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CREF Highlights June 4, 2020

June 2, 2020 |By Mike Flood

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

1. MBA Submits Comments to HUD Suggesting CNA e-Tool Process Improvements

MBA submitted comments to HUD in response to a 60-Day Notice of Proposed Information Collection on Capital Needs Assessment (CNA) through HUD’s CNA e-Tool. The comments and recommendations were compiled by the MBA FHA Committee e-Tool Advisory Working Group. This letter supplements MBA’s prior feedback and recommendations to HUD in a letter submitted on April 30, 2020.

  • Why it matters: The purpose of the comment was to allow 60 days of public review of the revised proposed collection of information by HUD. MBA’s comments recommended “that the release of the CNA e-Tool Version 3.0 be delayed until development of a fully functional tool is completed, fully tested, and both external and internal training is completed.”
  • What’s next: MBA has been advocating for two years to help improve the CNA e-Tool and is working closely with HUD to address member concerns.

For more information, contact Sharon Walker at (202) 557-2747.

2. ARRC Publishes Proposed NY Legislation for U.S. Dollar LIBOR Contracts

On Friday the Alternative Reference Rates Committee released a proposed legislative solution aimed to minimize legal uncertainty and adverse economic impacts associated with the London Interbank Offered Rate (LIBOR) transition.

Most importantly, the legislation would prohibit a party from refusing to perform its contractual obligations or declaring a breach of contract as a result of LIBOR discontinuance or the use of the legislation’s recommended benchmark replacement – but would not override existing contract language that specifies a non-LIBOR-based rate as a fallback to LIBOR. 

  • Why it matters: Many existing financial contracts don’t contemplate the discontinuation of LIBOR, and therefore lack fallback language to address the impending permanent termination of the rate. Given that amending existing contracts pose potential challenges, the ARRC proposed this legislative alternative in New York – where many of these financial contracts are governed.
  • What’s next: In the coming weeks, the ARRC plans to host a webinar to provide an in-depth overview of the proposed legislation. Details will be published separately on the ARRC’s website.

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

3. FHFA Announces New Fannie Mae and Freddie Mac LIBOR Transition Resources

On Thursday, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac have launched new websites to provide LIBOR transition resources. According to FHFA, the websites will “provide key resources for lenders and investors as the Enterprises transition away from the London Interbank Offered Rate.”

  • Why it matters: LIBOR is expected to be phased out by 2021. According to FHFA, “The Enterprises also announced today updates related to transitioning their Credit Risk Transfer (CRT) programs and their collateralized mortgage obligations (CMOs), including the cessation dates for new issuances indexed to LIBOR, and the expected dates for new issuances indexed to the Secured Overnight Financing Rate (SOFR). Details of these important milestones are available on the Enterprises’ LIBOR Transition webpages. ​
  • What’s next: MBA’s LIBOR Outreach Committee will continue to help members navigate this transition.

For more information, contact Kelli Burke at (202) 557-2742.

4. House Passes Bipartisan PPP Modifications Overwhelmingly

Last Thursday the U.S. House passed the Paycheck Protection Program (PPP) Flexibility Act of 2020 by a near unanimous vote of 417-1. The bipartisan bill – sponsored by Reps. Dean Phillips, D-Minn., and Chip Roy, R-Texas, – modifies the $669 billion relief measure included in the CARES Act (P.L. 116-136) that provides low-interest loans to small businesses so they can meet their payroll (and other financial) obligations.

Importantly, the legislation would lengthen the duration for businesses to utilize the proceeds of their loans, from eight to 24 weeks, and would lower the threshold of funds designated toward meeting payroll obligations, from 75% to 60%.

  • Why it matters: Flexibility on how recipient small businesses use PPP funding would help commercial real estate tenants better manage their cash flow constraints and potentially designate a greater share of their assistance to non-payroll expenses, including their mortgage payments.
  • What’s next: While this bill has bipartisan and bicameral support, it is unclear whether the Senate will consider the House bill or attempt to pass its own recrafted version. Senate Small Business Committee Chairman Marco Rubio (R-FL) commented that there are “inadvertent technical errors” in the House bill that the Senate may need to fix before consideration. Nonetheless, lawmakers from both parties are pushing for quick Senate action on the legislation.

For more information, contact Ernie Jolly at (202) 557-2741 or Tallman Johnson at (202) 557-2866.

5. New York Lawmakers Advance Bill Providing Rent Waivers and Mortgage ‘Forgiveness’

Last week New York lawmakers advanced Senate Bill 8124 A out of committee, which would suspend rent payments for residential tenants and certain small-business commercial tenants for 90 days. The bill would also provide 90 days of “forgiveness” for all residential and commercial small-business mortgage borrowers. In addition, the bill would automatically renew residential and small business commercial leases and remove personal liability for small business leases.

  • Why it matters: MBA is concerned this bill could present significant financial hardship to lenders, servicers, and landlords while also violating property rights.
  • What’s next: MBA is working with New York trade associations to oppose this legislation. The bill has not been formally placed on the legislature’s agenda for consideration by either the Assembly or Senate.

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

6. New Jersey Governor Vetoes Bill Allowing Small Businesses to Defer Rent Payments

Last Thursday, New Jersey Governor Phil Murphy vetoed S. 2363, which would suspend rent payments and evictions for certain small-business tenants for 90 days. Tenants would have been allowed to repay rent over six to nine months following the end of the pandemic-related state of emergency.

  • Why it matters: In his veto message, Murphy said the bill shifts the financial burden from small businesses to commercial landlords “who may not be relieved of their own obligations to pay mortgage payments and property taxes.”
  • What’s next: MBA will work with local trade groups to monitor and oppose this bill if the legislature attempts to override the governor’s veto.

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

7. MAA Members in California Take Action to Oppose Harmful Proposed Legislation in Sacramento

Last week, the Mortgage Action Alliance (MAA) and California MBA collaborated to issue a Call to Action to oppose legislation that would enact sweeping new 12-month forbearance requirement for residential and multifamily mortgages that conflict and diverge from existing federal standards.

The bill, AB 2501, authored by the California Assembly Banking and Finance Committee’s Chair, Assembly Member Monique Limón, has cleared the Committee, and is being fast-tracked for approval by the entire Assembly.

The Call to Action makes clear that at the very least, this bill needs to be amended to deem those companies that are subject to, and in compliance with, the federal CARES Act to also be in compliance with these duplicative state mandates. It also highlighted that the extended forbearance period would exacerbate housing affordability issued by causing future rent increases and future mortgage defaults, and that the bill’s substantial revision of contractual terms of existing multifamily mortgage agreements raises significant constitutional concerns.

Recently MBA and the California MBA joined a coalition of other trade associations on a letter to make this and other arguments in opposing the bill.

  • Why it matters: The bill includes numerous problematic provisions that far exceed federal CARES Act mandates, including the loss of foreclosure as a remedy for any violation of the Act. Consequently, enactment of the provisions of this law may limit access to credit and produce other unintended consequences.
  • Next steps: Real estate finance professionals in California are encouraged to take action today.

For more information, contact William Kooper (202) 557-2737 or Alden Knowlton (202) 557-2816.

8. Recent and Upcoming 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, 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 any questions, contact David Upbin at (202) 557-2890.

1. MBA Signs Two Joint Letters to Fed and Treasury Requesting Additional Support from TALF Program

Last Thursday MBA signed on to joint trades letters asking the U.S. Treasury and Federal Reserve to include AAA legacy and new-issue CRE CLOs and new-issue CMBS and Single Asset/Single Borrower (SASB) loans as eligible collateral in the Term Asset-Backed Securities Loan Facility (TALF) program.

  • Why it matters: MBA is working with a coalition that includes the CRE Finance Council, Real Estate Roundtable, National Multifamily Housing Council and others to advocate for new-issue AAA CMBS, Single Asset/Single Borrower CMBS and CRE CLOs to be included in the TALF program.
  • What’s next: To read the letter on inclusion of CRE CLOs, click here; to read the letter on inclusion of SASB and new-issue AAA CMBS, click here. 

For more information, contact Mike Flood at (202) 557-2745 or Mike Fratantoni at (202) 557-2935.

2. MBA Urges CREF Industry to Join MAA and Start a Company Campaign

The easiest and most effective way to grow MBA’s Mortgage Action Alliance beyond joining individually is to run a MAA enrollment campaign at your company.

Running a company campaign is a free and highly effective way to inform Congress of our industry’s needs. You can determine the scope. Some opt for companywide campaigns, but others limit the campaign to employees strictly involved in mortgage finance. You can take the lead or designate an employee to execute on your behalf.

MBA staff can send you a current list of MAA members at your company, set up individual calls with you and your team, and provide you with sample emails, talking points, downloadable graphics and any additional information to make this a simple copy/paste email appeal to your colleagues and peers.

  • Why it matters: Legislation and regulations being crafted and implemented right now will impact our industry in the months and years to come. Letting policymakers hear our voice makes a difference. Adding to the roughly 2,400 commercial/multifamily MAA members who are actively engaging in advocacy benefits the entire industry.
  • What’s next: MAA is holding its fifth annual Action Week this week. MAA Action Week is a national, industrywide campaign aimed at growing MAA and activating real estate finance professionals in key states and congressional districts. So far, CBRE, Grandbridge Real Estate Capital and NorthMarq have signed up to run campaigns.

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

3. New MBA-FHA Working Groups Announced

MBA announced two new Federal Housing Administration Working Groups that have been formed to address issues with the COVID-19 pandemic.

  • Multifamily Third-Party Site Inspection Working Group: This working group will work closely with vendors and the U.S. Department of Housing and Urban Development to address site inspection issues.
  • Multifamily 221(d)(4) Working Group: This working group will provide HUD with suggestions on multifamily underwriting policies when necessary and offer specific suggestions for underwriting mitigants for Section 221(d)(4) loans.

For more information, contact Sharon Walker at (202) 557-2747.

4. Federal Reserve Leaves Rates Unchanged; Discusses Economic Impact of COVID-19

Last Wednesday, the Federal Reserve said it would maintain its current interest rate target between 0% and 0.25%, and will likely keep it there until the U.S. economy shows marked improvement from the fallout of the current COVID-19 pandemic.

  • Why it matters: Since March, the Fed has enacted two emergency rate cuts and several separate programs aimed at providing market liquidity and getting loans to businesses and consumers.
  • In a statement sent to the media and picked up by The Washington Post and others, MBA Chief Economist Mike Fratantoni said, “The Federal Reserve has pulled out all the stops to help the economy and financial markets weather the current pandemic. In their statement, they made clear that supports would remain in place until the economy regains full employment and inflation trends return to normal. Of note to the mortgage industry, while they did not specify a pace for agency MBS and CMBS purchases, they did highlight that, ‘the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning.’ It is clear they want their actions to result in lower rates for mortgage borrowers, and recognize that this can only happen in the context of orderly markets. We expect that they will continue to modulate their purchases over the next few weeks, so long as markets remain stable.”

For more information, contact MBA’s Research team.

5. New York Lawmakers Introduce Bill to Provide Rent Waivers and Mortgage ‘Forgiveness’

New York lawmakers recently introduced Senate Bill 8124 A, which would suspend rent payments for residential tenants and certain small-business commercial tenants for 90 days. The bill would also provide 90 days of “forgiveness” for all residential and commercial small-business mortgage borrowers. In addition, the bill would automatically renew residential and small-business commercial leases. The New York Legislature will likely meet soon to consider this legislation.

Last week, the New York City Council announced it will be considering a bill that would prohibit sheriffs and marshals from evicting residential and commercial tenants.

  • Why it matters: MBA is concerned this bill could present significant financial hardship to landlords and violate property rights.
  • What’s next: MBA is working with local trade associations to oppose this legislation.

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

6. Maryland Lawmakers Sign Letter to Governor Requesting a Cancelation of Residential Rent Payments

Last week Maryland delegates sent a letter to Governor Larry Hogan asking him to cancel rent and mortgage payments for businesses and residents affected by the COVID-19 pandemic.

The letter also asked the Governor to “take executive action to require renewal of expiring leases, prohibit rent increases and late fees, and require that landlords negotiate reasonable, long-term payment plans. Finally, the undersigned urge the creation of a robust housing relief fund for renters and homeowners alike.”

  • Why it matters: MBA is concerned this bill could present significant financial hardship to landlords and harm the real estate finance market.
  • What’s next: MBA is working with local trade associations to oppose this legislation.

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

7. State Action Continues to Allow Remote Notarizations

Recently, Massachusetts Governor Charlie Baker signed S.2645 into law, which temporarily suspends the in-person requirement for notarial acts. The bill is consistent with recent executive orders in other states that enable Remote-Ink Notarizations, which are separate and distinct from Remote Online Notarizations because although the attestation is completed using audiovisual technology, the principal is still required to mail a copy of the original document to the notary public. The law is effective until three business days after the termination of the state of emergency.

The Massachusetts Mortgage Bankers Association was integral in getting this legislation passed. Additionally, on Thursday, Alaska Governor Mike Dunleavy signed HB 124 into law, which enables the use of RON in the state. Alaska becomes the 24th state to adopt RON. The bill is consistent with the national models for RON adoption.

  • Why it matters: As states continue to pass executive orders to allow RIN, the preferred method for remote notarizations for the industry is still RON because it provides legal certainty by adhering to a set of minimum standards for implementation.
  • What’s next: MBA recently developed a webinar to educate lenders on how to properly implement the necessary processes to use RON, which can be found here. For more information on RON, please visit MBA’s RON Resource Center; for a list of RON providers, please visit MISMO’s updated Digital Mortgage Resource Center.

For more information, contact Kobie Pruitt at (202) 557-2870 or Grant Carlson at (202) 557-2765.

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