A loan does not automatically qualify for an exemption from the HVCRE rules when it is made to acquire, develop or construct property in a low or moderate income census tract. However, the loan may be eligible for an exemption if it qualifies as an investment in community development under the Community Reinvestment Act or related provisions (but note that this exemption does not automatically apply to SBA loans). 

For resources related to our guidance, please see:

• The FDIC released its interim final rule on the risk-weight requirements on September 10, 2013. The final capital rule modifies the calculation of risk weights applicable to commercial real estate loans held by all banking organizations. The final rule assigns a higher risk weight of 150% to any High Volatility Commercial Real Estate (HVCRE) exposure. 12 CFR 324.32(j).

• FDIC Capital Rules [identical to the FRB and OCC versions], 12 CFR 324.2 (Exemption from the HVCRE definition for loans financing the acquisition, development or construction of “(2) Real property that: (i) Would qualify as an investment in community development . . . .”)

• Final Rule, FDIC Capital Rules, 78 Fed. Reg. 55339, 55407 (A loan is exempt from the HVCRE definition if it “provides affordable housing (including multi-family rental housing) for low to moderate income individuals; is used in the provision of community services for low to moderate income individuals; or revitalizes or stabilizes low to moderate income geographies, designated disaster areas, or underserved areas specifically determined by the federal banking agencies based on the needs of low- and moderate-income individuals in those areas.”)

• FDIC HVCRE FAQs (“10. Are Small Business Administration (SBA) 504 loans considered community development loans under the definition of HVCRE and, therefore, not subject to the HVCRE treatment? SBA 504 loans are used for fixed assets (for example, the purchase of land and buildings, site and building improvements, newly constructed facilities, and long-term machinery and equipment) as well as to refinance existing debt and are not automatically excluded from the definition of HVCRE. SBA 504 loans that meet the criteria in paragraphs (2)(i) and (2)(ii) under the HVCRE definition are exempt from treatment as an HVCRE exposure. SBA 504 loans that are not community development investments may be exempt from the HVCRE treatment if the loan satisfies the other exemption criteria in the definition of HVCRE.”)