CREF Policy Update Aug. 5, 2021

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

The Biden administration and CFPB launched call to action last week to raise awareness about the Emergency Rental Assistance (ERA) resources available to tenants and landlords. Last Tuesday, FHFA announced it would require enterprise-backed multifamily properties to give tenants at least 30 days’ notice before they can be evicted. And Thursday the House Financial Services Committee passed H.R. 4616, a LIBOR transition proposal, by voice vote.

Biden Administration, CFPB Launch Awareness Campaign on Rental Assistance

On Wednesday, the Biden administration and Consumer Financial Protection Bureau (CFPB) launched a call to action to raise awareness about the Emergency Rental Assistance (ERA) resources available to tenants and landlords. These efforts include the CFPB’s new rental assistance tool, which allows renters and landlords to find detailed information on rental assistance programs in their area. Following the announcement, MBA released a press statement of support from President and CEO Bob Broeksmit, CMB, and shared CFPB-recommended social media posts. MBA is also working closely with multifamily loan servicing members to communicate to borrowers that billions of dollars are available to help tenants and landlords in need. Servicers can also help by sharing the link to CFPB’s rental assistance tool on social media.

• With the Centers for Disease Control and Prevention (CDC) nationwide eviction moratorium set to expire on July 31, 2021, the federal government is conducting an all-out push to make sure tenants and landlords take advantage of emergency rental assistance to help cover rent, utilities, and other housing costs to prevent evictions.
• MBA will oppose any potential attempts by Congress to legislatively extend the CDC’s evictions moratorium and continue to partner with the Biden administration, the CFPB, state-level policymakers, and industry stakeholders to help landlords and tenants, including pushing for states to distribute rental assistance more efficiently.

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

Apartment Trade Group Files Lawsuit to Recover Moratorium Damages
On Tuesday, the National Apartment Association filed a lawsuit in the U.S. Court of Federal Claims to recover damages on behalf of rental housing providers who have suffered economic losses under the CDC eviction moratorium and are not covered by federal rental assistance. 

• The CDC eviction moratorium was first implemented in September 2020 and has faced numerous legal challenges.Unlike lawsuits seeking to terminate the moratorium, a lawsuit seeking damages caused by the moratorium may be able to proceed even after the moratorium expires.
• MBA will continue to follow state eviction moratoriums and rental assistance developments.

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

FHFA Requires 30-Day Notice Before Evictions

On Tuesday, the Federal Housing Finance Administration (FHFA) announced it would require enterprise-backed multifamily properties to give tenants at least 30 days’ notice before they can be evicted.

• The requirement applies to all enterprise-backed multifamily properties, regardless of whether the loan is in forbearance.
• MBA will follow developments to see how this impacts multifamily property owners.

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

House Advances HUD Funding Legislation

Last week the full U.S. House of Representatives considered and passed several Fiscal Year 2022 funding “minibus” bills, including one containing robust funding for the U.S. Department of Housing and Urban Development (HUD). H.R. 4502, the Labor, Health and Human Services, Education, Agriculture, Rural Development, Energy and Water Development, Financial Services and General Government, Interior, Environment, Military Construction, Veterans Affairs, Transportation and Housing and Urban Development Appropriations Act, 2022, passed by a party line vote of 219 – 208. 

• The proposal contained substantial funding and credit authority  for the Federal Housing Administration (FHA) multifamily and healthcare program, FHA’s cybersecurity and IT upgrades, and Ginnie Mae administrative expenses., . MBA sent a letter to House leadership and top appropriators advocating for the industry’s housing priorities, including urging them to provide HUD with the funding necessary to address the extended processing delays that are pervasive in the pipeline for FHA multifamily and health care financing.
  
  
• With Congress unlikely to reach agreement to move all 12 appropriations bills before September 30, 2021, legislators must pass a stop-gap continuing resolution to keep the government operating beyond October 1, 2021.

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

House Financial Services Committee Advances LIBOR Transition Legislation

On Thursday, the House Financial Services Committee passed H.R. 4616, the Adjustable Interest Rate (LIBOR) Act of 2021, by voice vote. The bill establishes a process for contracts that reference the London Interbank Offered Rate (LIBOR) to continue functioning after the cessation of LIBOR, and directs the Federal Reserve to issue rules and regulations for alternative reference rates that would replace LIBOR for existing contracts. MBA was joined by multiple coalition partners in sending a letter to the Committee.   

• LIBOR is the reference rate that indexes trillions of dollars of financial contracts, including mortgage loans. U.S. banking regulators have advised that beginning in December of 2021 financial contracts should discontinue references to LIBOR, and the heads of the financial regulators are unified that a LIBOR transition will require legislation.   
  
  
• MBA will continue working with coalition partners and congressional allies to refine the bill as it advances through the House and toward possible Senate action. 

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

ARRC Issues Recommendation to Adopt SOFR Term Rates; Bank Regulators Clarify Capital Treatment of Conversions from LIBOR

Earlier this week, the Alternative Reference Rates Committee (ARRC) announced that it is formally recommending forward-looking Secured Overnight Financing Rate (SOFR) term rates published by the CME Group. This announcement follows recent steps taken by regulators and market participants to transition activity in key derivatives markets from LIBOR to SOFR – a necessary step to develop robust SOFR term rates. Separately, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve each issued FAQs clarifying that the transition from LIBOR to an alternative reference rate for a capital instrument does not, on its own, change key elements of the regulatory capital treatment of that instrument.

• Why it matters: One significant shortcoming of SOFR had been the lack of broadly available, forward-looking term rates for use in various types of lending. The ARRC’s announcement should alleviate this concern and serve as a tailwind for continued growth in the use of SOFR. The bank regulators’ announcements provide greater clarity to their regulated banks and remove a potential impediment to the transition to alternative reference rates.
• What’s next: While most tenors of U.S. Dollar LIBOR will be published until mid-2023, various U.S. regulators have stated that they expect financial institutions to cease originations of new loans indexed to LIBOR by year-end 2021.

For more information, please contact Andrew Foster at (202) 557-2840.

CLIMATE/ESG UPDATES

MISMO Creates Community of Practice to Explore Market Need and Potential Standards for ESG Initiatives

On Thursday, MISMO^®, the real estate finance industry’s standards organization, announced the creation of a new Community of Practice (CoP) focused on exploring potential standards for Environmental, Social & Governance (ESG) initiatives to meet the needs of market participants.

• Seth Appleton, President, MISMO, said, “MISMO is ready to collaborate and engage with lenders, servicers, issuers, mortgage insurers, vendors, investors, government agencies and regulators, government sponsored enterprises, and all other market participants to facilitate the development and adoption of standards to support the exchange of ESG information, including, but not limited to, data, terms, and definitions.”
  
  
• Interested professionals are invited to the kickoff meeting of the MISMO ESG CoP in August with a follow-up discussion at the MISMO Fall Summit. The initial discussion will explore the impact of ESG within the residential and commercial mortgage industry and the potential role of industrywide MISMO standards. For more information on the MISMO ESG CoP, click here.

For more information, please contact Seth Appleton at (202) 557-2814.

SEC Chairman Gensler Shares SEC Priorities on Climate Change Disclosures

In prepared remarks on Wednesday, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler provided insight on future SEC climate-change disclosures expected to be released later by early next year. In his comments, Gensler stated that he wants climate change disclosures to be mandatory, consistent, comparable, and “decision-useful” to investors, and that he has instructed SEC staff to consider including climate change disclosure documents as part of the annual 10-K. SEC staff is examining requiring disclosure of specific metrics, qualitative and quantitative, related to climate change, including disclosure of metrics related to greenhouse gas emissions and whether there should be specific disclosure metrics for different industries. The Chairman also indicated that he has asked staff to examine possible disclosures related to which data or metrics companies are using for meeting climate change pledges.

• Why it matters: The Chairman’s remarks are an important indicator of what disclosure requirements are under consideration as part of the SEC’s effort to revise its climate change disclosure framework.

• What is next: Climate change and ESG rulemaking is expected later this year or early next year.

SEC Commissioner Highlights Challenges for ESG Disclosure

In prepared remarks before on the Brookings Institute on July 20, SEC Commissioner Hester Peirce highlighted a series of challenges the SEC faces related to mandatory ESG disclosure and regulation. Commissioner Peirce described how ESG is ill-suited to clear boundaries because ESG means something different to everyone. Further, SEC lacks ties to financial materiality and so does not warrant inclusion in SEC-mandated disclosures. The Commissioner also highlighted difficulties in finding objective input on the impact of an ESG rule and in creating a rule on something that is so influx and subject to disagreement. Commissioner Peirce highlighted that an ESG rulemaking could drag the SEC into areas outside its scope, while directing capital in a way that runs counter to the SEC’s agnostic approach.

• Why it matters: Commissioner Peirce’s comments provide insights on many of the challenges that the SEC faces when designing ESG disclosures.

• What’s next: MBA staff will continue to track and analyze statements made by SEC staff and commissioners to glean insight on the direction that an ESG disclosure rulemaking process, which is likely occurring later this year or early next.

For MBA’s Climate/ESG information, or how to get involved on climate and ESG issues, please visit MBA’s Climate and ESG webpage or contact Adrian Ballinger at (202) 557-2774.

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.

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 awards program acknowledges the dedication and creativity that increase DEI efforts within a company’s leadership and employee base. If your organization is a champion for 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 these 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:

• Compliance Considerations Before and After a Data Breach – August 10
• 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.