CREF Policy Update Feb. 17, 2022

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

Last Tuesday, House lawmakers passed a continuing resolution by a bipartisan vote of 272-162, sending the measure to the Senate for a vote ahead of a February 18 federal government funding deadline. And last Wednesday, FHFA released its draft Strategic Plan for fiscal years 2022-2026. See article elsewhere in this issue with more information.

Join the 160+ 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) is encouraged to sign this online form on behalf of your organization.  

1. U.S. House Passes Stopgap Government Funding Bill; Senate Expected to Pass

Last Tuesday, House lawmakers passed a continuing resolution by a bipartisan vote of 272-162, sending the measure to the Senate for a vote ahead of a February 18 federal government funding deadline.

  • Why it matters: The CR, which includes a short-term extension of the National Flood Insurance Program (NFIP) authorization, would extend government funding to March 11, 2022. The Senate is expected to pass the measure next week to provide additional time for Congress to complete bipartisan, bicameral negotiations on “omnibus” Fiscal Year (FY) 2022 appropriations legislation.
  • What’s next: Negotiations are already underway in the House and Senate for the longer-term funding bill. MBA will provide members with relevant updates as those discussions continue.

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

2. Federal Reserve Board 2022 Stress Tests for Large Banks Include Commercial Real Estate Shock 

On Thursday, the Federal Reserve announced its 2022 hypothetical stress tests. Under the 2020 stress test scenarios, 34 large banks will be tested against a large increase in the unemployment rate accompanied by a decline in commercial real estate prices, widening corporate bond spreads, and a collapse in asset prices, including increased market volatility. Banks with large trading operations will also be tested against a global market shock component that primarily stresses their trading positions, and banks with substantial trading or custodial operations will be tested against the default of their largest counterparty.

  • Why it matters: The hypothetical scenario includes a focus on commercial real estate lending risk, assuming a hypothetical 40 percent decline in commercial real estate prices.
  • What’s next: The Fed will use the hypothetical scenarios in 2022 to help ensure that large banks are able to lend to households and businesses even in a severe recession.

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

3. Congress Seeks Clarity from CFPB on Small Business Data Collection Rule 

This week, Republican members of the House Financial Services Committee and Senate Banking Committee sent a joint letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra seeking further explanation on the application of Section 1071 of the Dodd-Frank Act (DFA) and the impact a rulemaking might have on small businesses and lenders. Section 1071 of the DFA requires the CFPB to promulgate a rule for lenders to collect, maintain, and submit data to the CFPB on credit applications of women and minority-owned business. Though the DFA was signed into law in 2010, the CFPB has not yet executed its statutory responsibility to issue the rule under its previous leadership. 

  • Why it matters: Earlier this year, MBA led a coalition letter that urged the CFPB to clarify that loans made to finance income-producing commercial and multifamily properties should not be considered small-business lending. As proposed, the rule would exempt only loans to finance 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 the following 18 months. Combined pressure from Congress and industry can potentially influence the outcome of how the rule is finalized.  

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

4. FHFA Requests Input on its Strategic Plan: Fiscal Years 2022-2026

On Wednesday, the Federal Housing Finance Agency (FHFA) released its draft Strategic Plan for fiscal years 2022-2026. The Plan outlines a multi-year roadmap with a focus on equitable access to affordable housing and the safety and soundness of the GSEs. Requested input is due March 11, 2022.

  • Why it matters: FHFA’s draft Strategic Plan includes an objective to facilitate the increase of affordable rental housing supply by monitoring the GSEs’ efforts to meet multifamily housing needs – despite acknowledging limited ability to affect outcomes – as well an objective to publish data on affordability of GSE-backed rental units. The Strategic Plan also noted that disaster events such as hurricanes, wildfires, and floods could increase credit risk and credit-related expenses at the GSEs and could disproportionally impact affordable housing stock. FHFA also suggests that its lack of power to examine counterparties of its regulated entities, such as nonbank servicers, could interfere with its ability to ensure the GSEs’ safety and soundness.
  • What’s next: MBA will work with members and provide input to FHFA.

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

5. Acting FDIC Chairman Gruenberg Announces Priorities for 2022 

On Monday, Federal Deposit Insurance Corporation (FDIC) Acting Chairman Martin Gruenberg announced the five key policy priorities it would seek to address in 2022.

  • Why it matters: The FDIC will focus on five priorities; the Community Reinvestment Act (CRA), climate change, the Bank Merger Act, crypto-asset, and the Basel III capital rule, marking a regulatory shift for the FDIC.
  • What’s next: MBA is following these developments and will utilize its CRA working group, Green Lending Roundtable, and other outreach to MBA bank members to develop policy positions and develop responses to any regulatory proposals.

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

6. FDIC Announces Climate Change Supervisory Focus

Also on Monday, in announcing its priorities for 2022, FDIC Acting Chairman Martin Gruenberg indicated that it would be seeking public comment on guidance designed to help banks prudentially manage climate risk, establishing an FDIC interdivisional, interdisciplinary working group on climate-related financial risks, and joining the international Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The NGFS is a group of central banks and supervisors from around the world that share principles on climate and environment-related risk management in the financial sector.

  • Why it matters: The FDIC’s focus on climate change risk management supervision may involve releasing additional guidance and new supervisory approaches that could impact members’ business and costs.
  • What’s next: MBA staff will monitor the FDIC for new, climate-related guidance and other supervisory action that may impact commercial real estate business.

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

7. Banking Agencies to Hold Interagency CRA Conference 

Last Friday, the Office of the Comptroller of the Currency (OCC), FDIC, and the Federal Reserve announced they will host the 2022 National Interagency Community Reinvestment Conference on March 15-17.

  • Why it matters: The biennial conference offers participants from around the country the opportunity to learn about the Community Reinvestment Act (CRA); participate in regulator-led training on CRA examinations; and discuss best practices, emerging ideas, and challenges in community development. This year’s program, “Reimagine, Reinvest, Rebuild,” will be held online.
  • What’s next: The banking agencies have indicated they will propose joint rules making changes to CRA this year.

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

8. Fed Proposes Supervisory Approach to Holding Companies Engaged in Insurance and Supervised Insurance Organizations

Last week, the Federal Reserve released proposed guidance for depository institution holding companies engaged in insurance or supervised insurance organizations. The guidance proposes a supervisory approach designed to reflect differences in the relative complexity of institutions’ risk profiles as well as the difference between banking and insurance. The proposal would formalize risk ratings (firms would be rated annually in each of three components: Capital Management, Liquidity Management, and Governance and Controls).

  • Why it matters: While the proposed guidance would currently apply to only five bank holding companies that engage in insurance, the guidance would also apply to any insurance company designated in the future as a Significantly Important Financial Institution (SIFI).
  • What’s next: MBA will analyze the proposal and determine its impact on members. The comment period runs through April 5, 2022.

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

9. SEC Proposes New Disclosure Rules for Private Investment Funds 

On Wednesday, the U.S. Securities and Exchange Commission (SEC), in a 3-1 vote, approved disclosure rules for private investment funds.

  • Why it matters: Private fund managers will be required to provide investors with quarterly statements on the performance of funds, manager compensation, and fees and expenses.
  • What’s next: The SEC may propose disclosures around climate and ESG in the future.

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

10. SEC Proposes Rule Amendments to Beneficial Ownership Requirements 

On Thursday, SEC announced proposed rule amendments governing beneficial ownership reporting under Exchange Act Sections 13(d) and 13(g). The proposed amendments would update those rules to provide more timely information to meet the needs of today’s financial markets.

  • Why it matters: According to the SEC, the proposed amendments to Regulation 13D-G would accelerate the filing deadlines for Schedules 13D beneficial ownership reports from 10 days to 5 days and require that amendments be filed within one business day.
  • What’s next: Comments are due 60 days after publication in the Federal Register.

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


MBA Releases FAQs on Climate Change and ESG

Last Thursday, MBA published frequently asked questions (FAQs) on climate change risk and ESG in real estate finance. The FAQs address differences between climate change and ESG terminology, highlight climate change financial risk factors relevant to real estate, and provide an overview of MBA’s work on policy, research, and practice in the climate and ESG space.  

  • Why it matters: The FAQs aim to help MBA members conduct business and discuss the intersection of climate change, ESG, and CRE.
  • What’s next: MBA staff will continue to update the climate and ESG FAQs and other resources to reflect industry and policy trends.

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

12. 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.

6. Upcoming 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 webinars – which are complimentary to MBA members:

  • The Last Mile for LIBOR – February 17
  • CONVERGENCE: The 2022 Legislative Outlook for Affordable Housing – February 17
  • A Lender’s Playbook for Maximizing the ROI of your CRM – March 1
  • COVID’s Continued Impact on CECL and Lending – March 8

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

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