CREF Policy Update Jan. 20, 2022

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

Last week President Joe Biden announced his intent to nominate a full slate of choices to fill the remaining three vacancies on the Board of Governors of the Federal Reserve. Earlier in the week, the Senate Banking Committee held confirmation hearings for Federal Reserve Chair nominee Jerome Powell, Federal Reserve Vice Chair nominee Lael Brainard and FHFA Director nominee Sandra Thompson.

Last Tuesday, MBA released its 2022 CREF Outlook Survey, which revealed that originators are bullish about their firms’ lending activity this year. And earlier today, MBA released a new Chart of the Week on the allocation of funds from the Emergency Rental Assistance program.

1. Senate Banking Committee Holds Nomination Hearing for FHFA Acting Director Sandra Thompson 

Last week Acting Federal Housing Finance Agency Director Sandra Thompson appeared before the Senate Banking Committee in consideration of her appointment to a full five-year term. In response to direct questioning from several senators, Thompson testified that “[t]he end state of the enterprises is something that Congress would have to legislate.” Thompson also opined that her focus will be on the “the safety and soundness mission Congress gave to FHFA,” along with ensuring that the GSEs are “providing liquidity across the nation and especially supporting underserved markets,” and advancing credit risk transfer programs to sell mortgage default risk to private investors, “so that the taxpayers are not on the hook for any extreme events.” Committee Chairman Sherrod Brown (D-OH) closed the hearing by restating his broad priorities for GSE reform, offering a belief that a consensus on the topic could emerge.

• Why it matters: In December 2021, President Biden nominated Thompson to lead the FHFA. MBA wrote a letter in support of her nomination, which can be found here. The committee hearing provided an opportunity for her to discuss how FHFA will manage the GSEs’ exit from conservatorship and tackle issues tied to housing affordability.
• What’s next: The Senate Banking Committee must vote on her nomination before a vote by the full Senate can occur.

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

2. Senate Banking Committee Holds Nomination Hearing for Fed Chair Powell’s Second Term

Testifying before the Senate Banking Committee during his confirmation hearing for a second term, Federal Reserve Chairman Jerome Powell called high inflation a “severe threat” to a full economic recovery and said the central bank was preparing to raise interest rates because the economy no longer needed emergency support. Chairman Powell said he was optimistic that supply-chain bottlenecks would ease this year to help bring down inflation as the Fed “takes its foot off the gas pedal.” He also told lawmakers that if inflation stayed elevated, the Fed would be ready to “step on the brakes.” A summary of the hearing can be found here.

• Why it matters: In November 2021, President Biden announced his intention to nominate Powell to a second term leading the Fed after his current one expires next month. Despite some lawmakers expressing misgivings with recent Fed forecasts and policy during the hearing, most comments from lawmakers suggest that Powell would win confirmation comfortably with support from members of both parties. Yesterday, the Banking Committee also held a separate hearing on the nomination of Lael Brainard to serve as Vice Chairman of the Fed. Brainard is likely to face a tougher path to confirmation than Powell.
• What’s next: While he offered few specifics, Powell said the central bank could begin to shrink its $8.8 trillion portfolio of bonds and other assets later this year. Compared with a prior experience shrinking the portfolio last decade, the process now could run “sooner and faster; that much is clear,” he said. “We’re going to have to be both humble and a bit nimble.”

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

3. Coastal Lawmakers, FEMA Spar Over National Flood Insurance Program Rates

Coastal lawmakers on Capitol Hill dispute the Federal Emergency Management Agency’s conclusion that data it released Tuesday show its new flood insurance rating system will prove to be less costly for National Flood Insurance Program policyholders. This reaction represents the latest skirmish between Congress and FEMA, which administers the NFIP, over the implementation of its new Risk Rating 2.0. That new methodology was rolled out beginning October 1, 2021, and will continue over many years, even as some in Congress attempt to delay its impact.

• Why it matters: Lawmakers in states such as Florida, Louisiana, and Mississippi have bristled at the prospect of annual rate increases as high as 18% under Risk Rating 2.0.
• What’s next: Complaints about Risk Rating 2.0 come within the larger context of a program that has repeatedly fallen into debt and struggled with its longer-term viability. Since 2017, the NFIP has been reauthorized on a short-term basis 18 times, the last of which Congress approved in December. Congress must reauthorize the program again by February 18, 2022, which also coincides with the deadline to fund the federal government.

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

4. New York Eviction Moratorium Expires

On Saturday, January 15, New York’s statewide eviction moratorium expired for residential and commercial tenants.

• Why it matters: New York’s statewide moratorium was the last pandemic-related, statewide eviction moratorium to expire.
• What’s next: Local eviction moratoriums are still in place in multiple states. MBA tracks these moratoriums weekly, which can be viewed here.

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

5. Supreme Court Blocks OSHA Employer Mandate for Vaccines, Testing

Last Thursday evening, the Supreme Court stayed the Emergency Temporary Standard (ETS) issued by the Occupational Safety and Health Administration requiring employers with more than 100 employees to impose a vaccination or testing requirement in the workplace. The OSHA ETS order was set to take effect January 10; however, the Supreme Court held an emergency session last Friday to hear arguments from several states and numerous employer groups appealing a lower Court ruling upholding the standard. In an unsigned opinion, the Court held that “[a]lthough Congress has indisputably given OSHA the power to regulate occupational dangers, it has not given that agency the power to regulate public health more broadly. Requiring the vaccination of 84 million Americans, selected simply because they work for employers with more than 100 employees, certainly falls in the latter category.”

• Why it matters: Under the ETS, MBA members with more than 100 workers would have been required to mandate vaccines for employees or require them to be tested weekly for COVID-19. 
• What’s next: The Supreme Court’s action blocking the ETS from taking effect returns the issue to the 6th Circuit for a fuller hearing on the merits. Even if the 6th Circuit were to again uphold the ETS, the opinion strongly suggests that the Supreme Court is likely to strike the mandate down.

For more information, please contact Justin Wiseman at (202) 557-2854.

7. MBA CREF Outlook Survey: Originators Are Bullish on 2022 Outlook    

Commercial and multifamily mortgage originators anticipate 2022 will be another strong year of borrowing and lending, according to Tuesday’s release of MBA’s 2022 Commercial Real Estate Finance (CREF) Outlook Survey. Detailed survey results are available to MBA members at  www.mba.org/crefresearch .

• What it says: Every top commercial/multifamily firm polled expects originations to increase in 2022, with almost two-thirds (63%) expecting an overall increase of 5% or more across the entire market. When forecasting just their own firm’s originations, three out of four (74%) expect to see an increase in lending of 5% or more this year.
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “After a strong market bounce-back in 2021, top mortgage bankers expect the momentum to continue in 2022 – with borrowing and lending increasing for every major capital source. Industry leaders are optimistic about changes coming from industrial, apartment, and retail market fundamentals, the broader economy, increased focus on ESG [environmental, social, and governance], and new construction activity. At the highest level, the market sees a strong availability of debt relative to the number of deals looking for it.”

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

8. Commercial and Multifamily Mortgage Delinquencies Declined in the Fourth Quarter of 2021  

Delinquency rates for mortgages backed by commercial and multifamily properties declined during the final three months of 2021, according to Wednesday’s release of MBA’s latest CREF Loan Performance Survey.

• What it says: Loans backed by lodging and retail properties continue to see the greatest stress, but also saw improvement during the fourth quarter of 2021. Because of the concentration of hotel and retail loans, CMBS loan delinquency rates are higher than other capital sources, but also saw improvement during the final three months of 2021.
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “The fourth quarter saw continued improvement in the performance of commercial and multifamily mortgages, particularly among property types that were the most impacted by the downturn. The share of outstanding balances that are delinquent fell for both lodging and retail properties, as property owners and lenders and servicers continue to work through troubled deals. The share of loan balances becoming newly delinquent was the lowest since the onset of the pandemic.”

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

9. ESG/CLIMATE RESOURCES

Join MBA’s Commercial Real Estate and Net Zero Webinar

Please join MBA on January 27 from 3:00–4:00 pm EST for its newest ESG-related webinar, “ESG 102: Commercial Real Estate and a Net Zero Future: Challenges, Opportunities, and Considerations.” Net zero is a growing tool for the industry to address the climate crisis and to meet stakeholder demand for public action. One of the ways some firms are addressing the climate challenge is by adopting a net-zero carbon commitment, where a company strikes a balance between greenhouse gases generated and removed. This webinar will focus on the various factors at play as the industry increasingly incorporates net zero into business strategies. The webinar will feature a series of presentations from Fannie Mae, Nuveen, and the U.K.’s NatWest Group on the various net-zero factors relevant to CRE market participants.

• Why it matters: ESG 102 will provide MBA members with a snapshot of how net zero is working its way into the fabric of commercial real estate in the United States and around the world.
• What’s next: MBA will host the event on January 27 from 3:00 pm to 4:00 pm EST.

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

10. 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.

11. 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:

• Winning Game Plan for Improving “B” Originators – January 25
• Fair Lending and Redlining, Part I – Overview of Regulations and Enforcement – February 7
• Successful Recruiting in a Changing Marketplace – February 10
• Combating Multifamily Real Estate Financial Crimes and Fraud – March 10

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.