CREF Policy Update May 19 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 Wednesday night, Julia Gordon was confirmed by the Senate to be the Assistant Secretary for Housing and FHA Commissioner at HUD. Last Monday, the SEC–in response to numerous industry requests, including MBA–extended the comment period on the proposed rule on climate-related disclosures to June 17, 2022.

Last week S&P Global announced that it was withdrawing the “notching” portion of its proposed capital adequacy model for insurance companies. Also last week, five federal agencies issued revised interagency Q&As on flood insurance, including private flood insurance acceptance. MBA will review the Q&As to understand how they compare to industry concerns raised in our comment letters.

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.

Senate Confirms Julia Gordon, Jay Powell, and Two Additional Fed Nominees  

The U.S. Senate confirmed several nominees that will affect the real estate finance industry in the coming years. As inflationary undercurrents continue to ripple through the economy, Jerome Powell overwhelmingly secured a second term as Fed Chair by a vote of 80-19. Philip N. Jefferson, a college administrator and academic, was confirmed to the Federal Reserve’s Board of Governors on Wednesday. He is the third of President Joe Biden’s nominees to secure a spot on the Fed’s seven-person board, as Lisa D. Cook was confirmed as a Governor on Tuesday and Lael Brainard was confirmed as the Fed’s Vice Chair last month.

The Senate narrowly confirmed Julia Gordon to be the HUD Assistant Secretary for Housing and Federal Housing Administration (FHA) Commissioner by a vote of 51-50. MBA, in addition to its letter of support, issued a statement from President and CEO Bob Broeksmit, CMB, congratulating Gordon on her nomination.

• Why it matters: Within FHA, Gordon will inherit multifamily and healthcare housing application backlogs that continue to pose a challenge in key regions of the country. FHA has been without a confirmed FHA commissioner since January 2021.
• What’s next: The administration’s nominee for the final open Fed job – the Vice Chair for Supervision – is Michael Barr, a key Obama Treasury official, who will have a nomination hearing today.

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

SEC Extends Comment Period on Climate Disclosure Proposal, as MBA Continues to Work with its Members to Respond

On Monday, the U.S. Securities and Exchange Commission (SEC) extended the comment period on the proposed rule on climate-related disclosures from May 20, 2022, to June 17, 2022. The proposed regulations would require companies that file periodic reports with the SEC (e.g.,10-Ks and 10-Qs) to file new disclosures on their climate-related risk, the impacts of extreme weather events on their financial statements, and on greenhouse gas emissions.

• Why it matters: The proposed rule would impose substantial burdens on public companies – and on companies and possibly consumers that do business with them. The initial 60-day comment period gave little time for MBA to work with members to develop feedback on the proposal; the extension is appreciated in order to collect member input before drafting and submitting draft comments.
• What’s next: MBA will continue to work with members to develop a response to the proposal and will engage with other trade associations on a possible industry coalition letter. 

For more information or to be included in the working group, please contact Bruce Oliver at (202) 557-2840.

S&P Global Withdraws Notching Proposal

S&P Global announced that it was withdrawing the “notching” portion of its proposed capital adequacy model for insurance companies that would automatically lower the ratings of commercial mortgage-backed securities (CMBS) and certain other insurance company investments that are not rated by S&P. This change is responsive both to MBA’s comments and a letter from the U.S. Department of Justice (DOJ) warning that the automatic downgrades of investments not rated by S&P “could raise significant concerns that the Sherman Act has been – or will be – violated and warrant additional scrutiny by the Antitrust Division.”

• Why it matters: As we described in MBA’s letter to S&P, “the asset class of CMBS could suffer a disproportionate increase in insurance company capital charges under the proposed methodology because S&P’s market share for rating CMBS is relatively lower than its market share for rating other asset classes.”
• What’s next: S&P will issue a new Request for Comment on the change and announced that it will implement the new model no sooner than fourth-quarter 2022.

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

Federal Agencies Issue Revised Interagency Flood Insurance Q&As 

Last Wednesday, the Office of the Comptroller of the Currency (OCC), Federal Reserve, Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and Farm Credit Administration (FCA) issued revised joint interagency Q&As on flood insurance. These Q&As replace those originally published by the agencies in 2009 and 2011, and consolidate Q&As proposed by the agencies in 2020 and 2021. As a result, the new Q&As cover both federal flood insurance rules and those on private flood insurance acceptance. MBA led industry comments in response to both proposals.

• Why it matters: The Q&As are intended to clarify the application of flood insurance rules across the full range of scenarios in which lenders must apply them for both lenders and regulatory examiners.
• What’s next: MBA and members of MBA’s Flood Insurance Working Group will review the final Q&As and assess the extent to which they address concerns.

For more information, please contact Bruce Oliver at (202) 557-2840 or Sara Singhas at (202) 557-2826.

Treasury Secretary Yellen Testifies Before Congress  

U.S. Treasury Secretary Janet Yellen testified before both the Senate Banking and House Financial Services committees last week on the Financial Stability Oversight Council’s (FSOC) annual report. The FSOC report outlines the physical risks and transition risks of climate change – a topic raised repeatedly during both hearings. Republicans asserted that no banks have failed due to climate change risk in the past and that the FSOC should address actual issues worthy of regulatory attention. By contrast, Democrats asked Secretary Yellen to comment on the adequacy of current regulatory actions designed to address the crisis. Secretary Yellen replied that financial institutions should take into full account all the risks that future problems may pose. In response to other questioning, Secretary Yellen urged businesses to be prepared to face a variety of adverse economic scenarios in the months ahead. She also shared her views on the lack of affordable housing and provided an update on the successful implementation of London Interbank Offered Rate (LIBOR) transition legislation. More complete summaries of both hearings can be found here and here.

• Why it matters: The FSOC annual report to Congress indicates where Treasury and other financial regulators may take additional oversight and enforcement actions to manage financial risk. MBA is drafting a response to the SEC proposed rule on climate-related disclosures mentioned by Secretary Yellen.
• What’s next: MBA will continue to monitor legislative activity and share our members’ view regarding climate-related regulations.

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

FHFA Announces Membership in NGFS 

Last week, the Federal Housing Finance Agency (FHFA) announced that it will join the Network for Greening the Financial System (NGFS) and reaffirmed the need for the GSEs to make climate change a priority concern. NGFS is an international group made up of central banks and financial supervisors that share best practices and promote further development of climate risk management in the financial sector.

• Why it matters: FHFA recognizes that the enterprises play a significant role in addressing the threat that climate change presents to the U.S. housing finance system. The enterprises are tasked with properly managing climate-related risk, and it is possible FHFA will continue to further enhance its supervision over climate-related issues.
• What’s next: MBA will continue to monitor and work with FHFA on climate-related requirements.

For more information, please contact Dan Fichtler at (202) 557-2780 or Stephanie Milner at (202) 557-2747.

HUD Schedules Listening Session on Revisions to Chapter 9 of the Section 8 Renewal Policy Guidebook

On May 20, 2022, HUD will hold a listening session at 12:00 pm ET in an effort to collect feedback on the revised draft of Chapter 9 of the Section 8 Renewal Policy Guidebook; interested participants can register here. Registration closes at 5 pm ET on May 18. In addition to the listening session, HUD is accepting written comments. The draft chapter and a worksheet to record written feedback can be found here. All written feedback should be submitted to S8RPG@hud.gov.

• Why it matters: Chapter 9 addresses Rent Comparability Studies, and the proposed revisions are meant to provide greater clarity and reduce processing times and administrative burden in the housing assistance payments (HAP) contract renewal process.
• What’s next: MBA will work with members to develop feedback to the proposed revisions and will participate in the listening session.

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

MISMO Seeks Public Comment on Phase Two of Commercial Appraisal Dataset with Expanded Commercial Use Cases to Provide Increased Functionality

MISMO ^®, the real estate finance industry’s standards organization, announced that it is seeking public comment on phase two of proposed data standards for the Commercial Appraisal Dataset.

• Why it matters: The proposed MISMO dataset enhances the current Commercial Appraisal Dataset, published in May 2021, by adding retail-, industrial-, and office-related data points and use cases. These additions also expand the data collected for multifamily properties, which further the ability for commercial appraisers to fully utilize the standard. The proposed standard helps facilitate the efficient exchange of commercial appraisal information, critical for underwriting and loss mitigation, between multiple industry participants, and allows them to exchange appraisal information on commercial properties.
• What’s next: The 60-day comment period runs through July 12, 2022.

For more information, please contact Tara Dunion at (202) 557-2849.

MISMO Announces Launch of New Commercial Standard that Facilitates the Efficient Exchange of Financial Operating Statement Information

On Tuesday, MISMO ^® announced the availability of the Commercial Financial Operational Statement Dataset Standard. The dataset and accompanying package of resources helps facilitate the efficient exchange of financial operating statement information across the commercial real estate finance industry. The dataset standard has achieved “Candidate Recommendation” status, which means that it has been thoroughly reviewed by a wide range of organizations and industry participants and is available for use across the industry.

• Why it matters: The new MISMO exchange was developed by commercial real estate and technology professionals to address the need for standardization of the exchange of property financial statement data.
• What’s next: The release and use of MISMO standards and other resources, including the commercial financial operating statement dataset standard, are governed by the MISMO Intellectual Property Rights (IPR) Policy. For more information on the policy, please click here.

For more information, please contact Tara Dunion at (202) 557-2849.

Commercial/Multifamily Borrowing Jumped 72% in the First Quarter of 2022   

Commercial and multifamily mortgage loan originations increased 72% in the first quarter of 2022 compared to the same period last year, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, which was released yesterday. In line with seasonality trends, originations during the first three months of 2022 year were 39% lower than during the fourth quarter of 2021.

• Why it matters: Compared to a year earlier, a rise in originations for hotel, industrial, and retail properties led the overall increase in commercial/multifamily lending volumes. By property type, hotels increased by 359%, industrial increased by 145%, retail increased by 88%, healthcare properties increased by 81%, multifamily increased by 57%, and office increased 30%. Among investor types, the dollar volume of loans originated for depositories increased by 194% year-over-year. Life insurance company portfolios increased 81%, investor-driven lenders increased 77%, CMBS increased 56%, and GSEs (Fannie Mae and Freddie Mac) increased 1%.
• Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, said, “The continued growth in lending activity is the result of the ongoing strong demand for certain property types like industrial and multifamily, as well as renewed interest in other property types that saw more dramatic declines during the early stages of the pandemic, such as hotel and retail. It’s likely that the rise in interest rates will take some wind out of the sails of borrowing in upcoming quarters, but strong market fundamentals, property values, and investor interest should continue to support the market.”

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

MBA’s CREF Market Intelligence Symposium 

MBA’s popular CREF Market Intelligence Symposium is back – in person – at the NYU Stern Center for Real Estate Finance Research on June 15-16. Cut through the clutter to get the hard facts about the state of commercial real estate markets from the nation’s leading CRE analysts, including representatives from U.S. Bank, JLL, CBRE, Institutional Property Advisors, CoStar, Moody’s, JP Morgan, and more.

• Why it matters: The symposium goes beyond talking heads, featuring data, analysis, and insights from leaders in CRE research – as well as a networking reception on Wednesday evening. Presented in partnership with the NYU Stern Center for Real Estate Finance Research, this is an event you won’t want to miss. Learn more and register today.

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.

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:

• Introduction to Commercial Mortgage-Backed Securities – May 19
• New Fannie Mae and Freddie Mac Condominium and Cooperative Guideline Changes – May 24
• What Trends will Shape the Lending Space in the Second Half of 2022 – June 2
• CFPB, UDAAP and the Focus on Junk Fees – June 9
• Serving Loan Applicants with Limited English Proficiency – June 14
• Leveling Up Your Social Media Strategy with Paid Advertising – 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.