CREF Policy Update Dec. 23, 2021

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

Last Tuesday, President Joe Biden nominated Acting Director Sandra L. Thompson to permanently lead the FHFA, and the U.S. Senate confirmed Alanna McCargo to serve as President of Ginnie Mae. On Tuesday, both the House and the Senate passed legislation to increase the debt ceiling, enabling the president to sign the measure into law. And on Tuesday, the OCC issued a final rule rescinding its June 2020 CRA rule.

And late last week, President Biden publicly acknowledged that Senate Democrats are still weeks away from being able to finalize the details of their companion version of a tax and reconciliation package, quelling the prospect of enactment of a renegotiated Build Back Better Act prior to year’s end. 

1. Biden Administration to Nominate Sandra Thompson for FHFA Director

This week, the Biden Administration announced its nomination of Sandra Thompson to be the next Director of the Federal Housing Finance Agency (FHFA). Thompson assumed the role of Acting Director at FHFA in June and previously served as Deputy Director of the Division of Housing Mission and Goals, which oversees FHFA’s housing and regulatory policy, capital policy, financial analysis, fair lending and all mission activities for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Prior to joining FHFA, Thompson worked at the Federal Deposit Insurance Corporation (FDIC) for more than 23 years in a variety of leadership positions, most recently as Director of the Division of Risk Management Supervision. 

• Why it matters: In response to the White House announcement, MBA President and CEO Bob Broeksmit, CMB, stated: “Thompson’s in-depth expertise as a regulator and her experience in real estate finance makes her a great choice to lead FHFA. Since assuming the position of Acting Director in June, Thompson has addressed several topline issues, including reversing the adverse market refinance fee, calling for the continuation of pandemic-related flexibilities, enhancing the GSEs’ new refinance programs for low-income borrowers, and overseeing the GSEs’ mission of creating equitable and sustainable solutions for affordable housing and rental opportunities.”
• What’s next: As the Senate considers Thompson’s nomination in the coming months, MBA looks forward to our continued work with FHFA to ensure a stable and robust secondary mortgage market for a wide variety of single-family and multifamily lenders.

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

2. Congress Passes Legislation to Increase the Debt Ceiling  

Last week, the House and the Senate passed (and President Joe Biden signed) a one-time-only, procedural bill that allowed for the Senate to subsequently pass a motion to proceed to the actual debt limit increase proposal (as well as final passage) by a simple majority threshold. On Tuesday, the House and Senate along party lines passed a $2.5 trillion debt ceiling increase, which congressional Democrats hope will “punt” the issue until 2023 and spare them from revisiting the topic ahead of the 2022 midterm elections. Treasury Secretary Janet Yellen had previously provided a December 15 deadline before her agency could no longer take “extraordinary measures” to continue meeting U.S. debt obligations.

• Why it matters: Given the more than $8.6 trillion in mortgage debt backed by the federal government through Fannie Mae, Freddie Mac, Ginnie Mae, and other federal agencies, the housing and real estate markets are particularly susceptible to any instability stemming from concern about the United States meeting its financial obligations. MBA previously led an industry coalition letter to support an increase in the debt ceiling.
• What’s next: The Build Back Better Act (BBBA) remains the principal major unresolved issue Congress has yet to address prior to the end of the year. Yesterday, President Biden publicly acknowledged Senate negotiations on the BBBA proposal would “take weeks” and extend into next year.

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

3. OCC Publishes Final Rule Rescinding 2020 CRA Overhaul

On Tuesday, the Office of the Controller of the Currency (OCC) issued a final rule rescinding its June 2020 Community Reinvestment Act (CRA) rule.

• Why it matters: In October, MBA submitted comments to the OCC that supported rescinding the 2020 rule and provided recommendations to the OCC on what elements of the 2020 rule should – and should not – be included in the agency’s future proposal, with a focus on regulatory changes affecting commercial and multifamily lending.
• What’s next: MBA will follow the banking agencies’ eventual adoption of a new joint CRA rule and will work with members to analyze any new proposals and develop comments.

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

4. Alanna McCargo Confirmed as Ginnie Mae President

Earlier this week, the U.S. Senate confirmed Alanna McCargo to serve as President of Ginnie Mae. MBA had supported McCargo’s nomination, and upon her confirmation, MBA President and CEO Bob Broeksmit, CMB, released a statement applauding the Senate’s action and noting McCargo’s “experience, knowledge of housing issues, and strong working relationships with a wide array of stakeholders.”

• Why it matters: McCargo, who has held prior roles at the U.S. Department of Housing and Urban Development (HUD), the Urban Institute, CoreLogic, JPMorgan Chase, and Fannie Mae, is a well-respected industry leader. She will be the first confirmed Ginnie Mae President in several years and will lead the agency’s efforts to facilitate a vibrant secondary market for government-backed loans.
• What’s next: MBA will continue its strong relationship with Ginnie Mae, advocating on issues related to mortgage servicing right (MSR) liquidity, issuer capital and liquidity requirements, and the agency’s modernization initiatives.

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

5. FDIC Highlights Performance of Commercial Real Estate Sector During Pandemic

Today, the Federal Deposit Insurance Corporation (FDIC) issued an FDIC Quarterly captioned, “Commercial Real Estate: Resilience, Recovery, and Risks Ahead.” The paper notes that, while CRE market conditions improved with economic recovery in 2021, some parts of the commercial real estate industry may experience lasting changes, including retail and office. The paper also noted that, “The pandemic initially looked like it would significantly challenge banks’ commercial real estate loan quality, but loan delinquency rates remained low through third-quarter 2021 against the backdrop of economic rebound, stimulus support, and loan forbearance.”

• Why it matters: The first section of the paper analyzes the five major CRE property types – multifamily, industrial, lodging, retail, and office – and the conditions evident in each since the onset of the pandemic. In the second section, it discusses FDIC-insured institution exposure to CRE loans, credit quality, and potential challenges ahead.
• What’s next: MBA will continue to monitor regulatory views on the state of commercial real estate and on the risks of commercial real estate lending.

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

6. FHFA Releases Proposal on GSE Capital Planning

On Thursday, the Federal Housing Finance Agency published a proposed rule requiring Fannie Mae and Freddie Mac (the GSEs) to “develop, maintain, and submit annual capital plans.” The proposal addresses several actions the GSEs must take to assess and report on their capital adequacy, including projections of revenues, expenses, losses, reserves, and capital levels under a range of scenarios.

• Why it matters: This proposed rule follows a series of steps FHFA has taken in recent years – under varying leadership teams – to increase the quantity and improve the quality of the GSEs’ capital buffers. An improved capital framework is one of the many steps MBA and other stakeholders have recommended prior to the GSEs being permitted to exit their conservatorships.
• What’s next: Comments on the proposed rule will be due to FHFA 60 days after publication in the Federal Register.

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

7. Oregon Legislature Approves $214 Million in Additional Rental and Housing Assistance  

On Monday, in a special legislative session, the Oregon Legislature approved $214 million in funding, focused largely on tenant assistance.

• Why it matters: The legislature convened in part to address the state’s emergency rental assistance program, which stopped accepting applications for emergency rental assistance last Wednesday because the state had allocated all available emergency rental assistance funds.
• What’s next: Lawmakers previously approved $100 million to replenish the state’s emergency rental assistance program, $100 million to create a statewide system of more localized eviction-prevention services, and $14 million for affordable housing and homelessness-prevention programs in the state’s 14 largest cities.

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

8. FSOC Releases 2021 Annual Report

On Friday, the Financial Stability Oversight Council (FSOC) published its 2021 Annual Report. The report provides an overview of actions taken by FSOC in 2021, an update on U.S. economy and regulation, and a series of recommendations to promote U.S. financial stability. The recommendations outlined in the annual report focus on climate-related financial risk, digital assets, LIBOR transition, and cyber security. The report also addresses commercial real estate, among many other topics.

• Why it matters: FSOC’s report outlines recommendations to federal agencies that could impact CREF.
• What’s next: MBA will review the report and analyze its implications for commercial and multifamily real estate lending.

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

9. ESG/CLIMATE RESOURCES

FSOC Formally Establishes Climate-related Financial Risk Committee

On Friday, per the recommendation outlined in FSOC’s Report on Climate-Related Financial Risk, FSOC voted to create a new staff committee: the Climate-related Financial Risk Committee (CFRC). CFRC will work to identify priority areas for assessing and mitigating climate-related risk to the financial system, increase information sharing, assist in developing common standards, taxonomy, and approaches, and increase communication across FSOC members and other agencies on climate-related issues. FSOC was created under Dodd-Frank to monitor system risk to the U.S. financial system and consists of federal and state financial regulators and an independent insurance expert appointed by the president.

• Why it matters: The CFRC will examine climate-related financial risk in all sectors of the financial system, including CREF.
• What is next: MBA staff will continue to monitor federal regulators for additional implementation of recommendations outlined in FSOC’s report on Climate-Related Financial Risk.

OCC Announces Principles for Climate-Related Financial Risk Management

On Thursday, the Office of the Comptroller of the Currency (OCC) announced draft principles to support the identification and management of climate-related financial risks for banks with more than $100 billion in consolidated assets. The principles are intended “to support banks’ efforts to focus on key aspects of climate-related financial risk management and provide a high-level framework for climate-related financial risk management consistent with existing OCC rules and guidance.” The OCC is seeking feedback through February 14, 2022.

• Why it matters: OCC will use this feedback to inform future guidance on climate-related financial risk.
• What’s next: MBA staff will review the OCC’s newly released climate-related principles to determine impact on our commercial and multifamily members.

SEC Commissioner Speaks on Climate Pledges and Net Zero

On Tuesday, U.S. Securities and Exchange Commission (SEC) Commissioner Caroline Crenshaw gave remarks at a virtual event hosted by the Center for American Progress and the Sierra Club, stating that the SEC is examining enhanced disclosure requirements related to “net-zero” and climate change. At the event, Commissioner Crenshaw stated, “[W]hile net-zero emissions pledges are an important step forward, they underscore the loud, repeated, and sustained calls for decision-useful metrics – metrics calculated using reliable and comparable methodologies that enable investors to decide whether the companies mean what they say.” Crenshaw issued these remarks in relation to the SEC’s ongoing work to enhance climate-related disclosures for companies that file with the SEC.

• Why it matters: Commissioner Crenshaw’s remarks provide further insight into what future SEC climate-related disclosure guidance may look like.
• What’s next: The SEC is expected to issue enhanced climate-related disclosure guidance sometime early next year. 

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

10. Every Major Investor Group Increased Holdings of Commercial/Multifamily Mortgage Debt in the Third Quarter of 2021         

The level of commercial/multifamily mortgage debt outstanding increased by $64.8 billion (1.6%) in the third quarter of 2021, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report, released yesterday.

• What it says: Total commercial/multifamily debt outstanding rose to $4.05 trillion at the end of the third quarter. Multifamily mortgage debt alone increased $26.6 billion (1.5%) to $1.8 trillion from the second quarter of 2021. Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $885 billion (50%), followed by banks and thrifts with $496 billion (28%), life insurance companies with $177 billion (10%), state and local government with $106 billion (6%), and CMBS, CDO and other ABS issues holding $55 billion (3%). Non-farm, non-corporate businesses hold $20 billion (1%).
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “Every major investor group increased their holdings of commercial and multifamily mortgages during the third quarter, as many property types have healed considerably since the shutdowns at the onset of the COVID-19 pandemic in early 2020. Strong interest from both borrowers and lenders is likely to continue to drive increases in commercial and multifamily mortgage debt in 2022.”

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

11. 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.

12. [WATCH]: mPower Moments: On Increasing Diversity, Calculated Risk with Teresa Bryce Bazemore of FHLB SF

In this episode of mPower Moments, mPower Founder Marcia M. Davies chats with Teresa Bryce Bazemore, President and CEO at the Federal Home Loan Bank of San Francisco.

• Why it matters: During the insightful interview, Bazemore explains why recruiting more women and people of color right out of college will improve diversity in the industry. She also shares why “putting yourself out there” and taking calculated risks will help you grow and advance in your career.
• What’s next: To watch more mPower Moments, click here.

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

13. Upcoming 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 webinars – which are complimentary to MBA members:

• Ten Things Your Company Must Do in 2022 – January 12
• The Climate Change Imperative: Exploring the Role of Residential Lenders and Servicers – January 18
• DUS Multifamily Asset Management Perspectives – January 19
• Winning Game Plan for Improving “B” Originators – January 25
• Successful Recruiting in a Changing Marketplace – February 10
• Combating Multifamily Real Estate Financial Crimes and Fraud – March 10

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

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