Alert August 27, 2013

OCC Issues Updated Guidance on Commercial Real Estate Lending

The OCC issued a “Commercial Real Estate Lending” booklet (the “Booklet”) that is part of the Comptroller’s Handbook and that updates the OCC’s guidance for bank examiners and bankers and replaces its 1995 booklet entitled “Commercial Real Estate and Construction Lending.”  The Booklet’s updated guidance includes revised or new discussions concerning supervisory expectations and regulatory requirements for prudent loan workouts, management of concentrations, stress testing, interagency appraisal guidelines, and statutory and regulatory developments in environmental risk management.  The Booklet also provides expanded guidance for acquisition, development and construction lending.  The OCC stated that other new or expanded discussions contained in the Booklet address “supervisory loan-to-value, project feasibility, investor-owned residential real estate, amortization, debt yield, owner-occupied real estate, environmental risk management, and underwriting considerations for various property types.”  The Booklet provides an internal control questionnaire and verification procedures for bank examiners and an appendix with a useful list of OCC guidance on commercial real estate lending and related topics.