Section 1 Short title
This Act may be cited as the “Home Building Lending Improvement Act of 2013”.
Home Building Lending Improvement Act of 2013
A BILL
To enable Federal and State chartered banks and thrifts to meet the credit needs of home builders in the United States, and to provide liquidity and ensure stable credit in order to meet the need for new homes in the United States.
Sec. 2 Purpose
It is the purpose of this Act to—
immediately provide authority and guidance that Federal and State bank regulators can use to ensure that Federal and State chartered banks and thrifts that provide financing to America’s home builders are permitted to make loans, provide ongoing liquidity, and ensure stable financing; and
enable Federal and State chartered banks and thrifts to provide initial and ongoing credit in a sound manner to America’s home builders to aid in restoring liquidity and vitality to the housing market.
Sec. 3 Coordinated rulemaking
Initiation of proceedings— Not later than 3 months after the date of enactment of this Act, the appropriate Federal banking agencies shall each initiate guidance or rulemaking with respect to financial institutions under their respective jurisdictions that make real estate loans to home builders. Such guidance or rulemaking shall provide for the following:
Adjustment of the 100 percent of bank capital measurement—
Loan origination— Notwithstanding any other provision of law, the measurement of construction loans that triggers additional scrutiny of real estate loans in the lending portfolio of any qualified financial institution shall be 125 percent of bank capital. The Federal banking agencies shall not treat the 125 percent measurement as a hard cap beyond which loans cannot be made, but shall consider other relevant factors besides the concentration of such loans, such as whether the financial institution has in place effective risk management practices that are appropriate for the level and nature of the risk of such loans.
Lending decisions— The appropriate Federal banking agency shall not prevent a qualified financial institution from making a real estate loan to a home builder in good standing that is secured by a viable project, unless there is a legitimate supervisory or accounting reason to do so.
Prohibition on compelling lenders to call loans in good standing—
Home builders in good standing— The appropriate Federal banking agency shall not compel a financial institution to call a real estate loan of a home builder that is in good standing.
Workout activities—
In general— In any case in which a home builder is in good standing on a real estate loan, but the collateral of the home builder with respect to that loan has decreased in value, based on a projected valuation of a project as completed, the appropriate Federal banking agency shall permit a financial institution to engage in workout activities with the home builder to improve the prospects for repayment of principal and interest in a manner that is consistent with safe and sound banking principles and the need for credit for home building.
Period of workout activities— Workout activities authorized under clause (i) may be undertaken during the 24-month period following the date of issuance of final guidance or regulations under subsection (c).
Effects— No real estate loan may be required to be charged off during the period established in clause (ii) until the appropriate Federal banking agency has determined that—
the financial institution holding such loan has worked in good faith to consider reasonable workout activities and has adequately provided for any impairment in such loan; or
the financial institution has not considered reasonable workout activities in a timely manner.
Reclassification of loans— The appropriate Federal banking agency shall not require a financial institution to reclassify any real estate loan to a homebuilder in good standing on the balance sheet of such institution, unless there is a legitimate supervisory or accounting reason to do so.
No Waiting period— If the provisions of paragraph (2) help to improve the CAMEL composite rating of a financial institution under the Uniform Financial Institutions Rating System from 3, 4, or 5 to 1 or 2 in the next occurring examination of the financial institution that begins after the date on which final guidance or regulations are issued pursuant to subsection (c), such improved rating shall take effect immediately after the date on which such rating was received.
Coordination, consistency, and comparability— Each Federal banking agency shall consult and coordinate with the other Federal banking agencies for the purpose of assuring, to the extent possible, that the guidance or regulations by each of the agencies and authorities are consistent and comparable with those prescribed by the other agencies and authorities.
Deadline— Each Federal banking agency shall issue final guidance or regulations to implement this Act not later than the earlier of—
6 months after the date of enactment of this Act; or
3 months after the guidance or regulations are proposed.
Agency authority— The guidance and regulations issued under this Act shall be enforced by the appropriate Federal banking agencies.
Effect on State law— The guidance and regulations issued under this Act shall not supersede the law of any State, except to the extent that the State law is inconsistent with the guidance and regulations, and then only to the extent of the inconsistency.
Sec. 4 Definitions
In this Act, the following definitions shall apply:
Appropriate Federal banking agency; federal banking agency— The terms appropriate Federal banking agency and Federal banking agency have the same meanings as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
Financial institution— The term financial institution means an entity regulated by, and under the supervision of, any Federal banking agency.
Good standing— The term good standing means the borrower has made all payments on a real estate loan and any other extensions of credit to the borrower or any affiliated entities in accordance with the agreements for the loans.
Real estate loan— The term real estate loan means any indebtedness secured by a mortgage, deed of trust, or other equivalent consensual security interest on real property, for—
land acquisition for residential construction projects;
land development for residential construction projects; or
residential construction projects.
Total capital— The term total capital means the total risk-based capital of a financial institution as reported periodically by the financial institution in the Call Report or Thrift Financial Reports of the Federal Financial Institutions Examination Council, as applicable.
Viable project— The term viable project means a real estate project that continues to have a reasonable prospect of reaching completion and sale within a reasonable timeframe, and at a market price that provides for the orderly and timely repayment of the real estate loan.
Workout activities— The term workout activities means techniques to prevent default on a real estate loan, including a renewal or extension of loan terms, extension of additional credit, restructuring, loan write downs, or flexibility on using reappraisal methods that still provide credible value conclusions.
Qualified financial institution— The term qualified financial institution means a financial institution that received, in the most recent examination of the institution, a CAMEL composite rating of 1 or 2 under the Uniform Financial Institutions Rating System.