Commercial Real Estate Lending - Issue Summary
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| What is the fundamental issue? |
| Regulators are revisiting the federal risk management guidelines that govern the commercial real estate lending practices of financial institutions. These efforts could potentially limit the flow of capital to commercial real estate. |
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| I'm a Realtor®. What does this mean to my business? |
| The financial regulators are revising their risk management guidance to banks on commercial real estate lending. NAR is concerned that if the financial regulators take a heavy handed approach, banks may choose not to make otherwise sound commercial real estate loans, thereby impacting the health of many regional commercial real estate markets. |
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| NAR Policy: |
| NAR supports protecting and enhancing the flow of capital to commercial real estate. |
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| Legislative/Regulatory Status/Outlook: |
| The final guidance came out in December 2006. The guidance did make some modifications in line with NAR's recommendations, such as accounting for the diversity of commercial real estate classes (industrial, office, hotel etc.) and the differing performance characteristics of different local markets. However, combined with the treatment of commercial real estate under the Basel 1A accords, NAR remains concerned that both regulatory initiatives may have a chilling effect on commercial real estate lending by smaller banks. It is likely that scrutiny of this guidance will be included in any oversight hearings Congress may conduct on the Basel Accords. |
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