The banking industry celebrated a small victory in early November with the approval of H.R. 2148—a bill that aims to cut through some of the confusion that the Basel III high volatility commercial real estate (HVCRE) rule created for construction loans. Although it is a step in the right direction, it may be a bit premature to start popping champagne corks.
Banks are keeping close tabs on two key initiatives that could change the current HVCRE rule that was first introduced in January 2015. First there is the H.R. 2148 legislation that aims to clarify the HVCRE regulations. “It does provide clarity on key issues and it better aligns the rule with the economics and the risks of these types of projects,” says Bruce Oliver, associate vice president for commercial/multifamily policy at the Mortgage Bankers Association (MBA), an industry association.