I 

113TH CONGRESS 

1ST SESSION H. R. 1255 

To enable Federal and State chartered banks and thrifts to meet the credit 

needs of the Nation’s home builders, and to provide liquidity and ensure 

stable credit for meeting the Nation’s need for new homes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 19, 2013 

Mr. GARY G. MILLER of California (for himself and Mrs. MCCARTHY of New 

York) introduced the following bill; which was referred to the Committee 

on Financial Services 

A BILL 

To enable Federal and State chartered banks and thrifts 

to meet the credit needs of the Nation’s home builders, 

and to provide liquidity and ensure stable credit for 

meeting the Nation’s need for new homes. 

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 ‘‘Home Construction 

5 Lending Regulatory Improvement Act of 2013’’. 

6 SEC. 2. PURPOSE. 

7 It is the purpose of this Act to— 


pwalker on DSK7TPTVN1PROD with BILLS
2 

•HR 1255 IH

1 (1) immediately provide authority and guidance 

2 that Federal and State bank regulators can use to 

3 ensure that Federal and State chartered banks and 

4 thrifts that provide financing to America’s home 

5 builders are permitted to make loans, provide ongo6 ing liquidity, and ensure stable financing to such 

7 home builders; and 

8 (2) enable Federal and State chartered banks 

9 and thrifts to provide initial and ongoing credit to 

10 America’s home builders to aid in restoring liquidity 

11 to the home building sector and to restore vitality to 

12 the United States residential housing market. 

13 SEC. 3. COORDINATED RULEMAKING. 

14 (a) INITIATION OF PROCEEDINGS.—Not later than 

15 90 days after the enactment of this Act, the appropriate 

16 Federal banking agencies shall initiate a coordinated rule17 making with respect to financial institutions under their 

18 respective jurisdictions that make real estate loans to 

19 home builders. Such rulemaking shall provide for the fol20 lowing: 

21 (1) ELIMINATION OF THE 100 PERCENT OF

22 BANK CAPITAL MEASUREMENT.— 

23 (A) LOAN ORIGINATION.—If any qualified 

24 financial institution is holding real estate loans 

25 in its lending portfolio that in the aggregate 


pwalker on DSK7TPTVN1PROD with BILLS
3 

•HR 1255 IH

1 represent 100 percent or more of its total cap2 ital, the appropriate Federal banking agency 

3 shall not prohibit any such institution from con4 tinuing to make such loans to home builders. 

5 (B) LENDING DECISIONS.—The appro6 priate Federal banking agency shall not prevent 

7 a qualified financial institution from making a 

8 real estate loan to a home builder that has a 

9 viable project. 

10 (C) QUALIFIED FINANCIAL INSTITUTION

11 DEFINED.—For purposes of this paragraph, the 

12 term ‘‘qualified financial institution’’ means a 

13 financial institution that received, in the most 

14 recent examination of the institution, a 

15 CAMEL composite rating of 1, 2, or 3 under 

16 the Uniform Financial Institutions Rating Sys17 tem. 

18 (2) REALISTIC MARKET BASED APPRAISALS.— 

19 (A) VALUATION STANDARD.—The appro20 priate Federal banking agency shall require 

21 that entities used by financial institutions to as22 sess the value of collateral, with respect to a 

23 real estate loan, associated with any viable 

24 project in such institution’s lending portfolio 


pwalker on DSK7TPTVN1PROD with BILLS
4 

•HR 1255 IH

1 utilize an as completed valuation to make such 

2 an assessment. 

3 (B) ARMS LENGTH TRANSACTIONS.—The 

4 appropriate Federal banking agency shall re5 quire that entities used by financial institutions 

6 to assess or review underwriting standards and 

7 collateral values for real estate loans made by 

8 such institutions after the date of the enact9 ment of this Act use comparable sales involving 

10 arms length transactions to make such an as11 sessment or review. 

12 (3) PROHIBITION ON COMPELLING LENDERS TO

13 CALL OR CURTAIL LOANS IN GOOD STANDING.— 

14 (A) HOME BUILDERS IN GOOD STAND15 ING.—The appropriate Federal banking agency 

16 shall not compel a financial institution to call or 

17 curtail a real estate loan of a home builder that 

18 is in good standing. 

19 (B) MAXIMUM MARKET VALUATION.— 

20 (i) IN GENERAL.—The appropriate 

21 Federal banking agency shall, in the case 

22 that a home builder is in good standing on 

23 a real estate loan but the home builder’s 

24 collateral, with respect to that loan, has 

25 decreased in value based on an as comVerDate Mar 15 2010 23:43 Mar 22, 2013 Jkt 029200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1255.IH H1255

pwalker on DSK7TPTVN1PROD with BILLS
5 

•HR 1255 IH

1 pleted valuation, permit a financial institu2 tion to work with such home builder to re3 alize the maximum current market valu4 ation of such collateral using workout 

5 methods or other appropriate means. 

6 (ii) PERIOD OF WORKOUT METH7 ODS.—Workout methods may be utilized 

8 up to a 24-month period following the 

9 issuance of final regulations under sub10 section (c). In no case shall any real estate 

11 loan be required to be charged off until the 

12 financial institution holding such loan has 

13 worked in good faith to exhaust all work14 out methods or other appropriate means. 

15 (C) RECLASSIFICATION OF LOANS.—The 

16 appropriate Federal banking agency shall not 

17 require a financial institution to reclassify any 

18 real estate loan in this paragraph on such insti19 tution’s balance sheet, unless there is a signifi20 cant reason under Financial Accounting Stand21 ards Board Accounting Standards Codification 

22 310–10–35–55 or 310–10–35–57. 

23 (4) WAITING PERIOD.—If the enactment of 

24 paragraphs 2 or 3 of this subsection helps to im25 prove a financial institution’s CAMEL composite 


pwalker on DSK7TPTVN1PROD with BILLS
6 

•HR 1255 IH

1 rating under the Uniform Financial Institutions 

2 Rating System from a 4 or 5 to a 1, 2, or 3 in such 

3 institution’s next examination that begins after the 

4 date that final regulations are issued pursuant to 

5 subsection (c), such institution’s improved rating 

6 shall take effect no earlier than 24 months after 

7 such rating was received. 

8 (b) COORDINATION, CONSISTENCY, AND COM9 PARABILITY.—Each of the agencies with authorities re10 ferred to in subsection (a) shall consult and coordinate 

11 with the other such agencies and authorities for the pur12 pose of assuring, to the extent possible, that the regula13 tions by each such agency and authority are consistent 

14 and comparable with those prescribed by the other such 

15 agencies and authorities. 

16 (c) DEADLINE.—Not later than 6 months after the 

17 enactment of this Act, each of the agencies with authori18 ties referred to in subsection (a) shall issue final regula19 tions to implement rules issued under this Act. 

20 (d) AGENCY AUTHORITY.—The rules issued under 

21 this Act shall be enforced by the appropriate Federal 

22 banking agencies with respect to financial institutions 

23 under their respective jurisdictions. 

24 (e) EFFECT ON STATE LAW.—The rules issued under 

25 this Act shall not supercede the law of any State except 


pwalker on DSK7TPTVN1PROD with BILLS
7 

•HR 1255 IH

1 to the extent that such law is inconsistent with such rule, 

2 and then only to the extent of the inconsistency. 

3 SEC. 4. DEFINITIONS. 

4 In this Act: 

5 (1) APPROPRIATE FEDERAL BANKING AGEN6 CY.—The term ‘‘appropriate Federal banking agen7 cy’’ has the same meaning as is given such term in 

8 section 3(q) of the Federal Deposit Insurance Act 

9 (12 U.S.C. 1813(q)). 

10 (2) ARMS LENGTH TRANSACTION.— 

11 (A) IN GENERAL.—The term ‘‘arms length 

12 transaction’’ means a negotiated real estate 

13 transaction between a buyer and seller in which 

14 such buyer and seller act independently of each 

15 other. 

16 (B) TRANSACTIONS EXCLUDED.—Such 

17 term shall not include any transaction involving 

18 a short sale or foreclosed property or any other 

19 distressed real property. 

20 (3) AS COMPLETED VALUATION.—The term ‘‘as 

21 completed valuation’’ means the estimated market 

22 value of collateral after the full completion and ab23 sorption of the development and construction associ24 ated with the highest and best use of the collateral. 


pwalker on DSK7TPTVN1PROD with BILLS
8 

•HR 1255 IH

1 (4) FINANCIAL INSTITUTION.—The term ‘‘fi2 nancial institution’’ means an entity regulated by, 

3 and under the supervision of, any appropriate Fed4 eral banking agency. 

5 (5) GOOD STANDING.—The term ‘‘good stand6 ing’’ means making payments on a real estate loan 

7 in accordance with the agreement of such loan. 

8 (6) REAL ESTATE LOAN.—The term ‘‘real es9 tate loan’’ means any indebtness (secured by a mort10 gage, deed of trust, or other equivalent consensual 

11 security interest on real property) acquired for the 

12 purpose of purchasing or improving real property, 

13 including indebtness acquired for— 

14 (A) land acquisition; 

15 (B) land development; and 

16 (C) residential construction projects. 

17 (7) TOTAL CAPITAL.—The term ‘‘total capital’’ 

18 means the total risk-based capital of a financial in19 stitution as reported periodically by such institution 

20 in the Federal Financial Institutions Examination 

21 Council’s Call Report or Thrift Financial Reports, 

22 as applicable. 

23 (8) VIABLE PROJECT.—The term ‘‘viable 

24 project’’ means a real estate project that a financial 


pwalker on DSK7TPTVN1PROD with BILLS
9 

•HR 1255 IH

1 institution has determined continues to have a rea2 sonable prospect of reaching completion and sale. 

3 (9) WORKOUT METHODS.—The term ‘‘workout 

4 methods’’ means techniques to prevent a real estate 

5 loan defaulting, including workout assistance, loan 

6 modifications, loan write downs, and flexibility on re7 appraisal methods. 

Æ 


pwalker on DSK7TPTVN1PROD with BILLS