Tag: Dodd-Frank Reform

Revisions to the 2010 Dodd-Frank Act – including significant Roundtable-supported reforms to the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – were signed into law by President Trump yesterday, two days after the House passed The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). 

Revisions to the 2010 Dodd-Frank Act – including significant Roundtable-supported reforms to the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – were signed into law by President Trump yesterday, two days after the House passed The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155).

• S. 2155 previously passed the Senate in March with the same clarifications and reforms as the House bill.  The HVCRE Rule created needless confusion and increased borrowing costs in the industry for CRE Acquisition, Development and Construction (ADC) lending.
• Senate Banking Committee Chairman Mike Crapo (R-ID) commented, “This step toward right-sizing regulation will allow local banks and credit unions to focus more on lending, in turn propelling economic growth and creating jobs on Main Street and in our communities.” (Sen. Mike Crapo News Release, May 22)
• Details of the new measure addresses key deficiencies in current and proposed regulations.  Real Estate Roundtable HVCRE Working Group Co-Chair Joseph Forte (Sullivan and Worcester) noted, “This legislative action is a welcome solution to a poorly designed regulatory capital scheme that has not matched with risk. This caused an unnecessary cost burden to all commercial banks and their real estate development customers.  In addition, it restores to borrowers the ability to offer appreciated land value as equity to banks, when validated through appraisal practices established in earlier statutes.”  (Passage of Dodd-Frank Reform Encourages Investment, Economic Growth in Local Communities –Roundtable News Release, May 22) 
• The Roundtable and twelve other real estate organizations detailed the industry’s HVCRE policy positions and urged inclusion of the language in broader Dodd-Frank reform legislation (S. 2155). (Roundtable HVCRE Comment Letter, March 2)
• “The Reform Bill, in provisions that are now effective, overrides certain highly conservative provisions in both the federal banking agencies’ (Banking Agencies) Basel III capital rule and their interpretations of it.” ( Dodd Frank 2.0: Reforming U.S. HVCRE Capital Treatment, Gibson Dunn, May 24)

Since 2015, The Roundtable’s HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule.  During next month’s Real Estate Roundtable Annual Meeting, HVCRE will be a focus of discussion, with more specific details offered during the Real Estate Capital Policy Advisory Committee (RECPAC) meeting on June 14.

House Majority Leader Kevin McCarthy (R-CA) yesterday said the House will vote on the Senate’s Dodd-Frank reform bill (S. 2155),  before Memorial Day.  S. 2155 includes a measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – a top Roundtable priority.  (Roundtable Weekly, May 4)

House Majority Leader Kevin McCarthy (R-CA) said the House will vote on the Senate’s Dodd-Frank reform bill (  S. 2155  ),  before Memorial Day.

• Ryan: GOP has deal on bill easing Dodd-Frank, The Hill (May 8) – House Speaker Paul Ryan (Wisconsin) on Tuesday said the House will hold a vote on the Senate Dodd-Frank reform bill in exchange for the Senate taking up a separate set of financial reform bills  supported by House Financial Services Committee Chairman Jeb Hensarling (R-TX) Texas).

• House Speaker Ryan, American Banker (May 8) – “I had a good meeting with [Senate Majority Mitch McConnell] over the break on this and so we’ve got an agreement to be moving different pieces of legislation.” 

• Bill to Roll Back Post-Financial-Crisis Banking Rules Gets Clear Path to Passage, Washington Post, May 8 –- As the sponsor of more ambitious Dodd-Frank reforms approved by the House last year, Hensarling said he was confident that the new approach to separate the legislative effort into two bills would “create regulatory policy that will help us achieve sustained 3% economic growth.”
  

  The Roundtable and 12 other real estate organizations on March 2, 2018 sent a  comment letter  urging all members of the Senate Banking Committee to enact the HVCRE measure by including the measure in the broader Dodd-Frank reform package (S. 2155).

HVCRE Reform Measure Included  

• (Roundtable Weekly, Jan. 12) – The Senate bill would clarify which types of loans should be classified as High Volatility Commercial Real Estate Loans (HVCRE) to ensure they do not impede credit capacity or economic activity, while still promoting economically responsible commercial real estate lending.  

• GlobeSt.com, (March 19) – “The HVCRE rule, promulgated by Basel III, went into effect in 2016. It established a new risk-weight category requiring banks to hold more capital – 150% or one and half times as much – for such loans. The result has been a pull back on construction lending among other types of bank finance.” 

• Real Estate Industry Comment Letter, (March 2) – The Roundtable and twelve other real estate organizations on March 2, 2018 sent a comment letter urging all members of the Senate Banking Committee to enact the HVCRE measure by including it in the broader Dodd-Frank reform package (S. 2155).

Since 2015, The Roundtable’s HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule.  During next month’s Real Estate Roundtable Annual Meeting, HVCRE will be a focus of discussion, with more specific details offered during the Real Estate Capital Policy Advisory Committee (RECPAC) meeting on June 14.

The Senate is expected to vote early next week on bipartisan Dodd-Frank reform legislation (S. 2155) that includes a Roundtable-supported  measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which would clarify specific requirements for acquisition, development, or construction (ADC) loans.

The Senate is expected to vote early next week on bipartisan Dodd-Frank reform legislation (  S. 2155  ) that includes a Roundtable-supported  measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which would clarify specific requirements for acquisition, development, or construction (ADC) loans.

The Economic Growth, Regulatory Relief, and Consumer Protection Act(S. 2155) represents the most significant change to financial regulatory law since 2010, when the Dodd-Frank Act was enacted. Among the financial issues it addresses, the Act would raise the amount at which banks are considered “too big to fail” – from the current $50 billion threshold to $250 billion – and provides additional relief for community banks and credit unions.

Amendments added this week to the Manager’s Amendment for S. 2155 include a bipartisan  HVCRE measure that originated in the U.S. House of Representatives as the Clarifying Commercial Real Estate LoansHVCRE bill (H.R. 2148), introduced by House Financial Services Committee members Rep. Robert Pittenger (R-NC) and Rep. David Scott (D-GA). After passing the House by voice vote in November of last year (Roundtable Weekly, Nov. 10), the Senate Banking Committee took up an identical bill in February – S. 2405 – co-sponsored by Senators Tom Cotton (R-AR) and Doug Jones (D-AL). 

Last Friday, the Roundtable and twelve other real estate organizations sent a comment letter urging all members of the Senate Banking Committee to take the necessary steps to enact S. 2405 by including the measure in the broader Dodd-Frank reform package (S. 2155).

The current HVCRE Rule is overly broad and includes many stabilized loans without construction risk in this HVCRE category, unduly burdening those loans with capital charges meant to protect banks from heightened construction risks. As a result, banks, including small community financial institutions, have been deterred from making this type of loan, which can represent up to 50 percent of a small bank loan portfolio.   

The Roundtable and twelve other real estate organizations sent a  comment letter  urging all members of the Senate Banking Committee to take the necessary steps to enact S. 2405 by including the measure in the broader Dodd-Frank reform package (S. 2155).

The Senate’s HVCRE measure would clarify which types of loans should be classified as HVCRE loans to ensure they do not impede credit capacity or economic activity, while still promoting economically responsible commercial real estate lending.  (Roundtable Weekly, Jan. 12).

Senate Banking Committee Chairman Mike Crapo (R-ID) and House Financial Services Committee Chairman Jeb Hensarling (R-TX) continue to work with their colleagues to advance bipartisan reform measure that will muster enough votes for passage in both chambers. 

It remains uncertain whether Crapo’s efforts will attract the support of House Republicans, who must approve the bill before it can be sent to the President for his signature.  Hensarling said yesterday that the updated Senate bill doesn’t go far enough and needs more provisions to reflect “the will of the House.” (BNA, March 9)

HVCRE reform is a is a top policy priority of The Real Estate Roundtable and its industry coalition partners, who have submitted numerous letters to policymakers since the measure was enacted in 2015. The Roundtable’s HVCRE Working Group played a critical role in drafting the measure and aiding efforts to advance legislative reforms. (Roundtable letter, March 2)

Financial regulation and its effect on commercial real estate lending will be a focus of The Roundtable’s April 25 Spring Meeting in Washington, DC.