On May 24th the President signed into law S. 2155, the “Economic Growth, Regulatory Relief, and Consumer Protection Act”. In that legislation real estate professionals should look at the changes in High Volatility Acquisition Development and Construction (HVCRE). These changes remove hurdles and make it less complicated to provide construction financing. Banks will keep their lending standards but will not have the added roadblocks of government red tape. Borrowers will have more options for construction financing.
HVCRE regulation has a large impact on how banks look at construction financing. Banks must reserve more capital when they issue a loan that falls into HVCRE. Consequently banks, especially smaller banks, have a much lower appetite for this type of lending. The legislation clarified and improved HVCRE by better defining loans that are exempt from this legislation.
A potentially larger impact of the new law is increasing thresholds for bank reporting requirements. Call reports are filed by banks on a quarterly basis and give a snapshot of the bank’s financial health. Short form call report limits went from $1 Billion to $3 Billion and for well capitalized banks up to $10 Billion. Banks that report under the short form call report will effectively be exempt for risk-based capital requirements such as HVCRE.
Story Contributed by Tri City National Bank
More information detailing changes HERE from GlobeSt.com
More information on this REALTOR® supported legislation including PACE and HVCRE – Click HERE
View the Washington Report on HVCRE HERE