WASHINGTON, DC–Last week we reported that a source told us the Senate bill to roll back the Dodd-Frank Act's banking regulations might include a clause that would give some relief from the High Volatility Commercial Real Estate Loans, or HVCRE, rule. The bipartisan Clarifying Commercial Real Estate Loans — now called Promoting Construction And Development on Main Street — did make it into the final bill, which was passed by the Senate. It was not completely ideal — it wound up leaving several important aspects up to the regulators, including the risk weight that should be applied to higher-risk construction lending, according to CREFC.

Still, as the Real Estate Roundtable noted, “crucial clarifications to the HVCRE Rule now move forward to the House.” It wrote:

These reforms to HVCRE loan definitions would provide greater assurances for performing loan portfolios with low risk, bolster credit capacity and preserve economically responsible commercial real estate lending.

However, the House of Representatives has signalled it wants to add several provisions to the measure that could effectively kill the entire bill. Namely House Financial Services Committee Chairman Jeb Hensarling (R-TX) has said he wants to include broader revisions to the bill and plans to attach nearly three dozen bills to the package. This could threaten the support of Senate moderates for the measure. CREFC writes:

Even though the nearly three dozen bills that Hensarling would like to attach to S. 2155 enjoy bipartisan support (which nearly all do), we believe this avalanche of new policy would ultimately doom the fate of the year-long effort in this last conference phase. We expect moderation to win the day and the bill to become law before the August recess.

The Roundtable says that negotiations between House members, and between the two chambers, will begin this next week, prior to the two-week Easter recess scheduled for the end of the month.

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.

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HVCRE Made It Into Senate Bill But It Could Die In The House

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