CREF Policy Update July 22, 2021

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

Last week was marked by a slew of activity in Congress, including House and Senate testimony by Fed Chairman Jay Powell, the release of a budget and tax agreement by Senate Democrats and a key Senate confirmation. On Friday the House Committee on Appropriations considered several fiscal year 2022 appropriations bills, including funding for HUD. On Wednesday, the FDIC, Federal Reserve and OCC released proposed Interagency Guidance on Third-Party Relationships: Risk Management for public comment. And the OCC issued a Notice and Request for Comment on its LIBOR self-assessment tool.

Earlier in the week, HUD revised its FHA Subordination Agreement to remove a prior limitation on the use of net sales proceeds to reduce subordinated debt. Finally, remember to check out our new section on ESG to see how to get involved in our Green Lending Roundtable, Mortgage Industry Standards Maintenance Organization (MISMO) efforts, or to learn more about how regulators are approaching the issue.

1. House Ways and Means Subcommittee Holds Hearing on Expanding Housing Access

On Wednesday, the House Ways and Means Committee’s Oversight Subcommittee held a hearing entitled “Expanding Housing Access to All Americans.” Democrats focused on pandemic-related issues facing the housing market, such as evictions, supply chain issues, and a shortage of labor. They also expressed support for policy solutions to help first-time homebuyers enter the housing market by providing down payment assistance. Alternatively, Republican members discussed opportunity zones and tax credits, pushed back against “one-size-fits-all” approaches to regulation and benefits, and raised concerns around policies they suggested would continue to increase spending and inflation.

  • Why it matters: The series of proposed tax changes discussed at the hearing, along with others that could negatively impact our industry, are expected to be part of ongoing negotiations to offset the cost of infrastructure spending.
  • What’s next: MBA will continue to advocate with the administration and on Capitol Hill against any possible threat to real estate finance markets as the congressional debate on tax and infrastructure advances.

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

2. Federal Reserve Chairman Powell Testifies Before Congress 

On Wednesday and Thursday, Federal Reserve Chair Jerome Powell testified before the House Financial Services and Senate Banking Committees to discuss monetary policy and the state of the American economy. Per custom, Chair Powell fielded many questions on a broad range of topics, including the near-term outlook for economic growth; inflation and climate change; and environmental, social, and corporate governance (ESG) considerations. Significantly, Powell noted that the Federal Reserve will continue to purchase Treasury bonds and agency mortgage-backed securities (MBS) until the central bank has achieved its desired outcomes on maximum employment and stable pricing. He also observed that the Fed would provide advance notice going forward before making any significant monetary policy moves.

  • Why it matters: The Fed’s ongoing purchases of agency MBS have helped steady interest rates and ensure a steady flow of credit in the housing market. Any changes in the Fed’s position on MBS – or moves to taper those purchases – have the potential to impact market conditions. 
  • What’s next: The Federal Reserve will continue to face calls to adjust its economic and monetary policy levers, depending on the scope and targeting of infrastructure and tax funding Congress and President Joe Biden are looking to advance in the coming weeks and months.

For more information, please contact Borden Hoskins at (202) 557-2712, Alden Knowlton at (202) 557-2741, Ethan Saxon at (202) 557-2913, or Tallman Johnson at (202) 557-2866.

3. Senate Confirms Key Treasury Nominee Nellie Liang

This week the full Senate voted 72-27 to confirm Nellie Liang to be Undersecretary for Domestic Finance at the U.S. Treasury Department.

  • Why it matters: Treasury has not had a fully confirmed Undersecretary for Domestic Finance since 2014. Nellie Liang will play a key role in the federal oversight of housing finance.
  • What’s next: Undersecretary Liang will oversee the $21 trillion market for Treasury securities, and she has signaled that one of her top priorities will be to scrutinize the market following last year’s brief investor panic and consider changes that will help it better withstand turmoil. She is also expected to work closely with Sandra Thompson, the Acting Director of the Federal Housing Finance Agency (FHFA) on the implementation of the Preferred Stock Purchase Agreements for Fannie Mae and Freddie Mac.

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

4. House Committee on Appropriations Advances HUD Funding Legislation during Markup

Today the House Committee on Appropriations considered several appropriations bills for fiscal year (FY) 2022, including one containing robust funding for the U.S. Department of Housing and Urban Development (HUD). MBA sent a letter to the Committee’s leadership 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 Federal Housing Administration (FHA) multifamily and health care financing.

  • Why it matters: The proposal contained substantial funding increases for FHA cybersecurity and information technology (IT) upgrades, FHA multifamily and health care credit authority, Ginnie Mae administrative expenses, and rental assistance.
  • What’s next: This markup is the first step toward eventual negotiations with Republicans (and the Senate) on a final spending package. 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.

5. HUD Subordination Agreement Nixes Net Sales Proceeds Limitation

Earlier this week, HUD released its updated Subordination Agreement, which excluded previous limitations on net sale proceeds. The updated Subordination Agreement reflects the efforts of MBA’s FHA LIHTC Committee, which had worked with Multifamily Accelerated Processing (MAP) lenders, HUD Production, and HUD’s Office of General Counsel to eliminate language in the previous Subordination Agreement ( HUD 92420M), which limited to no more than 75% the amount of net sale proceeds that could be used to reduce subordinated debt. 

  • Why it matters: The new Subordination Agreement allows owners to utilize net sale proceeds for paying off subordinated debt without restrictions.
  • What’s next: HUD officials have indicated that this form must be used for transactions where HUD issues a firm commitment on or after September 1, 2021; however, if borrowers so choose, they may use it immediately.

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

6. Banking Agencies Seek Comment on Third-Party Risk Management Guidance

On Wednesday, the Federal Deposit Insurance Corporation (FDIC), Federal Reserve, and Office of the Comptroller of the Currency (OCC) released proposed Interagency Guidance on Third-Party Relationships: Risk Management for public comment. The proposed interagency guidance would replace each agency’s existing guidance and would be directed to all banking organizations supervised by the agencies.

  • Why it matters: MBA members supervised by the banking agencies will be subject to the revised Interagency Guidance when finalized, and many MBA members are third-party service providers to those institutions.
  • What’s next: The proposed guidance will be open for comment for 60 days after publication in the Federal Register. MBA will analyze the proposed changes to current guidance.

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

7. OCC Seeks Approval to Publish Bank Self-Assessment Tool to Use in Preparing for LIBOR Transition

On Wednesday, the OCC issued a Notice and Request for Comment on its London interbank offered rate (LIBOR) self-assessment tool. The expected cessation of LIBOR prompted the OCC to create a self-assessment tool for banks to use in preparing for the expected LIBOR cessation. The self-assessment tool may be used in assessing the appropriateness of a bank’s LIBOR transition plan. Read more about the request here.

  • Why it matters: The move to phase out LIBOR as the predominant interest rate benchmark is one of the most significant transitions occurring in financial markets.
  • What’s next: Comments on the self-assessment tool are due August 12, 2021. Market participants of all types and sizes need to be prepared to handle changes that will be necessary for both new originations and legacy products.  

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


FSOC to Meet on Climate-Related Risk

Today the Financial Stability Oversight Council (FSOC) will meet to discuss how member agencies can improve climate-related disclosures and incorporate climate risk into regulatory and supervisory actions.

  • Why it matters: President Biden’s Executive Order on Climate-Related Financial Risk, signed on May 20, 2021, directs Treasury to work with FSOC to put together an assessment for how member agencies can improve climate-related disclosures and how to incorporate climate risk into supervisory practices. The Biden administration continues to move forward with policies to enhance climate-related disclosure in the financial system.
  • What’s next: MBA staff will analyze the notes from FSOC’s meeting when they are released to gain insight into climate disclosure discussions. 

MBA Green Lending Roundtable Holds Monthly Meeting

On Wednesday, MBA hosted a virtual meeting of its Green Lending Roundtable to discuss ESG and climate policy as well as hear from industry experts on green lending standardization. MBA members heard from Ceres’ Accelerator for Sustainable Capital Markets about the current state of green standardization and other efforts around green lending. MBA staff also gave a presentation to members on ESG and climate policy and MISMO provided an update on ongoing work to facilitate the development of green lending and ESG standards.

  • Why it matters: 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. Members are encouraged to participate in the Green Lending Roundtable to discuss the latest policy trends in ESG and green lending.
  • What’s next: MBA’s Green Lending Roundtable meets monthly. 

Available Now: MISMO Q3 Newsletter

MISMO®, the real estate finance industry’s standards organization, has released its quarterly newsletter detailing top issues including an update on the Innovation Investment Fee, a request for public comment on its Green Utility Dataset for Commercial/Multifamily, a case study on LendingPad’s use of MISMO’s Industry Loan Application Dataset, and the availability of other resources.

  • Why it matters: The newsletter provides information on critical resources as well as upcoming events and webinars.
  • What’s next: To read the newsletter, click here. For more information on MISMO, please contact Tara Dunion at (202) 557-2849.

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

9. 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. [VIDEO]: mPower Moments: On Building Your Network with Faith Schwartz, President of Housing Finance Strategies

In this episode of mPower Moments, MBA COO and mPower Founder Marcia M. Davies chats with Faith Schwartz, President of Housing Finance Strategies, on the importance of leaning on your knowledge, career experience, and network when deciding to make a change.

  • Why it matters: Schwartz also gives insightful advice on being a better listener and working with people with various experiences, personalities, and backgrounds.
  • What’s next: To watch more mPower Moments, click here.

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

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

MBA’s Diversity, Equity and Inclusion (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.

11. 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:

  • Preparing for the End of the Pandemic – What Should Servicers Do Now? – July 28
  • Social Media and Digital Advertising 2021 Update – July 29
  • 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 25

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.