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MBA Policy Update June 25, 2020

June 23, 2020 |By Mike Flood

Last week, Federal Reserve Chairman Jerome Powell appeared before both the Senate Banking and House Financial Services Committees to give his semi-annual monetary report to Congress. Additionally, there were several state victories pertaining to California forbearance and rental legislation.

Also last week, the OCC issued a bulletin stating that federal law governs national banks and federal savings associations, pre-empting state laws, and the FDIC issued a letter confirming that the Interagency Statement of Troubled-Debt Restructuring applies to warehouse lines and repurchase agreements with nonbank lenders. And finally, the NAIC Life Risk-Based Capital Working Group scheduled a call for June 30 to consider the proposed RBC reporting guidance that MBA and ACLI submitted to NAIC on June 8.

1. Fed Chairman Testifies on Capitol Hill, Discusses Economy

Recently Federal Reserve Chairman Jerome Powell testified before the Senate Banking Committee and the House Financial Services Committee, respectively, to give his semi-annual monetary report to Congress. Members’ questions focused on the management and timeline of the Fed’s various lending facilities, including whether a real estate-focused facility would be needed in the future. Several members, most notably in the Senate hearing, noted concerns about disparities faced by minority communities.

A summary of the Senate hearing can be found here; and a summary of the House hearing can be found here.

  • Why it matters: During the Senate hearing, Chairman Powell responded to a mortgage servicing liquidity question by iterating that, even though the stress in the industry has been greatly reduced of late, the Fed and Treasury continue to monitor the issue closely. He concluded that a facility dedicated to mortgage servicing does not appear to be necessary at this time. In the House, Powell also said that the central bank is open to Rep. Barry Loudermilk’s (R-GA) call to expand the Term Asset-Backed Loan Facility (TALF) program to include nonagency MBS and consumer loans.
  • What’s next: Chairman Powell stressed that monitoring unemployment will remain a primary issue, especially in minority communities and those industries that rely on concentrating large groups of people. He also said that additional fiscal response of some sort is necessary, including an effort to prevent cuts in state and local employment.

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

2. California Assembly Fails to Pass Problematic Forbearance Bill

California Assembly Bill 2501, which would have enacted sweeping new forbearance standards beyond federal CARES Act mandates for residential and multifamily mortgages, was not approved last week ahead of a critical procedural deadline. After being approved by the Appropriations Committee two weeks ago, the bill was up for a vote of the full Assembly last week. However, the bill failed to receive the necessary votes to pass. MBA and the California MBA had signed on to a detailed letter noting the many issues with the bill.

  • Why it matters: Though the bill was improved by an amendment related to federal CARES Act compliance and by the removal of language that would have eliminated foreclosure as a default remedy for any violation of the Act, the industry still had serious concerns which were detailed in a rebuttal to the sponsor.
  • What’s next: The bill’s failure to pass ahead of the Legislature’s “crossover” deadline means that it is effectively dead for the year. This is a success for MBA, the California MBA, and the many members of the Mortgage Action Alliance (MAA) who wrote and/or called their representatives in Sacramento.

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

3. California Senate Bill to Permit Commercial Tenants to Void Leases Dies in Key Committee

California Senate Bill 939, which had been the focus of a MAA Call to Action, failed to receive approval of the Senate Appropriations Committee. The bill would have enabled commercial tenants to unilaterally terminate leases, release any third-party guarantees, and limit to three months the tenant’s liability for unpaid rent after termination of the lease. The bill would also have prohibited property owners from taking any actions on unpaid rents for commercial tenants and would impose fines on landlords for communications with tenants that may be deemed actions “threatening” to terminate occupancy for nonpayment of rent. The Appropriations Committee voted to “hold” the bill after placing it on “suspension.”

  • Why it matters: The Appropriations Committee vote effectively ends the bill’s prospects for passage this year.
  • What’s next: This is another successful result stemming from the partnership of MBA and the California MBA with the powerful support of the Mortgage Action Alliance.  

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

4. FHFA Releases Annual Report to Congress

Last Monday, the Federal Housing Finance Agency (FHFA) issued its 2019 Annual Report to Congress. The Report, which is required by statute, provides information about FHFA’s 2019 examinations of Fannie Mae and Freddie Mac, 11 Federal Home Loan Banks, and the Federal Home Loan Banks’ Office of Finance; as well as FHFA’s actions against its strategic goals as conservator of the GSEs, including goals on safety and soundness, and on credit-risk transfer. The Report also includes legislative suggestions, stating “only Congress can resolve the flaws in the structure of the nation’s housing finance system. Reform is long overdue. The time to act is now.”

  • Why it matters: The GSEs remain in conservatorship and, absent legislation, FHFA will continue to oversee their operations in conservatorship and their potential exit from conservatorship.
  • What’s next: FHFA has reproposed regulatory capital standards for the GSEs; regulatory capital standards establish a key measure of GSE readiness to exit conservatorship; and would affect pricing, risk-taking, and other GSE behavior post-conservatorship. The comment period will run 60 days after publication in the Federal Register. The proposal has not yet been published.

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

5. OCC Issues Bulletin Asserting Federal Preemption Over State and Local Pandemic Laws Aimed at Banks

Last Wednesday, the Office of Comptroller of the Currency (OCC) issued a bulletin stating that federal law governs national banks and federal savings associations – pre-empting state laws. The OCC in its notice wrote that “federal law pre-empts state and local laws that impermissibly conflict with banks’ exercise of federally authorized powers under the standard set forth in Barnett Bank of Marion County, N.A. v. Nelson. Consistent with this standard, OCC regulations provide examples of the types of state laws that do not apply to banks’ lending and deposit-taking activities.”

  • Why it matters: Many states and local governments are considering several laws governing bank activities, including examinations and forbearance.
  • What’s next: The notice also said that “the OCC recommends that banks consult with counsel to determine the applicability of any particular state or local law. Banks and their counsel may also contact the OCC with questions.”

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

6. FDIC Issues Letter Confirming Interagency Statement Applies to Lending Arrangements with Nonbank Lenders

Last Thursday, the Federal Deposit Insurance Corporation (FDIC) issued a letter confirming that the baking agencies’ Interagency Statement applies to all lending and financial arrangements originated by FDIC-supervised institutions, including warehouse lines and repurchase agreements with nonbank lenders (NBLs). The letter is a direct response to a coalition letter from MBA and other trades requesting such clarification. The OCC issued a comparable letter in response to the joint trades request on June 4.

  • Why it matters: The FDIC letter clarifies that FDIC-supervised banks have flexibility to work prudently with nonbank borrowers and that FDIC examiners will not criticize banks for working prudently with such borrowers affected by the pandemic as part of a safe and sound risk mitigation strategy.
  • What’s next: We are awaiting a similar response from the Federal Reserve.

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

7. FDIC Scheduled to Discuss Interagency Final Rule of Latest Round of Volcker Rule Changes

This Thursday, the FDIC Board will meet to discuss Interagency Final Rule on Volcker Re-Proposal of Certain Aspects of the Covered Funds Provisions of the Volcker Rule (Volcker 2.1). In an April 1 comment letter, MBA expressed our support for proposed changes to the definition of “ownership interest” but recommended modifications regarding creditor removal rights and clarification of certain safe harbor language.

  • Why it matters: The regulatory agencies charged with implementing the Volcker rule (OCC, Federal Reserve, FDIC, SEC, and CFTC) have recognized that implementation of the Volcker Rule has proven to be cumbersome, and they are continuing to work to improve it.
  • What’s next: The final rule will be published after all of the relevant federal agencies have approved it.

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

8. NAIC Working Group Scheduled to Discuss Proposed Life RBC Reporting Guidance June 30

The NAIC Life Risk-Based Capital Working Group has scheduled a call on June 30 to consider the proposed RBC reporting guidance that MBA and the American Council of Life Insurers (ACLI) submitted to the National Association of Insurance Commissioners (NAIC) on June 8. The proposed guidance would address reporting of NOI and contemporaneous property value for 2020, construction halted by government directive during the pandemic, and would effectively extend the modification period to the end of 2020. On June 12, the NAIC Financial Condition Committee revised its prior RBC Guidance, extending the modification period from June 30 to September 30, 2020, to give the Working Group time to address the requested RBC reporting guidance.

  • Why it matters: To prevent unwarranted distortions of capital calculations, existing life company risk-based capital reporting instructions need to be adapted to the unusual circumstances of 2020.
  • What’s next: MBA and life company members will present to the Working Group on the June 30 call. 

For additional information, or to become part of the MBA Life Company RBC Working Group, contact Bruce Oliver at (202) 557-2840.

9. NYC Rent Guidelines Board Votes to Freeze Stabilized Apartments Rent for One Year

Recently, the New York City Rent Guidelines Board voted to freeze rents for rent-stabilized apartments for one-year leases signed after September 30, 2020. In addition, two-year leases signed at the same date will be for one year with a 1 percent increase in the second year.

  • Why it matters: This rent freeze will apply to 2 million New York City residents.
  • What’s next: The New York City Rent Guidelines Board will hold future meetings weighing further actions.

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

10. D.C. Department of Insurance Securities and Banking Issues FAQs on Implementation of New Forbearance Law

Last week, the District of Columbia’s Department of Insurance, Securities and Banking (DISB) released an updated version of FAQs related to the implementation of the D.C. Residential Mortgage and Commercial Mortgage Program. The modifications to DISB’s guidance reflect changes to the program required by law (B23-0759), amending the D.C. COVID-19 Response Supplemental Emergency Amendment Act of 2020, which provides exemptions for federally backed mortgage loans and federally backed multifamily mortgage loans, and also exempts national banks and federally chartered credit unions.

  • Why it matters: The new guidance is consistent with feedback MBA provided DISB and discussed on a call with Commissioner Karima Woods.
  • What’s next: MBA will continue to work with DISB staff to improve their legislative guidance and implementation of the deferment program.

For more information, contact Kobie Pruitt at (202) 557-2870.

11. Commercial and Multifamily Mortgage Delinquencies Remained Low in the First Quarter of 2020

Last Thursday, MBA released its latest quarterly Commercial/Multifamily Delinquency Report. In the first quarter of 2020, commercial and multifamily mortgage delinquencies stayed low during the first three months of the year – most of which occurred before the economic disruption from the onset of the COVID-19 pandemic. MBA’s quarterly delinquency analysis incorporates the measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another. Read the report here.

  • Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “This year’s first quarter marked the end of a long period of extraordinarily low and stable delinquency rates for commercial and multifamily mortgages. With the onset of the COVID-19 pandemic and our social and economic responses to it, more recent data from MBA and others show increasing pressure on delinquency rates, particularly for loans backed by hotel and retail properties – where the impacts have been most immediately and dramatically felt.”
  • What’s next: To reflect current market conditions during the ongoing pandemic, MBA will be releasing numbers at the end of June covering commercial and multifamily loan performance in the second quarter.

For more information, contact Jamie Woodwell at (202) 557-2936.

12. [VIDEO]: mPower Moments: Raquel Borras on Effective Personal and Professional Branding on Social Media

In this month’s episode of mPower Moments, MBA COO and mPower Founder Marcia M. Davies sat down with True Branding Group’s Raquel Borras to discuss the importance of building your online brand and her rules of engagement on social media.

  • Why it matters: In this episode, Borras shared useful tips on leveraging social media to build your brand, and grow personal and professional networks through engaging content and conversation.
  • What’s next: To watch more mPower Moments episodes, click here.

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

13. 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.

MBA members can access the full list of COVID-19 webinar recordings by clicking here.

For more information, contact David Upbin at 202-557-2890.

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