CREF Policy Update May 5, 2022

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

Last week CFPB Director Rohit Chopra appeared on Capitol Hill to deliver the Bureau’s semiannual report to Congress. On Wednesday, FHFA published the GSEs’ Duty to Serve Underserved Markets Plans for 2022-2024. On Friday, MBA submitted comments on S&P Global’s proposed revisions to its insurer risk-based capital adequacy methodology and assumptions.

Earlier last week, over 400 state and local leaders and rank-and-file MBA members assembled in Washington to meet with elected officials and key congressional staffers during MBA’s National Advocacy Conference (NAC). The event included a record number of commercial/multifamily member registrants who attended the traditional CREF-specific portion of the program.

Sign MBA’s Home for All Pledge: Join the 200+ MBA member companies that have signed MBA’s Home for All Pledge, representing a commitment to promoting affordable rental housing; minority homeownership; and company diversity, equity, and inclusion. One senior executive (e.g., CEO, COO, President, Head of Lending, SVP) is encouraged to sign this online form on behalf of your organization.

1. MBA Concludes Successful 2022 National Advocacy Conference (NAC)

Early last week, over 400 state and local leaders and rank-and-file MBA members assembled in Washington to meet with elected officials and key congressional staffers on Capitol Hill. The event included a record number commercial/multifamily member registrants who attended the CREF-specific track.

Thanks to the MBA advocacy team’s efforts, attendees heard from key thought leaders such as House Democratic Caucus Chair Hakeem Jeffries (D-NY), Senate Republican Whip John Thune (R-SD), CBS News’ Face the Nation host Margaret Brennan, and House National Republican Congressional Committee Chairman Tom Emmer (R-MN).

Additionally, Congresswomen Madeleine Dean (D-PA) and Young Kim (R-CA) were part of a spirited, bipartisan mPower panel. Attendees also met with more than 50 other lawmakers and senior congressional staffers at MBA’s Tuesday night reception at the historic National Archives rotunda.

• Why it matters: The tailored CREF track included interactive presentations by key House Financial Services Committee members Juan Vargas (D-CA) and Trey Hollingsworth (R-IN), as well as important House and Senate tax and appropriations staff, and Department of Housing and Urban Development (HUD) and Consumer Financial Protection Bureau (CFPB) regulatory staff members. CREF members were able to discuss a full range of key policy themes — e.g., tax policy; small-business loan reporting; Federal Housing Administration (FHA) multifamily lending and HUD appropriations; climate-change risk and environmental, social, and governance (ESG); Davis-Bacon wage rates; GSE multifamily lending; affordable housing and more — with these policymakers. This was MBA’s first in-person NAC experience for members since 2019.
• What’s next: MBA staff will continue to advocate for the key CREF policy priorities that were a focus of this week’s conference.

For more information, please contact Rachel Kelley at (202) 557-2816.

2. CFPB Director Appears Before Congress; Lawmakers Voice Concern Over 1071 Rulemaking

Last week, CFPB Director Rohit Chopra appeared on Capitol Hill to deliver the Bureau’s semiannual report to Congress. Testifying before the House Financial Services and Senate Banking committees, Director Chopra engaged lawmakers on a broad range of topics falling under the jurisdiction of the CFPB. Several House and Senate lawmakers voiced their concerns over the CFPB’s ongoing Dodd-Frank Act (DFA) Section 1071 rulemaking. A summary of both hearings may be found here.

• Why it matters: In January, MBA led an industry comment letter responding to the CFPB’s proposed small-business loan reporting rule, urging the CFPB to clarify that loans to finance income-producing commercial and multifamily properties should not fall under the DFA statute’s definition of small-business lending. As proposed, the rule would exempt only single-family investment properties.
• What’s next: The CFPB is expected to finalize the rule in the coming months, with an implementation date expected within 18 months. Combined pressure from Congress and the industry can potentially influence the outcome of how the rule is finalized.

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

3. FHFA Announces Fannie Mae’s and Freddie Mac’s Duty to Serve Plans for 2022-2024

On Wednesday, the Federal Housing Finance Agency (FHFA) published Fannie Mae’s and Freddie Mac’s Duty to Serve Underserved Markets Plans for 2022-2024. FHFA issued a final rule in 2016 that implemented the Duty to Serve provisions, which require the GSEs to submit underserved market plans to FHFA that address manufactured housing, rural housing, and affordable housing preservation markets. FHFA has determined that the submitted plans meet the “non-objections” standard required by the Duty to Serve provisions.

• Why it matters: The plans as submitted contain a variety of objectives that impact the enterprises’ multifamily businesses. For example, there are objectives to increase liquidity to the Low-Income Housing Tax Credit (LIHTC) debt market by purchasing loans secured by LIHTC properties that are entering their extended use period, as well as objectives to promote greater preservation of the U.S. Department of Agriculture’s (USDA) Section 515 rural rental housing program through loan purchases.
• What’s next: The activities outlined in the plans remain subject to further FHFA review and approval. MBA will continue to monitor the approval and implementation of these plans and communicate any relevant information to our members.

For more information, please contact Stephanie Milner at (202) 557-2747.

4. MBA Urges S&P to Consider CMBS Impacts of Proposed Changes to its Insurance Capital Model

On Friday, MBA submitted comments on S&P Global’s proposed revisions to its insurer risk-based capital adequacy methodology and assumptions. In the letter, MBA expressed concerns that the notching approach proposed for S&P’s treatment of structured financial securities could dramatically increase the effective capital charge for commercial mortgage-backed securities (CMBS) under its insurer capital adequacy model. MBA urged S&P to eliminate or mitigate that impact.

• Why it matters: Companies respond to incentives created by credit rating agency capital adequacy models, and an approach that creates disincentives to holding CMBS could: remove CMBS as a balance-sheet management tool; make CMBS investments less desirable for insurance companies; reduce liquidity in CMBS markets; and reduce the availability of CMBS as a source of debt capital.
• What’s next: S&P will consider the comments it receives as it determines how to improve its capital adequacy model for insurers.

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

5. New York Announces Commercial Real Estate Building ‘Playbook’ Guide to Low Carbon Emissions  

Last week, New York State announced a new online tool to give commercial property owners a resource to reduce carbon emissions. “The Empire Building Playbook: An Owner’s Guide to Low Carbon” was developed by Empire State Realty Trust.

• Why it matters: New York City buildings over 25,000 square feet must significantly cut their greenhouse gas emissions under Local Law 97.
• What’s next: Local Law 97 takes effect starting in 2024.

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

5. State Trackers

• State eviction moratorium and legislative activity tracker available here.

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

6. MBA Releases New Monthly Affordability Index Based on Weekly Applications Survey Data; Comparison to Asking Rents Included  

MBA released its second monthly Purchase Applications Payment Index (PAPI), which reports Weekly Applications Survey (WAS) data every month by loan type, geography (state), and race, as well as how it compares to recent asking rents. The index itself measures how new monthly mortgage payments vary across time, relative to income. A FAQ document can be found here.

• Why it matters: MBA’s national mortgage payment-to-rent ratio (MPRR) increased to 1.38 in March (the highest since 2010) from 1.32 in February, 1.22 in January, and 1.15 in December 2021, meaning mortgage payments for home purchases have increased relative to rents. The national median asking rent in first-quarter 2022 increased 4.0% on a quarterly basis to $1,255. The 25th percentile mortgage application payment to median asking rent ratio was 0.90 in March, up from 0.87 in February and 0.74 in December 2021.
• What’s next: Multifamily lending is expected to remain robust during the rest of 2022 but is now expected to fall short of 2021’s record-high volumes. View MBA’s updated forecast here.   

For more information, please contact Eddie Seiler at (202) 557-2739.

7. 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 recent and upcoming webinars, which are complimentary to MBA members:

• Introduction to Commercial Mortgage-Backed Securities – May 19
• New Fannie Mae and Freddie Mac Condominium and Cooperative Guideline Changes – May 24
• What Trends will Shape the Lending Space in the Second Half of 2022 – June 2
• Serving Loan Applicants with Limited English Proficiency – June 14
• Leveling Up Your Social Media Strategy with Paid Advertising – June 28

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

For more information, contact David Upbin at (202) 557-2931.