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HVCRE Update – New Interagency FAQ

April 14, 2015

Authors

Jerry Blanchard

HVCRE Update – New Interagency FAQ

April 14, 2015

by: Jerry Blanchard

As previously mentioned, the federal banking regulators have been working on a FAQ on the topic. The interagency FAQ was published on April 6, 2015. While there were no surprises in what was published there were a number of takeaways from the FAQ that lenders need to keep in mind and I have added those to my previous list of FAQ. Under Basel III, as a general rule, a lender applies a 100% risk weighting to all corporate exposures, including bonds and loans. There are various exceptions to that rule, one of which involves what is referred to as “High Volatility Commercial Real Estate” (“HVCRE”) loans. Simply put, acquisition, development and construction loans are viewed as a more risky subset of commercial real estate loans and are assigned a risk weighting of 150%.

HVCRE is defined to include credit facility that, prior to conversion to permanent financing, finances

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High Volatility CRE Rules and Contributed Capital

March 30, 2015

Authors

Jerry Blanchard

High Volatility CRE Rules and Contributed Capital

March 30, 2015

by: Jerry Blanchard

The new risk weighting rules applicable to commercial real estate are now fully in effect for all banks. The rule flows out of the new capital rulemaking carried out by the federal banking agencies as a result of Basel III. As a general rule, the agencies agreed to apply a 100% risk weighting to all corporate exposures, including bonds and loans. There were various exceptions to that rule, one of which involves what is referred to as “High Volatility Commercial Real Estate” (“HVCRE”) loans. Simply put, acquisition, development and construction loans are viewed as a more risky subset of commercial real estate loans and are assigned a risk weighting of 150%.

HVCRE is defined to include credit facility that, prior to conversion to permanent financing, finances or has financed the acquisition, development, or construction (ADC) of real property, unless the facility finances:

  • One- to four-family residential properties;
  • Real property that
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  • New Proposed Capital Rules May Mean the Death of Highly Leveraged ADC Transactions

    June 19, 2012

    Authors

    Jonathan Hightower

    New Proposed Capital Rules May Mean the Death of Highly Leveraged ADC Transactions

    June 19, 2012

    by: Jonathan Hightower

    Many bankers are spending their evenings attempting to work through the very dense and long Joint Notices of Proposed Rulemakings that together propose new capital standards for financial institutions.  Even though the proposed Basel III rules would not become effective until January 1, 2013 and the proposed risk-weighting rules would not become effective until January 1, 2015, bankers need to begin to understand how these rules will affect their capital planning now.  While the regulatory agencies are busily assuring bankers that the vast majority of financial institutions would have been in compliance if the proposed rules had been effective on March 31, 2012, the rules, as proposed, will certainly change how many financial institutions approach their capital planning and asset mixes.

    One facet of the rule that may impact many community banks and their borrowers is the proposed risk-weighting of certain commercial real estate (CRE) loans.  While acquisition,

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    Financial Services Update

    September 20, 2010

    Authors

    Matt Jessee

    Financial Services Update

    September 20, 2010

    by: Matt Jessee

    Senate Passes Small Business Tax Credits Bill

    On Thursday, the Senate passed a long-stalled small business tax credit measure, 61-38, with all fifty-nine Democrats and two Republicans, George Voinovich (Ohio) and George LeMieux (Fla.), voting for the bill. The bill will extend a number of tax provisions, including liberalized and expanded expensing for 2010 and 2011, revived bonus depreciation for 2010, a five-year carryback of unused general business credits for eligible small businesses, removal of cell phones from the listed property category, and liberalized Code Sec. 6707A penalty rules. The bill now heads back to the House where it is expected to pass and then be signed into law by the President.

    Warren Appointed as Special Adviser to the Bureau of Consumer Financial Protection

    On Friday, President Barack Obama formally appointed Elizabeth Warren as a “Special Adviser” to temporarily lead the new Bureau of Consumer Financial

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    Financial Services Update

    September 10, 2010

    Authors

    Matt Jessee

    Financial Services Update

    September 10, 2010

    by: Matt Jessee

    Goolsbee to Chair White House Council of Economic Advisors

    On Friday, President Obama named a longtime adviser, Austan Goolsbee, to be the chairman of the White House Council of Economic Advisers. Goolsbee is a former University of Chicago economics professor and one of three economists currently serving on the council. He previously was confirmed by the Senate and will not need to be reconfirmed. Goolsbee, 41, replaces Christina Romer, who has returned to her teaching position at the University of California, Berkeley.

    Clash Over Tax Cuts Extension

    With the Bush tax cuts set to expire at the end of 2010, President Obama, speaking at a White House news conference on Friday, proposed extending tax cuts for families earning less than $250,000 a year while allowing taxes to rise for those with higher incomes.  However, the President stopped short of promising a veto should Congress send him legislation extending, perhaps temporarily,

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    Financial Services Update

    July 30, 2010

    Authors

    Matt Jessee

    Financial Services Update

    July 30, 2010

    by: Matt Jessee

    GDP Rose 2.4% in Second Quarter

    On Friday, the Commerce Department reported that U.S. gross domestic product rose at an annualized seasonally adjusted rate of 2.4% for the second quarter, indicating that the recovery has been weaker than previously expected. However, the report also indicated that business spending increased by 21.9% in the second quarter, compared with a 20.4% rise in the first three months. The figures highlight the contrast in the economy between company profits and the slower jobs market. The underlying inflation rate increased by 1.1% in the April-to-June period over the previous quarter. The consumer price index rose by only 0.1% in the second quarter, slowing sharply from a 2.1% gain in the first quarter. Gross domestic purchase prices rose 0.1%, after a 2.1% increase in the first quarter. The chain-weighted GDP price index increased by 1.8%, compared to 1.0% in the first three months.

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