CREF Policy Update July 8, 2021

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

1. U.S. Supreme Court Declines to Lift National Eviction Ban     

Last Tuesday, the U.S. Supreme Court in a 5-4 ruling declined to lift the Centers for Disease Control and Prevention’s (CDC) residential eviction moratorium. The ruling responds to a request to lift the D.C. Federal District Court’s stay, which has effectively paused its order invalidating the CDC moratorium.

Justice Brett Kavanaugh, the tie-breaking vote, said in his concurring opinion, “I agree with the District Court and the applicants that the Centers for Disease Control and Prevention exceeded its existing statutory authority by issuing a nationwide eviction moratorium,” and, “In my view, clear and specific congressional authorization (via new legislation) would be necessary for the CDC to extend the moratorium past July 31.” However, he still voted not to end the moratorium: “Because the CDC plans to end the moratorium in only a few weeks, on July 31, and because those few weeks will allow for additional and more orderly distribution of the congressionally appropriated rental assistance funds, I vote at this time to deny the application to vacate the District Court’s stay of its order.”

• Why it matters: As a result of this decision, the CDC nationwide eviction moratorium remains in place.
• What’s next: In its one-month extension last week, the CDC stated that the eviction moratorium will expire on July 31, 2021. An appeal from the D.C. Federal Court order vacating the CDC’s nationwide eviction moratorium is now before the D.C. Circuit Court, but a three-judge panel of that court declined to lift the stay, saying the government was likely to prevail on appeal.

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

2. CFPB Releases Compliance Bulletin on Rental Information Accuracy 

Last week the Consumer Financial Protection Bureau (CFPB) released an enforcement compliance bulletin regarding the accuracy of consumer reporting of rental information. 

• Why it matters: The enforcement compliance bulletin and policy guidance reminds landlords, consumer reporting agencies (CRAs), and others of their critical obligations to accurately report rental and eviction information.
• What’s next: The CFPB issued the bulletin in advance of the July 31, 2021, end to the CDC’s national residential eviction moratorium. 

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

3. California Governor Signs Extension of State Eviction Moratorium with Rental Assistance Improvements; New Jersey Lawmakers Reach Similar Agreement 

Last Thursday California Governor Gavin Newsom signed the state’s budget into law. The budget bill extended the state’s eviction moratorium until September 30, 2021, and improved the state’s rental assistance program by removing requirements for landlords to forgive a portion of unpaid rent to receive funds under rental assistance programs. Also, this week, lawmakers in New Jersey announced they had reached a similar agreement, extending the state’s residential eviction moratorium until August 30, 2021, and removing requirements for landlords to forgive part of tenants’ unpaid rent to participate in rental assistance programs. 

• Why it matters: MBA led a coalition of trade groups urging state and local governments to remove barriers to rental assistance and to make landlords whole through rental assistance.
• What’s next: MBA will continue to track the remaining state eviction moratoriums and remaining impediments to getting emergency rental assistance to landlords.

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

4. MBA Adds New Climate Change and ESG Resources to Website

MBA recently launched a new webpage to provide members with information on MBA’s initiatives and advocacy on climate change and environmental, social, and corporate governance (ESG). The webpage lists MBA’s Green Lending Roundtable, which is a collection of MBA members that meet on ESG and climate-risk investment trends to navigate the intersection of managing climate-change risk and ESG lending. Additionally, the webpage describes MBA’s work with the Mortgage Industry Standards Maintenance Organization (MISMO), the real estate industry’s standards organization, to facilitate the development of green lending-related data standards.  

• Why It matters: The climate and ESG webpage serves as an important resource. Members are encouraged to participate in MBA’s various climate and ESG initiatives. 
• What’s next: Visit MBA’s webpage for ongoing news and initiatives, including a planned ESG white paper set for publication in the near future.  

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

5. MISMO Seeks Public Comment on Commercial Green Utility Data Set 

Last Tuesday, MISMO requested public input on a proposed standard for Commercial Green Utility Data. The new dataset will facilitate the efficient exchange of information on green utility data, including energy and water use, on commercial and multifamily properties across the commercial real estate finance industry. The request for public input is part of a broader effort on the part of MBA and MISMO to facilitate the development of green lending and ESG standards, including, but not limited to, standardizing data, terms, and definitions.

• Why it matters: MBA continues to work with MISMO to develop data standards related to green lending and ESG to support the flow of consistent information throughout the mortgage finance ecosystem. 
• What’s next: MBA will continue to update its climate and ESG webpage with the most up-to-date information on its work with MISMO to establish green lending and ESG standards.

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

6. NAIC Task Force Formally Adopts Prior Action to Lower RBC for Life Company Real Estate Investments

Last Thursday, the NAIC Capital Adequacy Task Force formally adopted the May 27 action by the Risk-Based Capital Working Group to reduce RBC charges for life company investments in real estate. The Working Group reports to the Task Force, and the Task Force’s adoption of the change is a procedural formality. The action formalizes and finalizes the reduction of the RBC factor for direct investments from 15% to 11% and the reduction of the factor for indirect investments from 23% to 13%; technical changes to the treatment of encumbrances; and structural reporting changes that allow for possible future recognition of a portion of unrealized gains. 

• Why it matters: This action formalizes the prior action to better align capital requirements for real estate investments with risk, which will help life companies make better investment and capital allocation decisions.
• What’s next: These changes will be in effect for life company year-end 2021 reporting. MBA will work with the American Council of Life Insurers (ACLI) to support the development of an approach to recognizing the capital-like impact of unrealized gains in protecting against insolvency. 

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

7. House Advances Transportation and Infrastructure Legislation     

The U.S. House of Representatives passed a broad $715 billion infrastructure package (H.R. 3684, the Invest in America Act, as amended), largely along party lines. Some provisions within this comprehensive House bill could be merged with a parallel Senate package prior to September 30, when the current federal highway bill authorization is set to expire. MBA’s letter highlighting two housing-related provisions within the package can be found here.

• Why it matters: The administration has endorsed a bipartisan Infrastructure Framework negotiated with a group of 21 senators, which focuses on traditional infrastructure investments such as roads, railways, bridges, and broadband internet. This bipartisan Senate compromise does not presently include investments President Joe Biden has referred to as “human infrastructure,” including affordable housing provisions. 
• What’s next: In both chambers, Democratic leaders are pushing a parallel (and more partisan) reconciliation bill process to offset the cost of infrastructure spending via a series of proposed tax changes, including several that could directly impact our industry. The timing and details of negotiations over this reconciliation approach will determine which infrastructure and tax vehicles are ultimately advanced by Congress.  

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

8. Federal Reserve to Release CECL Tool for Community Banks   

Last Thursday, the Federal Reserve announced that it will release a new tool to help community bankers implement the Current Expected Credit Losses (CECL) accounting standard on July 15, 2021. While the CECL methodology was effective for most public financial institutions beginning in 2020, most community banks with assets under $1 billion will not implement CECL until 2023.

• Why it matters: The tool is intended to address community bankers’ concerns about the complexity of implementing the CECL standard.  
• What’s next: The Federal Reserve will launch the SCALE tool and answer questions during an “Ask the Fed” webinar on July 15, 2021. Registration information is available at www.AsktheFed.org, and the SCALE tool will be available at  SupervisionOutreach.org/cecl.

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

9. FHFA Cautions Federal Home Loan Banks on use of non-SOFR-based LIBOR Alternatives    

The Federal Housing Finance Agency (FHFA) issued a letter to Federal Home Loan Banks (FHLBanks) urging them to use caution when considering the use of alternatives to the London Interbank Offered Rate (LIBOR) that are not based on the Secured Overnight Financing Rate (SOFR). The letter observed that the FHLBanks “have been leaders” in moving from LIBOR to SOFR but cautioned that they “should make informed and sound decisions prior to employing an alternative reference rate” to avoid using alternative rates that may “significantly pose the same safety and soundness and reputational risks that befell LIBOR.” Notably, the letter directed the FHLBanks to provide advance notice to FHFA prior to using an alternative reference rate they are not already using (i.e., before using an alternative rate that is not SOFR-based).

• Why it matters: One of the most significant transitions occurring in financial markets is the move to phase out LIBOR as the predominant interest rate benchmark. The procedural obstacle course FHFA is establishing for the FHLBanks may discourage the use of non-SOFR alternatives to LIBOR. 
• What’s next: MBA will continue to monitor and provide members with information on LIBOR transition issues.  

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

10. MBA Releases Q1 2021 Commercial/Multifamily DataBook   

Last Wednesday, MBA released its first-quarter 2021 Commercial/Multifamily DataBook. The quarterly report summarizes major industry trends, with a plethora of charts and tables that provide historical information on commercial and multifamily real estate markets. The first-quarter 2021 report provides a lookback of economic activity, originations, mortgage debt outstanding lending activity, and loan performance – all during a time when the economy, households, and the industry were dealing with the positives of increased vaccinations and negatives of still-high caseloads.

• Why it matters: Questions about the post-pandemic impacts to different property types are already beginning to be answered as the economy reopens. “As the uncertainty from the COVID-19 pandemic wanes, lenders will have greater clarity into the different properties and property types and be in stronger positions to make new loans,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.
• What’s next: Click here to download the Q1 2021 Commercial/Multifamily DataBook.     

For more information, please contact Reggie Booker at (202) 557-2863.

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. Webinar: Tax Advocacy Tuesdays at 2:30

MBA’s next biweekly update takes place Tuesday, July 20 at 2:30 PM ET.

• Why it matters: As the Biden administration and Congress negotiate on disclosed plans for trillions of dollars in new taxes and government spending, MBA is actively engaging policymakers on the proposals under consideration that would impact real estate finance. This next session of the biweekly webinar series will cover proposed investments in affordable housing through such programs as the Low-Income Housing Tax Credit (LIHTC) and others.
• What’s next: This biweekly series will be offered through fall 2021 as developments dictate. It is closed to press. You must register for each event individually. Register here.  

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

13. 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.

14. 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:

• MISMO API Toolkit for Technical Audience – July 8
• CONVERGENCE: Intersections of Supply and Demand Challenges in Accessing Affordable Homeownership – July 8
• A Strategy for Executing a Successful LIBOR Transition (CREF) – July 12
• Do Commercial Servicer Ratings Matter? – July 14
• Planning for Community Reinvestment Act Modernization – July 15

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.