MBA CREF COVID Communication–Legislative and Regulatory Update–July 28, 2020

A summary of the COVID-19-related legislative, regulatory and operational items that the membership has asked MBA to help address, including actions, next steps and how you or your team can get involved.

This week, MBA is working on analyzing the Senate stimulus package, advocating on a number of state advocacy issues, working hand-in-hand with our member advocacy teams as well as our state and local MBA chapters. We would appreciate your help, as we have multiple Mortgage Action Alliance Calls to Action in the states of Oregon and California.

Stimulus Debate – Senate Republicans Release HEALS Act

On Monday, Senate Republicans released the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act proposal for any future round of stimulus negotiations due to the COVID-19 pandemic. An early read of the legislation suggests the following proposals pertain to CRE finance: 1. Tenant-Based Rental Assistance: $2.2 billion to maintain the current Section 8 voucher rental assistance for low-income families and $1 billion for assistance to Public Housing Agencies to maintain their public housing programs and help contain the spread of COVID-19. 2. Rural Rental Assistance: $113.4 billion for rural rental assistance. 3. Unemployment Insurance: $200 per week in enhanced unemployment insurance through October, continuing with $500 per week thereafter, with the goal of providing 70% of income to the unemployed. 4. Stimulus Rebates: $1,200 rebated to residents with adjusted gross income of up to $75,000 ($150,000 married), with $500 added for each dependent. The amount of the rebate phases out completely once the income of single filers exceeds $99,000 ($198,000 for joint filers). 5. Business Tax Credits: Employee Hiring and Payroll Tax Credit; Work Opportunity Tax Credit; and Safe and Healthy Workplace Tax Credit. 6. Supporting America’s Restaurant Workers: Temporarily expand the 100% deduction for business meals provided at a restaurant. 7. Payment Protection Program (PPP) Modifications. MBA will continue to analyze the bill for its effects on the real estate industry and remain active in the next round of stimulus negotiations. The unemployment and tax credit sections of the bill can be found here. The rental assistance appropriations can be found here. The business meal deduction section can be found here. For more information, contact Dan Grattan at (202) 557-2712 or Tallman Johnson at (202) 557-2866.

CRE Borrower Relief

Last Wednesday, MBA signed a letter to Senate Banking Committee Chairman Mike Crapo, R-Idaho, and Ranking Member Sherrod Brown, D-Ohio, recommending that the Main Street Lending Program (MSLP) be modified to (a) allow commercial property borrowers to access the facility, and (b) clarify that the MSLP can create a private-equity structure to allow COVID-19-affected borrowers to pay their mortgages. Commercial properties across asset classes–hotels, shopping centers, apartments, and office buildings–are a major part of the economy, directly and indirectly comprising 18 percent of U.S. GDP. “Today a number of these income- and job-producing properties are shut down or operating at very limited capacities, impacting their ability to meet contractual debt obligations,” the letter said. Why it matters: If the proposal were to be enacted, it could provide another relief option for both COVID-19-affected borrowers and servicers to consider. The letter is complimentary to Congressman Van Taylor’s (R-TX) efforts to propose a bill with a private equity structure, known as the HOPE Act. Rep. Taylor is expected to formally release the HOPE Act. What’s next: This week, Congress may begin to debate a potential next stimulus package, where such a proposal could be considered. For more information, contact Dan Grattan at (202) 557-2712 or Tallman Johnson at (202) 557-2866.

Insurance Company Relief

Last Friday, MBA and the American Council of Life Insurers (ACLI) submitted supplemental information to National Association of Incurance Commissioners (NAIC) for potential guidance on reporting of 2020 net operating income (NOI). Previously, the NAIC had approved guidance that contemporaneous property valuations for 2020 risk-based capital reporting will be based on an average of 2019 and 2020 property value indexes. The Working Group had deferred acting on possible guidance on reporting of 2020 NOI. The Working Group had already approved proposed guidance on construction loans and on extending the modification period to the end of 2020 on June 30. What’s next: This Thursday, MBA and ACLI will provide an update to the NAIC Working Group on efforts to develop additional material in support of our recommended treatment of 2020 NOI for risk-based capital reporting that we hope the Working Group will consider during the third quarter. For more information, or to join MBA’s Life Company Risk-Based Capital Working Group, contact Bruce Oliver at (202) 557-2840.

MBA State Advocacy Efforts

California – Legislature Reconvenes – Ballot Initiative California 

On Monday, the California Legislature reconvened. MBA will be monitoring AB 1436, which was amended and referred to the Senate Judiciary Committee earlier this month. Various overlapping provisions of AB 1436 would protect any residential tenant from eviction or collection of unpaid rent for up to 12 months after the end of the state of emergency and/or would forbid any eviction, ever, based on nonpayment of rent accrued during the emergency and/or would enable tenants to block eviction for rents accrued during the emergency by notifying their landlord: “I declare that the following is true and correct: I have had a loss of income and/or increased expenses as a result  of the COVID-19 pandemic that has impacted my ability to fully pay the rent.” Landlords would be prohibited from using the tenants’ security deposit for payment, filing an eviction, or reporting the non-payment of rent to credit bureaus.

Looking ahead, Prop 10 (repeal of Costa-Hawkins state pre-emption of local rent and vacancy controls) and Prop 13 (split-tax proposal that would increase property taxes on nonresidential commercial properties) will both be on the California ballots in November.

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

New York – Legislature Convenes Special Session

Last week, the New York Assembly and Senate convened a Special Legislative Session to complete their regularly scheduled business before adjourning for the remainder of the summer. Legislators addressed numerous bills in both chambers in what is characterized in Albany as the annual “calendar clearing” session, which involves passing many bills on key issues before the election season starts in earnest after Labor Day.

Of particular interest were COVID-19 relief bills that would provide forbearance on residential and commercial investment properties (A.10532-A/S.8744), as well as other bills that could affect commercial and multifamily borrowers and lenders. MBA and the New York MBA opposed the bill in a Mortgage Action Alliance (MAA) Call to Action. Those bills remain pending.

The Legislature is expected to return in September to address ongoing budget issues and may consider other COVID-19-related measures. MBA will be following developments and working with the New York MBA to oppose harmful proposed bills that would mandate commercial and multifamily loan forbearance, create rent holidays for commercial and multifamily properties, allow small-business owners to terminate leases without legal consequences, and tax and record mezzanine debt.

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

Oregon – Special Session – Letter and Call to Action

In mid-July, MBA sent Oregon Governor Kate Brown and party leadership in the Legislature a letter urging them to amend new laws related to the COVID-19 pandemic (HB 4204 and HB 4213) that create regulatory and legal risk for the real estate finance industry in the state. HB 4204 and HB 4213 were enacted in a matter of days and did not provide adequate and appropriate opportunity for stakeholder input from consumers, regulators and industry stakeholders.

The new law applies to both residential and commercial mortgages, creates a right to deferrals during the entire period of emergency (which may be extended beyond September 30, 2020, by executive order), provides that repayment is due only at the end of the loan term, imposes eviction moratorium for the duration of the emergency, and halts actions to foreclose during the emergency. There is no CARES Act carve-out. Lenders must provide written notice of rights to borrowers by August 29, 2020.

MBA recently issued a Call to Action urging legislators to amend the law, including deeming loans that are subject to the federal CARES Act, or loans that are receiving forbearance that is functionally equivalent, to also be in compliance with these duplicative and conflicting state mandates. MBA has reached out to the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) to ask them to weigh in on the impact of the new law on their programs. MBA will also continue to work with the Oregon MBA to advocate for a CARES Act carve-out to the law when the Legislature potentially reconvenes for a special session in early August, and will work to develop templates to facilitate compliance with the laws’ notice requirement.

If the law cannot be amended, then MBA will work with the legal community to create templates that the industry can use for any disclosures required by August 29, 2020.

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

Massachusetts – Special Session – Call to Action

Last week, in preparation for the Massachusetts Legislature’s special session, MBA issued a Call to Action urging members of the Legislature to oppose legislation (HD.5166 and S.2831) that seeks to extend current eviction and foreclosure moratoriums, as well as mandatory forbearances for 12 months after the state of emergency order related to the COVID-19 pandemic. The eviction moratorium would extend to 12 months after the end of the state of emergency, reducing owners’ ability to manage their properties.

As MBA was issuing the Call to Action, it was announced that Governor Charlie Baker was extending the current moratorium for evictions and foreclosures until October 17, 2020. This potentially has the effect of reducing the need for legislation that poses issues for the real estate finance industry in the state. MBA will continue to partner with the Massachusetts MBA to monitor potentially harmful legislation during the special legislative session.

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