It is not focused on commercial loans for which a bank looks to a business’s cash flow as the source of repayment and accepts real estate collateral as a secondary source of repayment.
That is, the proposed guidance addresses bank loans for commercial real estate projects in which repayment is dependent on third-party rental income or on the sale, refinancing, or permanent financing of the property. These are “true” commercial real estate loans in that repayment depends on the condition and performance of the real estate market.