Local Banks Eschew HVCRE Regulations


Jonathan Lee: “The competitive advantage of the more local banks is that we know from the beginning what their cost of capital is going to be.”

LOS ANGELES—In January, new high volatility commercial real estate legislation came into effect, which has been a challenge for lenders and borrowers across the country who have been struggling to understand and apply the new regulations. Adding more confusion, some local and regional banks haven’t been complying with the regulations. Jonathan Lee, a principal at George Smith Partners, has run into this issue on a few of the construction loans that he has secured on behalf of his clients. We sat down with Lee for an exclusive interview to find out about this issue. Here is what he tells us:

GlobeSt.com: For the unfamiliar, tell us a little bit about the new HVCRE legislation that came into effect in January.

Jonathan Lee: HVCRE came out of Basel III. It is a new banking regulation that is meant to slow down speculative loans done by banks from the past cycle. It passed in 2013, but it went into full effect in January of this year…

Local Banks Eschew HVCRE Regulations

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