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Triple Play: The potential relaxation of high-volatility commercial real estate banking standards

Triple Play is a weekly NJBIZ feature that asks top executives in New Jersey to talk about three things related to their industry.

Mark M. Scott is the president of Commercial Mortgage Capital.

We asked Mark for three reasons a potential relaxation of high-volatility commercial real estate banking standards will help the housing industry.

HVCRE banking standards may be on the way to becoming relaxed. The Basel III rule requires developers (borrowers) to invest 15 percent of a project’s completed value in actual cash equity into construction projects, no longer allowing them to contribute land at current value as a portion or as all of their equity investment.

The Mortgage Bankers Association recently submitted a recommendation to Congress, looking to allow developers to contribute ‘appreciated land’ as part or all of their equity contribution. The recommendation has come out of committee with no changes. It is on its way to the full Congress for approval.

A change in this law would be great news for developers in the region, where property development approvals can take 10 months to 10 years, or even longer. Developers will now be able to realize the value added by working these assets into developable approved sites.

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