The OCC, the Federal Reserve Board and the FDIC (collectively, the "agencies") approved a revised definition of the "high volatility commercial real estate loan" ("HVCRE") and other amendments under their respective regulatory capital rules.

As previously covered, the revised HVCRE definition conforms to the statutory definition of a "high volatility commercial real estate acquisition, development, or construction loan" pursuant to Section 214 of the Economic Growth, Regulatory Relief and Consumer Protection Act. Additionally, the final rule will clarify, under the revised HVCRE exposure definition, the capital treatment for loans that finance the development of land.

Based on comments received from market participants, the agencies made several modifications to the final rule, including:

  • providing banking organizations with the option to keep the current capital treatment of their acquisition, development or construction loans under the HVCRE, if they originated between January 1, 2015 and April 1, 2020;

  • clarifying several aspects of the final rule, including the definition and interpretation of (i) "credit facility secured by land or improved real property," (ii) "loans secured by nonfarm nonresidential properties," (iii) "other land loans" and (iv) certain requirements concerning one- to four- family residential properties;

  • making the exclusion of loans financing one- to four- family residential properties consistent with the definition and reporting of one- to four- family residential property loans, rather than the original definition provided under the inter-agency real estate lending guidelines; and

  • rescinding all outstanding HVCRE exposure-related FAQs.

The rule will become effective on April 1, 2020.