CREF Policy Update Sept. 2, 2021

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

the U.S. Supreme Court lifted the latest CDC ban on residential evictions in a 6-3 decision. On Tuesday, the full House of Representatives voted along party lines to adopt a $3.5 trillion budget resolution framework for fiscal year 2022. On Wednesday, the U.S. Treasury Department announced seven additional policies intended to expedite the distribution of Emergency Rental Assistance. And CFPB officials told MBA on Wednesday that on September 1 they intend to propose a rule for reporting on loans to small businesses.

Finally, we encourage you to participate in a new DEI survey. See below for more information.

U.S. Supreme Court Strikes Down the CDC Eviction Moratorium  

Late Thursday night, the U.S. Supreme Court lifted the latest Centers for Disease Control and Prevention (CDC) ban on residential evictions in a 6-3 decision. The majority opinion said the CDC had exceeded its authority by issuing earlier this month a new evictions ban through October 3, 2021.

• Why it matters: While the court has invalidated the CDC’s national eviction moratorium, some state eviction moratoriums are still in effect. MBA provides a weekly member resource of these moratoriums, which can be accessed here.
• What’s next: MBA opposes efforts – legislative or non-legislative – to extend the CDC’s eviction moratorium, given the $46 billion in Emergency Rental Assistance (ERA) available, and will continue to provide recommendations to improve the distribution of emergency rental assistance to help landlords and tenants in need and stabilize the multifamily housing market.

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

House Clears First Hurdle to Advance $3.5 Trillion Budget Resolution
On Tuesday, the full House of Representatives voted along party lines to adopt a $3.5 trillion budget resolution framework for fiscal year (FY) 2022, clearing a procedural hurdle to advancing key Biden administration tax priorities The budget resolution passed within a House rule that also allows for a floor vote on the Senate-passed bipartisan infrastructure bill by September 27. House and Senate committees are now preparing to finalize legislation within their respective policy jurisdictions to include as part of a reconciliation package.

• Why it matters: The budget resolution framework set the stage for large potential investments in public, green/sustainable, and affordable housing to be offset by a series of proposed tax changes, including several that would directly impact the commercial/multifamily real estate industry. Democrats only need a simple majority in both chambers of Congress to pass a final bill via the reconciliation process.
  
  
• What’s next: House and Senate committees will begin finalizing legislation in earnest in the coming days and weeks, with congressional leaders giving committees a September 15 target deadline to develop their portions of the reconciliation bill. Mortgage Action Alliance (MAA) members need to take action TODAY to urge Congress to preserve industry tax priorities that support real estate investment.

For more information, please contact Borden Hoskins at (202) 557-2712 or Alden Knowlton at (202) 557-2741.

CFPB to Require Reporting on Loans to Small Businesses

In a meeting with MBA on Wednesday, officials of the Consumer Financial Protection Bureau (CFPB) indicated that the CFPB intends to propose a rule for reporting on loans to small businesses on September 1. The proposal will implement section 1017 of the Dodd-Frank Act, which requires lenders to collect and report information in connection with applications for credit by small businesses and by women- and minority-owned businesses.

• Why it matters: The rules will apply to applications for commercial and multifamily loans by small businesses. An outline of proposals and alternatives the CFPB’s small-business advisory review panel considered is available here.
  
  
• What’s next: The notice of proposed rulemaking (NPRM) will provide a comment period of 90 days from the date it is published in the Federal Register. MBA will be working to propose exemptions and otherwise reduce the reporting burden this new reporting requirement will impose on our members.

For additional information, or to participate in the member working group that will be developing MBA’s response to the proposal, please contact Bruce Oliver at (202) 557-2840.

Treasury Releases Updated Emergency Rental Assistance Guidance

On Wednesday, the U.S. Department of the Treasury announced seven additional policies intended to expedite the distribution of Emergency Rental Assistance (ERA).

• Why it matters: The new guidance clarified that states and localities can use self-attestation for initial applications by tenants to expedite applications. Treasury also clarified that funds can be advanced while applications are still being processed for tenants at risk of eviction.

• What’s next: States and local governments must distribute a substantial amount of their ERA funds by September 30, 2021, or these funds are at risk of being returned to Treasury.

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

Lawmaker Continues to Pressure HUD Over FHA Multifamily Processing Delays
On Monday, Rep. Roger Williams (R-TX) sent a letter to U.S. Department of Housing and Urban Development (HUD) Secretary Marcia Fudge following up on his questions from a House Financial Services Committee hearing held last month. During the July hearing, Rep. Williams asked Sec. Fudge about the lags in the Federal Housing Administration (FHA) multifamily pipeline, including the six to 12 months’ wait time before an application is assigned to an underwriter. His follow-up letter asked HUD what specific actions the Department is taking to address the delays, and if FHA has considered hiring additional contractors or diverting applications to other processing channels. A copy of the letter can be found here.

• Why it matters: The letter reiterates Congress’ interest in the issue and provides an opportunity for HUD to respond in writing documenting the actions it is taking or plans to take.
  
  
• What’s next: HUD is expected to respond in the coming weeks, and MBA will continue education and outreach to apply pressure for a resolution to the problem.     

For more information, please contact Borden Hoskins at (202) 557-2712 or Alden Knowlton at (202) 557-2741.

MBA and New York MBA Urge New York Governor to Focus on Key Industry Priorities

This week, as Kathy Hochul was sworn in as New York’s 57^th Governor, MBA and the New York MBA delivered a letter providing guidance to the new governor and her team on critical issues they will face in the coming weeks that affect the real estate finance industry.

• Why it matters: The letter urged Governor Hochul to make every effort to distribute federally allocated rental and homeowner assistance funds, sign remote online notarization (RON) legislation, and exclude a new proposed tax and recording of mezzanine debt and preferred equity investments from the forthcoming 2022-23 state budget.

• What’s next: MBA and the New York MBA asked to meet with Governor Hochul’s new team to learn how the associations can cooperate with the administration in supporting the expansion of affordable homeownership and rental housing, as well as exploring ways to expand commercial real estate opportunities for New York businesses.

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

FDIC Publishes Working Paper on Construction Loans

On Wednesday, the Federal Deposit Insurance Corporation (FDIC) published a working paper entitled, “Determinants of Losses on Construction Loans: Bad Loans, Bad Banks, or Bad Markets?” The paper explores loan-level data for more than 15,000 conduction loans from 2008 to 2013 to identify key factors underlying the credit risk of construction lending.Among its findings,the paper discovered close ties between loss rates and certain loan characteristics, as well as of market conditions both at and after origination. Institution-level differences across banks appear less important. Also, the paper found that the risk of higher losses on construction loans is influenced not only by the originating bank’s behavior but also by the behavior of other local lenders in the market.

• Why it matters: The paper states that its findings have important implications for how lenders and regulators manage risk through the real estate cycle. It also found support for existing regulatory guidance regarding higher capital requirements for construction loans, specifically for land and lot development loans.
• What’s next: The findings in the paper will inform how supervisors view financial institutions’ management of construction credit risk.

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

State Trackers

• State eviction moratorium and legislative activity tracker available here.

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

Climate/ESG Updates

SEC Highlights ESG-Related Focus on Human Capital Disclosures

On August 18, U.S. Securities and Exchange Chairman Gary Gensler reaffirmed that the SEC is considering a human capital disclosure requirement for companies. Chairman Gensler stated that human capital disclosures “could include a number of metrics, such as workforce turnover, skills and development training, compensation, benefits, workforce demographics including diversity, and health and safety.” These disclosures are being considered as part of the SEC’s new environmental, social, and governance (ESG) disclosures expected to be released later this year or in early 2022. Chairman Gensler had recently addressed human capital disclosures as part of a speech at London City Week back in June of this year.

• Why it matters: Some, if not all, of the human capital disclosure standards mentioned above could be included as part of the SEC’s future proposed enhanced ESG disclosure requirements.

• What’s next: MBA staff will continue to track and analyze SEC statements and actions on ESG and climate change risk disclosures.

For more information, please contact Adrian Ballinger at (202) 557-2774.

Participate in the New Diversity, Equity and Inclusion (DEI) Study

Sign up today to participate in a new offering to MBA members – the Diversity, Equity and Inclusion (DEI) Study. The study is separately designed and compiled for both the residential and commercial/multifamily sides of the real estate finance industry, and is administered by world-class human resources advisory firm McLagan, part of Aon plc. All participating companies are encouraged to complete as many sections of the study template as possible on the following topics: Policy and Initiatives; Headcount by Mortgage Job Function; Headcount by EEO-1 Categories; and Headcount by Movement.  

• Why it matters: Over the past year, racial and gender inequalities have shaped our nation’s conversation, and MBA remains committed to supporting our member companies by forming solutions. Participating will give our industry a baseline from which to improve and to see how member companies compare to the industry as a whole.
• What’s next: Individual company data will be kept confidential in accordance with McLagan’s high standards. As a bonus, MBA members save $1,000 off the regular survey pricing. The general timeline is provided in the registration form, with data due back to McLagan in mid-September and results released in October 2021.

For specific information about the DEI Study, please email Dave Rosenthal at McLagan or call (203) 326-4349. For general questions, please contact MBA Research members Marina Walsh at (202) 557-2817 or Jamie Woodwell at (202) 557-2936.

Webinar: Tax Advocacy Tuesdays at Two Thirty Returns in September

MBA’s next update takes place Tuesday, September 14, at 2:30 PM ET

• Why it matters: As the Biden administration and Congress negotiate on disclosed plans for trillions of dollars in new taxes and government spending, MBA is actively engaging policymakers on the proposals under consideration that would impact real estate finance. Get real-time insights and analysis on policy developments that significantly impact the commercial/multifamily finance ecosystem. Rotating MBA staff, members, and invited guests will share information, answer questions, and ensure you are well-informed and active participants in helping achieve the industry’s advocacy objectives.
  
  
• What’s next: This series will be offered through fall 2021 as developments dictate. It is closed to press. You may register for the entire series here.

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

Upcoming and Recent MBA Education Webinars on Critical Industry Issues

MBA Education continues to deliver timely programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:

• Budgeting and Financial Planning for Non-Believers – September 9
• Introduction and Walkthrough of MISMO’s Enhanced Logical Data Dictionary (LDD) – October 6

MBA members can register for any of the above events and view recent webinar recordings here.

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