Can someone refresh my memory regarding why banks would want to get out of the land loan business? Is it part of Reg Z and more regulatory carp?

Thanks in advance!

It's not a Reg Z thing to my knowledge.

The agencies issued guidance in December 2006 advising banks that if they exceeded certain concentration thresholds for commercial real estate, they would be expected to maintain stronger CRE risk management systems and would be subject to enhanced regulatory oversight (thresholds were construction, land development, and other land loans at 100% or more of total capital; and total non-owner occupied CRE at 300% or more of total capital).

Many banks vastly exceeded these thresholds and yet did not maintain proper risk management systems. Following the subprime mortgage meltdown, real estate values (land in particular) have taken a big hit and huge losses have followed - resulting in the failure of many banks. Surviving banks are being pressured by regulators to get below these thresholds, which are now being treated by the regulators more like strict limits.