THE CONGRESS.—Each report 

9 published under paragraph (1) shall be submitted by 

10 the Board to the Committee on Financial Services of 

11 the House of Representatives, the Committee on 

12 Banking, Housing, and Urban Affairs of the Senate, 

13 and the Joint Economic Committee of the Congress 

14 by the time of such publication. 

15 (3) PUBLIC AVAILABILITY.—Each report pub16 lished under paragraph (1) shall be publicly avail17 able on the website maintained by the Board. 

18 (c) DEFINITIONS.—For purposes of this section, the 

19 following definitions shall apply: 

20 (1) INCORPORATED DEFINITIONS.— 

21 (A) SECTION 5.—The terms ‘‘Board’’ and 

22 ‘‘depository institution’’ have the same meaning 

23 as in section 5. 

24 (B) DEPOSITORY INSTITUTION HOLDING

25 COMPANY; SUBSIDIARY.—The terms ‘‘depository 


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1 institution holding company’’ and ‘‘subsidiary’’ 

2 have the same meanings as in section 3(w) of 

3 the Federal Deposit Insurance Act. 

4 (2) QUALIFIED FINANCIAL INSTITUTION.—The 

5 term ‘‘qualified financial institution’’ means any de6 pository institution and any subsidiary of a deposi7 tory institution or a depository institution holding 

8 company that makes permanent commercial mort9 gage loans or holds permanent commercial mortgage 

10 loans, directly or indirectly. 

11 (3) STATE.—The term ‘‘State’’ has the same 

12 meaning as in section 3 of the Federal Deposit In13 surance Act. 

14 (d) SUNSET.—This section shall not apply after 

15 March 31, 2013. 

16 SEC. 7. STUDY ABOUT FEDERAL REGULATORS. 

17 (a) IN GENERAL.—The Secretary of the Treasury 

18 shall conduct a study to determine— 

19 (1) whether Federal banking agencies (as de20 fined in section 5) and the Securities and Exchange 

21 Commission may have exacerbated both— 

22 (A) the excessive expansion of commercial 

23 mortgage credit on overly generous terms that 

24 contributed to a commercial real estate price 

25 bubble between 2004 and 2007; and 


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1 (B) the rapid contraction in the availability 

2 of commercial mortgage credit on reasonable 

3 terms after the commercial real estate price 

4 bubble burst through pro-cyclical evaluations of 

5 the value of collateral by appraisers, depository 

6 institutions and other financial institutions, and 

7 Federal banking agencies and the Securities 

8 and Exchange Commission; 

9 (2) whether modifications in formulation and 

10 use of appraisals by appraisers, depository institu11 tions and other financial institutions, and Federal 

12 banking agencies and the Securities and Exchange 

13 Commission, including providing greater weight to 

14 the cash flows associated with mortgaged properties, 

15 along with any other modifications in regulatory 

16 practices by Federal banking agencies and the Secu17 rities and Exchange Commission, that the Secretary 

18 may deem appropriate would reduce this pro-cyclical 

19 bias and provide a more even flow of commercial 

20 mortgage credit on reasonable terms throughout the 

21 business cycle; and 

22 (3) what, if any, changes to— 

23 (A) Federal laws or regulations; and 

24 (B) State laws or regulations, 


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1 would be necessary to accomplish these modifica2 tions. 

3 (b) SUBMITTAL TO THE CONGRESS.—A report on the 

4 study required under subsection (a) shall be submitted by 

5 the Secretary of the Treasury to the Committee on Finan6 cial Services of the House of Representatives, the Com7 mittee on Banking, Housing, and Urban Affairs of the 

8 Senate, and the Joint Economic Committee of the Con9 gress before the end of the 6-month period beginning on 

10 the date of the enactment of this Act. 

Æ 


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