12 U.S.C. § 1831bb — Capital requirements for certain acquisition, development, or construction loans

(a) In general. An appropriate Federal banking agency may require a depository institution to assign a heightened risk weight to a “high volatility commercial real estate (HVCRE) exposure” under a risk-based capital requirement only if the exposure is an “HVCRE ADC loan.” “HVCRE exposure” has the meaning given in section 324.2 of title 12 of the Code of Federal Regulations as of October 11, 2017. If a successor regulation was in effect on May 24, 2018, it has the meaning of that term, or any successor term, in the successor regulation. This section does not define “HVCRE exposure.” (b) HVCRE ADC loan defined. For this section and with respect to a depository institution, “HVCRE ADC loan”— (1) means a credit facility secured by land or improved real property that, before the depository institution reclassifies it as a non-HVCRE ADC loan under subsection (d)— (A) primarily finances, has financed, or refinances the acquisition, development, or construction of real property; (B) is intended to finance acquiring, developing, or improving that real property into income-producing real property; and (C) depends on future income or sales proceeds from, or refinancing of, that real property to repay the 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 refinancing of existing income-producing real property secured by a mortgage on that property, if the property's cash flow is enough to support its debt service and expenses under the institution's applicable loan-underwriting standards for permanent financing; (C) improvements to existing income-producing improved real property secured by a mortgage on that property, if the property's cash flow is enough to support its debt service and expenses under those standards; 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 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) development expenses paid out of pocket, or (IV) contributed real property or improvements; and (iii) the borrower contributed the minimum capital described in clause (ii) before the depository institution advances funds under the credit facility, other than a nominal advance made to secure the depository institution's lien against the real property. The minimum capital contributed by the borrower must be contractually required to remain in the project until the depository institution reclassifies the credit facility as a non-HVCRE ADC loan under subsection (d); (3) does not include a loan made before 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. For this section, the value of real property contributed by a borrower as a capital contribution is the property's appraised value determined under standards prescribed under 12 U.S.C. § 3339, in connection with extending the credit facility or loan to the borrower. (d) Reclassification as a non-HVCRE ADC loan. For this section and with respect to a credit facility and a depository institution, after (1) substantial completion of the development or construction of the real property financed by the credit facility, and (2) the property's cash flow becoming sufficient to support its debt service and expenses under the institution's applicable loan-underwriting standards for permanent financing, the depository institution may reclassify the credit facility as a non-HVCRE ADC loan. (e) Existing authorities. Nothing in this section limits an appropriate Federal banking agency's supervisory, regulatory, or enforcement authority to further the safe and sound operation of an institution under that agency's supervision.