CREF Policy Update Oct. 14, 2021

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

Last week SEC Chairman Gary Gensler testified before the House Financial Services Committee on numerous issues, including ESG disclosures. Yesterday, HUD published a rule in the Federal Register that requires a 30-day notice before eviction for certain tenants. Earlier, MBA released a monthly report showing continued improvement in commercial/multifamily mortgage loan performance. And congressional leaders reached agreement to temporarily raise the statutory federal debt limit last night.

LISTEN: Mike Flood recently participated in an interview on The TreppWire Podcast to discuss taxes, infrastructure, the multifamily sector, banking areas to watch, insurance lending, and ESG

1. Senate Passes a Short-Term Debt Limit Increase

Last Thursday evening, the Senate voted to advance a measure that would temporarily shift the U.S. debt limit deadline from October to December 2021. The temporary increase in the debt limit will allow the U.S. Treasury Department to continue funding the government’s financial obligations, staving off immediate economic disruption. The Senate reached a bipartisan last-minute agreement after a months-long standoff between Republicans and Democrats. The issue will resurface again in early December. 

• Why it matters: A default in U.S. debt, which allows the Treasury Department to fund all aspects of the federal government, has never occurred and would create immediate national and global economic uncertainty.   
• What’s next: The House was scheduled to be in a legislative recess until October 18 but will now reconvene on October 12 for a vote on the Senate’s temporary debt ceiling increase. President Joe Biden is expected to sign the bill into law as quickly as possible. 

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

2. SEC Chairman Gensler Testifies Before House Financial Services Committee 

Last Tuesday, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testified before the House Financial Services Committee. A wide range of issues were addressed, including human capital disclosure, climate risk disclosure, diversity disclosure, environmental, social and corporate governance (ESG) issues, market structure, executive compensation clawbacks, systemic risk, taxes and cybersecurity. Regarding ESG disclosure, Chairman Gensler repeatedly emphasized the need for consistent, comparable, decision-useful information—noting anticipation for the public comments to be received during the agency’s rulemaking process. In June, MBA provided these recommendations in a response to a March 15, 2021, SEC request for input (RFI) to inform its evaluation of disclosure rules and climate change.

• Why it matters: The SEC is likely to turn towards a series of robust rulemakings on numerous issues within the agency’s jurisdiction, including ESG, diversity, equity and inclusion, cyber security, and cryptocurrencies.
• What’s next: Chairman Gensler is likely to collaborate with other federal financial regulators, Congress, and outside stakeholders before finalizing any rulemakings. MBA will continue to stay engaged with both the Hill and the agencies as this process unfolds.

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

3. MBA Provides Input on HUD’s Relaunched FFB Program 

Earlier this week, MBA provided recommendations to U.S. Department of Housing and Urban Department (HUD) officials on their implementation of the relaunched Federal Financing Bank (FFB) program. Under the program, the FFB will provide funding for Housing Finance Agency (HFA) multifamily loans under HUD’s multifamily risk-sharing program.

• Why it matters: The recommendations address MBA’s concerns regarding conflicts of interest, the Davis-Bacon Act, waivers, risk, and passing along the lower FFB borrowing costs to borrowers to lower rents.
• What’s next: MBA will continue its dialogue with HUD and administration officials regarding the concerns with the FFB program.

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

4. HUD Issues Rule Providing 30-Day Tenant Eviction Protection 

On Thursday, HUD published an interim final rule that requires a 30-day notice before eviction for certain tenants. The rule prohibits the eviction of tenants facing eviction for nonpayment of rent from HUD-subsidized public housing and certain properties with project-based rental assistance without providing a 30-day notice period (rather than a 14-day notice) and information about applying for rental assistance, when a national emergency is declared.

• Why it matters: The rule applies to public housing and properties with the following project-based rental assistance (PBRA): Section 8, Section 8 Moderate Rehabilitation, Section 202/162 Project Assistance Contract, Section 202 Project Rental Assistance Contract (PRAC), Section 811 PRAC, Section 236 Rental Housing Assistance Program and Rent Supplement.
• What’s next: The rule is effective November 8, 2021, which is also the end of the comment period. 

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

5. Climate/ESG Resources

White House Releases Federal Climate Adaption Plans

On Thursday, the White House released 20 federal agency action plans outlining the steps that each agency is taking to ensure that “their facilities and operations adapt to and are increasingly resilient to climate change impacts.” Per President Joe Biden’s January 27, 2021, Executive Order 14008, major federal agencies were required to develop an adaption and resilience plan to address their most significant climate risks and vulnerabilities.

• Why it matters: Agency climate action plans could impact commercial real estate finance.
• What is next: MBA staff is analyzing agency action plans for potential impact on commercial and multifamily business and will inform members of any relevant issues.

Treasury Releases Climate Action Plan

On Thursday, as part of the White House release of federal agency action plans, the U.S. Treasury Department released the “Treasury Climate Action Plan,” which outlines Treasury’s priorities to “increase resilience of Treasury facilities and operations to the impacts of climate change.” Treasury’s Climate Action Plan outlines five priority areas to focus on to improve its own climate resilience, including rebuilding internal climate programs and capabilities; addressing climate change impacts and vulnerabilities across Treasury operations; ensuring a climate-focused approach to managing Treasury’s real property portfolio footprint; enabling procurement management to consider climate change realities; and providing for a financial investment approach that mirrors the Treasury’s climate objectives.

• Why it matters: Treasury investment and procurement strategies could impact commercial real estate assets.
• What’s next: MBA staff will review the Treasury’s Climate Action Plan for impacts on commercial real estate finance.

CFPB Small Business Reporting Rule Published in Federal Register 

The Consumer Financial Protection Bureau (CFPB) proposed small business lending reporting rule was published in the Federal Register. The proposed rule would implement section 1071 of the 2010 Dodd-Frank Act. Under the proposal, lenders would be required to collect and report the amount and type of small business credit applied for, demographic information about small business credit applicants (e.g., whether they are minority- or women-owned), and elements of the price of the credit offered.

• Why it matters: While the CFPB released the proposed rule on September 1, publication of the proposal starts the 90-day clock on the comment period. As a result, the comment period will close January 6, 2022.
• What’s next: MBA will leverage its HMDA working group to develop its response to the proposal and will also work with other trade associations.

For more information or to participate in the comment process, please contact Bruce Oliver at 202-557-2840.

Fed Governor Brainard Highlights Importance of Climate Scenario Analysis 

Last week at the Federal Reserve Stress Testing Conference, Federal Reserve Governor Lael Brainard highlighted that the Federal Reserve is putting together large bank supervisory guidance on climate scenario analysis to guide efforts to mitigate climate-related physical and transition risk facing the financial system. In a prepared speech, Governor Brainard highlighted the challenges and opportunities presented with creating such an analysis, including opportunities for international cooperation. However, Governor Brainard also highlighted the difficulty of modeling climate risk given existing data gaps and lack of precedents. On closing the data gaps, Governor Brainard recognized the importance of mandatory climate-related disclosures, stating, “Consistent, comparable, and, ultimately, mandatory disclosures are likely to be vital to enable market participants to measure, monitor, and manage climate risks on a consistent basis across firms.” Governor Brainard recognized that this was the SEC’s responsibility, and not the Federal Reserve’s. There was no update on the timing of this proposal, nor whether it would be open to comment.

• Why it matters: Climate-related supervisory guidance, including mandatory disclosures on climate risk, could impact the commercial real estate industry.
• What’s next: MBA staff will continue to monitor regulators for additional climate-related action and advocate on behalf of member interests.

For more information or to get involved in climate and ESG policy, please contact Adrian Ballinger at (202) 557-2774.

6. Trade Group Raises Industry Issues with FHFA Radon Testing Proposal 

Last Thursday, the Bipartisan Policy Committee (BPC) released a blog post on the Federal Housing Finance Agency’s (FHFA) proposed radon testing standards. The post summarized and supports the issues MBA and members have been raising about the standards.

• Why it matters: The industry agrees that FHFA’s proposed 100% radon testing program does not take into account the science on regional differences in the likelihood of radon or practical difficulties, including a lack of sufficient radon testers.
• What’s next: MBA will pull together a group meeting to discuss a post-closing process, as there is renewed interest in understanding how that would look, work and function.

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

7. 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.

8. Commercial and Multifamily Mortgage Delinquencies Declined in September      

Delinquency rates for mortgages backed by commercial and multifamily properties declined in September, according to MBA’s latest monthly CREF Loan Performance Survey. The survey was developed to better understand the ways the COVID-19 pandemic is impacting commercial mortgage loan performance.

• What it says: Loans backed by lodging and retail properties continue to see the greatest stress, but the overall balance of commercial and multifamily mortgages that are not current decreased slightly last month.
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “Commercial and multifamily mortgage performance has improved considerably since the worst of the downturn. The stress that entered – and remains – in the market is largely concentrated in lodging and retail properties, but with fewer new loans becoming delinquent and shrinking balances of overall delinquency as lenders and servicers work out the longer-term troubled loans.”

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

9. 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:

• ESG 101: How ESG is changing Commercial Real Estate – October 12
• CFPB’s New AVM Guidelines – How to Be Prepared – November 3
• Are We There Yet? CRE and LIBOR Transition Check-Up – November 4
• Understanding the Surge in Single-Family Rentals – November 4
• The Impact of Increased Enforcement on Marketing Compliance – November 18

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.