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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6317 Introduced in House (IH)]

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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Investment in Commercial Real Estate 
Act of 2010''.

SEC. 2. SERVICER SAFE HARBOR.

    (a) Safe Harbor.--
            (1) Loan modifications and workout plans.--Notwithstanding 
        any other provision of law, and notwithstanding any investment 
        contract between a servicer and a securitization vehicle or 
        investor, a servicer shall not be liable for entering into a 
        loan modification or workout plan with respect to any 
        commercial mortgage loan that meets all of the criteria set 
        forth in paragraph (2)(B) to--
                    (A) any person, based on that person's ownership of 
                a commercial mortgage loan or any interest in a pool of 
                commercial mortgage loans or in securities that 
                distribute payments out of the principal, interest and 
                other payments in loans on the pool;
                    (B) any person who is obligated to make payments 
                determined in reference to any loan or any interest 
                referred to in subparagraph (A); or
                    (C) any person that insures any loan or any 
                interest referred to in subparagraph (A) under any law 
                or regulation of the United States or any law or 
                regulation of any State or political subdivision of any 
                State.
            (2) Ability to modify mortgages.--
                    (A) Ability.--Notwithstanding any other provision 
                of law, and notwithstanding any investment contract 
                between a servicer and a securitization vehicle or 
                investor, a servicer--
                            (i) shall not be limited in the ability to 
                        modify mortgages, the number of mortgages that 
                        can be modified, the frequency of loan 
                        modifications, or the range of permissible 
                        modifications; and
                            (ii) shall not be obligated to repurchase 
                        loans from or otherwise make payments to the 
                        securitization vehicle on account of a 
                        modification, workout, or other loss mitigation 
                        plan for a commercial mortgage or a class of 
                        commercial mortgages that constitute a part or 
                        all of the mortgages in the securitization 
                        vehicle,
                if any mortgage so modified meets all of the criteria 
                set forth in subparagraph (B).
                    (B) Criteria.--The criteria under this subparagraph 
                with respect to a mortgage are as follows:
                            (i) Default on the payment of such mortgage 
                        has occurred or is reasonably foreseeable.
                            (ii) The property securing such mortgage is 
                        occupied by the mortgagor of such mortgage.
                            (iii) The servicer reasonably and in good 
                        faith believes that the anticipated recovery on 
                        the principal outstanding obligation of the 
                        mortgage under the particular modification or 
                        workout plan or other loss mitigation action 
                        will exceed, on a net present value basis, the 
                        anticipated recovery on the principal 
                        outstanding obligation of the mortgage to be 
                        realized through foreclosure.
            (3) Applicability.--This subsection shall apply only with 
        respect to modifications, workouts, and other loss mitigation 
        plans initiated before January 1, 2012.
    (b) Definition of Securitization Vehicles.--For purposes of this 
section, the term ``securitization vehicle'' means a trust, 
corporation, partnership, limited liability entity, special purpose 
entity, or other structure that--
            (1) is the issuer, or is created by the issuer, of mortgage 
        pass-through certificates, participation certificates, 
        mortgage-backed securities, or other similar securities backed 
        by a pool of assets that includes commercial mortgage loans; 
        and
            (2) holds such mortgages.

SEC. 3. RECOVERY PERIOD FOR RESIDENTIAL RENTAL PROPERTY AND 
              NONRESIDENTIAL REAL PROPERTY.

    (a) In General.--The table in subsection (c) of section 168 of the 
Internal Revenue Code of 1986 (specifying applicable recovery period) 
is amended--
            (1) by striking ``27.5 years'' and inserting ``20 years'', 
        and
            (2) by striking ``39 years'' and inserting ``20 years''.
    (b) Depreciation Rules for Residential Rental Property and Non-
residential Real Property for Purposes of Earnings and Profits.--
Paragraph (3) of section 312(k) of the Internal Revenue Code of 1986 
(relating to exception for tangible property) is amended by adding at 
the end the following new subparagraph:
                    ``(C) Treatment of residential rental property and 
                nonresidential real property.--In the case of any 
                residential rental property or nonresidential real 
                property (within the meaning of section 168(c)), the 
                adjustment to earnings and profits for depreciation for 
                any taxable year shall be determined under the 
                alternative depreciation method (within the meaning of 
                section 168(g)(2)), except that the recovery period 
                shall be 20 years.''.
    (c) Conforming Amendment.--Subparagraph (A) of section 312(k)(3) of 
the Internal Revenue Code of 1986 is amended by striking ``subparagraph 
(B),'' and inserting ``subparagraphs (B) and (C),''.
    (d) Effective Date.--The amendments made by subsection (a) shall 
apply to property placed in service on or after the date of the 
enactment of this Act.

SEC. 4. NET OPERATING LOSS CARRYBACK INCREASED TO 5 YEARS.

    (a) In General.--Clause (i) of section 172(b)(1)(A) of the Internal 
Revenue Code of 1986 (relating to years to which loss may be carried) 
is amended by striking ``2 years'' and inserting ``5 years''.
    (b) Alternative Minimum Tax.--Subclause (II) of section 
56(d)(1)(A)(i) of such Code is amended by striking ``90 percent of''.
    (c) Conforming Amendments.--
            (1) Section 172(b)(1) of such Code is amended by striking 
        subparagraphs (F), (G), (H), (I), and (J).
            (2) Section 56(d)(1)(A) of such Code is amended--
                    (A) in clause (i)(I) thereof by striking ``(other 
                than the deduction described in clause (ii)(I))'', and
                    (B) by amending clause (ii) to read as follows:
                            ``(ii) alternative minimum taxable income 
                        determined without regard to such deduction and 
                        the deduction under section 199 reduced by the 
                        amount determined under clause (i),''.
            (3) Section 56(d) of such Code is amended by striking 
        paragraph (3).
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 5. DYNAMIC PROVISIONING OF INVESTMENT AND LOAN LOSS RESERVES.

    (a) Implementation Requirement.--The Federal banking agencies shall 
implement a system of dynamic provisioning for investment and loan loss 
reserves (hereafter in this section referred to as the ``dynamic 
reserve system'') that meets the requirements of this section and is 
applicable to all depository institutions before January 1, 2011.
    (b) Total Provisioning.--For each depository institution during any 
accounting period, the total provision for investment and loan loss 
reserves shall equal the sum of--
            (1) the general provision for investment and loan loss 
        reserves, as determined under subsection (c); and
            (2) the specific provision for investment and loan loss 
        reserves, as determined under subsection (d).
    (c) General Provision.--
            (1) Categories.--The Board of Governors of the Federal 
        Reserve System shall establish major categories of loans and 
        investment to be used by depository institutions for purposes 
        of the dynamic reserve system.
            (2) Publication of average historical specific losses and 
        write-downs.--
                    (A) In general.--For each major category 
                established pursuant to paragraph (1), the Board shall 
                calculate and publish the average historical specific 
                losses and write-downs as a percentage of total loans 
                and investments over a period determined by the Board.
                    (B) Limits on period.--The period determined by the 
                Board under subparagraph (A) may not be less than 10 
                years and shall include at least 1 full business cycle.
            (3) Minimum percentage.--For each major category 
        established pursuant to paragraph (1), the Board shall 
        establish a minimum percentage that shall be the larger of--
                    (A) the average historical specific losses and 
                write-downs, in such category, as a percentage of total 
                loans and investments, in such category, of all United 
                States depository institutions over the period 
                determined by the Board; or
                    (B) a percentage determined by the Board.
            (4) Provision.--
                    (A) In general.--During each accounting period, 
                each depository institution shall make a general 
                provision to the investment and loan loss reserves of 
                the institution for each major category established 
                pursuant to paragraph (1).
                    (B) Measure of provision.--The general provision to 
                the investment and loan loss reserves of a depository 
                institution under subparagraph (A) for each major 
                category shall consist of the sum of--
                            (i) the product of--
                                    (I) the total amount of the loans 
                                and investment in such category in such 
                                depository institution at the beginning 
                                of the accounting period; and
                                    (II) the average historical 
                                specific credit losses and write-downs 
                                in such category as a percentage of 
                                total loans and investments in such 
                                category of all depository institutions 
                                over the period determined by the Board 
                                minus the amount of any specific 
                                provisions made by such depository 
                                institution during such accounting 
                                period with respect to such category; 
                                and
                            (ii) the product of--
                                    (I) the difference between the 
                                total amount of the loans and 
                                investment in such category in such 
                                depository institution at the end of 
                                the accounting period and the total 
                                amount of the loans and investment in 
                                such category in such depository 
                                institution at the beginning of the 
                                accounting period; and
                                    (II) the minimum percentage 
                                determined by the Board under paragraph 
                                (3) for such category.
    (d) Specific Provisions for General Categories of Investments and 
Loans.--
            (1) Establishment of categories.--The Board shall establish 
        the general categories of investments and loans for all 
        depository institutions.
            (2) Calculation of historical specific provisions and 
        average among of credit losses.--The Board shall calculate, 
        publish and make available to the public--
                    (A) the average historical specific provisions for 
                each category of investment and loans in all depository 
                institutions over a period of such number of years as 
                the Board may determine to be appropriate, subject to 
                paragraph (3); and
                    (B) the average historical amount of credit losses 
                and write-downs for each major category of investment 
                and loans in all depository institutions over a period 
                of such number of years as the Board may determine to 
                be appropriate, subject to paragraph (3).
            (3) Period of years shall encompass business cycle.--The 
        period of years determined under subparagraphs (A) and (B) of 
        paragraph (2) shall be of such duration as to at least comprise 
        a complete business cycle.
    (e) Other Requirements and Authority.--The Board may establish a 
cap on the accumulation of general provision for investment and loan 
losses at any depository institution expressed as percent of total 
investment and loans at such depository institution.
    (f) Basel Accord Supersedes This Section.--If the Basel Committee 
on Banking Supervision agrees upon an alternative method for dynamic 
provisioning before December 31, 2010, the Board may implement such an 
agreement in lieu of implementing the requirements of subsections (c) 
and (d).
    (g) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Board.--The term ``Board'' means the Board of Governors 
        of the Federal Reserve System.
            (2) Other banking definitions.--The terms ``depository 
        institution'' and ``Federal banking agencies'' have the same 
        meaning as in section 3 of the Federal Deposit Insurance Act.

SEC. 6. REPORT TO THE CONGRESS ON NON-RENEWALS OF COMMERCIAL MORTGAGE 
              LOANS.

    (a) In General.--Each qualified financial institution shall, before 
the end of the 30-day period beginning at the end of each calendar 
quarter beginning after the date of the enactment of this Act, submit 
to the Board with respect to such calendar quarter the aggregate amount 
of permanent commercial mortgage loans that--
            (1) matured during the quarter, but did not fully amortize;
            (2) were current prior to maturity;
            (3) had adequate cash flows from the mortgaged properties 
        to continue paying interest and principal payments in a timely 
        manner if such loans were renewed on substantially the same 
        terms and conditions; and
            (4) as a result of a suggestion or urging of, or a 
        requirement by, a Federal regulator that the institution reduce 
        its exposure to commercial mortgage loans or the determination 
        by the institution to require a reduction in the loan-to-value 
        ratio upon any renewal of such loans, either--
                    (A) were not renewed at maturity under 
                substantially the same terms and conditions; or
                    (B) were renewed at a lower principal balance.
    (b) Publication of Report.--
            (1) In general.--Not later than 60 days after the end of 
        each calendar quarter for which information is submitted 
        pursuant to subsection (a), the Board shall publish a report of 
        the--
                    (A) the total amount of all permanent commercial 
                mortgage loans described in subsection (a) reported to 
                the Board under such subsection with respect to such 
                quarter; and
                    (B) the ratio, expressed as a percentage, which 
                such loans in each of the following categories bear to 
                the average permanent amount of all commercial mortgage 
                loans outstanding in each such category:
                            (i) The United States as a whole.
                            (ii) Each State (as defined in section 3 of 
                        the Federal Deposit Insurance Act).
                            (iii) Each type of qualified financial 
                        institution.
                            (iv) Each depository institution holding 
                        company (as determined on a consolidated 
                        basis).
                            (v) Each qualified financial institution 
                        that is not controlled by or under common 
                        control with a depository institution holding 
                        company.
            (2) Report to the congress.--Each report published under 
        paragraph (1) shall be submitted by the Board to the Committee 
        on Financial Services of the House of Representatives, the 
        Committee on Banking, Housing, and Urban Affairs of the Senate, 
        and the Joint Economic Committee of the Congress by the time of 
        such publication.
            (3) Public availability.--Each report published under 
        paragraph (1) shall be publicly available on the website 
        maintained by the Board.
    (c) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Incorporated definitions.--
                    (A) Section 5.--The terms ``Board'' and 
                ``depository institution'' have the same meaning as in 
                section 5.
                    (B) Depository institution holding company; 
                subsidiary.--The terms ``depository institution holding 
                company'' and ``subsidiary'' have the same meanings as 
                in section 3(w) of the Federal Deposit Insurance Act.
            (2) Qualified financial institution.--The term ``qualified 
        financial institution'' means any depository institution and 
        any subsidiary of a depository institution or a depository 
        institution holding company that makes permanent commercial 
        mortgage loans or holds permanent commercial mortgage loans, 
        directly or indirectly.
            (3) State.--The term ``State'' has the same meaning as in 
        section 3 of the Federal Deposit Insurance Act.
    (d) Sunset.--This section shall not apply after March 31, 2013.

SEC. 7. STUDY ABOUT FEDERAL REGULATORS.

    (a) In General.--The Secretary of the Treasury shall conduct a 
study to determine--
            (1) whether Federal banking agencies (as defined in section 
        5) and the Securities and Exchange Commission may have 
        exacerbated both--
                    (A) the excessive expansion of commercial mortgage 
                credit on overly generous terms that contributed to a 
                commercial real estate price bubble between 2004 and 
                2007; and
                    (B) the rapid contraction in the availability of 
                commercial mortgage credit on reasonable terms after 
                the commercial real estate price bubble burst through 
                pro-cyclical evaluations of the value of collateral by 
                appraisers, depository institutions and other financial 
                institutions, and Federal banking agencies and the 
                Securities and Exchange Commission;
            (2) whether modifications in formulation and use of 
        appraisals by appraisers, depository institutions and other 
        financial institutions, and Federal banking agencies and the 
        Securities and Exchange Commission, including providing greater 
        weight to the cash flows associated with mortgaged properties, 
        along with any other modifications in regulatory practices by 
        Federal banking agencies and the Securities and Exchange 
        Commission, that the Secretary may deem appropriate would 
        reduce this pro-cyclical bias and provide a more even flow of 
        commercial mortgage credit on reasonable terms throughout the 
        business cycle; and
            (3) what, if any, changes to--
                    (A) Federal laws or regulations; and
                    (B) State laws or regulations,
        would be necessary to accomplish these modifications.
    (b) Submittal to the Congress.--A report on the study required 
under subsection (a) shall be submitted by the Secretary of the 
Treasury to the Committee on Financial Services of the House of 
Representatives, the Committee on Banking, Housing, and Urban Affairs 
of the Senate, and the Joint Economic Committee of the Congress before 
the end of the 6-month period beginning on the date of the enactment of 
this Act.
                                 <all>
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