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Federal Agencies Seek Changes to HVCRE Rule

A trio of federal agencies have proposed revising the regulatory capital rule that defines “high volatility commercial real estate exposure” or HVCRE. The intent, according to CRE Finance Council, is to conform the regulatory rule to the existing statutory definition of a “high volatility commercial real estate acquisition, development, or construction” loan.

The regulators view HVCRE exposures as having increased risk characteristics relative to other credit exposures, and thus assigned a heightened risk weight of 150% under the capital rule. The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency proposes to addresses key issues of particular interest to the CRE industry. Primarily, the ‘borrower contributed capital’ exemption and the timing on the HVCRE determination.

CRE Finance Council notes, the original HVCRE rule applied a higher capital charge to loans originated for the purpose of acquisition, construction and development (ADC) made by large, regional, and small banks. The original definition and exemptions applied to advanced approaches (AA) and standardized approaches (SA) banks, as do the proposed “HVCRE 2.0” revisions.

The proposed change essentially seeks to transfer the statutory language into a new regulation, but it also leaves room for further clarifications.

Comments on the proposed HVCRE 2.0 revisions will be due 60 days, once published in the Federal Register, which will likely translate to an early December deadline. When finalized, the resulting changes would apply to all banking institutions subject to the agencies’ capital rules.

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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