CREF Policy Update Feb. 25, 2021

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

On Wednesday, MBA joined a coalition letter to the Senate Banking Committee urging lawmakers to support efforts to ensure the continued viability and stability of our nation’s rental housing communities. Also this week, FHFA released its 2021 Scorecard, which includes initiatives related to GSE capital retention, level playing field standards, housing market reform, and the response to the COVID-19 pandemic. And on Tuesday, MBA submitted comments on the Advance Notice of Proposed Rulemaking issued by the Federal Reserve Board last September on the Community Reinvestment Act. In addition, MBA and ACLI sent a joint letter this week to the NAIC supporting an extension of TDR guidance for risk-based capital; ACLI and MBA have revised the proposal to change the NAIC RBC factors for real estate investments, and the NAIC proposed a single RBC designation for non-legacy CMBS. 

1. MBA Joins Trades Supporting Rental Assistance in Next Stimulus Bill

On Thursday, MBA joined 11 other trades in a letter to Senate leadership supporting the proposed $25 billion in additional rental assistance that is in the current House Financial Services Committee reconciliation bill. The letter acknowledges the positive impact that the $25 billion in rental assistance, direct assistance, and enhanced unemployment insurance provided within COVID-19 relief legislation enacted in December has had, but also highlights that this additional assistance (coupled with the other income supports) is necessary to continue to help tenants affected by the pandemic.

• Why it matters: The assistance provided in the prior COVID-19 relief package enacted in December will not likely provide enough support to help affected tenants get to the other side of the pandemic. Combined with the House proposal, the total stimulus may provide enough assistance to help renters and the multifamily housing industry through much of 2021.
• What’s next: MBA will continue to advocate for holistic forms of assistance to help affected renters, as well restaurants and other businesses hit hard by the pandemic.

For additional information, please contact Ethan Saxon at (202) 557-2913, Tallman Johnson at (202) 557-2866, or Bruce Oliver at (202) 557-2840.  

2. MBA and ACLI Letter Supports Extension of NAIC TDR RBC Relief

On Thursday, MBA and the American Council of Life Insurers (ACLI) sent a joint letter to the National Association of Insurance Commissioners (NAIC) Life Risk-Based Capital Working Group supporting an extension of the period covered by NAIC Trouble Debt Restructurings (TDR) guidance for risk-based capital (RBC) reporting. The letter responds to two alternative drafts of guidance to extend the TDR RBC guidance to the earlier of January 1, 2022, or 60 days after the end of the National Emergency. The exposures were responsive to a joint MBA/ACLI request to harmonize the periods covered by accounting and RBC reporting TDR guidance. The comment letter suggests ways to make the guidance more user-friendly and to automatically harmonize periods covered by accounting and RBC TDR guidance.

• Why it matters: NAIC accounting TDR relief has already been extended to January 1, 2022, but its TDR guidance for RBC reporting expired December 31, 2020.
• What’s next: The Working Group is scheduled to act on the exposures on a February 26, 2021, call.

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

3. NAIC Working Group to Consider Revised Proposal to Adjust Real Estate Investment RBC Factors

Today, ACLI will be submitting to the NAIC Life Risk-Based Capital Working Group a revised version of its proposal to adjust life company risk-based capital factors for direct and indirect investments in real estate. MBA participated in the revision process, which was intended to address questions and concerns regulators had raised in earlier presentations of the proposal to the Working Group. After several years with little progress, the proposal was reassigned earlier this year to the Life RBC Working Group, the same group MBA and ACLI have been working with to adopt COVID-19-related RBC guidance.

• Why it matters: The current RBC factors are too high (direct investment: current 15%, proposed 11%; indirect investment: current 23%, proposed 11%).
• What’s next: The Working Group is scheduled to resume consideration of the proposal on a February 26, 2021, call. The Working Group’s Chair has expressed its intention to complete consideration of the proposal in time for year-end 2021 reporting.

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

4. NAIC Proposes Single RBC Designation for Non-Legacy CMBS

On Thursday, the NAIC Valuation of Securities Task Force voted to expose a proposal to move to a single NAIC designation and NAIC designation category for all non-legacy securities. The single NAIC designation will be determined by comparing a bond’s intrinsic price against its intrinsic price mapping. Non-legacy securities are those financially modeled RMBS/CMBS securities that closed on or after to January 1, 2013.

• Why it matters: Moving away from financial modeling price breakpoints process for these non-legacy securities will avoid further and future market disruptions. It will also permit a clearer assessment of the credit risk assessment for these securities that will not be impacted by whether the life company purchased the securities at a premium. Making this change for only non-legacy securities preserves their historical treatment.
• What’s next: The proposed change will be exposed until March 20, 2021, and the Task Force will act on it at its meeting the following day.

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

5. MBA Submits Comments on the Fed’s CRA ANPR

On Tuesday, MBA submitted comments to the Federal Reserve in response to an Advance Notice of Proposed Rulemaking (ANPR) proposing changes to the Community Reinvestment Act (CRA). Among other recommendations, the letter urged the Fed to not unduly limit CRA credit for MBS purchases; to expand CRA qualification to unsubsidized (“naturally occurring”) affordable housing; to preserve CRA credit for LITHC investment, sponsorship, and syndication activity; to provide an ongoing list of qualifying CRA activities; and to establish a process for preclearing activities for CRA credit. 

• Why it matters: CRA is likely to be an area of interest during the Biden administration as it pursues more equitable housing options for renters and homeowners alike.
• What’s next: The Federal Reserve and other banking agencies are likely to be active over the next year or so, making adjustments to their CRA rules and, possibly, again engaging in joint agency rulemaking on CRA.

For more information, please contact Bruce Oliver at (202) 557-2840 or Grant Carlson at (202) 557-2765.

6. FHFA Releases its 2021 Conservatorship Scorecard

On Thursday, the Federal Housing Finance Agency (FHFA) released its 2021 Scorecard for overseeing conservatorship of the GSEs. Largely mirroring prior Scorecards, FHFA’s three GSE objectives for 2021 are: (1) focus on their core mission responsibilities; (2) operate in a safe and sound manner; and (3) prepare for their eventual exits from the conservatorships. In a change from the prior Scorecard, this version requires each GSE to begin resolution planning (“living wills”) and to implement capital management and capital planning capabilities to transition to the new GSE capital rules. Separately, last December, FHFA issued a notice of proposed rulemaking on resolution.

• Why it matters: MBA has raised concerns about the final GSE capital rules and their potential impacts, including those on multifamily lending and credit-risk transfer (CRT) activity.
• What’s next: The comment period for the proposed rules on resolution planning ends March 9, 2021. It is not clear when FHFA will resume quarterly classification of the GSEs’ capital levels applying the new GSE capital rules.

 For more information, please contact Bruce Oliver at (202) 557-2840 or Sharon Walker at (202) 557-2747.

7. Senate Banking Committee Hearing on The Coronavirus Crisis: Paving the Way to an Equitable Recovery

On Thursday, the Senate Banking Committee held a hearing on the economic impacts of the COVID-19 pandemic, where the issue of evictions was the focus of witness testimony and questions from lawmakers. Via his testimony and under questioning from Chairman Sherrod Brown (D-OH), Jyoshu Tsushima, Staff Attorney, Legal Aid Society of Columbus, described in detail the short- and long-term consequences of the eviction process in Ohio, including within ZIP codes with high levels of minority residents. Senator Jack Reed (D-RI) noted that one of the best forms of personal protective equipment (PPE) is “safe, affordable, housing,” and that the government’s cost to provide healthcare and support services increase because of homelessness.  

Newly elected Senator Jon Ossoff (D-GA) asked, “What are the forms of exploitation and abuse that the constituents and legal aid clients you serve are facing in this crisis?” In response, Youngstown, Ohio, Mayor Jamael “Tito” Brown opined that “both tenants and homeowners are scrambling to find funds.… Sometimes they don’t know what the consequences of not paying their mortgage or taxes are.” Senator Chris Van Hollen (D-MD) shared his concerns regarding “loopholes in the CDC eviction moratorium” and affirmed his very strong support for an additional $25 billion in emergency rental assistance.

• Why it matters: The testimony indicates a clear direction by Chairman Brown to focus the committee’s oversight work on economic racial disparities and the implementation of the CDC eviction moratorium.
• What’s next: MBA will continue to advocate for additional rental assistance and housing counseling to address the concerns raised at the committee hearing.

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

8. Federal Reserve Governor Brainard Speech on Climate Change

On Thursday, in a speech on climate, Federal Reserve Governor Lael Brainard said the “Future financial and economic impacts would depend on the frequency and severity of climate-related events and on the nature and the speed at which countries around the world transition to a greener economy.”

• Why it matters: The Biden administration has made addressing climate change a key administration goal and has recently appointed senior officials tasked with climate change at financial regulatory agencies. The Federal Reserve is also taking action to address climate change and its effect on the economy and financial markets.
• What’s next: FHFA recently issued a Request for Information (RFI) on climate change and natural disasters, for which MBA is working to provide comments.

For more information, please contact Bruce Oliver at (202) 557-2840 or Grant Carlson at (202) 557-2765.

9. State Updates

MBA’s State Remote Online Notarization Campaign Continues its Momentum

On Tuesday, MBA joined the MBA of Georgia and a coalition of industry representatives on a joint letter to urge Georgia policymakers to adopt remote online notarization (RON) legislation ( HB334) introduced by Georgia Rep. Joseph Gullett prior to a hearing on the bill. HB334 is consistent with the MBA-ALTA state model RON bill and the national consensus for RON adoption. New Mexico RON legislation (SB12) passed in its committee of original jurisdiction with a “Do Pass” recommendation as it goes for a state Senate vote. In Wyoming, the House and Senate passed legislation (SF29) that would enable both RON and remote ink notarizations (RIN). SF29 is consistent with MBA’s views on RON and includes the necessary provisions to protect consumer information and provide legal certainty. However, the bill also allows for the use of RIN, which MBA believes is a temporary measure created to address challenges created by the pandemic and typically enabled by state executive order. The bill requires RIN transactions to follow the same requirements as RON transactions to verify a principal’s identification, which mirrors the MBA-ALTA model for RON/RIN executive orders. Last week, Kansas legislators held a hearing on legistlation ( SB106) that would allow their constituents to use RON. The bill is consistent with the national standard for RON adoption.

• Why it matters: The pandemic has revealed the need to modernize our state laws to allow for the use of technology to serve consumer needs. RON is a tool that can help facilitate financial transactions in a safe and secure manner long-term.
• What’s next: There are currently 29 states with laws enabling RON, and MBA will continue to work with local partners to promote the adoption of RON in states without laws enabling its use.

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

Rhode Island Eviction Legislation Advances

This week, Rhode Island House Bill 5309 was referred to committee, which would place a moratorium on evictions during a state of emergency and create an eviction diversion program for tenants.

• Why it matters: The bill would place a moratorium on residential evictions during a state of emergency but would allow landlords to evict tenants if they are engaging in illegal activities or violations of the lease. In addition, landlords would be required to enter a 30-day mediation session with tenants before evictions can move to landlord-tenant courts.
• What’s next: The bill has been referred to the House Judiciary Committee for consideration. MBA is following the legislation and working with the Rhode Island MBA.

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

Other State Highlights

• Indiana: On Wednesday, Indiana lawmakers voted to override the Governor’s veto of legislation that pre-empts local governments for enforcing certain landlord-tenant laws. Senate Bill 148, passed by the 2020 General Assembly, prevents individual cities from taking action on landlord and tenant matters, including expedited evictions and regulating rental properties.
• New York: Among many other bills, a bill to tax mezzanine debt transactions remains in play.

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

10. 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:

• MAA Quarterly Webinar: February 2021 – February 25
• Achieving Touchless Mortgage Automation: Insights from Industry Experts – March 3
• Multifamily Real Estate Financial Crimes Training – March 10

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

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