republic-os/legal/us/code/title-12/chapter-16/section-1831bb.md

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LegalText	12 U.S.C. § 1831bb	Capital requirements for certain acquisition, development, or construction loans	us	united_states_code	code_section	12	BANKS AND BANKING	16	FEDERAL DEPOSIT INSURANCE CORPORATION	1831bb	12 U.S.C. § 1831bb	current	119-100	2026-06-26	official	https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc12@119-100.zip	/us/usc/t12/s1831bb	data/legal/raw/us/code/title-12/usc12.xml	2b64262aeb70483178a0082ffae9f8a454387f46b7a4ea79ecdc4b8fd17ae1ad	e6b98700ef4156ac33fde5d105824845d727afa91a53f3762be2cf4d1a3b01fa	2bb5bf39805a5237cbbf38dc6d54ce71701c4f4e097c65131d7a6588142a7286	2026-07-04	official	legal us-code

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

Text

(a) In general The appropriate Federal banking agencies may only require a depository institution to assign a heightened risk weight to a high volatility commercial real estate (HVCRE) exposure (as such term is defined under section 324.2 of title 12, Code of Federal Regulations, as of October 11, 2017, or if a successor regulation is in effect as of May 24, 2018, such term or any successor term contained in such successor regulation) under any risk-based capital requirement if such exposure is an HVCRE ADC loan.

(b) HVCRE ADC loan defined For 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 For purposes of this section, the value of any real property contributed by a borrower as a capital contribution shall be the appraised value of the property as determined under standards prescribed pursuant to section 3339 of this title, in connection with the extension of the credit facility or loan to such borrower.

(d) Reclassification as a Non-HVRCE ADC loan For 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 Nothing in this section shall limit the supervisory, regulatory, or enforcement authority of an appropriate Federal banking agency to further the safe and sound operation of an institution under the supervision of the appropriate Federal banking agency.

(Sept. 21, 1950, ch. 967, § 2[51], as added Pub. L. 115–174, title II, § 214, May 24, 2018, 132 Stat. 1321.)