Short title

This Act may be cited as the

Investment in Commercial Real Estate Act of 2010

Servicer safe harbor

(a)

Safe Harbor

(1)

Loan modifications and workout plans

Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer shall not be liable for entering into a loan modification or workout plan with respect to any commercial mortgage loan that meets all of the criteria set forth in paragraph (2)(B) to— (A)any person, based on that person’s ownership of a commercial mortgage loan or any interest in a pool of commercial mortgage loans or in securities that distribute payments out of the principal, interest and other payments in loans on the pool; (B)any person who is obligated to make payments determined in reference to any loan or any interest referred to in subparagraph (A); or (C)any person that insures any loan or any interest referred to in subparagraph (A) under any law or regulation of the United States or any law or regulation of any State or political subdivision of any State. (2)

Ability to modify mortgages

(A)

Ability

Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer— (i)shall not be limited in the ability to modify mortgages, the number of mortgages that can be modified, the frequency of loan modifications, or the range of permissible modifications; and (ii)shall not be obligated to repurchase loans from or otherwise make payments to the securitization vehicle on account of a modification, workout, or other loss mitigation plan for a commercial mortgage or a class of commercial mortgages that constitute a part or all of the mortgages in the securitization vehicle,

if any mortgage so modified meets all of the criteria set forth in subparagraph (B).

(B)

Criteria

The criteria under this subparagraph with respect to a mortgage are as follows: (i)Default on the payment of such mortgage has occurred or is reasonably foreseeable. (ii)The property securing such mortgage is occupied by the mortgagor of such mortgage. (iii)The servicer reasonably and in good faith believes that the anticipated recovery on the principal outstanding obligation of the mortgage under the particular modification or workout plan or other loss mitigation action will exceed, on a net present value basis, the anticipated recovery on the principal outstanding obligation of the mortgage to be realized through foreclosure. (3)

Applicability

This subsection shall apply only with respect to modifications, workouts, and other loss mitigation plans initiated before January 1, 2012. (b)

Definition of securitization vehicles

For purposes of this section, the term securitization vehicle means a trust, corporation, partnership, limited liability entity, special purpose entity, or other structure that— (1)is the issuer, or is created by the issuer, of mortgage pass-through certificates, participation certificates, mortgage-backed securities, or other similar securities backed by a pool of assets that includes commercial mortgage loans; and (2)holds such mortgages.

Recovery period for residential rental property and nonresidential real property

(a)

In general

The table in subsection (c) of section 168 of the Internal Revenue Code of 1986 (specifying applicable recovery period) is amended— (1)by striking 27.5 years and inserting 20 years, and (2)by striking 39 years and inserting 20 years. (b)

Depreciation rules for residential rental property and non-residential real property for purposes of earnings and profits

Paragraph (3) of section 312(k) of the Internal Revenue Code of 1986 (relating to exception for tangible property) is amended by adding at the end the following new subparagraph:

(C)

Treatment of residential rental property and nonresidential real property

In the case of any residential rental property or nonresidential real property (within the meaning of section 168(c)), the adjustment to earnings and profits for depreciation for any taxable year shall be determined under the alternative depreciation method (within the meaning of section 168(g)(2)), except that the recovery period shall be 20 years.

(c)

Conforming amendment

Subparagraph (A) of section 312(k)(3) of the Internal Revenue Code of 1986 is amended by striking ‘‘subparagraph (B),’’ and inserting ‘‘subparagraphs (B) and (C),’’. (d)

Effective date

The amendments made by subsection (a) shall apply to property placed in service on or after the date of the enactment of this Act.

Net operating loss carryback increased to 5 years

(a)

In general

Clause (i) of section 172(b)(1)(A) of the Internal Revenue Code of 1986 (relating to years to which loss may be carried) is amended by striking 2 years and inserting 5 years. (b)

Alternative minimum tax

Subclause (II) of section 56(d)(1)(A)(i) of such Code is amended by striking 90 percent of . (c)

Conforming amendments

(1)Section 172(b)(1) of such Code is amended by striking subparagraphs (F), (G), (H), (I), and (J). (2)Section 56(d)(1)(A) of such Code is amended— (A)in clause (i)(I) thereof by striking (other than the deduction described in clause (ii)(I)), and (B)by amending clause (ii) to read as follows:

(ii)alternative minimum taxable income determined without regard to such deduction and the deduction under section 199 reduced by the amount determined under clause (i),

(3)Section 56(d) of such Code is amended by striking paragraph (3). (d)

Effective date

The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

Dynamic provisioning of investment and loan loss reserves

(a)

Implementation requirement

The Federal banking agencies shall implement a system of dynamic provisioning for investment and loan loss reserves (hereafter in this section referred to as the dynamic reserve system) that meets the requirements of this section and is applicable to all depository institutions before January 1, 2011. (b)

Total provisioning

For each depository institution during any accounting period, the total provision for investment and loan loss reserves shall equal the sum of— (1)the general provision for investment and loan loss reserves, as determined under subsection (c); and (2)the specific provision for investment and loan loss reserves, as determined under subsection (d). (c)

General provision

(1)

Categories

The Board of Governors of the Federal Reserve System shall establish major categories of loans and investment to be used by depository institutions for purposes of the dynamic reserve system. (2)

Publication of average historical specific losses and write-downs

(A)

In general

For each major category established pursuant to paragraph (1), the Board shall calculate and publish the average historical specific losses and write-downs as a percentage of total loans and investments over a period determined by the Board. (B)

Limits on period

The period determined by the Board under subparagraph (A) may not be less than 10 years and shall include at least 1 full business cycle. (3)

Minimum percentage

For each major category established pursuant to paragraph (1), the Board shall establish a minimum percentage that shall be the larger of— (A)the average historical specific losses and write-downs, in such category, as a percentage of total loans and investments, in such category, of all United States depository institutions over the period determined by the Board; or (B)a percentage determined by the Board. (4)

Provision

(A)

In general

During each accounting period, each depository institution shall make a general provision to the investment and loan loss reserves of the institution for each major category established pursuant to paragraph (1). (B)

Measure of provision

The general provision to the investment and loan loss reserves of a depository institution under subparagraph (A) for each major category shall consist of the sum of— (i)the product of— (I)the total amount of the loans and investment in such category in such depository institution at the beginning of the accounting period; and (II)the average historical specific credit losses and write-downs in such category as a percentage of total loans and investments in such category of all depository institutions over the period determined by the Board minus the amount of any specific provisions made by such depository institution during such accounting period with respect to such category; and (ii)the product of— (I)the difference between the total amount of the loans and investment in such category in such depository institution at the end of the accounting period and the total amount of the loans and investment in such category in such depository institution at the beginning of the accounting period; and (II)the minimum percentage determined by the Board under paragraph (3) for such category. (d)

Specific provisions for general categories of investments and loans

(1)

Establishment of categories

The Board shall establish the general categories of investments and loans for all depository institutions. (2)

Calculation of historical specific provisions and average among of credit losses

The Board shall calculate, publish and make available to the public— (A)the average historical specific provisions for each category of investment and loans in all depository institutions over a period of such number of years as the Board may determine to be appropriate, subject to paragraph (3); and (B)the average historical amount of credit losses and write-downs for each major category of investment and loans in all depository institutions over a period of such number of years as the Board may determine to be appropriate, subject to paragraph (3). (3)

Period of years shall encompass business cycle

The period of years determined under subparagraphs (A) and (B) of paragraph (2) shall be of such duration as to at least comprise a complete business cycle. (e)

Other requirements and authority

The Board may establish a cap on the accumulation of general provision for investment and loan losses at any depository institution expressed as percent of total investment and loans at such depository institution. (f)

Basel accord supersedes this section

If the Basel Committee on Banking Supervision agrees upon an alternative method for dynamic provisioning before December 31, 2010, the Board may implement such an agreement in lieu of implementing the requirements of subsections (c) and (d). (g)

Definitions

For purposes of this section, the following definitions shall apply: (1)

Board

The term Board means the Board of Governors of the Federal Reserve System. (2)

Other banking definitions

The terms depository institution and Federal banking agencies have the same meaning as in section 3 of the Federal Deposit Insurance Act.

Report to the Congress on non-renewals of commercial mortgage loans

(a)

In general

Each qualified financial institution shall, before the end of the 30-day period beginning at the end of each calendar quarter beginning after the date of the enactment of this Act, submit to the Board with respect to such calendar quarter the aggregate amount of permanent commercial mortgage loans that— (1)matured during the quarter, but did not fully amortize; (2)were current prior to maturity; (3)had adequate cash flows from the mortgaged properties to continue paying interest and principal payments in a timely manner if such loans were renewed on substantially the same terms and conditions; and (4)as a result of a suggestion or urging of, or a requirement by, a Federal regulator that the institution reduce its exposure to commercial mortgage loans or the determination by the institution to require a reduction in the loan-to-value ratio upon any renewal of such loans, either— (A)were not renewed at maturity under substantially the same terms and conditions; or (B)were renewed at a lower principal balance. (b)

Publication of report

(1)

In general

Not later than 60 days after the end of each calendar quarter for which information is submitted pursuant to subsection (a), the Board shall publish a report of the— (A)the total amount of all permanent commercial mortgage loans described in subsection (a) reported to the Board under such subsection with respect to such quarter; and (B)the ratio, expressed as a percentage, which such loans in each of the following categories bear to the average permanent amount of all commercial mortgage loans outstanding in each such category: (i)The United States as a whole. (ii)Each State (as defined in section 3 of the Federal Deposit Insurance Act). (iii)Each type of qualified financial institution. (iv)Each depository institution holding company (as determined on a consolidated basis). (v)Each qualified financial institution that is not controlled by or under common control with a depository institution holding company. (2)

Report to the Congress

Each report published under paragraph (1) shall be submitted by the Board to the Committee on Financial Services of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Joint Economic Committee of the Congress by the time of such publication. (3)

Public availability

Each report published under paragraph (1) shall be publicly available on the website maintained by the Board. (c)

Definitions

For purposes of this section, the following definitions shall apply: (1)

Incorporated definitions

(A)

Section 5

The terms Board and depository institution have the same meaning as in section 5. (B)

Depository institution holding company; subsidiary

The terms depository institution holding company and subsidiary have the same meanings as in section 3(w) of the Federal Deposit Insurance Act. (2)

Qualified financial institution

The term qualified financial institution means any depository institution and any subsidiary of a depository institution or a depository institution holding company that makes permanent commercial mortgage loans or holds permanent commercial mortgage loans, directly or indirectly. (3)

State

The term State has the same meaning as in section 3 of the Federal Deposit Insurance Act. (d)

Sunset

This section shall not apply after March 31, 2013.

Study about Federal regulators

(a)

In general

The Secretary of the Treasury shall conduct a study to determine— (1)whether Federal banking agencies (as defined in section 5) and the Securities and Exchange Commission may have exacerbated both— (A)the excessive expansion of commercial mortgage credit on overly generous terms that contributed to a commercial real estate price bubble between 2004 and 2007; and (B)the rapid contraction in the availability of commercial mortgage credit on reasonable terms after the commercial real estate price bubble burst through pro-cyclical evaluations of the value of collateral by appraisers, depository institutions and other financial institutions, and Federal banking agencies and the Securities and Exchange Commission; (2)whether modifications in formulation and use of appraisals by appraisers, depository institutions and other financial institutions, and Federal banking agencies and the Securities and Exchange Commission, including providing greater weight to the cash flows associated with mortgaged properties, along with any other modifications in regulatory practices by Federal banking agencies and the Securities and Exchange Commission, that the Secretary may deem appropriate would reduce this pro-cyclical bias and provide a more even flow of commercial mortgage credit on reasonable terms throughout the business cycle; and (3)what, if any, changes to— (A)Federal laws or regulations; and (B)State laws or regulations,

would be necessary to accomplish these modifications.

(b)

Submittal to the Congress

A report on the study required under subsection (a) shall be submitted by the Secretary of the Treasury to the Committee on Financial Services of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Joint Economic Committee of the Congress before the end of the 6-month period beginning on the date of the enactment of this Act.