The OCC has issued a booklet titled “Commercial Real Estate Lending” to replace the OCC’s 1995 “Commercial Real Estate and Construction Lending” booklet in the Comptroller’s Handbook. The new booklet released on August 20 includes expanded guidance on acquisition, development and construction (“ADC”) lending. Issues unique to ADC and income-producing real estate lending are discussed in separate sections. Other topics that are new or with respect to which there is expanded guidance include supervisory loan-to-value guidelines, project feasibility, investor-owned residential real estate, amortization, debt yield, owner-occupied real estate, environmental risk management and underwriting considerations for various property types. For the purposes of the booklet, commercial real estate lending comprises ADC financing and the financing of income-producing real estate. Income-producing real estate comprises real estate held for lease to third parties and nonresidential real estate that is occupied by its owner or a related party. The booklet discusses supervisory expectations and regulatory requirements for prudent risk management, and includes the internal control questionnaire and verification procedures used by examiners. The booklet applies equally to national banks and federal savings associations.
Nutter Notes: The new booklet replaces section 210, “Income Property Lending” and section 213, “Construction Lending” of the former OTS Examination Handbook. The booklet incorporates guidance issued since the 1995 release of the “Commercial Real Estate and Construction Lending” booklet. The updated guidance covers loan workouts, management of concentrations, stress testing, updated interagency appraisal guidelines, and statutory and regulatory developments in environmental risk management. The booklet also includes information about statutes and regulations governing federal savings associations. In addition to the replacement of the 1995 booklet and the OTS handbook sections, the OCC has rescinded OCC Bulletin 2012-27, “Investor-Owned One- to Four-Family Residential Properties: Supervisory Guidance on Risk Management and Reporting Requirements” (September 17, 2012) and OCC Advisory Letter 2003-7, “Guidelines for Real Estate Lending Policies” (August 8, 2003).