CREF Policy Update Aug. 12, 2021

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

Last Tuesday the CDC issued a new order temporarily halting residential evictions through October 3, 2021, in counties with “heightened levels of community transmission.” The Senate Banking Committee held a hearing on several housing nominees last week including Julia Gordon to be HUD’s Assistant Secretary of Housing and FHA Commissioner. The Committee also held a hearing featuring testimony from prudential regulators. And the Senate rushed to conclude its debate on a bipartisan infrastructure agreement as a prelude to a tax and budget reconciliation debate.

1. CDC Issues New Residential Eviction Moratorium Through October 3, 2021

Last week the Centers for Disease Control and Prevention (CDC) issued a new order temporarily halting residential evictions through October 3, 2021, in counties with “heightened levels of community transmission.” The new order comes after the most recent nationwide eviction moratorium expired on July 31, 2021, and is intended to “target specific areas of the country where cases are rapidly increasing, which likely would be exacerbated by mass evictions.” Given current COVID-19 case counts, this would cover a substantial part of the country.

• Why it matters: MBA opposed any potential attempts by Congress last week to legislatively extend the CDC’s evictions moratorium and does not believe this ruling is appropriate, given the $46 billion in Emergency Rental Assistance (ERA) available. On Wednesday afternoon, MBA signed onto a joint coalition statement expressing this position, while also urging the Biden administration to work with Congress, states, and localities to help disburse rental assistance funds to landlords and tenants.  
• What’s next: Late Wednesday, the Alabama and Georgia associations of Realtors® filed an emergency motion with Judge Dabney Friedrich of the U.S. District Court for the District of Columbia, asking her to enforce the U.S. Supreme Court’s recent order that the CDC could not extend the moratorium without new legislation. The CDC had until this morning to submit a response to the motion Judge Friedrich ordered on Thursday. The plaintiffs have until 9 p.m. ET this evening to file their response. MBA will continue to follow developments regarding the CDC’s new eviction moratorium, including any challenges by state and federal courts.

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

2. Senate Banking and Housing Committee Holds Hearing on Housing Nominees

On Thursday, the Senate Banking and Housing Committee held a hearing on the nominations of Julia Gordon to be HUD’s Assistant Secretary of Housing and Federal Housing Administration (FHA) Commissioner, David Uejio to be HUD’s Assistant Secretary for Fair Housing and Equal Opportunity, and Solomon Greene to be HUD’s Assistant Secretary for Policy Development and Research.

Several senators referenced MBA’s support for Gordon’s nomination in their remarks. A summary of the hearing can be found here. Prior to the hearing, Ranking Member Pat Toomey (R-PA) sent a letter, signed by all Republican committee members, calling into question Greene’s and Gordon’s qualifications to serve based on their past public statements regarding the need for policing reforms. While addressing these statements took up much of the hearing, the nominees were also able to address significant housing and real estate finance policy issues.

• Why it matters: If confirmed, the three nominees (particularly Gordon) will play leading roles in implementing the Biden agenda for regulating real estate finance. The hearing revealed a shared interest in helping to ensure single-family borrowers who use FHA loans remain competitive in a very active housing market.
• What’s next: The partisan divide over all three nominations indicates a slower path to their Senate confirmation, with committee votes likely to occur only after the August recess.

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

3. Fed Issues Solicitation for Membership on the Insurance Policy Advisory Committee

On Thursday, the Board of Governors of the Federal Reserve System (Board) published a solicitation in the Federal Register for statements of interest for membership on the Insurance Policy Advisory Committee (IPAC). IPAC members are appointed to staggered 3-year terms.

• Why it matters: The IPAC advises the Board on insurance matters and international capital standards.
• What’s next: Submissions are due to the Board by October 4, 2021.

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

4. MBA Submits Comments on GSE Executive Compensation Policies

This week, MBA submitted recommendations to the Federal Housing Finance Agency (FHFA) in response to its request for input (RFI) on executive compensation policies at Fannie Mae and Freddie Mac (the GSEs), as well as the Federal Home Loan Banks. The MBA letter emphasizes the need to strike the appropriate balance between the GSEs (1) offering a level of compensation that will attract and retain talented executives with industry expertise; and (2) implementing a compensation structure with incentives that encourage prudent risk management and financial stewardship. MBA further argues that the GSEs should be permitted to offer attractive compensation packages that are competitive with similar private sector entities, while being required to structure that compensation in a manner that is aligned with the GSEs’ public interest goals: safe and sound operations and a continued focus on affordable housing duties and missions.

• Why it matters: Establishing appropriate executive compensation is essential to retaining human capital and reducing turnover among senior officials at the GSEs, and could help promote innovation and contribute to the organizational stability of the GSEs.
• What’s next: MBA will continue to engage with the new FHFA leadership on this topic and other important housing finance issues.

For more information, please contact Sasha Hewlett at (202) 557-2805.

5. 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.

6. CLIMATE/ESG Updates

MBA Green Lending Roundtable Holds Monthly Meeting

On Thursday, MBA hosted a virtual meeting of its Green Lending Roundtable that featured discussion on a potential survey of green lending activity in the commercial lending space and a presentation by MBA staff on environmental, social, governance (ESG) and climate-related disclosures. MBA members discussed various priorities to be included in the green lending survey and MBA staff gave a presentation on the future climate and ESG disclosure framework expected later this year or early next. The Green Lending Roundtable consists of MBA members who work together to gather and share information on emerging investor expectations and appetites on climate risk and ESG, and to identify policy and other trends and conditions in climate and ESG investing.

• Why it matters: Members are encouraged to participate in the green lending survey and collaborate with MBA staff on ESG- and climate-related policy initiatives.
• What’s next: MBA’s Green Lending Roundtable meets monthly.

NYDFS Releases Report on Insurer Management of Climate Risk

On July 28, the New York Department of Financial Services (DFS) released a report analyzing New York domestic insurers’ management of climate-related risks. The report is based on responses to the National Association of Insurance Commissioners’ (NAIC) Climate Risk Disclosure Survey and Task Force on Climate-Related Disclosures reports. The DFS report was compiled in response to feedback from insurers indicating that they would benefit from knowing more about how others in the domestic insurance industry manage climate risks. Among several provisions, the report highlights good practices insurers are taking to consider climate change in risk management and how insurers are incorporating climate risk in their own governance structures. In March 2021, the DFS released proposed Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change, and in April 2021, the DFS released another report on transition risks and opportunities in climate change.

• Why it matters: The DFS stated it will use the responses to identify insurers that appear to lag compared to their peers in managing climate risk.
• What’s next: MBA staff will continue to monitor state and federal regulator actions as they pertain to managing climate-related risk.

For more information or to get involved in climate and ESG policy, please contact Adrian Ballinger at (202) 557-2774.

7. Financial Regulators Testify Before Senate Banking and Housing Committee

On Tuesday, the Senate Banking and Housing Committee held a hearing titled, “Oversight of Regulators: Does our Financial System Work for Everyone?” The Committee heard from the leadership of the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and National Credit Union Association (NCUA). Senators focused their comments and questions around efforts to: (1) promote financial inclusion; (2) regulate financial technology (fintech) while enabling innovation; (3) modernize the Community Reinvestment Act (CRA); and (4) address future risks to the financial system. Chairman Sherrod Brown (D-OH) asked whether the OCC agrees with the Federal Reserve’s commitment to a comprehensive CRA modernization, questioning what the timeline of action may be. Acting Comptroller Michael Hsu affirmed the agency’s commitment and stated there is “a lot of urgency,” though the timing remains in flux. Ranking Member Pat Toomey (R-PA) also asked Hsu to commit to retaining principles of “clarity, objectivity, and transparency” in the OCC’s CRA updates — which he did. Senator Bob Menendez (D-NJ) advocated for more diversity among senior leadership, not just new hires. He questioned whether the regulators had internal goals on voluntary diversity reporting under the CRA, which all witnesses noted they did not have.

• Why it matters: The regulators outlined their respective actions and the financial sector’s resilience in light of the COVID-19 pandemic, as well as highlighted their ongoing initiatives to ensure the financial system works for everyone.
• What’s next: MBA will continue to monitor congressional hearings for indications of future legislation or regulatory actions that impact our members.

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

8. Fewer Households Missed Housing Payments in the Second Quarter of 2021

On Wednesday, MBA’s Research Institute for Housing America (RIHA) released a second-quarter 2021 update of its study, “Housing-Related Financial Distress During the Pandemic.” The study contains innovative household survey data on rent, mortgage, and student loan payment patterns from the Understanding America Study (UAS), an internet panel survey of over 8,000 households specially tailored to analyze the impact of the pandemic.

• What it says: Slightly under 5 million households did not make their rent or mortgage payments in the second quarter of 2021. The report found that 8.6% of renters (2.86 million households) missed, delayed, or made a reduced payment in June 2021, while 4.6% of homeowners (2.19 million) missed their mortgage payment. In addition, 28 million student debt borrowers (44.8%) missed payments, up from 26 million in March. 
• Gary V. Engelhardt, author of the report and Professor of Economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University, said, “Given the level of government support during the pandemic and the more recent improvements in the economy and labor market, it is quite possible that the observed levels of rental non-payments may be at or close to pre-pandemic levels. However, the recent rise in COVID-19 cases, and elevated inflationary pressures, could slow economic growth and hiring. These potential headwinds could also impact households still facing hardships.”

For more information, please contact Eddie Seiler at (202) 557-2739.

9. Commercial and Multifamily Mortgage Delinquencies Declined in July        

Delinquency rates for mortgages backed by commercial and multifamily properties declined in July, hitting the lowest point since the onset of the pandemic, according to the release yesterday of MBA’s latest monthly CREF Loan Performance Survey. The survey was developed to better understand the ways the COVID-19 pandemic is impacting commercial mortgage loan performance.

• What it says: Loans backed by lodging and retail properties continue to see the greatest stress, but did show improvement last month.
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “Loan performance continues to be very property-type-dependent, with lodging loans still the hardest hit but showing strong improvement. Office properties saw a decline in overall delinquencies but an uptick in loans that are newly delinquent. The strength of the economy should continue to support most property types in the coming months.”

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

10. Are You a Diversity Champion? Apply for MBA’s DEI Leadership Awards

MBA’s DEI Leadership Awards are back! Now in its sixth year of recognizing MBA member companies, this award program acknowledges the dedication and creativity that increase DEI efforts within a company’s leadership and employee base. If your organization is a champion of diversity, share how you are inspiring change and highlight your success by applying today.

• What’s next: Applications are due August 13, 2021. Prior to getting started, please review application tips to help you prepare your entry.

For more information, please contact MBA’s DEI Team.

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:

• C-PACE Financing 101: A Commercial/Multifamily Lender’s Overview – August 12
• Commercial/Multifamily: Core and Non-Traditional Sector Outlooks and Mortgage Risk – August 17
• Bank-Owned Mortgage Divisions: What Bankers Need to Know to Manage Mortgage Banking – August 26
• 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.