On October 21, 2021, the FDIC Board of Directors adopted a final rule to amend the Interagency Guidelines for Real Estate Lending Policies to incorporate consideration of the capital framework established in the community bank leverage ratio (CBLR) rule into the method for calculating the ratio of loans in excess of the supervisory loan-to-value limits (LTV limits). The amendment provides a consistent approach for calculating the ratio of loans in excess of the supervisory LTV limits at all FDIC-supervised institutions without requiring the computation of total capital.
A copy of the final rule is available on the FDIC’s public website.
Statement of Applicability: This Financial Institution Letter (FIL) applies to all FDIC-supervised financial institutions.
- The Interagency Guidelines for Real Estate Lending Policies, Appendix A to Subpart A of the FDIC’s Real Estate Lending Standards Regulation (Appendix) establishes supervisory LTV criteria for various real estate lending transaction types, but also allows exceptions to the supervisory LTV limits, measured against total capital, as defined in the capital rules.
- The final rule revises the Appendix so that all FDIC-supervised institutions calculate the ratio of loans in excess of the supervisory LTV limits using tier 1 capital plus the appropriate allowance for credit losses in the denominator, regardless of an institution’s CBLR election status.
- The final rule provides a consistent approach for calculating the ratio of loans in excess of the supervisory LTV limits at all FDIC-supervised institutions, and would approximate the historical methodology for calculating the ratio of loans in excess of the supervisory LTV limits.
- The final rule was adopted without any changes from the notice of proposed rulemaking published on June 25, 2021.
- The final rule will become effective 30 days after publication in the Federal Register.
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Chief Lending Officer