CREF Policy Update June 3, 2021

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

Last week the Senate Banking Committee held hearings on the National Flood Insurance Program and on housing infrastructure and the House Ways and Means Committee held a hearing on tax code options for infrastructure investment. On Tuesday, the FHFA announced the publication of the GSEs’ Duty to Serve programs for 2022-2024. And recently, the OCC announced it is reconsidering its Community Reinvestment Act final rule that was issued in June 2020. Finally, MBA sent a letter to the NAIC last week supporting proposed changes to RBC for life company investments in real estate.

NAIC Lowers RBC for Life Company Real Estate Investments

On Thursday, the National Association of Insurance Commissioners (NAIC) Life Risk-Based Capital Working Group voted to approve proposed reductions in risk-based capital (RBC) charges for life company investments in real estate. The Working Group adopted a proposal to reduce the RBC factor for direct investments from 15% to 11% and to reduce the factor for indirect investments from 23% to 13%. The Working Group deferred consideration of a proposal to capture a portion of the difference between book value and market value, pending further work on practical considerations. The American Council of Life Insurers (ACLI) initiated this proposal in 2013, and MBA has actively supported it throughout the approval process, including submitting a recent letter of support presenting during Thursday’s call.

• Why it matters: This action better aligns 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. We will continue 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.

2. Biden Administration Releasing FY 2022 Federal Budget Request; Treasury’s “Green Book” on Taxes Expected

President Joe Biden is expected to propose a $6 trillion federal budget blueprint today, as widely reported. The plan, which does not have the force of law, lays the foundation for his plans to increase the government’s role in infrastructure, housing, and other services. The Treasury “Green Book,” whose formal title is “General Explanation of the Administration’s Revenue Proposals,” is a supplement to the budget, and includes a detailed list of tax proposals that the administration currently supports.

• Why it matters: The budget proposal and “Green Book” provide deeper detail and context for the administration’s infrastructure, housing and tax policy priorities. Congressional authorizers and tax writers will potentially use these blueprints as guidance – and cover – for actions they take in the coming weeks and months.
• What’s next: Action on infrastructure and tax legislation will begin in earnest later this summer and continue well into the fall. MBA staff will review the substance of these proposals and provide a detailed summary for members next week.

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

3. New York Announces June 1 Launch of Rental Assistance Program

On Tuesday, New York Governor Andrew Cuomo announced the state’s $2.7 billion Emergency Rental Assistance Program would begin accepting applications on June 1, 2021. The Governor also announced the state would begin accepting applications under its $800 million Small Business Recovery Grant Program on June 10, 2021.

• Why it matters: The rental assistance program will “assist households behind on their rent and that have experienced financial hardship, that are at risk of homelessness or housing instability and that earn at or below 80 percent of area median income.”
• What’s next: In the first 30 days, the program will prioritize unemployed tenants with incomes at or below 50% of the area medium income. After the first 30 days, the program will process applications on a first- come, first-served basis and cover tenants with up to 80% of the area medium income.

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

4. SBA Launches the Community Navigator Pilot Program

On Wednesday, the Small Business Administration (SBA) began accepting applications for the new Community Navigator Pilot Program (CNPP). The CNPP is a $100 million competitive grant program, established by the American Rescue Plan Act of 2021, designed to strengthen outreach to businesses in underserved communities. Under the program, SBA will partner with local governments, states, nonprofits, tribal governments, and resource partners to increase the availability of counseling, networking, and other assistance to small businesses. The focus will include socially and economically disadvantaged business owners, as well as women and veterans.

• Why it matters: The Community Navigator Pilot Program will help small businesses recover from the impacts of the pandemic.
• What’s next: SBA will continue to accept applications through July 12, 2021, and award grants by August 2021.

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

5. Senate Finance Committee Holds Hearing on Biden Treasury Nominees

President Joe Biden’s nominee to head domestic finance operations at the U.S. Treasury Department said on Tuesday she would review the Treasury debt market to ensure that it operates well in times of stress. Nellie Liang, a former Federal Reserve economist who was nominated as Treasury undersecretary for domestic finance, appeared with three other nominees for senior posts at the department at a Senate Finance Committee confirmation hearing.

Liang said that if confirmed, she would “provide an assessment of changes in this market that have arisen from technological advances and shifts in market participants’ behavior, and recommend policies, as needed, to ensure a resilient Treasury securities market.” Senator Sherrod Brown (D-OH) asked Liang for a commitment to work with the Congress on GSE reforms tied to housing affordability (she agreed to do so if confirmed). MBA submitted a letter of support for Liang’s nomination prior to the hearing.

• Why it matters: Once confirmed, Liang would oversee the $21 trillion market for Treasury securities, and she 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.
• What’s next: Liang is also expected to lead other key financial regulatory efforts, including a potential re-examination of the housing GSEs’ Preferred Stock Purchase Agreement amendments and the Federal Financing Bank’s risk-sharing activities – though she offered only vague hints at her other priorities in her testimony.

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

6. Biden Administration Issues Executive Order on Climate-Related Financial Risk

The White House recently released an Executive Order addressing the physical risks to financial companies and assets presented by climate change, as well as the transition risks associated with the shift away from carbon-intensive energy sources. Among other directives, the Executive Order instructs the Financial Stability Oversight Council (FSOC) to report on these risks and actions to mitigate them. It also instructs the agencies operating the federal housing programs to consider approaches to better integrate these risks into underwriting standards, loan terms and conditions, and asset management and servicing procedures.

• Why it matters: This Executive Order underscores the Biden administration’s emphasis on a “whole-of-government” response to climate change. Financial regulators and agencies are expected to increase their focus on climate risks in their rulemakings, supervision, and examinations in the coming years.
• What’s next: The FSOC report is due to the White House within 180 days, and various agencies will begin taking steps to comply with the directives in the Executive Order shortly. MBA will remain engaged with the agencies responsible for oversight of the mortgage market as these efforts progress.

For more information, please contact Bruce Oliver at (202) 557-2780.

7. Freddie Mac Announces Michael DeVito as CEO

In a statement released on Wednesday, Freddie Mac announced Michael DeVito as its new Chief Executive Officer. DeVito will take over for Interim CEO Mark Grier and succeeds David Brickman, who stepped down as CEO in early 2021. Prior to joining Freddie Mac, DeVito spent more than two decades with Wells Fargo, from which he retired in 2020 as Head of Home Lending. Until recently, DeVito also served as a member of the MBA Board of Directors.

• Why it matters: The announcement of DeVito for this role places a highly knowledgeable industry executive in the top leadership position at Freddie Mac. MBA will look to continue its strong relationship with Freddie Mac during DeVito’s tenure.
• What’s next: DeVito will assume his new role on June 1, 2021.

For more information, please contact Dan Fichtler at (202) 557-2780 or Sasha Hewlett at (202) 557-2805.

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. Congress Calls Up CEOs from the U.S.’s Largest Commercial Banks

On Wednesday and Thursday, the Senate Banking Committee and House Financial Services Committee (HFSC) held oversight hearings of the nation’s largest banks. Witnesses included the CEOs from six of the largest financial institutions based in the United States. Topics included racial equity; environmental, social, and corporate governance (ESG); tax reform; and LIBOR. Of note, HFSC Chairwoman Maxine Waters (D-CA), asked for the witnesses’ commitment that housing will be a priority as the country emerges out of the crisis, specifically that these banks prioritize loan modifications to stave off bankruptcies as the forbearance and foreclosure moratoriums are set to expire.

• Why it matters: Congress and the administration are uncertain over the best course of action once foreclosure and forbearance provisions expire. 
• What’s next: Both the Chairs of the House Financial Services Committee and the Senate Banking Committee have stated that the issue of housing affordability is a top priority, and pushing lenders (absent legislation or regulation) will be a part of their playbook moving forward. 

For more information, please contact Alden Knowlton at (202) 557-2741, Borden Hoskins at (202) 557-2912, Tallman Johnson at (202) 557-2866, or Ethan Saxon at (202) 557-2913.

10. MBA Hosts Conversations on Capitol Hill 

MBA mPact and MBA Advocacy will host a complimentary webinar for young professionals on June 2, 2:00-3:00 ET, breaking down the current state of play in Washington, D.C.

• Why it matters: Speakers from MBA’s policy, advocacy, and lobbying teams – including Alden Knowlton, Sasha Hewlett, Adrian Ballinger, and Rosie Sheehan – will talk through fast-paced changes and shifting priorities for policymakers such as remote online notarization, housing finance reform, and the industry’s approach to potential tax changes. They will also highlight when and how key stakeholders, like members of mPact, can get involved to shape legislation and regulations directly impacting our businesses and customers. 
• What’s next: Register for this complimentary webinar here.

For more information, please contact Jacky Salazar at (202) 557-2746.

11. HUD Leadership Lessons: An Interview with Lamar Seats and Dana Wade

Join us on Thursday, June 3rd at 2-3pm ET for a conversation with Former HUD Deputy Assistant Secretary, C. Lamar Seats, and Former FHA Commissioner, Dana Wade, about lessons learned and perspectives on how our industry can effectively partner with the government to achieve mutually beneficial outcomes. Whether you interact with HUD and/or the GSEs or compete against entities that do, attendees will receive insight from two notable public officials as they transition to their new roles within their respective companies.

• Why it matters: This event will be moderated by MBA’s Sharon Walker, AVP-CREF, and Seth Appleton, President, MISMO.
• What’s next: Click this link for registration information. It is closed to the media.

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

12. MBA Hosts Senior Executive Roundtable on CRE Lending Recovery

On Wednesday, MBA hosted a virtual conversation between members and MBA staff to discuss top-line issues impacting the commercial/multifamily lending landscape.

• Why it matters: Debra Morgan of Black Eagle Real Estate Partners served as chair and moderated discussion highlighting the competitive landscape, lending dynamics, and advocacy priorities. Participants included executives from 15-20 institutions involved in all types of commercial/multifamily lending as well as asset management and other service providers. 
• What’s next: MBA hosts numerous business councils, committees, and roundtables throughout the year for different sectors, functions, and capital sources. These initiatives allow members to exercise leadership, build relationships, and inform the association’s advocacy efforts. Don’t hesitate to reach out to the member engagement team to get involved. 

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

13. MBA Hosts Nonbank Senior Executive Roundtable for Middle Market Lending

MBA hosted a virtual conversation between commercial real estate industry veterans last week.

• Why it matters: Mark Fogel of ACRES Capital served as chair and Greta Guggenheim of TPG Real Estate moderated discussion highlighting bridge lending dynamics, challenges and opportunities.
• What’s next: MBA hosts numerous business councils, committees, and roundtables throughout the year for different sectors, functions, and capital sources. These initiatives allow members to build relationships and inform the association’s advocacy efforts. Don’t hesitate to reach out to the member engagement team to get involved.

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

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:

• 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.