text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Home Construction Lending Regulatory 
  Improvement Act of 2011''.
  
  SEC. 2. PURPOSE.
  
      It is the purpose of this Act to--
              (1) immediately provide authority and guidance that Federal 
          and State bank regulators can use to ensure that Federal and 
          State chartered banks and thrifts that provide financing to 
          America's home builders are permitted to make loans, provide 
          ongoing liquidity, and ensure stable financing to such home 
          builders; and
              (2) enable Federal and State chartered banks and thrifts to 
          provide initial and ongoing credit to America's home builders 
          to aid in restoring liquidity to the home building sector and 
          to restore vitality to the United States residential housing 
          market.
  
  SEC. 3. COORDINATED RULEMAKING.
  
      (a) Initiation of Proceedings.--Not later than 90 days after the 
  enactment of this Act, the appropriate Federal banking agencies shall 
  initiate a coordinated rulemaking with respect to financial 
  institutions under their respective jurisdictions that make real estate 
  loans to home builders. Such rulemaking shall provide for the 
  following:
              (1) Elimination of the 100 percent of bank capital 
          measurement.--
                      (A) Loan origination.--If any qualified financial 
                  institution is holding real estate loans in its lending 
                  portfolio that in the aggregate represent 100 percent 
                  or more of its total capital, the appropriate Federal 
                  banking agency shall not prohibit any such institution 
                  from continuing to make such loans to home builders.
                      (B) Lending decisions.--The appropriate Federal 
                  banking agency shall not prevent a qualified financial 
                  institution from making a real estate loan to a home 
                  builder that has a viable project.
                      (C) Qualified financial institution defined.--For 
                  purposes of this paragraph, the term ``qualified 
                  financial institution'' means a financial institution 
                  that received, in the most recent examination of the 
                  institution, a CAMEL composite rating of 1, 2, or 3 
                  under the Uniform Financial Institutions Rating System.
              (2) Realistic market based appraisals.--
                      (A) Valuation standard.--The appropriate Federal 
                  banking agency shall require that entities used by 
                  financial institutions to assess the value of 
                  collateral, with respect to a real estate loan, 
                  associated with any viable project in such 
                  institution's lending portfolio utilize an as completed 
                  valuation to make such an assessment.
                      (B) Arms length transactions.--The appropriate 
                  Federal banking agency shall require that entities used 
                  by financial institutions to assess or review 
                  underwriting standards and collateral values for real 
                  estate loans made by such institutions after the date 
                  of the enactment of this Act use comparable sales 
                  involving arms length transactions to make such an 
                  assessment or review.
              (3) Prohibition on compelling lenders to call or curtail 
          loans in good standing.--
                      (A) Home builders in good standing.--The 
                  appropriate Federal banking agency shall not compel a 
                  financial institution to call or curtail a real estate 
                  loan of a home builder that is in good standing.
                      (B) Maximum market valuation.--
                              (i) In general.--The appropriate Federal 
                          banking agency shall, in the case that a home 
                          builder is in good standing on a real estate 
                          loan but the home builder's collateral, with 
                          respect to that loan, has decreased in value 
                          based on an as completed valuation, permit a 
                          financial institution to work with such home 
                          builder to realize the maximum current market 
                          valuation of such collateral using workout 
                          methods or other appropriate means.
                              (ii) Period of workout methods.--Workout 
                          methods may be utilized up to a 24-month period 
                          following the issuance of final regulations 
                          under subsection (c). In no case shall any real 
                          estate loan be required to be charged off until 
                          the financial institution holding such loan has 
                          worked in good faith to exhaust all workout 
                          methods or other appropriate means.
                      (C) Reclassification of loans.--The appropriate 
                  Federal banking agency shall not require a financial 
                  institution to reclassify any real estate loan in this 
                  paragraph on such institution's balance sheet, unless 
                  there is a significant reason under Financial 
                  Accounting Standards Board Accounting Standards 
                  Codification 310-10-35-55 or 310-10-35-57.
              (4) Waiting period.--If the enactment of paragraphs 2 or 3 
          of this subsection helps to improve a financial institution's 
          CAMEL composite rating under the Uniform Financial Institutions 
          Rating System from a 4 or 5 to a 1, 2, or 3 in such 
          institution's next examination that begins after the date that 
          final regulations are issued pursuant to subsection (c), such 
          institution's improved rating shall take effect no earlier than 
          24 months after such rating was received.
      (b) Coordination, Consistency, and Comparability.--Each of the 
  agencies with authorities referred to in subsection (a) shall consult 
  and coordinate with the other such agencies and authorities for the 
  purpose of assuring, to the extent possible, that the regulations by 
  each such agency and authority are consistent and comparable with those 
  prescribed by the other such agencies and authorities.
      (c) Deadline.--Not later than 6 months after the enactment of this 
  Act, each of the agencies with authorities referred to in subsection 
  (a) shall issue final regulations to implement rules issued under this 
  Act.
      (d) Agency Authority.--The rules issued under this Act shall be 
  enforced by the appropriate Federal banking agencies with respect to 
  financial institutions under their respective jurisdictions.
      (e) Effect on State Law.--The rules issued under this Act shall not 
  supercede the law of any State except to the extent that such law is 
  inconsistent with such rule, and then only to the extent of the 
  inconsistency.
  
  SEC. 4. DEFINITIONS.
  
      In this Act:
              (1) Appropriate federal banking agency.--The term 
          ``appropriate Federal banking agency'' has the same meaning as 
          is given such term in section 3(q) of the Federal Deposit 
          Insurance Act (12 U.S.C. 1813(q)).
              (2) Arms length transaction.--
                      (A) In general.--The term ``arms length 
                  transaction'' means a negotiated real estate 
                  transaction between a buyer and seller in which such 
                  buyer and seller act independently of each other.
                      (B) Transactions excluded.--Such term shall not 
                  include any transaction involving a short sale or 
                  foreclosed property or any other distressed real 
                  property.
              (3) As completed valuation.--The term ``as completed 
          valuation'' means the estimated market value of collateral 
          after the full completion and absorption of the development and 
          construction associated with the highest and best use of the 
          collateral.
              (4) Financial institution.--The term ``financial 
          institution'' means an entity regulated by, and under the 
          supervision of, any appropriate Federal banking agency.
              (5) Good standing.--The term ``good standing'' means making 
          payments on a real estate loan in accordance with the agreement 
          of such loan.
              (6) Real estate loan.--The term ``real estate loan'' means 
          any indebtness (secured by a mortgage, deed of trust, or other 
          equivalent consensual security interest on real property) 
          acquired for the purpose of purchasing or improving real 
          property, including indebtness acquired for--
                      (A) land acquisition;
                      (B) land development; and
                      (C) residential construction projects.
              (7) Total capital.--The term ``total capital'' means the 
          total risk-based capital of a financial institution as reported 
          periodically by such institution in the Federal Financial 
          Institutions Examination Council's Call Report or Thrift 
          Financial Reports, as applicable.
              (8) Viable project.--The term ``viable project'' means a 
          real estate project that a financial institution has determined 
          continues to have a reasonable prospect of reaching completion 
          and sale.
              (9) Workout methods.--The term ``workout methods'' means 
          techniques to prevent a real estate loan defaulting, including 
          workout assistance, loan modifications, loan write downs, and 
          flexibility on reappraisal methods.
target: Home Construction Lending Regulatory Improvement Act of 2011 - Directs the appropriate federal banking agencies to initiate a coordinated rulemaking with respect to financial institutions under their respective jurisdictions that make real estate loans to home builders.
  
  Requires such rulemaking to provide for: (1) elimination of the 100% of bank capital measurement, (2) realistic market-based appraisals, and (3) a prohibition against compelling lenders to call or curtail loans in good standing.
  
  Prohibits a federal banking agency also from preventing a qualified financial institution from making a real estate loan to a home builder that has a viable project.
feat_title: To enable Federal and State chartered banks and thrifts to meet the credit needs of the Nation's home builders, and to provide liquidity and ensure stable credit for meeting the Nation's need for new homes.