CREF Policy Update May 27, 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.

1. Senate Banking Committee Discusses Flood Insurance Reauthorization

Last Tuesday, the Senate Banking Committee held the first in a series of hearings on reauthorizing the National Flood Insurance Program (NFIP) prior to its expiration of authority on September 30, 2021. Lawmakers were divided on a list of proposed reforms to the program, with senators from flood-prone states resisting certain proposals, citing concerns about premium costs for homeowners. A summary of the hearing may be found here.

• Why it matters: The NFIP allows mortgage lenders, real estate agents, home builders and the rest of the housing industry to close deals on homes in floodplains. Long-term flood insurance reform has eluded Congress for years, resulting in lawmakers passing short-term reauthorizations of the program 16 times since 2017.
• What’s next: Tuesday’s hearing was the first in four years that the Senate Banking Committee has held on the NFIP. The House Financial Services Committee unanimously passed a five-year reauthorization of the program in 2019 that required disclosure of property-specific risks for homeowners and homebuyers, and updated maps to create new flood zones. The Senate has been unable to reach an agreement on long-term changes.

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

2. MBA’s Mike Fratantoni in HousingWire: What the Biden tax plans mean for the housing market

Last week, HousingWire published a guest column written by MBA SVP and Chief Economist Mike Fratantoni on what the Biden administration’s tax proposals mean for the real estate industry. Fratantoni analyzes the current state of the U.S. federal budget, gives an overview of the 2017 Tax Cuts and Jobs Act (TCJA), and examines President Joe Biden’s two 2021 tax proposals: The American Jobs Plan and The American Families Plan. Fratantoni’s analysis focuses on the tax elements of the two proposals that would directly affect real estate markets.

• Why it matters: The Biden administration has proposed the $2.3 trillion American Jobs Plan and the $1.8 trillion American Families Plan to rebuild infrastructure, as well as provide new spending for a host of educational, public health, and other initiatives. To pay for these expenditures – at least partially – the plans include a series of provisions that would largely reverse the TCJA’s tax rate cuts for corporations and higher-income individuals.
• What’s next: MBA will continue to advocate with the administration and on Capitol Hill against any threat to real estate finance markets as the congressional debate on tax and infrastructure advances.

For more information, please contact Bill Killmer at (202) 557-2736 or Mike Fratantoni at (202) 557-2935.

3. President Biden Signs Executive Order on Climate Change

On Thursday, President Biden signed an executive order (EO) on climate change that will impact the real estate finance industry. Among other provisions, the order directs various government agencies to: assess whether climate change represents a threat to financial stability; assess the climate risk of government finance programs; change fiduciary duty for investors to encourage ESG investing (including repealing a current rule that could discourage ESG investing); incorporate climate change risk into the underwriting standards for FHA mortgages; and accelerate the integration of climate change reporting into regulatory and supervisory review, which could lead to climate change stress tests for financial institutions.

• Why it matters: Financial institutions and investors in real estate should be prepared to operate in a regulatory environment with a growing focus on climate change.
• What’s next: The federal banking agencies and other government regulators will take action in response to this EO. This is likely only one of many expected climate-related actions by the Biden administration that will affect CREF members.

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

4. Senate Banking and Housing Committee Hearing on ‘21st Century Communities: Expanding Opportunity Through Infrastructure Investments’

On Thursday, the Senate Banking Committee held a hearing to hear testimony from Department of Housing and Urban Development (HUD) Secretary Marcia Fudge and Transportation Secretary Pete Buttigieg on the Biden administration’s proposed American Jobs Plan. The hearing exposed partisan disagreement on how infrastructure should be paid for and the size of future federal transit and infrastructure investments. Ranking Member Patrick Toomey (R-PA) opened the hearing with remarks emphasizing the need for Congress to focus on physical infrastructure spending, rather than housing, and outlined the preferred Republican approach of repurposing previously appropriated stimulus money to pay for infrastructure. He said, “[L]et’s be clear: Housing is housing. People certainly need housing, but housing is not infrastructure.”

Senators Kyrsten Sinema (D-AZ), Steve Daines (R-MT), and Jon Tester (D-MT) each raised concerns regarding affordable housing in rural areas, and Secretary Fudge mentioned a variety of tax measures in her responses – such as the Low-Income Housing Tax Credit (LIHTC) and the Neighborhood Homes Investment Act (NHIA) – in the context of the Biden proposal. Chairman Sherrod Brown (D-OH) asked how HUD can help communities address restrictive zoning and expand access to housing development. Secretary Fudge asked Congress to provide HUD with tools to assist localities as they address zoning challenges. Senator Mark Warner (D-VA) briefly mentioned the need to further help homebuyers build equity, and credited much of the existing wealth gap to unequal access to homeownership.

• Why it matters: The hearing highlighted the deep division in the committee over how to pay for the approximately $85 billion in transit funding that the committee has jurisdiction over, as well as the $213 billion in additional housing funding proposed by the Biden administration.
• What’s next: The committee will seek to authorize multiyear transportation legislation as part of a larger transportation and infrastructure package that will be merged with the highway authorization.

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

5. House Ways and Means Committee Holds Hearing on Tax Code Options for Infrastructure Investment

On Wednesday, the House Ways and Means Committee held a hearing entitled, “Leveraging the Tax Code for Infrastructure Investment.” Both Republicans and Democrats expressed an underlying agreement that Congress must act on infrastructure policy. Specifically, there was bipartisan agreement that funding mechanisms, such as private activity bonds and public-private partnerships, should be pursued. There was also agreement in favor of policy options that would renovate, revitalize, and expand access to affordable housing for low-income and rural communities.

• Why it matters: This hearing is part of a series that will set the stage for congressional action on the nature, size, and scope of revenue raisers and tax “pay-fors” to fund infrastructure priorities.
• What’s next: MBA will continue to engage with the administration and key congressional leaders and staff to advocate for the CREF-related tax priorities identified by COMBOG and the MBA Board-approved Tax Task Force.

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

6. Court Pauses its Order Vacating CDC Nationwide Eviction Moratorium 

Last Friday, Judge Dabney L. Friedrich of the United States District Court for the District of Columbia issued a stay of her earlier order vacating the Centers for Disease Control and Prevention’s (CDC) nationwide eviction moratorium. Absent a stay, the court’s May 5 order vacating the CDC moratorium would have ended its application nationwide.

• Why it matters: The CDC eviction moratorium currently remains in effect in most jurisdictions, but additional legal challenges are ongoing.
• What’s next: The DOJ has appealed the decision to vacate the CDC moratorium to the United States Court of Appeals for the District of Columbia Circuit, and the order to stay Judge Friedrich’s order may be appealed to the U.S. Supreme Court. 

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

7. Court Declines to Block CFPB IFR on Tenant Protections in Tennessee

Last Friday, a Tennessee federal court judge declined to issue an emergency order blocking the Consumer Financial Protection Bureau’s (CFPB) interim final rule (IFR) that requires landlords to inform tenants of federal protections under the CDC’s order temporarily halting evictions. Notably, in its ruling, the court said that the CFPB’s IFR does not apply in jurisdictions such as Tennessee where the CDC order is not in effect. The Sixth Circuit Court of Appeals (the Sixth Circuit includes Tennessee) had ruled earlier in April that the CDC eviction moratorium exceeded CDC authority.

• Why it matters: Landlords should be aware that they may or may not be required to comply with the requirements under the CFPB IFR, depending on the location of their property.
• What’s next: MBA will continue to monitor and analyze any additional CFPB action as it relates to the eviction moratorium.

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

8. MBA Leads Industry Comment on Private Flood Insurance Q&As

On Monday, MBA and 10 other trade organizations submitted joint comments to the banking agencies on proposed interagency questions and answers (Q&As) regarding private flood insurance. MBA worked closely with its industry partners to provide the regulatory agencies with specific, practical recommendations on how the proposed Q&As could better operationalize the final private flood insurance rules. The comments also urged the agencies to highlight that the Q&As “are guidance only and should not serve as the basis for supervisory action.”

• Why it matters: The interagency Q&As provide guidance that lenders and servicers rely on to ensure compliance with mandatory flood insurance purchase requirements, and that examiners look to when assessing flood insurance compliance processes. As a result, it is critical for the Q&As to accurately apply the rules across a wide range of lending and servicing circumstances.
• What’s next: Agencies will review these and other comments before issuing the final Q&As.

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

9. MBA Lends Support to Change in RBC for Life Company Real Estate Investments

Today, MBA sent a letter to the NAIC Life Risk-Based Capital Working Group in support of an American Council of Life Insurers (ACLI) proposal to change the risk-based capital (RBC) treatment of life company investments in real estate. The ACLI proposal would reduce the RBC factors for direct and indirect investments in real estate and would make technical changes to treatment of encumbrances on that real estate. The proposal also includes a novel approach to providing capital recognition of a portion of unrealized gains. The NAIC Statutory Accounting Principles Working Group has raised significant practical concerns with that approach; it is not expected to be adopted.

• Why it matters: The current RBC treatment of life company investments in real estate is out of date and results in capital requirements that are not commensurate with risk, which can distort life company capital allocation and investment decisions. 
• What’s next: The Working Group is expected to act on the proposal in a meeting next week, on May 27, 2021. If adopted, the revisions would apply to 2021 year-end reporting.

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

10. OCC Halts Implementation of Its 2020 CRA Overhaul 

On Tuesday, the Office of the Comptroller of the Currency (OCC) announced it would halt implementation of a 2020 rule that overhauled the agency’s Community Reinvestment Act (CRA) regulations. The OCC stated it “does not plan to finalize the December 4, 2020, proposed rule that requested comment on an approach to determine the CRA evaluation measure benchmarks, retail lending distribution test thresholds, and community development minimums under the June 2020 rule.” Last year, the OCC finalized this overhaul of CRA regulations, without harmonizing with the other federal banking agencies.

• Why it matters: The OCC’s pause on its CRA regulations headed off a possible congressional override of those regulations under the Congressional Review Act.  
• What’s Next: The OCC, FDIC, and Federal Reserve have indicated they will work to develop new unified CRA rules.

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

11. HUD Announces $5 Billion to House People Experiencing Homelessness

On May 17, HUD Secretary Marcia Fudge announced the allocation of $5 billion in American Rescue Plan (ARP) funds for emergency housing vouchers for individuals and families who are experiencing homelessness or are at risk of homelessness. The supplemental funding is allocated through the Emergency Housing Voucher (EHV) program and is the second of two homelessness-related funding opportunities. It provides 70,000 housing choice vouchers to local public housing authorities (PHAs) to help Americans with housing needs. 

• Why it matters: HUD’s allocation of these funds provides communities around the country with the resources needed to give access to housing to families who have had to endure the COVID-19 pandemic without it.
• What’s next: MBA will continue to work with Congress, policymakers, and key industry stakeholders to provide needed pandemic relief that impacts our industry and communities.    

For more information, please contact Sharon Walker at (202) 5557-2747.

12. MBA Sends Letter to Colorado Lawmakers on Proposed Multifamily Forbearance Bill

On Thursday, MBA sent a letter to legislators in Colorado expressing concern with proposed draft legislation that includes multifamily forbearance provisions. In the letter, MBA suggested that direct rental assistance was a better way to help property owners, highlighting the $385 million in emergency rental assistance Colorado has received, and suggested that, at a minimum, property owners should be required to submit a financial attestation and requests for forbearance should be net of expected rental assistance.

• Why it matters: While dozens of state bills mandating forbearance have emerged during the COVID-19 pandemic, in part due to MBA advocacy, only one other state has enacted similar legislation, which has since expired. 
• What’s next: MBA is working with state partners to follow developments as the sponsors consider whether to introduce the bill and, if so, in what form.

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

13. Fannie Mae, Freddie Mac Release Proposed 2022-2024 Duty to Serve Plans

On Tuesday, the Federal Housing Finance Agency (FHFA) announced the publication of the GSEs’ proposed 2022-2024 Underserved Markets Plans under the Duty to Serve program. These plans provide an overview of the activities outlined by the GSEs to fulfill their Duty to Serve requirements over a three-year period.

• Why it matters: The Duty to Serve program holds the GSEs accountable for serving three important markets – rural housing, affordable housing preservation, and manufactured housing.
• What’s next: Comments on the proposed plans are due to FHFA no later than July 16, 2021. FHFA also will hold public listening sessions on each of the three targeted markets – rural housing (July 12, 2021), affordable housing preservation (July 13, 2021), and manufactured housing (July 14, 2021).

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

14. HUD Deputy Secretary Nomination Advances to Senate Floor; MBA Submits Letter of Support

On Wednesday, the Senate Banking Committee approved by voice vote the nomination of Adrianne Todman to be Deputy Secretary of the Department of Housing and Urban Development. Her nomination now moves to the full Senate for consideration. MBA’s letter of support for Todman can be found here.

• Why it matters: Todman has an extensive background in housing, having served as CEO of the National Association of Housing and Redevelopment Officials (NAHRO) since 2017. Prior to joining NAHRO, she served as Executive Director of the District of Columbia Housing Authority (DCHA), where she focused on housing homeless veterans, increased homeownership opportunities for low- and moderate-income families served by DCHA, and improved and expanded affordable housing units available to a range of household incomes.
• What’s next: Given her unanimous vote in committee, Todman’s nomination may move quickly and should not encounter strong resistance on the Senate floor. As the second most senior official at HUD, Todman will manage the day-to-day operations of the agency and will advise and assist the Secretary in leading the Department’s nearly 8,000 employees on issues such as affordable housing, government lending, and fair housing.

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

15. House Financial Services Committee Holds Hearing with Prudential Regulators

On Wednesday, the House Financial Services Committee held a hearing titled, “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions.” Witnesses included the heads of the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency, and the National Credit Union Administration (NCUA); and the Vice Chair of Supervision of the Federal Reserve System (Fed). A broad range of topics were discussed including the Community Reinvestment Act, LIBOR transition, fintech partnerships, climate change, and the implications of forbearance relief afforded to bank customers during the pandemic.    

• Why it matters: The topics discussed during this hearing indicate regulatory adjustments Congress may pursue during the remainder of the 117th Congress, as well as priorities that may be pursued by the respective regulatory agencies themselves.  
• What’s next: MBA will continue working with key lawmakers and regulators on all issues impacting our members. 

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

16. 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.

17. MAA Action Weeks Campaign Recap

The Mortgage Action Alliance (MAA), just wrapped up MAA Action Weeks, a national, industrywide campaign aimed at growing MAA and activating real estate finance professionals in key states and congressional districts. Eighty companies participated, and through concurrent company campaigns, this effort generated 5,900 new MAA sign-ups and 13,400 MAA renewals. This expanded the active MAA member total to more than 75,000.

• Why it matters: MAA empowers members to contact their state and federal elected officials through Calls to Action. This is the most critical time for our industry to unite and play an active role in shaping legislation and regulations that impact our companies, our customers, and the broader economy.
• What’s next: Click here to request a report of your company’s or state’s involvement, or to receive additional information about how to run a company campaign.

For more information, please contact Rosie Sheehan at (202) 557-2933.

18. House Financial Services Committee Announces New Leadership Posts

On Tuesday, Republicans and Democrats on the House Financial Services Committee announced new leadership posts for their respective caucuses. Rep. Jake Auchincloss (D-MA) will assume the post of Vice Chairman of the full Committee, the No. 2 position under Chairwoman Maxine Waters (D-CA). Rep. French Hill (R-AR) will replace former Rep. Steve Stivers (R-OH) as the lead Republican on the Housing, Community Development, and Insurance Subcommittee. 

• Why it matters: Leadership positions on the Committee are integral in crafting policies and guiding bills through the legislative process.   
• What’s next: MBA congratulates Reps. Auchincloss and Hill on their new assignments and looks forward to working with both members in their new roles.

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

19. Upcoming and Recent MBA Education Webinars on Critical Industry Issues

MBA Education continues to deliver timely single-family and commercial/multifamily 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:

• CONVERGENCE: The Future Is Female: How Women Are Shaping the Future of Housing – May 26
• Retail 3.0: Re-envisioning Retail – May 26
• Fair Lending: Things You Might Not Be Thinking Of – June 22
• 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
• Do Commercial Servicer Ratings Matter? – July 14

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

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