CREF Policy Update August 4, 2022

Mike Flood; Bill Killmer

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

Last Wednesday, the Treasury Department announced new guidance that will give state, local, and tribal governments more flexibility to use COVID-19 State and Local Fiscal Recovery Funds to finance affordable housing. Also on Wednesday, Sen. Joe Manchin, D-W.V., Senate Majority Leader Chuck Schumer, D-N.Y., and the White House reached agreement on a $740 billion reconciliation package, giving Senate Democrats another chance to enact broad climate and tax code changes before the end of Fiscal Year 2022

Sign MBA’s Home for All Pledge: Join the 310+ 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.  

Treasury Announces New Steps to Increase Affordable Housing Supply

On Wednesday, the Department of the Treasury announced new guidance that will give state, local, and tribal governments more flexibility to use COVID-19 State and Local Fiscal Recovery Funds (SLFRF) to finance affordable housing. Generally, the guidance provides that SLFRF funds can be used for affordable housing projects that either meet the requirements of various federal housing programs (LIHTC, HOME, etc.) or fund units that serve households at or below 65% of AMI (or 80% AMI under special circumstances). MBA President and CEO Bob Broeksmit, CMB, released a statement commending the measure.

  • Why it matters: This step by Treasury is a follow up on the Biden administration’s commitment in its Housing Supply Action Plan to increase the supply of affordable housing using SLFRF funds. Treasury issued a “How-to” Guide to help governments understand how to use the funds, together with other sources of federal funding (including HUD MAP financing and LIHTC), to facilitate affordable housing transactions. The funds must be obligated by the end of 2024 (governments decide how to use) and then spent by the end of 2026.   
  • What’s next: MBA will continue to analyze the guidance and communicate any relevant information to our members.

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

Senators Manchin And Schumer Reach Deal on Energy, Healthcare, Tax Package

On Wednesday, Senator Joe Manchin (D-WV) agreed to support a renewed legislative reconciliation package designed to address climate change, curb healthcare costs, and reduce budget deficits while raising corporate taxes. The deal, primarily negotiated with Senate Majority Leader Chuck Schumer (D-NY) and the White House, would raise approximately $740 billion in revenue, with much coming from a 15% corporate minimum tax and enhanced funding for the Internal Revenue Service (IRS), as well as projected savings from allowing Medicare to negotiate some prices on prescription drugs. A summary of the deal can be found here

  • Why it matters: The Manchin-Schumer agreement does not include many items proposed in versions of the Build Back Better Act (BBBA), including changes to the tax treatment of pass-through entities, such as the expansion of the Net Interest Investment Tax (NIIT) or limits to the 199a pass-through deduction. In addition, the language also does not include revenue raisers such as a cap on 1031 Like-Kind Exchanges or changes to capital gains treatment and the use of stepped-up basis. Finally, previous MBA-negotiated language to preserve the current deferred tax treatment of mortgage servicing rights (including multifamily MSRs) was included in the corporate minimum tax portion of the current deal. The newly negotiated deal would also extend the capital gains holding period requirement for carried interest from 3 years to 5 years, while including a real estate exception for gain associated with assets used in a real property trade or business. 
  • What’s next: Senate Democrats will use “fast-track” budget rules to advance the legislation and do not need any votes from Senate Republicans. While both procedural and political challenges remain, Schumer indicated he would like to have the bill on the floor and voted on next week, prior to the start of the August congressional recess.

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

OCC Issues Infographic on CRA

On Wednesday, the Office of the Comptroller of the Currency (OCC) released an infographic that includes key information from the Community Reinvestment Act (CRA) Notice of Proposed Rulemaking (NPR).

  • Why it matters: In a press release, the OCC said, “infographics include key information from the CRA NPR on performance standards; data collection, maintenance and reporting; assessment areas; community development; and retail lending products. The infographics are specific to small banks, intermediate banks, large banks, and wholesale or limited purpose banks. The large bank infographic includes an additional section on data reporting.”
  • What’s next: MBA is in the process of finalizing comments in response to the NPR, which is due by August 5, 2022.

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

FSOC Releases Factsheet on Climate-Related Financial Risk Efforts

On Thursday, the Financial Stability Oversight Council (FSOC) Climate-Related Risk Council provided an update on progress made by the Council to identify and address climate-related financial risks.

  • Why it matters: Accompanying the briefing, the Council released a Fact Sheet detailing the progress made to date by the FSOC’s members to address climate- related financial risk.
  • What’s next: MBA will continue to follow the FSOC’s progress and action regarding climate-related risk.

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

Federal Reserve Raises Short-Term Interest Rates Again; GDP Falls 0.9% in Q2 

On Wednesday, the Federal Reserve increased the benchmark federal funds rate three-quarters of a percentage point for the second straight meeting and reaffirmed its plans to reduce its balance sheet by continuing the passive runoff of its Treasury and MBS holdings. On Thursday, the U.S. Commerce Department reported that Gross Domestic Product (GDP) fell 0.9% at an annualized pace – the second straight quarter of contraction.

  • According to Mike Fratantoni, MBA’s SVP and Chief Economist, “Inflation continues to run too high, and the Fed remains committed to slowing it, even if it leads to a recession. Further rate increases are baked in through at least the remainder of this year. The unanimous vote for this rate increase emphasizes the commitment to this path.”
  • Added Fratantoni, “The headline of a second straight decline in real GDP highlights the abrupt change in the path of the U.S. economy, but the ongoing strength in the job market and other signs of growth make it unlikely that this will be categorized as a recession at this point. MBA is forecasting 0.6% growth for all of 2022 and 1.5% growth for the next two years, with downside risk as the full impact of the Fed’s rapid rate hikes is realized over the next 12 months.”

For more information, please contact Mike Fratantoni at (202) 557-2935.

State Trackers

  • State eviction moratorium and legislative activity tracker available here and here.

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

WATCH: mPower Moments: On Being a CRE Leader with M&T Realty Capital Corporation’s Christine Chandler

In this episode of mPower Moments, Marcia M. Davies sits down with Christine Chandler, Chief Credit Officer and COO at M&T Realty Capital Corporation. As a highly accomplished industry professional, Chandler shares how she got her start in the commercial real estate finance industry and the lessons she’s learned along the way.

  • Why it matters: Chandler also discusses the critical moments that have shaped her career and lends inspiring advice to women starting in the industry. Additionally, Christine also addresses how our industry can continue its upward path of ensuring more women rise to the C-suite level.
  • What’s next: To watch more mPower Moments, click here.

For more information, please contact Marcia Davies at (202) 557-2707.

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:

  • How Technology Helps Drive More LO Value with Realtor Relationships – August 4
  • Commercial Real Estate Property Insights – Where are We Now? – August 11
  • C-PACE Financing 101: A Commercial/Multifamily Lender’s Overview – August 23
  • Risk and Compliance Management: Are You Covered? – August 24

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.