Senate Passes Dodd-Frank Reform, Aims to Clarify HVCRE Policies

Posted on March 27, 2018

Senators took a positive step last week, with an overwhelming vote to begin reforming the 2010 Dodd-Frank banking law. The measure, S. 2155, passed on a 67-31 vote, with support from members on both sides of the political aisle.

A key component of the reform measure is a NAIOP-supported provision aimed at improving the regulatory process involving High Volatility Commercial Real Estate (HVCRE) loans. The HVCRE rule, which has resulted in confusion among lenders and borrowers, was originally put into place by the Basel III committee on international banking supervision and was adopted by U.S. banking regulators. 

“The current HVCRE rule is overly broad and forces banks to hold unreasonably high capital levels before they may make certain loans,” said Thomas Bisacquino, NAIOP president and CEO. “We commend the Senate for passing a measure addressing the problem by providing greater clarity on the HVCRE issue.”

Improving access to capital and credit is a legislative priority issue for NAIOP. By addressing the HVCRE problem, S. 2155 would help support job creation, economic growth and investment in the U.S. economy by providing a sensible financial regulatory framework that permits stable capital formation and balanced and disciplined lending.

The Senate measure now moves to the House of Representatives, which last year passed a bill containing similar legislative language. That bill, H.R. 2148, was sponsored by Representatives Robert Pittenger (R-NC) and David Scott (D-GA).

However, passing the bill won’t be a slam dunk. Rep. Jeb Hensarling (R-TX), chair of the House Financial Services Committee, wants a conference to discuss adding more elements to the Senate bill, which already includes roughly 40 pieces of House legislation. Some senators say they don’t want to add anything to their bill.

If the House and Senate can reconcile their versions of Dodd-Frank reform, it would be the first major bill of the year to go to President Donald Trump for his signature.

Also, lawmakers need to pass a 2018 spending bill by Friday, or the federal government could shut down for the second time this year. A deal is considered likely, but will be expensive. The measure is expected to cost more than $1 trillion and the 2018 deficit could be $800 billion.

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