CREF Policy Update March 24, 2022

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

Last week the Senate Committee on Banking, Housing and Urban Affairs advanced FHFA Acting Director Sandra Thompson’s nomination out of committee, moving her closer to being confirmed as FHFA Director.

On Friday the rulemaking that overhauls Davis-Bacon made by the Wage and Hour Division of the U.S. Department of Labor was published in the Federal Register.

Sign MBA’s Home for All Pledge: Join the 200+ 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. 

View Any Session You Missed from MBA CREF22: Were you one of the over 2,400 registrants that attended MBA’s Commercial/Multifamily Finance Convention & Expo? If you weren’t able to attend every session, they are available to you online for the next month. Simply access the program videos by clicking here. 

1. Senate Banking Committee Votes on Key Housing & Finance Nominations

On Wednesday, the Senate Committee on Banking, Housing, and Urban Affairs voted on the nominations of: Jerome Powell for Chairman of the Federal Reserve (23-1); Lael Brainard for Vice Chair of the Federal Reserve (16-8); Dr. Lisa DeNell Cook (12-12); and Dr. Philip Jefferson for Governors of the Federal Reserve (24-0); and Sandra Thompson for Director of the Federal Housing Finance Agency (FHFA) (13-11). Senator Mike Rounds (R-SD) provided the bipartisan support that Acting Director Thompson needed to avoid further procedural delays to her nomination. The nomination of Sarah Bloom Raskin to serve as Vice Chair of Federal Supervision of the Federal Reserve was withdrawn. After Acting Director Thompson was voted out of committee, MBA President and CEO Bob Broeksmit, CMB, issued a press statement urging the full Senate to quickly confirm Thompson. 

• Why it matters: The committee vote on these nominations each serve a crucial role in federal oversight of housing finance and ended a month-long delay in the Senate confirmation process. 
• What’s next: The full Senate will need to vote to confirm the nominations. While those that received bipartisan support will quickly advance, Dr. Lisa DeNell Cook, who received a tie vote, will now require two votes by the full Senate to be confirmed, and additional time to debate her nomination. 

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

2. Labor Proposes Updated Davis-Bacon Regulations

Today, the rulemaking that overhauls Davis-Bacon made by the Wage and Hour Division (WHD) of the U.S. Department of Labor was published in the Federal Register. Among other provisions, the Notice of Proposed Rulemaking (NPRM) would reaffirm current WHD policy and practice on multiple wage rate (split-wage) determinations and the effective dates for wage rate revisions for projects insured by the Federal Housing Administration (FHA) – i.e., a revised wage rate determination is effective if it is issued prior to the earlier of initial endorsement or beginning of construction. The NPRM also addresses the process for establishing prevailing wage rates.

• Why it matters: Davis-Bacon wage rates apply to FHA-insured new construction and substantial rehabilitation projects. Current WHD policies and practices result in unwarranted and disruptive split-wage decisions and other impediments to increasing the supply of workforce and affordable housing.
• What’s next: Publication of the NPRM starts the clock on the 60-day comment period, which will end May 17, 2022. MBA will work closely with FHA Committee members and the Davis-Bacon Working Group to analyze the proposal, summarize key points, and develop our response.

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

3. HUD Releases Annual Indexing of Basic Statutory Mortgage Limits for Multifamily Housing Programs 

On Wednesday, the U.S. Department of Housing and Urban Development (HUD) released the annual indexing of the base statutory limits and substantial rehabilitation threshold for Calendar Year 2022. HUD is authorized to make an annual adjustment to FHA multifamily statutory limits using the Consumer Price Index for All Urban Consumers (CPI-U). The 2022 adjustment on loan limits is an increase of about 4.2%, and the change to the substantial rehabilitation threshold is an increase from $15,000 per unit to $16,983 per unit.   

• Why it matters: Maximum Loan Limits for HUD Multifamily financing are determined by law and prescribed on a per unit basis, with certain exceptions. With rising inflation, supply chain issues, and labor shortages, construction costs continue to rise. As a result, it is important that the statutory limits and the available exceptions are at levels that are consistent with the economic environment so that financing through HUD remains viable.
• What’s next: MBA will conduct further analysis and work with a member working group to determine follow up questions, concerns, and next steps.

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

4. Treasury Reallocates $377 Million in Emergency Rental Assistance 

Last Monday, the U.S. Department of the Treasury announced it would reallocate $377 million in Emergency Rental Assistance to states with the greatest needs. According to a March 8, 2022, report from Treasury, approximately $23 Billion in ERA funds have been distributed.

• Why it matters: Treasury is authorized to reallocate emergency rental assistance from areas that did not need all allocated funds to areas with a continuing need for rental assistance.
• What’s next: Treasury redirected most unspent ERA funds to New York, California, Illinois, and New Jersey, where there is the greatest demand.

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

5. Mezzanine Debt Tax Not Included in NY Legislature and Governor’s Budget Proposals 

Last Tuesday the New York Legislature released its 2022-2023 state budget proposal, which does not include a tax on mezzanine debt and preferred equity. In January, Governor Kathy Hochul also proposed a state budget that does not include this tax.

• Why it matters: In 2021 and 2020, state lawmakers proposed a bill to require the tax and recording of mezzanine debt and preferred equity. MBA worked with the New York MBA and other New York groups and launched multiple Mortgage Action Alliance (MAA) calls to action to oppose these taxes, which the legislature failed to enact. Without inclusion in the 2022-2023 budget proposals, this provision is less likely to become law in 2022.
• What’s next: The deadline for New York to enact its state budget is April 15, 2022.

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

6. SEC Proposal on Climate Change and ESG Disclosure Possible Soon

Last week, the U.S. Securities and Exchange Commission (SEC) announced  that on March 21, 2022, it will consider whether to propose amendments to enhance and standardize registrants’ climate-related disclosures for investors. This action could result in the release of the expected Notice of Proposed Rulemaking (NPRM) on climate change and environmental, social, and governance (ESG) disclosures. 

• Why it matters: The proposed rule could affect commercial and multifamily borrowers, lenders, and investors.
• What’s next: When the expected NPRM is released, MBA will immediately share it with members and distribute a summary of the proposal. MBA will also form a working group to develop a response, as well as coordinate with other trade associations.

For more information, or to participate in the working group, please contact Adrian Ballinger at (202) 557-2774.

7. ECB Releases Report Highlighting Bank Shortcomings on Climate Risk Disclosure

On Monday, the European Central Bank (ECB) published its assessment of the progress European banks have made on disclosing climate and environmental risk. The assessment highlighted transparency improvements banks had made relative to 2020, but it also noted that no bank is fully meeting supervisory expectations, and that significant reporting gaps remain relative to expectations set out in the ECB’s November 2020 guide. Supervisors have informed banks of these shortcoming and provided a list of recommended “good practices.”

• Why it matters: The ECB report highlights inherent challenges related to climate change disclosure that may translate to possible mandatory climate disclosures in the U.S.
• What’s next: MBA will continue to monitor non-US climate-related supervisory actions and reports for possible impacts on CREF members.

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

8. Federal Reserve Raises Short-Term Interest Rates for First Time Since 2018  

On Wednesday, the Federal Reserve – in a widely expected move – raised the benchmark federal funds rate at a range between 0.25% and 0.5% to curb hot inflation levels. The median FOMC member expects to raise rates at each of the six remaining meetings in 2022.

• According to Mike Fratantoni, MBA’s SVP and Chief Economist, “With the unemployment rate below 4%, inflation nearing 8%, and the war in Ukraine likely to put even more upward pressure on prices, this is what the Fed needs to do to bring inflation under control. The FOMC economic projections indicate slower growth and higher inflation than had been the expectation at their December meeting. Note that they do not expect to be back at 2% inflation until after 2024.”
• Added Fratantoni, “Beyond the hike in short-term rates, the Fed also indicated its plan to begin to shrink their balance sheet, with Treasuries and MBS being allowed to passively roll off. Although we anticipate that shrinking the balance sheet will begin this summer, we will be looking for details regarding the pace of the runoff and whether they would consider active MBS sales at some point to return to an all-Treasury portfolio.”

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

9. 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.

10. CREF Track at MBA’s Technology Solutions Conference and Expo in Las Vegas – Register Today (April 11-14, 2022) 

Register today for MBA’s Technology Solutions Conference and Expo in Las Vegas on April 11-14. This year’s conference will include the first in-person get together of the CREF Technology Officers Roundtable since the onset of the pandemic. Join us for a great set of sessions as well as ample time for discussion and networking.

• Why it matters: The CREF Track will include: emerging technologies; a view of tech from the C-suite; cybersecurity and privacy; mapping and GIS; cloud innovation; office 2.0/adaptation; documentation and automation; career development; creating a tech platform/tech adoption; and climate-risk and ESG.
• What’s next: The full schedule can be viewed here. Let us know if you have any questions, and please share the registration information with the right people on your team.

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

11. Register Today: MBA’s National Advocacy Conference – April 26-27

Register now for MBA’s National Advocacy Conference to be held April 26-27 in Washington, D.C. NAC allows you to connect directly with elected officials in our nation’s capital. Your story matters – share it with key policymakers as they consider and pass legislation that affects all of us. 

• Why it matters: The last two years have been unprecedented for millions of Americans, and the real estate finance industry is no different as we navigate new terrains. NAC gives you the opportunity to share your narrative with the key staff and decision-makers while networking with your colleagues from all over the industry. When we work together and combine our voices, we can do great things.  
• What’s next: Share your experiences, your voice, and your passion for our industry April 26-27! Register today at mba.org/nac and take advantage of the early-bird rate before the March 14 deadline.

For more information, please contact Rachel Kelley at (202) 557-2816.

12. 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 recent and upcoming webinars, which are complimentary to MBA members:

• Ukrainian Situation: Cybersecurity Implications for Your Organization – March 18
• MISMO Monthly Webinar: ESG Industry Impacts and MISMO ESG Initiatives – March 24
• Tomorrow’s Servicing: Automated Transfers, Recoverables and Accuracy – March 29
• Special Purpose Credit Programs: The What, the Why, and the How – April 12
• CFPB Enforcement Authority Over Student Loans and Impact on Mortgage Lending – April 21

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.