CREF Policy Update Nov. 18, 2021

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

Both chambers of Congress were in recess last week, but MBA remained actively and directly engaged in key staff-level discussions regarding President Biden’s Build Back Better Act tax and reconciliation package.

Last Wednesday, HUD announced a new electronic submission portal for multifamily mortgage insurance applications. In this week’s newsletter, you will also find several updates related to ESG and climate change risk management.  

Sign the Home for All Pledge and join the over 100 organizations that have already committed to promoting minority homeownership; affordable rental housing; and company diversity, equity, and inclusion. A senior member of your organization (e.g., CEO, COO, President) should complete this online form.

1. FHA Catalyst Electronic MAP Applications Required Starting December 10 

On Wednesday, a Mortgagee Letter from the U.S. Department of Housing and Urban Development’s (HUD) Office of Multifamily Housing announced it now requires the use of the FHA Catalyst: Multifamily Applications Module. 

• Why it matters: Effective December 10, 2021, all MAP electronic application submissions will be required to use the FHA Catalyst: Multifamily Applications Module.
• What’s next: MBA will follow developments and work with HUD to address any issues. 

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

2. Federal Reserve Governor Quarles to Resign  

On Monday, Federal Reserve Governor Randal Quarles announced he would resign his position at the end of the year. 

• Why it matters: Quarles was appointed to a four-year term in October 2017 by then-President Donald Trump as the Fed’s Vice Chairman for bank supervision, a position created by the 2010 Dodd-Frank financial-regulatory overhaul. 
• What’s next: President Joe Biden is expected to appoint a replacement who will likely pursue a position that favors greater regulation of banks. 

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

3. Mortgage Action Alliance (MAA) Action Weeks 

MAA Action Week is a national, industry-wide campaign dedicated to helping real estate finance professionals learn how to become more engaged in political advocacy that supports our industry. MAA Action Week began on Monday, November 1, and was extended through today, November 12, with the goal of growing MBA’s free grassroots advocacy network. So far, 1,692 professionals have joined MAA and 2,348 have renewed their membership.

• Why it matters: Less than 20% of the real estate finance industry is represented in MAA. We need the full strength of our industry to effectively advocate for our industry, your business, and your customers.  
• What’s next: It’s not too late – take 30 seconds to join or renew your MAA membership and be added to our Action Week totals!

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

4.  ESG/CLIMATE Resources

OCC Set to Release Guidance on Climate Risk Management

On Monday, Michael Hsu, Acting Head of the Office of the Comptroller of the Currency (OCC), announced that the OCC is developing – and will publish later this year – high-level supervisory expectations for large banks related to climate risk management. Detailed guidance for each risk area will follow next year. In addition to outlining expected supervisory guidance on climate change, Hsu appealed to banks’ leadership to drive their climate risk mitigation efforts at the firm level by focusing on answering a set of key questions on the financial institution’s ability to withstand the emerging threat of climate change. 

• Why it matters: The OCC is the primary regulator of national banks and federal savings associations. Other prudential regulators may issue similar guidance. 
• What’s next: MBA staff will continue to monitor the federal regulators for climate-related guidance that may impact CREF members.  

NYDFS Announces Creation of the Climate Risk Division

On November 3, the New York Department of Financial Services (NYDFS) announced the creation of the Climate Risk Division (CRD). The NYDFS is the first U.S. state banking regulator to establish a climate risk division. The CRD “will integrate climate risks into its supervision of regulated entities; support the industry’s growth in managing climate risks; coordinate with international, national, and state regulators; develop internal capacity on climate-related financial risks; support the capacity-building of peer regulators on climate-related supervision; and ensure fair access to financial services for all communities, especially those most impacted by climate change.”

• Why it matters: Additional climate-related guidance may be introduced at the state level as states expand their climate-related supervisory capacity. 
• What’s next: MBA will continue to analyze the impact of state regulators’ expansion into climate risk management.

UK Announces Plans to Become a Net-Zero Aligned Financial Center

On November 3, Rishi Sunak, Chancellor of the Exchequer, announced a set of plans for the UK to become the world’s first net-zero aligned financial center. According to the Chancellor, there will be new requirements for UK financial institutions and listed companies to publish net-zero transition plans that detail how they will adapt and decarbonize as the country moves toward a net-zero economy by 2050. There is no timeline for when the climate-related guidance will be released. 

• Why it matters: The UK’s commitment to decarbonizing its financial sector serves as an example of a national policy on mitigating the impacts of climate change by focusing on mitigating financed carbon and generally decarbonizing financial institutions. 
• What’s next: MBA will continue to track developments in the UK and around the world that align financial institution operations with net-zero objectives. 

FRB Releases Financial Stability Report

On Monday, the Federal Reserve Board (FRB) released its Financial Stability Report, which, among several provisions, highlighted how stresses in China’s real estate sector could impact the United States and threaten financial stability. The report cites that market shocks and spillovers from Chinese regulator efforts to reduce leverage in the property development sector could accelerate broader property-sector and financial system stress. Specifically, the report states, “Stresses could, in turn, propagate to the Chinese financial system through spillovers to financial firms, a sudden correction of real estate prices, or a reduction in investor risk appetite.” The financial stability report is a summary of the FRB’s framework for assessing the resilience of the U.S. financial system.  

• Why it matters: Given the size of China’s economy and financial system, and its general linkage to the rest of the world, MBA members should be aware that the stretched real estate valuations in China may strain global financial markets through a deterioration of risk sentiment. 
• What’s next: MBA will continue to track developments in China and around the world as they pertain to commercial real estate markets.  

Treasury Issues State Small-Business Credit Program Guidance

On Wednesday, the U.S. Department of the Treasury issued capital program implementation guidance for the reauthorized State Small Business Initiative (SSBCI) program. The SSBCI program was established in 2010 to expand access to capital for small businesses by leveraging private financing to spur lending to small businesses and manufacturers in need of capital. Recently, the American Rescue Plan Act reauthorized and expanded the program. The reauthorized version of the SSBCI will provide $10 billion to states, territories, the District of Columbia, and tribal governments to fund venture capital programs, loan participation programs, loan guarantee programs, collateral support programs, and capital access programs to small businesses emerging from the pandemic.

• Why it matters: The SSBCI program could indirectly provide business opportunities for CREF members.
• What’s next: In the coming weeks, Treasury will announce the availability of technical assistance funding and issue separate guidelines regarding technical assistance and instructions on how to apply.  

For more information on climate and environmental, social, and governance (ESG), please contact Adrian Ballinger at (202) 557-2774.

5. Sign MBA’s Home for All Pledge to Promote Minority Homeownership, Affordable Rental Housing, and DEI

Kristy Fercho, MBA Chair, and Executive Vice President and Head of Home Lending at Wells Fargo, announced the Home for All Pledge last month at MBA’s Annual Convention & Expo 2021. The member company action pledge represents a long-term commitment by MBA member companies and employees to promote minority homeownership; affordable rental housing; and company diversity, equity, and inclusion. Click here to see the growing list of companies that have already signed the pledge.

• Why it matters: Member companies are encouraged to sign the Home for All Pledge today and commit to aligning with MBA’s efforts to: foster public policies and industry practices that promote and sustain minority homeownership and affordable rental housing; support market-based solutions through MBA’s place-based CONVERGENCE programs; and champion diversity, equity, and inclusion in our workplaces and our industry.
• What’s next: To sign the Home for All Pledge, a senior member of your organization (e.g., CEO) should complete this online form. More information on how to act will follow. Only one senior member per organization needs to sign the pledge.

For more information, please contact Lisa Haynes at (202) 557-2835.

6. 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. 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:

• Emergency Rental Assistance: What is Working, Where Are the Challenges, and What is to Come? – November 17
• The Impact of Increased Enforcement on Marketing Compliance – November 18
• Introduction to MISMO’s Commercial Appraisal Dataset – November 23
• Rental Housing Perspectives: Low-Income Housing Tax Credit Landscape – November 30
• Commercial Real Estate Tech Tools & Trends – December 1

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.