CREF Policy Update: July 28, 2022

Mike Flood mflood@mba.org; Bill Killmer bkillmer@mba.org

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

During a busy week on Capitol Hill, the full House advanced legislation to partially fund the government (including HUD) for Fiscal Year 2023, the House Financial Services Committee held an oversight hearing with FHFA Director Sandra Thompson, and the Senate Banking and Finance Committees each held hearings on housing affordability.

On the regulatory front, President Biden announced new actions, and the G-20 discussed joint efforts to combat climate change. Meanwhile, MORPAC entered record fundraising territory for the real estate finance industry – having now raised over $2.7 million dollars this political cycle.

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.  

House Advances Fiscal Year (FY) 2023 “Minibus” Appropriations Legislation

The House on Wednesday passed H.R. 8294, a “minibus” package of six FY 2023 federal funding bills, which included an increase of $8.9 billion for the Department of Housing and Urban Development (HUD).

• Why it matters: Earlier this week, MBA submitted a letter to House leaders advocating for specific industry priorities at HUD and the Treasury Department, including a Federal Housing Administration (FHA) mortgage insurance premium reduction, appropriate funding recommendations for FHA single-family and multifamily lending programs, and the IRS’s process for verifying tax transcript data.
• What’s next: House appropriators will consider the remaining funding bills for FY 2023 before the August congressional recess, while Senate appropriators finalize bills for HUD and the other federal agencies. With Congress unlikely to reach agreement to move all 12 appropriations bills before September 30, legislators will need to pass a “stop-gap” Continuing Resolution to keep the government operating until an “omnibus” package can be agreed upon after October 1 (most likely during a “lameduck” congressional session following the November midterm elections).

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

FHFA Director Testifies Before House Financial Services Committee

On Wednesday, the House Financial Services Committee (HFSC) convened an oversight hearing with recently confirmed Federal Housing Finance Agency (FHFA) Director Sandra Thompson. Topics discussed at the hearing included the agency’s capital rule for the GSEs, uniform mortgage-backed securities pricing issues, the potential expansion of the agency’s supervisory authority to regulate third parties, housing goal metrics, and multifamily lending caps.

• Why it matters: Hearing questions from elected officials can sometimes place pressure on an agency like FHFA to resolve issues garnering significant attention, including the implementation of specific programs and the nature of enforcement actions. A summary of the hearing can be found here.
• What’s next: A similar oversight hearing involving Director Thompson in the Senate Banking Committee is unlikely this Congress. MBA will continue to work with both FHFA and Congress on a broad range of issues impacting housing, the GSEs, and the secondary mortgage market.

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

Senate Finance Committee Discusses Affordable Housing Tax Incentives

On Wednesday, affordable housing experts, advocates, and stakeholders testified before the Senate Finance Committee on the impact tax incentives have on affordable housing. Witnesses, including Walker & Dunlop’s Dana Wade, discussed several topics such as the ongoing shortage of housing supply, the increased costs to building new – or rehabilitating old –homes, the Low-Income Housing Tax Credit (LIHTC), and rising rent and home prices. A summary of the hearing can be found here. 

• Why it matters: The persistent low supply of available single- and multi-family housing throughout the country has affected affordability – further adding to the challenges faced by renters.
• What’s next: Movement on housing-related tax credit legislation may take place in a “lame-duck” session following the November mid-term elections.

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

Senate Banking Committee Holds Separate Hearing on Affordability

On Thursday, the Senate Banking Committee held a hearing on home-price appreciation and low housing supply. Senators focused their questions on expanding multifamily housing, the use of LIHTCs, and providing alternative credit scores for borrowers that include their rental income. Senator Bill Hagerty (R-TN) specifically mentioned Davis-Bacon Act requirements as a contributing factor to higher prices for affordable housing development. A hearing summary can be found here. 

• Why it matters: The hearing highlighted the lack of progress the Senate has made advancing the Biden administration’s housing agenda.
• What’s next: MBA will continue to advocate for targeted legislation to help advance our industry’s housing affordability priorities.  

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

MORPAC Raises Record Amount of Political Dollars for Industry

Earlier this month, and on the heels of our highly successful Action Week efforts in June, MORPAC reached its most significant milestone to date by raising an aggregate total of more than $2.7 million during the current 2022 election cycle, thus breaking our 2020 record fundraising cycle amount of $2,659,406 – and putting us 90% of the way toward our ambitious fundraising cycle goal of $3 million by year’s end. MORPAC currently ranks in the top 10 of trade association PACs in terms of individual contributions, and in the top 5 in contributions to candidates – having disbursed more than $2.1 million to federal candidates, party committees, and leadership PACs. Late last month, MORPAC hosted its 5th annual Action Week, with 20 MBA member organizations running concurrent MORPAC company campaigns. Those efforts recruited over 400 individual donors and raised roughly $150,000 in individual contributions to MORPAC.

• Why it matters: The “hard” dollars raised for MORPAC serve as political capital for our industry to support congressional candidates and incumbents that support our industry. These efforts keep the MBA Advocacy team “at the table” during discussions on the broad range of congressional issues that impact our members, their businesses, consumers, and other end users.
• What’s next: This MORPAC dollar total represents participation across all market segments of the real estate finance industry and our membership: Associate, Commercial/Multifamily, and Residential. The MORPAC team will continue to pursue our ambitious political cycle goal — while broadening participation for our grassroots PAC from a growing number of industry members. Thank you to all of our contributors.

For more information, please contact Rachel Kelley at 202-557-2816 and Jamey Lynch at 202-557-2818.

President Biden Announces New Climate Change Programs

On Wednesday, President Biden announced new programs to combat climate change, but did not issue a climate emergency declaration – as called for by some Democrats. The programs include $2.3 billion in funding to help communities prepare for disasters as well as funding to help low-income families pay for heating and cooling. President Biden is also directing the Department of the Interior to propose new offshore wind areas in the Gulf of Mexico.

• Why it matters: President Biden is pursuing various avenues to make progress on his climate agenda following failed legislative negotiations on provisions within any “slimmed-down” Build Back Better reconciliation package. Although President Biden did not issue an emergency declaration at this time, doing so would make certain federal funds available to address climate change and could give the administration legal authority to curb some oil and gas drilling and move funds to clean energy projects.
• What’s next: MBA will continue to monitor all climate-related news and communicate any relevant information to members.

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

Treasury Office of Financial Research Releases a Paper on Commercial Real Estate 

On Tuesday, the Department of the Treasury Office of Financial Research released a report on the U.S. commercial real estate market titled, “U.S. Commercial Real Estate Has Proven Resilient, but Emerging Risks Could Generate Losses for Lenders.”

• Why it matters: The paper notes, “Despite the 2020 economic downturn and uptick in remote work, the U.S. commercial real estate market held strong, particularly compared to its performance in previous recessions.”
• What’s next: The paper also emphasizes that “Relatively small changes in economic and financial conditions, however, could have a detrimental impact on CRE loan performance.” MBA will continue to monitor and analyze commercial real estate reports and insights from government agencies.

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

Luetkemeyer Chides SEC on Climate Rulemaking  

On Wednesday, Rep. Blaine Luetkemeyer (R-MO) sent a letter to the U.S. Securities and Exchange Commission (SEC) requesting the agency to rescind its proposed rule on “Enhancement and Standardization of Climate-Related Disclosures for Investors.” The rule’s “Scope 3” provisions are designed to require publicly traded companies to disclose “climate related risks” to investors but, as drafted, would impose significant greenhouse gas (GHG) emissions-relate requirements on both public and private companies, including lenders of all sizes.

• Why it matters: MBA and a broad coalition of other trades supported Leutkemeyer’s letter designed to convince the agency to reconsider the proposal’s harmful “Scope 3” provisions.
• What’s next: The SEC will consider a high volume of stakeholder comments before issuing a final rule, potentially with an effective date of December 2022.

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

G20 Meeting Concludes Without Joint Statement on Climate Change  

On Saturday, representatives at the G20 meeting in Jakarta, Indonesia, were unable to agree on a joint communique on climate change and climate change risk.  

• Why it matters: The 20 nations represented at the meeting were unable to come to a consensus on a joint commitment to address climate change.
• What’s next: The meeting’s Chair instead issued a statement emphasizing central bankers appear to have agreed only on the need to continue work to address the challenges related to climate-risk data before proceeding to specific standards.

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

FHFA Announces Office of Financial Technology

This week, FHFA announced the establishment of the Office of Financial Technology. The Office will help develop strategies for Fannie Mae and Freddie Mac (the GSEs) to advance housing finance fintech and innovation in a safe and sound, responsible, and equitable manner and will engage with market participants, various industry stakeholders, and other agencies to facilitate the sharing of information and best practices. In conjunction with this announcement, FHFA issued a Request for Input (RFI) to gather public input on the role of technology in housing finance, and to better understand the current landscape of innovation in each stage of mortgage lifecycle as well as related processes, risks, and opportunities. 

• Why it matters: The responsible use of fintech has many potential benefits, including increasing efficiencies, lowering costs, and lowering risk. For these reasons, MBA has supported innovation executed in a safe and sound manner at both FHFA and the GSEs.
• What’s next: MBA will be submitting comments in response to the RFI and will continue to work with FHFA and the GSEs as the Office of Financial Technology is established. The deadline for public comments is October 16, 2022.

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

Federal Reserve Issues Proposed LIBOR Contracts Rule 

On Tuesday, the Federal Reserve Board issued a proposed rule that would establish benchmarks to replace LIBOR for certain financial contracts.

• Why it matters: The Federal Reserve has proposed default rules for certain contracts that use the LIBOR reference rate in their transition away from this standard.
• What’s next: The current LIBOR standard is set to be discontinued on June 30, 2023.

For more information, please contact Dan Fichtler at (202) 557-2780 Grant Carlson at (202)-557-2765.

Treasury Office of Financial Research Releases a Blog on the Effects of Rising Rates on Insurers

On Thursday, the U.S. Department of the Treasury Office of Financial Research published a blog entitled “ Rising Interest Rates Help Insurers, but Market Volatility Poses Risk to Some.”

• Why it matters: The blog notes, “While the insurance industry has been subject to stresses recently, it is unlikely to affect the stability of the U.S. financial system in the near term. During the prolonged low-interest rate environment, certain investment strategies were adopted, widely, by insurers in an attempt to boost yields.”
• What’s next: The blog also states that, “….enhanced yields do not come without trade-offs, such as increased risk and reduced liquidity. We explain three insurance industry investment trends of which policymakers should be mindful.”

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

Higher Rates, Economic Uncertainty to Slow Commercial/Multifamily Lending in the Second Half of 2022   

Total commercial and multifamily mortgage borrowing and lending is expected to fall to $733 billion this year, down 18 percent from 2021 totals ($891 billion), according to an updated baseline MBA forecast released Tuesday. Multifamily lending alone (which is included in the total figures) is expected to drop to $436 billion in 2022 – a 10 percent decline from last year’s record of $487 billion. MBA anticipates borrowing and lending will rebound in 2023 to $872 billion in total commercial real estate lending and $454 billion in multifamily lending.

• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “After a record start to the year, we expect that the rise in rates, ongoing uncertainty about supply and demand balances among some property types, and concerns about the direction of the economy will suppress new loan originations in the second half of the year. Most commercial real estate market fundamentals remain strong, with significant increases in the incomes and values of many properties in recent years. These factors are why MBA expects loan demand to begin to bounce back in 2023 and 2024.”
• Woodwell continued, “The direction of the economy, which remains uncertain, will be a major driver of the magnitude and timing of market changes. Should the economy enter a recession, which – if it were to happen – would most likely come in the first half of 2023, commercial and multifamily borrowing and lending would likely be further constrained.”

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

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.