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Thomas D. Kearns
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Recent Partial Rollback of Dodd Frank Should Help Developers Obtain Construction Loans

The controversial partial rollback of the Dodd Frank rules applicable to commercial lenders may help real estate developers obtain construction loans by easing tough rules on “High Volatility” (HVCRE) loans.

While criticized by some, the recent federal legislation signed into law yesterday should make it easier for real estate developers to obtain construction loans for new development projects. One prior rule was particularly criticized by the industry: the old law required that land that had appreciated in value nevertheless be counted at cost rather than the current value.  By ignoring current land value, the rule increased the equity required for “High Volatility” construction loans and made HVCRE loans harder to obtain.  Joe Forte of Sullivan and Worcester, a well-known lenders’ lawyer, summarized the changes in this article

One quote from the article: “Commercial borrowers will be able to satisfy the 15% equity requirement through the appreciated value of contributed land/property – versus the cost basis under the current rule.” 

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