HVCRE (High Volatility Commercial Real Estate) is a federal banking regulation that requires banks to hold 150% risk-weight against qualifying construction loans, instead of the normal 100%. An ADC loan is outside HVCRE if LTV is within the supervisory maximum and, before funding, the borrower has contributed capital of at least 15% of as-completed appraised value and that capital stays in until the bank reclassifies the loan. Eligible capital is cash, unencumbered readily marketable assets, out-of-pocket development expenses, or contributed real property at its appraised value. Affects pricing, availability, and structure.
What loans are HVCRE?
Acquisition, development, or construction (ADC) loans on commercial real estate. The classification dates from Basel III implementation and was modified by the HVCRE-ADC framework to give banks a clearer compliance path. An ADC loan is outside HVCRE if LTV is within the supervisory maximum and, before funding, the borrower has contributed capital of at least 15% of as-completed appraised value and that capital stays in until the bank reclassifies the loan. Eligible capital is cash, unencumbered readily marketable assets, out-of-pocket development expenses, or contributed real property at its appraised value.
Practical implications for the borrower
Ground-up multifamily is HVCRE only if it misses that exemption. Substantial rehab and value-add construction can qualify either way depending on structure. Get the bank's HVCRE determination in writing before closing, the classification often surprises borrowers late in the process.
Sources
- Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) · Board of Governors of the Federal Reserve System · 2026-Q1
- Quarterly Banking Profile · Federal Deposit Insurance Corporation · 2026-Q1