[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 1002 Introduced in Senate (IS)]

113th CONGRESS
  1st Session
                                S. 1002

  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.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 21, 2013

  Mr. Menendez (for himself and Mr. Isakson) introduced the following 
 bill; which was read twice and referred to the Committee on Banking, 
                       Housing, and Urban Affairs

_______________________________________________________________________

                                 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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Home Building Lending Improvement 
Act of 2013''.

SEC. 2. PURPOSE.

    It is the purpose of this Act to--
            (1) 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
            (2) 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.

    (a) 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:
            (1) Adjustment of the 100 percent of bank capital 
        measurement.--
                    (A) 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.
                    (B) 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.
            (2) Prohibition on compelling lenders to call loans in good 
        standing.--
                    (A) 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.
                    (B) Workout activities.--
                            (i) 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.
                            (ii) 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).
                            (iii) 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--
                                    (I) 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
                                    (II) the financial institution has 
                                not considered reasonable workout 
                                activities in a timely manner.
                    (C) 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.
            (3) 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.
    (b) 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.
    (c) Deadline.--Each Federal banking agency shall issue final 
guidance or regulations to implement this Act not later than the 
earlier of--
            (1) 6 months after the date of enactment of this Act; or
            (2) 3 months after the guidance or regulations are 
        proposed.
    (d) Agency Authority.--The guidance and regulations issued under 
this Act shall be enforced by the appropriate Federal banking agencies.
    (e) 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:
            (1) 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).
            (2) Financial institution.--The term ``financial 
        institution'' means an entity regulated by, and under the 
        supervision of, any Federal banking agency.
            (3) 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.
            (4) 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--
                    (A) land acquisition for residential construction 
                projects;
                    (B) land development for residential construction 
                projects; or
                    (C) residential construction projects.
            (5) 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.
            (6) 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.
            (7) 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.
            (8) 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.
                                 <all>