CREF Policy Update June 23, 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.

Last week was busy on the regulatory front, with commentary from the FDIC, SEC, and FHFA that affects the CRE finance industry (see our analysis below). MBA submitted a comment letter Friday responding to SEC proposed new mandatory disclosures of climate-related risk and company greenhouse gas emissions. By voice vote, the full Senate confirmed Jaime Lizárraga and Mark Toshiro Uyeda to fill vacant slots at the SEC. 

Last Wednesday, FHFA issued its 2021 Annual Report to Congress, and MBA announced that Laura Escobar, President of Lennar Mortgage, was nominated to serve as MBA’s Vice Chair for the 2023 membership year. And be sure to stay current on MBA’s upcoming events focused on compassionate leadership, DEI and other critical industry issues.

Sign MBA’s Home for All Pledge: Join the 260+ 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.

MBA Recommends Changes to Proposed SEC Climate-related Risk Disclosure Rule

On Friday, MBA submitted a comment letter responding to a U.S Securities and Exchange (SEC) notice of proposed rulemaking (NPR) on new mandatory disclosures related to climate-related risk and company greenhouse gas (HGH) emissions. The letter expressed MBA’s view that the rule is not necessary to achieve SEC’s objective of ensuring investors are provided with decision-useful information about climate-related financial risks; public companies already are required to disclose material information. The letter specifically recommended that: 1) reporting of Scope 3 GHG emissions, including emissions from properties securing mortgages, should be voluntary not mandatory; 2) all new mandatory Regulation S-K climate-related risk reporting should be limited to “material” information; 3) the SEC should not add new (and unworkable and non-decision-useful) Regulation S-X notes to financial statements on the impacts of severe weather events; and 4) the projected implementation schedule should be extended by at least two calendar years. MBA also joined a real estate industry letter commenting on the proposal submitted on Monday.

• Why it matters: The rule, which would apply to all public companies that file with the SEC, would impose a substantial burden on reporting companies and other entities doing business with those companies.
• What’s next: The SEC will consider a large volume of comments before issuing a final rule. They have projected an aspirational target of issuing a final rule with an effective date in December 2022.

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

SEC Disclosure Proposal for ESG-Focused Investment Advisors and Funds Published in Federal Register

Today, the Federal Register published the SEC’s proposed environmental, social, and governance (ESG) disclosure rule for investment advisors and investment companies. The proposed rule would require advisors and funds that are “ESG-focused” to make certain, standardized disclosures and, if the advisor or fund considers greenhouse gas (GHG) emissions when making investment decisions, it must also disclose portfolio GHG emissions. This includes Scope 3 emissions where companies within the portfolio publicly report those emissions. The SEC previously released this proposal on May 25, 2022.

• Why it matters: MBA’s climate/ESG-related comments to the SEC and to other federal regulators have emphasized the need to distinguish between disclosures related to voluntary claims of ESG factors (such as this rulemaking) and disclosures related to climate-related risk (such as the rulemaking that MBA commented on today). This rulemaking does not directly apply to commercial and multifamily mortgage lending.
• What’s next: The comment period on the proposal will be open until August 17, 2022.

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

FHFA Issues 2021 Report to Congress

Last Wednesday, the Federal Housing Finance Agency (FHFA) issued its 2021 Annual Report to Congress. The report, which is required by statute, provides information on FHFA’s examination of Fannie Mae, Freddie Mac (collectively, the “Enterprises”) and the Federal Home Loan Banks, as well as FHFA’s activities as conservator of the Enterprises. The report provides transparency into many topics, including housing goals, Duty to Serve plans, and the Enterprises’ management of credit risk.

• Why it matters: FHFA reported that both Enterprises met the benchmark levels for each of the three multifamily housing goals in 2021. Also, FHFA reported that each Enterprise remained below the $70 billion multifamily cap for 2021, at $69.5 billion and $70 billion for Fannie Mae and Freddie Mac, respectively. In addition, each Enterprise surpassed the minimum requirements of at least 50 percent mission-driven, and 20 percent affordable shares of multifamily acquisitions.
• What’s next: MBA will continue to analyze the report and communicate all relevant information to members.

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

Senate Committee Holds Flood Insurance Hearing; Lawmakers Voice Mixed Concerns On Reform

Last week the Senate Banking Committee held a hearing on reauthorizing the National Flood Insurance Program (NFIP). Lawmakers expressed mixed views on proposals to overhaul the government’s flood insurance program. Last month’s Biden administration proposal, which called for dropping coverage for frequently flooded properties and denying coverage for homes and commercial properties in the most flood-prone areas, served as a backdrop for the hearing discussions. A summary of the hearing can be found here.

• Why it matters: For years, Congress has debated the need for reforms to modernize the financially beleaguered flood insurance program, with policymakers divided over the appropriate level of public subsidy needed.
• What’s next: The Senate Banking panel will hold an additional hearing next week – with the NFIP’s administrator appearing as the sole witness. There have been 21 short-term reauthorizations for the NFIP in recent years, and another brief reauthorization can be expected before the program lapses on September 30, 2022. 

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

Laura Escobar of Lennar Mortgage Nominated to Be 2023 MBA Vice Chair

Last Wednesday, MBA announced that Laura Escobar, President of Lennar Mortgage, has been nominated to serve as MBA’s Vice Chair for the 2023 membership year. She is expected to be installed at MBA’s 109th Annual Convention in Nashville, Tennessee, in October.

• Why it matters: Escobar is a 35-year real estate finance industry veteran who has held leadership positions with both bank-owned and independent mortgage companies overseeing all aspects of mortgage banking. Since 2018, she has been President of Lennar Mortgage, the mortgage lending subsidiary of Lennar Corporation, leading a team of more than 1,100 associates in 34 locations across 20 states. Escobar joined Lennar Mortgage in 2002 as Branch Manager; in 2004, she was promoted to Senior Vice President managing the Eastern Region; and in 2016, she became Executive Vice President, overseeing operations and production of the company’s Builder Division.
• Kristy W. Fercho, 2022 MBA Chair, and Executive Vice President and Head of Home Lending at Wells Fargo, said, “It is my pleasure to welcome Laura to MBA’s leadership ladder. She is a tireless advocate for mortgage lenders and their customers and is an inspired choice to lead MBA and its members. Her strategic mind, energetic personality, and deep compassion for others will ensure we continue to succeed in our members’ commitment to advancing homeownership and affordable rental housing opportunities nationwide.”

For more information, please contact Adam DeSanctis at (202) 557-2727.

Acting FDIC Chairman Gruenberg Outlines CRA NPR in Speech

Last Monday, Acting Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg spoke on the banking agencies’ notice of proposed rulemaking (NPRM) to amend the Community Reinvestment Act (CRA) regulations in a speech before the National Community Reinvestment Coalition (NCRC). His remarks focused on how the NPRM would expand CRA’s scope by raising the bar for retail lending performance, providing greater clarity to banks on what qualifies for CRA, and modernizing the rule to better reflect current banking standards.

• Why it matters: The NPRM both modernizes and broadens CRA and will make changes to how banks receive CRA credit, including affordable multifamily housing and commercial development activities.
• What’s next: MBA is drafting a comment letter, which is due by August 5, 2022.

For more information or to participate in the comment process, please contact Grant Carlson at (202)-557-2765.

New York Legislature Adjourns Without Enacting Proposed Climate and ESG Legislation  

The New York Legislature adjourned without passing climate legislation affecting commercial real estate.

• Why it matters: The Legislature failed to advance proposed legislation MBA had been monitoring to phase out fossil fuel usage in commercial buildings through the code process. In addition, the All-Electric Building Act failed to advance, which would have banned gas usage in new buildings under seven stories starting in 2024 and all others in 2027.
• What’s next: In 2019, legislation was enacted mandating emissions in New York be reduced by 40 percent from 1990 levels by 2030 and 85 percent by 2050.

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

House Energy and Commerce Committee Holds Hearing on Bipartisan Data Privacy Legislation    

On Tuesday, the House Energy and Commerce Subcommittee on Consumer Protection and Commerce held a hearing on bipartisan data privacy legislation. The bill in focus, the American Data Privacy and Protection Act (ADPPA), creates a comprehensive data privacy framework that covers financial institutions. As expected, Republicans and Democrats were unified on the need to move forward with a national standard as provided in the legislation. A full summary of the hearing can be found here. 

• Why it matters: Several states and foreign jurisdictions have already adopted data security and data privacy regimes, which have resulted in a patchwork compliance regime.
• What’s next: Although Congress has grappled with the best way to approach data issues, the ADPPA is the first bipartisan bicameral proposal in recent years. The legislation is slated for an Energy and Commerce Committee markup in the coming months and could receive a full House vote before the end of the 117th Congress.

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

FHFA Announces 2022-2024 Equitable Housing Finance Plans for Fannie Mae and Freddie Mac 

On Wednesday, the Federal Housing Finance Agency (FHFA) released the GSEs’ Equitable Housing Finance Plans for 2022-2024. The plans are designed to address racial and ethnic disparities in homeownership and rental housing, particularly in Black and Latino communities, and will be updated annually. Any action taken under the plans will still require final approval of FHFA.

• Why it matters: The plans contain a variety of objectives that are aimed at supporting renters and creating more safe, affordable rental housing in underserved markets. Some key areas of the plans specifically seek to help renters manage security deposits, increase affordable supply, and assist renters in building credit profiles through rental payment history.
• What’s next: MBA will analyze the impact of the GSEs’ plans and will communicate all relevant information to members.

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

Treasury Secretary Yellen Testifies Before House and Senate Panels 

This week, U.S. Treasury Secretary Janet Yellen testified before both the Senate Finance and House Ways and Means Committees on the Biden administration’s Fiscal Year 2023 (FY23) budget request. As expected, much of the dialogue at both hearings focused on the Biden administration’s efforts to combat inflation and rising gas prices. There was also discussion about the OECD global minimum tax, Foreign Tax Credits, the national debt, the deficit, and increased funding for the Internal Revenue Service (IRS).

• Why it matters: In both hearings, House and Senate members promoted tax investments for the production of affordable housing units, including the expansion and strengthening of the Low-Income Housing Tax Credit (LIHTC), and the creation of a new low- to moderate-income (LMI)-targeted residential rehabilitation tax credit (the Neighborhood Homes Investment Act) as solutions to help curb the impacts of inflation. MBA continues to support bipartisan, bicameral efforts promoting these housing credits as part of any tax and reconciliation package that Congress may still consider before year’s end.
• What’s next: A more detailed summary of both Yellen hearings can be found here. Congress has begun drafting its FY23 funding bill with legislative mark-ups slated to begin in the House next week. With Congress unlikely to reach agreement to move all 12 separate appropriations bills before September 30, 2022, legislators will have to pass a stop-gap continuing resolution to keep the government operating beyond October 1, 2022.

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

Federal Reserve, SEC Nominees Receive Bipartisan Approval from Senate Banking Panel

The Senate Banking Committee on Wednesday voted 17-7 to support Michael Barr, a veteran of the Obama and Clinton administrations, for a four-year term as the Federal Reserve’s Vice Chairman for Supervision. Five Republicans (and the committee’s Democrats) voted for Barr, including Senator Pat Toomey (R-PA), the panel’s Ranking Member. By voice vote, the committee also approved Republican Mark Uyeda and Democrat Jaime Lizárraga as nominees for the Securities and Exchange Commission (SEC).

• Why it matters: Barr, once confirmed, will be the Fed’s top banking regulator and will play a significant role regarding policies impacting the C/MF sector, including proposed revisions to the Community Reinvestment Act. Lizárraga and Toshiro’s confirmations would solidify a Democratic majority at the SEC as it considers climate change and environmental, social, governance (ESG)-related rulemakings.
• What’s next: Support from members of both parties means the nominees will face just two remaining procedural Senate floor votes to be fully confirmed. Timing for that floor consideration is now deemed possible prior to July 4.

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

FHFA Announces New Pilot Transparency Framework for the GSEs

Last week, FHFA announced a new pilot transparency framework for the GSEs. The framework requires each GSE to publish and maintain a list of pilots and test-and-learn activities on its public website. The initial lists have been posted and include the name, description, status, and scope for each pilot.

• Why it matters: This new framework will provide transparency and accountability in determining whether GSE pilot programs are achieving their intended outcomes. It also aligns with longstanding MBA advocacy in support of greater transparency on pilot programs to ensure that they have clearly defined objectives and timelines, and – if deemed successful – eventually are made available to all eligible companies regardless of size or business model.
• What’s next: The lists of GSE pilots will be refreshed every year in April and October. MBA will continue to partner with FHFA on this and other critically important housing issues.

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

Federal Reserve to Release CECL Tool

The Federal Reserve last week announced that it will release a second tool to help community financial institutions implement the Current Expected Credit Losses (CECL) standard.

• Why it matters: According to the Federal Reserve, the Expected Losses Estimator (ELE) utilizes a financial institution’s loan-level data and management assumptions to aid community financial institutions in calculating their CECL allowances.
• What’s next: The ELE tool will be launched during an “Ask the Fed” webinar on June 16, 2022. 

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

New York Governor Signs Hotel Conversion Bill 

Last Tuesday, New York Governor Kathy Hochul signed new legislation (S.4937C/A.6262B) into law to incentivize the conversion of underutilized hotel space into permanent housing.

• Why it matters: The bill gives New York City the power to approve underutilized hotels in New York City to be converted into affordable housing.
• What’s next: Earlier this year, the Legislature provided $200 million in budgetary funding for this hotel-to-housing conversion program.

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

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.

Register for VOICES: Courageous Conversations with Men of Color

MBA is pleased to extend its award-winning webinar series, Voices: Courageous Conversations with Women of Color, to include a new conversation focusing on the male experience. Hear from a dynamic and diverse lineup of male industry leaders on their personal journeys throughout their careers. This timely conversation will inspire and inform while giving voice to the challenges and lessons learned.

There will be two sessions highlighted in this series:

• June 21: Courageous Conversations with Men of Color
• July 19: Courageous Conversations with Men as Allies

What’s next: This virtual series is complimentary for MBA Members. Learn more here.

For more information, please contact the DEI team. 

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:

• CONVERGENCE: Understanding and Serving Today’s Buyer – June 23
• Leveling Up Your Social Media Strategy with Paid Advertising – June 28
• How to Navigate Lower Margins and a Tighter Market Through Effective Leadership and Embracing Technology – June 28

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.