Commercial Real Estate Lending

Laws and Regulations

Key laws and regulations that pertain to FDIC-supervised institutions; note that other laws and regulations also may apply.

• Appendix A to Part 364 — Interagency Guidelines Establishing Standards for Safety and Soundness provides operational and managerial standards for safety and soundness to include asset quality and asset growth
• Part 365 — Real Estate Lending Standards provides standards for real estate lending and addresses the adoption and maintenance of written policies for extensions of credit that are secured by real estate, or that are made for the purpose of financing permanent improvements to real estate
• Part 323 — Appraisals discusses requirements for a written appraisal for certain real estate-related transactions
• Section 337.2 — Standby Letters of Credit discusses the calculation of legal lending limitations, including loans to any one borrower, loans to affiliates of the bank, or aggregate loans
• Section 337.3 and Federal Reserve Board Regulation O address extensions of credit from an institution to its executive officers, directors, and principal shareholders
• Part 347 — International Banking discusses requirements for institutions to engage in foreign financial activities
• Federal Reserve Board Regulation W restricts certain transactions between banks and their affiliates

Supervisory Resources

Frequently asked questions, advisories, statements of policy, and other information issued by the FDIC alone, or on an interagency basis, provided to promote safe-and-sound operations.

• Risk Management Manual of Examination Policies
  • Section 3.1 — Asset Quality describes areas of consideration for assigning the asset quality rating and defines each rating
  • Section 3.2 — Loans describes the review process for evaluating lending policies and credit administration practices, as well as their effectiveness to maintain loan quality and minimize loss
  • Section 3.8 — Off-balance Sheet Activities describes the review process for items such as loan commitments, letters of credit, and revolving facilities
• Statement on Prudent Risk Management for Commercial Real Estate Lending discusses the importance of maintaining underwriting discipline and credit administration practices to identify, measure, monitor, and manage risks
• Interagency Advisory on Use of Evaluations in Real Estate-Related Financial Transactions responds to questions regarding the use of an evaluation instead of an appraisal for estimating the market value of real property collateral
• FDIC Advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations discusses the importance of underwriting and administering loan purchases and participations as if they were being directly originated by the purchasing institution
• Policy Statement on Prudent Commercial Real Estate Loan Workouts addresses supervisory evaluations of institutions’ efforts to renew or restructure loans to creditworthy borrowers that may be experiencing diminished operating cash flows, depreciated collateral values, or prolonged sales and rental absorption
• Managing Commercial Real Estate Concentrations in a Challenging Environment emphasizes the importance of strong capital, loan loss allowance levels, and robust credit risk management practices
• Concentrations in Commercial Real Estate Lending promotes sound risk management practices and appropriate capital levels to pursue lending in a safe and sound manner
• Managing Risks Associated with Acquisition, Development, and Construction Lending discusses information outlined in Part 365 — Real Estate Lending Standards
• Working with Borrowers
  • Joint Statement on Additional Loan Accommodations Related to COVID-19 provides risk management and consumer protection principles to consider while working with borrowers for loans nearing the end of initial accommodation periods
  • Revised Interagency Statement on Loan Modifications by Financial Institutions Working with Customers Affected by the Coronavirus encourages the activity and provides supervisory views on regulatory reporting of past due and nonaccrual loans, and troubled debt restructurings
  • Frequently Asked Questions on Coronavirus Impact address a variety of issues that may arise as financial institutions work with customers and communities
  • Responsible Small-Dollar Lending to Consumers and Small Businesses in Response to COVID-19 encourages financial institutions to offer small-dollar loans in a manner that provides fair treatment of consumers and is consistent with safe and sound practices
  • Interagency Statement on Meeting the Needs of Creditworthy Borrowers provides a supervisory perspective on providing credit to businesses, consumers, and other creditworthy borrowers
  • Guidance Addressing Certain Issues Related to Troubled Debt Restructurings provides insight into the accounting treatment and regulatory credit risk grade or classification of commercial and residential real estate loans that have undergone troubled debt restructurings
  • Interagency Policy Statement on Documentation for Loans to Small- and Medium-Sized Businesses and Farms outlines steps taken to correct potential misunderstanding of regulatory requirements for lending to creditworthy small- and medium-sized businesses and farms
• Community Reinvestment Act (CRA) Resources

Other Resources

Supplemental information related to safe-and-sound banking operations.

• FDIC's Supervisory Insights — Fall 2019 article, “Commercial Real Estate Loan Concentration Risk Management”
• FDIC's Supervisory Insights — Winter 2011 article, “Navigating the Real Estate Valuation Process”