CREF Policy Update Jan. 14, 2021

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

NAIC Task Force Proposes to Extend TDR Relief

Last Wednesday, the National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles Working Group (SAPWG) proposed to extend NAIC Troubled Debt Restructuring (TDR) relief to match the extension of TDR relief under the CARES Act. Specifically, the SAPWG voted to expose INT 20-03 – Troubled Debt Restructuring Due to COVID-19, and INT 20-07 – Troubled Debt Restructuring of Certain Instruments Due to COVID-19 for possible extension. Both exposure drafts are available on the Exposure Drafts tab of the SAPWG website.

• Why it matters: Current NAIC accounting interpretations for loan modifications expired December 31, 2020. The proposal would extend those interpretations to the earlier of January 2, 2022, or 60 days after termination of the national emergency.
• What’s next: The SAPWG has established a comment deadline of January 22. Depending on the nature of the comments received, it may elect to adopt the revisions via e-vote. MBA and the American Council of Life Insurers (ACLI) will, of course, be supporting the proposed extensions. We expect the extensions to be in place prior to the end of the first quarter of 2021.

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

2. Treasury Launches Rental Assistance Program and MBA Signs Letter Encouraging HUD and Treasury to Distribute Assistance Quickly 

Last Thursday, the U.S. Treasury Department announced it had launched a $25 billion rental assistance program with funds from the $900 billion coronavirus relief package enacted last week. Also on Thursday, MBA signed a joint trade letter to the Secretary of Treasury and U.S. Department of Housing and Urban Development (HUD) urging “Treasury to allocate the funding as quickly as possible and to provide a framework for implementation that will maximize states’ and localities’ ability to get the much-needed assistance into the hands of the eligible recipients.”

• Why it matters: MBA has been advocating for rental assistance since the start of the COVID-19 pandemic. State, territorial, tribal, and local governments covering more than 200,000 people are now eligible to apply for rental assistance.
• What’s next: MBA will continue to work with policymakers to ensure rental assistance is distributed as efficiently and rapidly as possible.

3. FASB Issues Accounting Standards Update on LIBOR Transition

Last week the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) clarifying the scope of the March 2020 LIBOR transition guidance. The guidance was aimed at easing some of the potential accounting burdens of the upcoming LIBOR transition, and provided temporary, optional expedients and exceptions for applying accounting guidance to contract modifications and hedging relationships that reference LIBOR – or some other reference rate that is expected to be discontinued. Since its issuance, FASB has received questions about whether the guidance can be applied to derivative instruments that do not reference a rate that is expected to be discontinued, but use a rate that is modified as a result of refence rate reform for margining, discounting, or contract price alignment.

• Why it matters: The ASU clarifies that certain optional expedients and exceptions in the March guidance for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in the guidance to capture the incremental consequences of the scope clarification, and to tailor the existing guidance to derivative instruments affected by the discounting transition.
• What’s next: MBA appreciates FASB’s commitment to working with stakeholders and providing guidance intended to help address accounting burdens, transition-related costs, and operational challenges related to LIBOR transition.

For more information, please contact Fran Mordi at (202) 557-2860 or Andrew Foster at (202) 557-2740.

4. MBA Comments on Proposed Changes to FHFA New Products Rule

MBA recently submitted a letter to the Federal Housing Enterprise Agency (FHFA) commenting on proposed amendments to FHFA’s 2009 interim final new products rule. While MBA expressed general support for improvements to the transparency and efficiency of the activities/new products process, from a multifamily perspective, we also raised concerns about the lack of a materiality factor within the definition of a “new activity” and overly broad elements factors as to when a “new product” is in the public interest.

• Why it matters: Approval processes for GSE new activities and public notice requirements for GSE new products must appropriately balance transparency with an interest in not impairing appropriate innovation.
• What’s next: The 2008 interim final new products rule will remain in place until FHFA issues a final rule amending it.

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

5. MBA Comments on Proposed Rule on Supervisory Guidance

Last Monday, MBA submitted comments in support of a proposed rule on supervisory guidance issued by a group of federal financial regulators, including the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Board of Governors of the Federal Reserve System. The proposed rule would create regulations establishing that guidance does not “have the force and effect of law” and therefore cannot serve as the basis for an enforcement action, or the issuance of “matters requiring attention, matters requiring immediate attention, matters requiring board attention, documents of resolution, and supervisory recommendations for the public.”

• Why it matters: Consistent with a longstanding MBA advocacy goal, the proposed rule would prevent federal regulators from using guidance to create enforceable legal obligations for regulated entities.   
• What’s next: MBA will continue to advocate for guidance to be used to provide compliance certainty, rather than as a tool to create legally binding obligations outside of the rulemaking process.

For more information, please contact Justin Wiseman at (202) 557-2854, Blake Chavis at (202) 557-2930, or Lucia Jacangelo at (202) 557-2941.

6. FHFA Releases Proposed Rule on GSE ‘Living Wills’

On December 22, the Federal Housing Finance Agency (FHFA) issued a proposed rule to require Fannie Mae and Freddie Mac (the GSEs) to develop resolution plans, or “living wills.” These living wills, similar to those required by the largest banks, would be designed to facilitate a rapid and orderly resolution if the GSEs must be placed into receivership. Through this process, the GSEs would need to demonstrate how core business lines would be maintained under such a scenario.

• Why it matters: This proposed rule follows other changes proposed to the GSE capital and liquidity requirements by FHFA, which in the aggregate are meant to prepare the GSEs for post-conservatorship operations. FHFA has placed a strong emphasis on addressing safety and soundness concerns with the GSEs, and living wills are seen as a tool to minimize systemic risk resulting from the failure of one or both GSEs.
• What’s next: Comments on the proposed rule will be due within 60 days of the rule’s publication in the Federal Register.

For more information, please contact Dan Fichtler at (202) 557-2780.

7. SEC Makes Recommendations Regarding Ways to Mitigate Conflicts of Interest in Credit Ratings 

In December, U.S. Securities and Exchange Commission (SEC) staff summarized the year’s activities of the Fixed Income Market Structure Advisory Committee (FIMSAC). The Staff Report outlined regulatory recommendations that FIMSAC made to the SEC concerning a variety of issues, including methods of mitigating conflicts of interest in credit ratings. One main area of exploration has been conflicts of interest in the industry payment model (i.e., issuer pays for the credit ratings assignment and maintenance) and any potential impact on market structure and efficiency. The Credit Ratings Subcommittee heard from many industry participants on this topic and hosted panels at FIMSAC meetings to expose the broader Committee to its deliberations.

• Why It matters: This set of recommendations is the culmination of work the Subcommittee performed in recent months and leverages ideas that surfaced through research. It attempts to mitigate some of the perceived potential conflicts of interest associated with the current issuer-pay model, without being overly prescriptive or recommending structural changes to the current NRSRO selection process.
• What’s next: The Committee notes that it recognizes that existing statutory, regulatory, or legal constructs could prevent the implementation of its recommendations. However, it urges the SEC to explore them further and work to establish the needed legal or regulatory authority. MBA will continue to serve as a resource to regulators on CMBS and work with its members and other stakeholders to ensure policy outcomes that contribute to liquidity and stability for the commercial real estate finance market. 

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

8. State Updates

New York Quickly Enacts Forbearance and Eviction Extensions

Facing a December 31, 2020, expiration of existing eviction and foreclosure moratoria, New York Governor Andrew Cuomo signed new legislation into law on December 28, 2020. Under the new legislation, homeowners and small landlords who own 10 or fewer residential dwellings can file hardship declarations with their mortgage lender, other foreclosing party, or a court to prevent a foreclosure. Additionally, local governments may not engage in a tax lien sale or a tax foreclosure until at least May 1, 2021 (payments due to the locality are still due). Lending institutions are also prohibited from discriminating against a property owner seeking credit if the property owner has been granted a stay of mortgage foreclosure proceedings, tax foreclosure proceedings, or tax lien sales. They are also prohibited from discriminating because the owner is in arrears and has filed a hardship declaration with the lender.

• Why it matters: The legislation impairs the ability of property owners to manage their properties. On the single-family side, the law’s requirements, also create potential conflicts with CFPB’s ability-to-repay requirements and FHA and GSE policies prohibiting purchase or insuring of new loans where borrowers are in active forbearance on existing ones.
• What’s next: MBA will continue to evaluate the law and monitor its impacts.

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

States Reconvene in New Legislative Sessions

Following last November’s state elections, numerous state legislatures reconvened this week for new legislative sessions.

• Why it matters: When a legislative session ends, all unenacted bills die. To be considered in a new legislative session, any bill would need to be reintroduced.
• What’s next: MBA will continue to monitor the states for bills that could have an impact on our CREF members.

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

State Trackers: The state eviction moratorium and rental assistance trackers are available here. The state legislative tracker will return as new state legislative sessions introduce new bills of relevance to MBA’s CREF members.

9. Commercial and Multifamily Mortgage Delinquencies Rise in December  

Delinquency rates for mortgages backed by commercial and multifamily properties rose for the second month in a row in December, according to MBA’s latest monthly MBA CREF Loan Performance Survey, released earlier today.

• What it says: The balance of commercial and multifamily mortgages that are not current increased last month, driven by more loans becoming newly delinquent. 94.0% of outstanding loan balances were current – down from 94.3% in November – and loans backed by lodging and retail properties continue to see the greatest stress.
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “For several months, delinquency rates declined as the economy stabilized. But more recently, the added stress from a winter wave of the virus has weakened the economy and challenged some owners, as property income has been disrupted. The roll-out of multiple COVID-19 vaccines is good news for the long term, but last month’s rise in commercial mortgage delinquencies reinforces that many challenges remain between now and when the economy can fully reopen.”

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

10. [VIDEO]: mPower Moments: Falen Taylor on Self-Confidence and Putting Yourself Out There

In this latest episode of mPower Moments, mPower Founder Marcia M. Davies sits down with MBA Public Affairs Specialist Falen Taylor. Taylor is featured in several MBA Now, Washington Report, and MBA Live videos. She also plays a pivotal role in promoting MBA’s diversity and inclusion efforts to MBA members and the media.

• Why it matters: In this inspiring episode, Taylor discusses her path to MBA, and how her inner drive and self-confidence are helping her stand out and succeed. Taylor also discusses MBA’s exciting new series launching next week, VOICES: Courageous Conversations with Women of Color. VOICES will explore the experiences of being a woman of color in the industry.
• What’s next: To watch more mPower Moments, click here.

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

11. Upcoming and Recent MBA Education Webinars on Critical Industry Issues

MBA Education continues to deliver timely single-family and commercial/multifamily 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:

• Where Do I Start? Implementing D&I in Your Company – January 11
• Ten Things Your Company Must Do in 2021 – January 13
• Expanding Homeownership to Close the Racial Wealth Gap – January 15
• Engaging Borrowers in Today’s Digital Environment – January 19
• Best Execution Analysis in the Secondary Mortgage Market – January 26
• The State of the Mortgage Industry: Building a Sustainable Operating Model for 2021 and Beyond – January 28

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.