CREF Highlights

Commercial and multifamily developments and activities from MBA relevant to your business and our industry.

MBA Raises Concerns about D.C.’s 90-day Deferment Law

MBA joined with regional District of Columbia, Maryland, and Virginia MBAs in a letter to Kenyan McDuffie of the Council of the District of Columbia communicating concerns with D.C.’s 90-day deferment law. Key concerns include conflicts between the D.C. law and CARES Act forbearance, and the D.C. Department of Insurance, Securities and Banking’s lack of jurisdiction over commercial and multifamily loans and over non-D.C. banks.

• Why it matters: The far-reaching D.C. law is already in effect and lenders, including commercial lenders, are already receiving requests for 90-day payment deferrals under that law.
• What’s next: The City Council is expected to consider amendments to the law next week. MBA will continue to press for modifications to the law and for necessary clarifying guidance from DISB.

For more information, contact Kobie Pruitt at (202) 557-2870 or Bruce Oliver at (202) 557-2840.

2. MBA Initiates Actions to Address Life Company RBC Modification Period, and NOI and Valuations for 2020

Last week, MBA followed up on its successful efforts to get appropriate COVID-19 risk-based capital (RBC) and accounting guidance from the National Association of Insurance Commissioners (NAIC) to give life companies flexibility to work with borrowers and make prudent modifications.

Request for extension of modification period. MBA is circulating with other trade associations a draft request for an extension of the modification period under current RBC Guidance, which applies only through June 30, 2020. NAIC staff and leadership are expecting the letter, which ask for the modification period to be conformed with the CARES Act (i.e., the period of national emergency plus 60 days, not to extend beyond December 31, 2020).

Request to address 2020 NOI and valuations issues. Separately, MBA has begun working with NAIC staff and leadership of the key NAIC working group to get relief and guidance on reporting net operating income (NOI) and valuation across all commercial mortgage loans for 2020, including those where borrowers have not sought relief. The request for this relief and guidance was previously presented to NAIC in an April 10 joint trades letter to NAIC, and in April 22 Q&As. We expect to formalize a request for consideration in working group call in June.

• Why it matters: Life companies need the flexibility to make prudent modifications and relief from unintended adverse accounting and RBC impacts of the current, unprecedented circumstances.
• What’s next: Working with the American Council of Life Insurers (ACLI) and other trades, and with MBA’s Life RBC Working Group, MBA will submit a request for an extension early next week and will submit a formal submission to the NAIC working group. We expect both requests to be considered in June.

For more information, please contract Bruce Oliver at (202) 557-2840.

3. MBA Urges Bank Agencies to Clarify that Interagency Statement on TDR Applies to Warehouse Lending for Nonbank Lenders

On Friday MBA joined with other trades in a letter urging the Federal Reserve, Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) to clarify that, in addition to traditional loan products, lending and financing arrangements, such as warehouse lines and repurchase agreements secured by multifamily and commercial real estate loans and commercial mortgage-related securities, are within the scope of the guidance in the agencies’ Interagency Statement on TDR.

• Why it matters: The liquidity provided to NBLs via warehouse lines and repurchase agreements allows NBLs to, in turn, extend debt capital to the commercial and multifamily marketplace, which represents a vital component of the U.S. economy, responsible for some $1.14 trillion in commercial real estate development and operations or 18.1% of GDP.
• What’s next: MBA will continue to identify areas where existing standards need to be clarified or modified to help CREF members prudently work with all borrowers to address COVID-19 impacts.

For more information, please contact Bruce Oliver at (202) 557-2840.

4. House Introduces Next Round of COVID-19 Relief Legislation

House Democrats, led by Speaker Nancy Pelosi (D-CA), introduced a $3 trillion pandemic relief bill last Tuesday. The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800) is the fifth in a series of legislative proposals related to the economic fallout from the pandemic in the past two months. The bill calls for approximately $1 trillion in funding for states and localities along with another round of direct payment to Americans impacted by the global pandemic, extension of unemployment insurance increases, funding for hospitals and virus testing, and a rollback of the State and Local Tax (SALT) cap, among many other items.

• Why it matters: The legislation includes a series of housing provisions including $100 billion for rental assistance, $75 billion for broad housing assistance in the form of mortgage vouchers through state HFAs, the establishment of a liquidity facility for mortgage servicers, expansion of single-family and multifamily forbearance coverage, and eviction moratorium to include non-government-backed loans, an extension of the so-called GSE Patch through June 2022, and liability safe harbor for servicers of securitized mortgages offering forbearance related to this legislation.
• What’s next: While observing social distancing guidelines, the full House is expected to vote on the $3 trillion proposal today. It is expected to pass along fairly rigid party lines. Looking beyond this week, the prospects of this House proposal advancing in total are virtually nonexistent in the Republican-controlled Senate, but it will set a baseline for negotiations between a divided Congress and the administration over the next few weeks. MBA sent a letter outlining our industry’s legislative priorities and key areas of concern to both the House and Senate leadership on Thursday.

For more information, please contact Ernie Jolly at (202) 557-2741 or Dan Grattan at (202) 557-2712. 

5. Multifamily Forbearance Bill Introduced in the California Assembly; MBA Signs Letter in Opposition

Last week, Assembly Bill 2501 was introduced in the California Assembly, providing multifamily borrowers 180 days forbearance after the Governor lifts the statewide coronavirus emergency measures. The bill also provides multifamily mortgage loans an additional 180 days of forbearance upon request after the original 180 days expire. The bill also prevents any additional fees, penalties, or higher amounts of interest while under forbearance, and would suspend all foreclosures and evictions.

• Why it matters: MBA believes this legislation could provide significant disruptions in the mortgage market and harm multifamily lenders and servicers.
• What’s next: MBA signed a letter in opposition to this bill that will be sent to members of the Assembly, and will work with the California MBA to oppose its enactment.

For more information, please contact William Kooper at (202) 557-2737 or Grant Carlson at (202) 557-2765.

6. Prudential Regulators Issue Final Interagency Policy Statement on CECL

On May 8, The OCC, the Federal Reserve Board (Board), the FDIC, and the National Credit Union Administration (NCUA) issued a final Interagency Policy Statement on Allowances for Credit Losses. The statement describes the measurement of expected credit losses under the current expected credit losses (CECL) methodology and establishes supervisory expectations for designing, documenting, and validating expected credit loss estimation processes. The agencies also address comments received by industry members to the proposed rule –emphasizing flexibility and judgment in implementing the standard and management oversight.

• Why it matters: For those entities facing forecasting challenges with loss data (as is the case for many in commercial real estate), the agencies advised that organizations holding long histories of data with limited credit losses aren’t expected to default to external data, but can assess existing data to see if an adjustment should be made. Entities with a limited history of loss data are expected to supplement with external or peer data, industry data, or qualitative factor adjustments.
• What’s next: The agencies will continue to monitor implementation activities through routine supervisory activities, and will determine if any additional materials or outreach may be needed.

For more information, please contact Kelly Hamill at (202) 557-2746.

7. SBA Clarifies ‘Good Faith’ Certification Requirement of the PPP

Last Wednesday, the Small Business Administration (SBA) updated its Paycheck Protection Program (PPP) Q&A guidance providing that “[a]ny borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million, will be deemed to have made the required certification concerning the necessity of the loan request in good faith” (Question 46). This guidance relates to the PPP Q&A provision requiring applications to certify that that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” (Question 31). 

• Why it matters: This guidance provides a clear and concise standard for smaller entities struggling to interpret Question 31 of the SBA guidance, and will “enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.” (Question 46).
• What’s next: MBA will continue to monitor developments in SBA guidance as it relates to COVID-19 relief efforts.

For more information, please contact Kelly Hamill at (202) 557-2746 or Andrew Foster at (202) 557-2740.

8. U.S. Treasury Addresses State Legislation Potentially Compelling Insurance Carriers to Cover COVID-19 Losses

The Treasury Department recently responded to North Carolina Representative Ted Budd (R-NC), addressing concerns he raised regarding state legislative measures that could require insurance carriers to retroactively change the terms of insurance contracts and cover COVID-19 losses.

• Why it matters: The letter states that “these proposals fundamentally conflict with the contractual nature of insurance obligations and could introduce stability risks to the industry.”
• What’s next: Treasury will continue to work with Congress, the states, NAIC, and other stakeholders to determine the best course of action for current and future pandemic losses.

For more information, please contact Kelly Hamill at (202) 557-2746.

9. Full Senate Confirms HUD Deputy Secretary and Banking Committee Votes on FHA Commissioner

Last Tuesday, the Senate advanced key political nominees to fill senior positions at the U.S. Department of Housing and Urban Development (HUD). The full Senate confirmed Brian Montgomery to be Deputy Secretary by a vote of 61–32, with 10 Democratic senators voting yes. MBA submitted a letter in support of his nomination. Following up on last week’s nomination hearing, the Senate Banking Committee approved Dana Wade’s nomination to be Federal Housing Administration (FHA) Commissioner by a vote of 15-10, with two Democratic senators voting yes.

• Why it matters: In their new roles, both Brian Montgomery and Dana Wade will focus on key items of regulatory and operational importance for MBA members. For example, both were instrumental in helping to establish a lending facility at Ginnie Mae, which will allow many servicers to better help FHA consumers.
• What’s next: Wade’s nomination now moves to the Senate floor for consideration. MBA submitted a letter in support of her nomination.

For more information, please contact Tallman Johnson at (202) 557-2866 or Ethan Saxon at (202) 557-2913.

10. Senate Banking Committee Holds Hearing with Financial Regulators

The Senate Banking Committee held an oversight hearing last week with Federal Reserve Vice Chairman Randal Quarles, Comptroller of the Currency Joseph Otting, FDIC Chairwoman Jelena McWilliams, and NCUA Chairman Rodney Hood. Republicans questioned some of the restrictions on access to the Fed’s Main Street Lending Facility, which sets a minimum loan size of $500,000 – larger than some midsized businesses can afford – and the Primary Market Corporate Credit Facility’s credit rating requirements. Democrats criticized financial regulators’ coronavirus responses, telling the officials that too many businesses and public bodies were slipping through the gaps of aid programs. 

• Why it matters: With regulators and senators participating via video conference, lawmakers took their first look at the financial system’s handling of the COVID-19 pandemic and trillions of dollars in lending programs Congress established in four laws enacted to provide relief to businesses that had to shut down or curtail production.
• What’s next: Several senators pressed the regulators on issue areas of importance to MBA. In directing his question to Quarles, Senator Pat Toomey (R-PA) said that he hoped that the Fed would deem nonbank lenders as eligible participants in the Main Street Facility, as borrowers depend primarily on nonbank lender for their credit. Please see the hearing summary here.

For more information, please contact Tallman Johnson at (202) 557-2866 or Ethan Saxon at (202) 557-2913.

11. House Financial Services Subcommittee Holds First Virtual Roundtable

Last Wednesday, the Consumer Protection and Financial Institutions Subcommittee held a virtual roundtable with key prudential regulators, including leaders from the FDIC, NCUA, OCC, and Federal Reserve to discuss their responses to the recent economic dislocation caused by the COVID-19 public health crisis.

• Why it matters: Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC) recently came to agreement on bipartisan guidelines for conducting virtual roundtables in order to continue Committee business while the House is away during this pandemic. This subcommittee roundtable follows a live hearing conducted by the Senate Banking Committee with the same regulators on Tuesday.
• What’s next: This is the first time the House Financial Services Committee has ever convened a meeting in an entirely virtual setting, but it is expected these will be more frequent occurrences in the coming weeks.

For more information, please contact Ernie Jolly at (202) 557-2741 or Dan Grattan at (202) 557-2712. 

12. [VIDEO] mPower Moments: On Leading During Challenging Times and Work-Life Balance with Reena S. Pally

In this month’s episode of mPower Moments, mPower Founder Marcia Davies sits down with MetLife Investment Management’s Reena S. Pally to discuss the importance of being open to different career opportunities and balancing responsibilities at work and home.

• Why it matters: In the video, Pally discussed her career path and how she has benefited from taking on new opportunities – all while embracing the idea of stepping out of her comfort zone. Pally also talked about the importance of being prepared and present in different environments, including the workplace and at home.
• What’s next: To watch more mPower Moments, click here.

For more information, please contact Marcia Davies at (202) 557-2707.

13. The Month of MAA Campaign Continues
Mortgage Action Alliance (MAA), MBA’s free grassroots advocacy network, has extended its fifth annual Action Week to the end of the month. The month of May will be the month of MAA. This national, industrywide campaign aimed at growing MAA and activating real estate finance professionals in key states and congressional districts has already generated over 12,000 new MAA sign-ups. MAA now has over 46,000 active members nationwide in an industry of over 250,000 employees.  

• Why it matters: In recent weeks, MAA members have collectively sent nearly 50,000 emails to state and federal elected officials supporting the call to action to protect and secure our industry. This is the most critical time for our industry to unite and play an active role in shaping legislation and regulations that impact our companies, our customers, and the broader economy.
• What’s next: Our goal is to grow our active MAA membership to at least 50,000 through company enrollment campaigns, and continue helping them become informed and engaged industry advocates. Currently over 100 companies have committed to run a campaign. Complete this form to join them and receive further information.

For more information, please contact Alden Knowlton at (202) 557-2816.

14. Upcoming and Recent MBA Education Webinars on COVID-19-Related Topics

MBA Education continues to deliver timely single-family and commercial/multifamily programming that covers the spectrum of challenges, obstacles, and solutions pertaining to the ongoing COVID-19 pandemic. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:

• The New Un-Normal for Multifamily – May 20
• Forbearance: Borrower Outreach & Loss Mitigation Efforts – May 20
• Cybersecurity in the Age of COVID-19: Working from Home – May 22
• COVID-19 Special Report with the GSEs – May 27

MBA members can access the full list of COVID-19 webinar recordings by clicking here.For more information, please contactDanielle Jackson at (202) 557-2873.