CREF Policy Update June 10, 2021

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

President Biden’s full fiscal year 2022 budget proposal was released recently, along with the Treasury Department’s “Green Book” itemizing the revenue implications of various tax proposals. Last Wednesday, a three-judge U.S. Court of Appeals for the D.C. Circuit panel unanimously denied a request by a group of landlords to resume evictions, leaving the temporary nationwide eviction moratorium intact. Also last week, FHFA extended COVID-19 forbearance for GSE multifamily loans to September 30, 2021.

MBA launched a biweekly series titled Tax Advocacy Tuesdays at 2:30 (ET) this week. Register here.

1. President Biden Unveils Budget Proposal; Outlines Broad Spending and Revenue Projections for FY 2022

On May 28, President Joe Biden formally introduced his fiscal year (FY) 2022 budget proposal – supplemented by the Treasury Department’s “Green Book” regarding tax measures – to offer a full accounting of the administration’s previously disclosed plans for trillions of dollars in new taxes and government spending. The move also revealed for the first time how the administration believes inflation, employment, and economic growth would be affected by enacting its agenda. The release of the budget proposal typically marks the opening of appropriations season on Capitol Hill. MBA prepared a summary of the president’s budget and tax proposals, which can be found here and here.

  • Why it matters: The delivery of the president’s budget clears the way for the House and Senate to begin working on a congressional FY 2022 budget resolution outline. That, in turn, will unlock a fast-track process that could potentially allow Democrats to pass large portions of Biden’s infrastructure/tax plan and social spending along party lines. With committees expected to act this summer, congressional budget “reconciliation” legislation would contain detailed instructions for one or more follow-on bills implementing tax increases, tax credits, and spending increases.
  • What’s next: The House and Senate appropriations committees can begin writing and voting on the 12 annual spending bills needed to keep the government open after the October 1 start of the new fiscal year. Both the budget and appropriations processes will be colored by the political debate over taxes and federal spending, kicking off a familiar cycle of Democrats highlighting ways in which new government programs and tax changes can promote economic growth and equity, while Republicans warn of the dangers of the mounting federal debt.

For more information, please contact Mike Flood at (202) 557-2745 or Bill Killmer at (202) 557-2736.

2. Federal Appeals Court Rejects Motion by Landlords to End CDC Eviction Moratorium 

Last Wednesday, a three-judge U.S. Court of Appeals for the D.C. Circuit panel unanimously denied a request by a group of landlords to resume evictions, leaving the temporary nationwide eviction moratorium intact for now. The plaintiffs, Alabama Association of Realtors, et al, filed an emergency appeal with the Supreme Court on Thursday. Separately, on Thursday, a federal judge in Cleveland who had previously ruled against the CDC nationwide eviction moratorium declined to apply his ruling nationwide.

  • Why it matters: On May 5, 2021, Federal District Judge Dabney Friedrich vacated the Centers for Disease Control and Prevention (CDC) eviction moratorium, ruling the CDC exceeded its authority. Judge Friedrich subsequently issued a stay of that order pending a Department of Justice (DOJ) appeal. On May 15, 2021, Judge Friedrich agreed to issue an emergency stay of her order in a 10-page ruling while the Biden administration’s appeal of that decision is pending before the U.S. Court of Appeals for the D.C. Circuit.
  • What’s next: Once received, the Chief Justice will refer the emergency appeal to the full Court. The plaintiffs expect the Court will rule by the end of June, when the Court’s session concludes. MBA is following numerous other legal cases challenging the moratorium.

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

3. FHFA Extends COVID-19 Forbearance for GSE Multifamily Loans to September 30, 2021 

On Thursday, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the GSEs) would continue to offer multifamily property owners the ability to enter into a new or, if qualified, modified COVID-19 forbearance through September 30, 2021. The program was previously set to expire on June 30, 2021.

  • Why it matters: Multifamily property owners who enter into a forbearance agreement must comply with certain tenant protections that apply during the period of forbearance and repayment period. These actions are just the latest steps FHFA has taken to direct the GSEs to benefit renters, property owners, and the mortgage market during the pandemic.
  • What’s next: MBA will continue to work with FHFA to provide timely guidance to members in response to the ongoing COVID-19 pandemic.  

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

4. 25 States Announce Exit of Federal Enhanced Unemployment Programs

On Tuesday, Maryland Governor Larry Hogan became the 25th governor to announce their state will end participation in enhanced federal unemployment benefits. Affected unemployed workers will no longer receive an extra $300 in weekly enhanced unemployment benefits above weekly state assistance. Most states announcing the end of extended unemployment benefits are also ending benefits for the self-employed and gig workers.  

  • Why it matters: Governors have asserted that these enhanced unemployment benefits are contributing to labor shortages, making it difficult for employers to fill job openings.
  • What’s next: Enhanced unemployment benefits, first provided in the CARES Act last year and extended twice, are set to expire on September 3, 2021. The states ending the unemployment program early will exit between June 12, 2021, and August 3, 2021.

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

5. House Agriculture Committee Chairman David Scott (D-GA) Objects to Biden’s Capital Gains Tax Increases

On Wednesday, House Agriculture Committee Chairman David Scott (D-GA) sent a letter opposing President Biden’s proposal that would eliminate stepped-up basis and tax capital gains at death. The congressman argued that this proposed tax change could hurt farmers and promoted the stepped-up basis as a “critical tool enabling family farming operations to continue from generation to generation.”

  • Why it matters: Scott’s letter follows similar efforts from over a dozen rural Democrats who last month appealed to congressional leaders, cautioning that altering the stepped-up basis for capital gains could result in taxes that long-standing family farms could not afford. These actions demonstrate the growing opposition among moderate Democrats to one of many tax changes that the administration hoped would help pay for some of the ambitious spending proposals contained in the American Jobs Plan and the American Families Plan.
  • What’s next: Action on infrastructure and tax legislation will begin in earnest later this summer and continue well into the fall. MBA will continue to advocate with the administration and on Capitol Hill against any possible threat to real estate finance markets (e.g., agriculture sector specific carveouts) 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) 557-2816.

6. House Republicans Ask SEC to Carefully Consider Agency’s Approach Regarding Climate-Related Disclosures

On Thursday, Rep. French Hill (R-AR), along with more than 20 of his Republican colleagues, sent a letter to the U.S. Securities and Exchange Commission (SEC) regarding the agency’s approach to climate disclosure regulation. The letter specifically asked that the SEC adhere to the Administrative Procedures Act (APA), while also fully considering the definition of investor materiality on this topic.   

  • Why it matters: This letter is representative of the stark difference on climate and climate disclosure regulation between Republicans and Democrats in Congress. 
  • What’s next: Absent legislation, a slew of regulatory actions is expected on the climate and environment, social, and corporate governance (ESG) front, with a major focus on the financial services industry. 

For more information, please contact Borden Hoskins at (202) 557-2912 or Alden Knowlton at (202) 557-2741.

7. Commercial and Multifamily Mortgage Delinquencies Decline to Lowest Level Since the Onset of the Pandemic     

According to two MBA reports released last week, delinquency rates for mortgages backed by commercial and multifamily properties continue to decline. The findings come from MBA’s Commercial Real Estate Finance (CREF) Loan Performance Survey for May, and the latest Commercial/Multifamily Delinquency Report for the first quarter of 2021.

  • Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “Commercial and multifamily mortgage delinquency rates ticked down last month to the lowest level since the onset of the COVID-19 pandemic. Pockets of elevated stress remain in loans backed by lodging and retail properties, driven by loans in the later stages of delinquency and foreclosure or REO. Quarterly measures of delinquency rates between last year’s fourth quarter and this year’s first quarter show a drop in distress across nearly every capital source.” 

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

8. 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.

9. Webinar: Tax Advocacy Tuesdays at 2:30 

Starting Tuesday, June 8, at 2:30 p.m. ET, MBA will host a biweekly series titled “Tax Advocacy Tuesdays at 2:30.” Join MBA for real-time insights and analysis on pending policy developments that significantly impact the commercial/multifamily finance ecosystem and your business.

  • Why it matters: As the Biden administration and Congress negotiate potential policy and legislation, MBA is actively engaging policymakers to positively impact changes under consideration. Not since 1986 have so many substantive tax increases that would impact real estate finance been up for discussion in Washington. Rotating MBA staff, members, and invited guests will share information and answer questions to ensure CREF members are well-informed, active participants in helping to achieve advocacy objectives.
  • 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.

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:

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:

  • Fair Lending: Things You Might Not Be Thinking Of – June 22
  • Lending to the LGBTQ Community: Opportunities and Considerations – June 28
  • Benchmarking for Performance and the Performance Ratios Every Mortgage Banker Must Know – June 29
  • Transformation Impact of Blockchain in Mortgage Industry and Realized Economic Benefits – June 29
  • MISMO API Toolkit for Technical Audience – July 8
  • Do Commercial Servicer Ratings Matter? – July 14

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

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