CREF Highlights: Pass-Through Deduction Regulations, New GSE Capital Requirements, NFIP Extension
MBA Meets with OIRA to Discuss Treasury/IRS Proposed Pass-Through Deduction Regulations Currently under OMB Review
Last Monday, MBA met with the Office of Management and Budget’s Office of Information and Regulatory Affairs, which is currently reviewing Treasury’s proposed guidance implementing the pass-through deduction provision (Section 199A) of The Tax Cuts and Jobs Act.
While neither the exact scope of what the proposed guidance covers, nor the scope of the review that will be conducted by OIRA is known by the public at this time, MBA took the opportunity during the meeting to reiterate MBA’s position that mortgage banking companies are engaged in the business of financing real estate loans (commercial and residential), and are therefore eligible for the pass-through deduction.
Guidance to this effect would not only make good tax policy, but would be consistent with congressional intent to level the playing field for pass-throughs that compete with C-corporations–such as S-Corp vs. C-Corp banks or pass-through IMBs vs. C-Corp IMBs.
As previously reported, because the proposed regulations are listed as economically significant, OIRA has 10 business days to complete its review. However, the agency has the discretion to conclude its review earlier or extend the 10-day time frame for good reasons.
For more information, contact Tom Kim at tkim@mba.org or Bruce Oliver at boliver@mba.org.
FHFA Extends Comment Period for Proposed New GSE Capital Requirements
Last Tuesday, FHFA announced it is extending the comment period for its proposed new capital framework for the GSEs for an additional 60 days. The new deadline will be November 16.
FHFA has proposed a new framework for risk-based capital requirements for the GSEs and proposed two alternatives for an updated minimum capital requirement. Proposed RBC requirements for multifamily will be based on four components: credit risk (including adjustments for credit risk transfers), market risk (applied to whole loans and to GSE/GNMA-issued MBS), operational risk (8 bps, consistent with operational risk treatment across each GSE), and a going concern buffer (75 bps, consistent with the buffer across each GSE).
RBC requirements for commercial mortgage-backed securities would be based on the same four components. In proposing this rule, FHFA indicated it is not taking a position on housing finance reform and that this is not a step towards recapitalizing the GSEs and releasing them from conservatorship.
For more information, please see the FHFA Fact Sheet or contact Bruce Oliver at boliver@mba.org or Sharon Walker at swalker@mba.org.
MBA Solicits Member Input Regarding Comments on Proposed Volker Rule Reforms
The banking agencies have released proposed changes to the Volcker rule and MBA is soliciting input from MBA members as we develop our comments.
The proposal is intended to establish clear guidelines and reduce compliance costs, replace the ban on all investments held for less than 60 days that are not otherwise approved by regulators, and reduce the burden on banks to justify hedging trades amongst other changes.
MBA’s initial impression is that it is roughly consistent with MBA’s prior recommendations that the agencies provide more flexibility and discretion around market making by adopting a supervisory rather than a prescriptive approach and that they maintain current exemptions that facilitate hedging an active mortgage pipeline. Comments are due on September 17.
For more information, contact Bruce Oliver at boliver@mba.org.
Short-Term Extension of NFIP Signed Into Law
Last Tuesday, the Senate voted to pass a short-term authorization of the National Flood Insurance Program. The four-month extension, which was signed into law by President Trump following the Senate’s action, will expire on November 30.
The authorization does not include any reforms to the program.
MBA sent a letter of support and the Mortgage Action Alliance issued a Call to Action urging Members of Congress to reauthorize the program ahead of its July 31st expiration. MBA President and CEO David Stevens, CMB, issued a statement praising Congress for the extension.
For more information, contact Kathy Marquardt at kmarquardt@mba.org.
Senate Passes Appropriations Bills
Last Wednesday, the Senate passed a package of appropriations bills, including the Fiscal Year 2019 Transportation, Housing and Urban Development and Financial Services and General Government Appropriations bills.
Both the House and Senate passed the FY2019 FSGG Appropriations bills out of their respective chambers. The House and Senate must now reconcile different funding levels and legislative provisions in the bills in a conference meeting. The Senate THUD bill included $900 million more than the House legislation and $12.8 billion more than President Trump’s budget request.
Of note, neither THUD bill contains language supporting a lender fee for FHA technology. However, the Senate bill directs $20 million for modernizing FHA’s IT systems, including improving single-family processing underwriting and delivery, claims systems, and program compliance.
The Senate FSGG bill did not include financial services riders such as the Mortgage Choice Act and the TRID Improvement Act. The House bill included both along with changes to the Bureau of Consumer Financial Protection. These provisions will need to be addressed when the House and Senate meet in conference committee.
For more information, contact Erin Barry at ebarry@mba.org or Meghan Sullivan at msullivan@mba.org.
MBA Receives Response from DOL Regarding Davis Bacon
MBA received a letter last week from the Department of Labor Wage and Hour Division responding to MBA letters and outreach regarding important Davis-Bacon Act issues that lenders and developers who work with the U.S. Department of Housing and Urban Development are experiencing.
Under current Davis-Bacon procedures, unexpected updates in Davis-Bacon wage rates can occur late in the FHA process resulting in unforeseen increases in development costs, which can result in higher rents to tenants or may derail a project. The letter from the Acting Chief of the Division, who oversees Davis-Bacon decisions, discussed DOL policies and expressly invited MBA to provide further feedback to the DOL.
For more information, contact Sharon Walker at swalker@mba.org.
HUD Responds to MBA Member Concerns in Update to the CNA e-Tool
MBA and the CNA e-Tool Technical Advisory group headed by Scott Thurman, Greystone, have been working with HUD to improve the tool’s functionality. HUD has been responsive in the form of a July 17 letter from HUD official Dana Wade acknowledging our concerns and a July 30 release of version 2.3 of the CNA e-Tool.
The e-Tool upgrade adds “Save as Draft” functionality and doubles the size limit of attachments to 10 MB each. HUD also has posted a revised Assessment Tool (Excel template), which corrects the Calendar Year change error. HUD also has released a new memo clarifying guidance on the Narrative Form, Photography Requirements, and Sizing Reserves for Replacements.
The MBA CNA e-Tool Technical Advisory group worked with HUD to get relief from the MAP Guides’ onerous photography requirement. The Narrative Form and sizing of the Replacement Reserves are still works in progress for the Advisory Group, but we are encouraged by the published guidance on HUD’s current interpretation and/or policy.
HUD is holding webinars and has provided new tutorials and training videos regarding these latest releases and the e-Tool in general.
For more information, contact Sharon Walker at swalker@mba.org.
Upcoming mPact Event: Building Your Personal Brand August 23rd in Washington, D.C.
On August 23, MBA will host an mPact regional event in Washington, D.C. on from 5:00 – 8:00 pm ET. The event, focused on building your personal brand, will help strengthen your skills, expand your network and build your competitive advantage.
Following the presentation, please stay for the networking reception which, in addition to drinks and appetizers, will also feature a photographer taking professional headshots and appearances from MBA’s senior leadership.
As a reminder, mPact is MBA’s young professional network for those 35 years or younger in the real estate finance industry.
For more information or to RSVP, please contact Krystal Thomas at kthomas@mba.org.
MBA Education’s Property Inspection and Environmental Concerns Course
On August 29, join MBA Education starting for our next CRE Basics course covering property inspection and environmental concerns.
This course is designed to introduce the physical inspection process, the physical components of a commercial property as well as common environmental concerns that can affect commercial real estate. It includes a discussion of the steps taken to ensure a sound and complete property inspection, why it is important to understand the subject property’s market and understand how the property competes within the market.
Problem areas of the physical asset, environmental hazards and possible mitigants for each are also discussed.
To register for this course, click here. For more information, contact Gail Griffith at ggriffith@mba.org.
