View all text of Chapter 16 [§ 1811 - § 1835a]
§ 1831bb. Capital requirements for certain acquisition, development, or construction loans
(a) In general
(b) HVCRE ADC loan definedFor purposes of this section and with respect to a depository institution, the term “HVCRE ADC loan”—
(1) means a credit facility secured by land or improved real property that, prior to being reclassified by the depository institution as a non-HVCRE ADC loan pursuant to subsection (d)—
(A) primarily finances, has financed, or refinances the acquisition, development, or construction of real property;
(B) has the purpose of providing financing to acquire, develop, or improve such real property into income-producing real property; and
(C) is dependent upon future income or sales proceeds from, or refinancing of, such real property for the repayment of such credit facility;
(2) does not include a credit facility financing—
(A) the acquisition, development, or construction of properties that are—
(i) one- to four-family residential properties;
(ii) real property that would qualify as an investment in community development; or
(iii) agricultural land;
(B) the acquisition or refinance of existing income-producing real property secured by a mortgage on such property, if the cash flow being generated by the real property is sufficient to support the debt service and expenses of the real property, in accordance with the institution’s applicable loan underwriting criteria for permanent financings;
(C) improvements to existing income-producing improved real property secured by a mortgage on such property, if the cash flow being generated by the real property is sufficient to support the debt service and expenses of the real property, in accordance with the institution’s applicable loan underwriting criteria for permanent financings; or
(D) commercial real property projects in which—
(i) the loan-to-value ratio is less than or equal to the applicable maximum supervisory loan-to-value ratio as determined by the appropriate Federal banking agency;
(ii) the borrower has contributed capital of at least 15 percent of the real property’s appraised, “as completed” value to the project in the form of—(I) cash;(II) unencumbered readily marketable assets;(III) paid development expenses out-of-pocket; or(IV) contributed real property or improvements; and
(iii) the borrower contributed the minimum amount of capital described under clause (ii) before the depository institution advances funds (other than the advance of a nominal sum made in order to secure the depository institution’s lien against the real property) under the credit facility, and such minimum amount of capital contributed by the borrower is contractually required to remain in the project until the credit facility has been reclassified by the depository institution as a non-HVCRE ADC loan under subsection (d);
(3) does not include any loan made prior to January 1, 2015; and
(4) does not include a credit facility reclassified as a non-HVCRE ADC loan under subsection (d).
(c) Value of contributed real property
(d) Reclassification as a Non-HVRCE ADC loanFor purposes of this section and with respect to a credit facility and a depository institution, upon—
(1) the substantial completion of the development or construction of the real property being financed by the credit facility; and
(2) cash flow being generated by the real property being sufficient to support the debt service and expenses of the real property,
in accordance with the institution’s applicable loan underwriting criteria for permanent financings, the credit facility may be reclassified by the depository institution as a Non-HVCRE ADC loan.
(e) Existing authorities
(Sept. 21, 1950, ch. 967, § 2[51], as added Pub. L. 115–174, title II, § 214, May 24, 2018, 132 Stat. 1321.)