MBA CREF Policy Update March 16, 2023

Last Thursday, the Biden Administration released its Fiscal Year 2024 (FY24) budget proposal. The Budget requests $73.3 billion in discretionary budget authority for the Department of Housing and Urban Development, a 1.6 percent increase from the 2023 enacted level. It also includes an increase to the allocation of the Low Income Housing Tax Credit (LIHTC) that states receive as well as a reduction in the private activity bond financing requirement to enable credits to facilitate more units of affordable housing. The budget also requests $13 billion in resources to help tenants avoid eviction. On the tax policy front, the budget proposes increasing the corporate tax rate to 28 percent, establishing a 25 percent minimum tax on those with wealth exceeding $100 million, and establishing limits on tax deferral for 1031 “like-kind” exchanges.

• Why it matters: Each year, the President’s budget request provides a blueprint for the administration’s priorities as Congress kicks off its appropriations process for the 2024 fiscal year. The Biden vision isn’t expected to become law, but is an opening salvo in tax and spending talks with Republicans.
• What’s next: More detailed information will follow in the coming days when the various federal agencies release their FY24 Budget Justifications to Congress. MBA staff will provide a more in-depth analysis as these are released and circulate a report on items most relevant for MBA members.

For more information, please contact Megan Booth at (202) 557-2740.

2. House Financial Services Committee Hearing Focuses on Consumer Financial Protection Bureau Reforms

Last Thursday, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy held a hearing focused on potential reforms to the Consumer Financial Protection Bureau (CFPB). The hearing featured several industry panelists as well as Minnesota State Attorney General Keith Ellison. Legislative proposals to reform the Bureau were discussed, including: subjecting the agency to congressional appropriations, requiring CFPB rulemakings to go through a cost benefit analysis, creating a separate CFPB inspector general, and replacing the single director governance structure with a 5-member bipartisan commission. A more complete summary of the hearing can be found here.

• Why it matters: Last year, the federal 5th Circuit Court ruled that the CFPB’s funding structure is unconstitutional. The Supreme Court of the United States (SCOTUS) is expected to consider the 5th Circuit’s ruling in the relevant case later this year. The SCOTUS ruling has the potential to materially impact the many mortgage related mortgage-related rulemakings the Bureau has finalized since its inception.
• What’s next: MBA is monitoring the upcoming SCOTUS decision and working with Congress and other industry stakeholders to find a viable solution to ensure continuity for the consumer finance channel and mortgage market participants.

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

3. Federal Reserve Chair Testifies In House and Senate; Warns About Long Inflation Fight

Federal Reserve Chair Jerome Powell testified before the House Financial Services Committee and Senate Banking Committee this week and warned lawmakers that the central bank may have to push interest rates higher than previously expected to curb inflation. Lawmakers questioned Chair Powell on a wide range of issues including inflation, the debt ceiling standoff, bank capital standards, and the U.S. dollar’s status as the world’s reserve currency. A summary of both hearings can be found here.

• Why it matters: Powell’s inflation warning comes after a series of economic indicators that show the economy is running hotter than expected despite action from the Fed.
• What’s next: Powell added that Fed policymakers may have to raise interest rates more aggressively at its next FOMC meeting in two weeks if new data on employment and inflation show similar strength.

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

4. House Ways and Means Committee Holds Markup

The House Committee on Ways and Means held a markup last week of the Default Prevention Act (H.R. 187), which would allow the Treasury Secretary to continue to borrow and pay interest and principal on the debt, while prioritizing some federal payments over others. The markup, held the same day President Biden announced his Fiscal Year (FY) 2024 budget, sets the stage for a potential vote in the full House of Representatives, absent a bipartisan, bicameral agreement on the debt ceiling. House Republicans have said they want a two-year budget agreement to cut government spending in exchange for voting to increase the borrowing limit (no specific cuts have been outlined yet).

• Why it matters: House Republicans passed this legislation on separate occasions in 2013 and 2015. Both a Democratic-controlled Senate and Republican-controlled Senate declined to consider the proposal in the years 2013 and 2015, respectively. During the markup, Republicans present defended the measure, arguing it would protect the creditworthiness of the U.S. should the two parties not reach a deal on the debt ceiling. Conversely, Democrats strongly criticized the bill, arguing it would be impossible to implement and not actually shield the economy from the catastrophic effects of default. Given the more than $10.3 trillion in mortgage debt backed by the federal government through Fannie Mae, Freddie Mac, Ginnie Mae, and other federal agencies, the housing and real estate markets are particularly susceptible to any resulting instability resulting from the debt limit debate.
• What’s next: MBA and our real estate coalition partners will undoubtedly be asked – by both the White House and key lawmakers – to engage on this highly-charged topic. The Treasury Department has indicated it can continue taking “extraordinary measures” to meet U.S. obligations up until early June.

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

5. Senate Finance Committee Holds Housing Hearing

On Tuesday, the Senate Finance Committee held a hearing titled, “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.” The hearing provided a forum for senators to highlight different tax policies they support to expand investment in multifamily housing, including the Affordable Housing Credit Improvement Act, which was reintroduced by Senators Cantwell (D-OR) and Young (R-IN) to expand and improve the LIHTC program. Several senators questioned the role of institutional investors in the single-family rental market. A summary of the hearing can be found here.

• Why it matters: Despite the split majorities in the 118th Congress, Finance Committee Chairman Ron Wyden (D-OR) has indicated his ongoing interest in pursuing affordable housing investments such as LIHTC enhancements, a middle-income housing tax credit (MIHTC), and a potential “repurposing” credit for office conversions.
• What’s next: MBA will continue to engage in discussions with key House and Senate tax writers and their staffs about any potential for bipartisan action on housing tax credits during this Congress.

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

6. FDIC Chairman Outlines Concerns with Unrealized Losses and Credit Risks Impacting Banks

Last Tuesday, Federal Deposit Insurance Corporation Chairman Martin Gruenberg spoke at the Institute of International Bankers about the impact of the pandemic on the economy and banking system as well as upcoming risks and challenges ahead, including commercial real estate. The Chairman noted that higher interest rates have left banks with $620 million in unrealized losses.

• Why it matters: Unrealized loan losses, particularly in commercial real estate, may come under greater scrutiny from banking regulators.
• What’s next: MBA will follow ongoing developments on this issue and others.

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

7. Commercial and Multifamily Mortgage Delinquency Rates Remain Low in Fourth Quarter 2022

Commercial and multifamily mortgage delinquencies remained low in the fourth quarter of 2022, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Delinquency Report, released Tuesday.

• Jamie Woodwell, MBA’s Head of Commercial Real Estate Research, said, “Commercial and multifamily mortgage delinquency rates remained low at the end of 2022. There were slight upticks among loans in CMBS, life companies, and banks and decreases for Fannie Mae and Freddie Mac, but overall performance remained positive. It is likely that as higher interest rates and softer property values work through the system this year – prompted by maturing and adjustable-rate loans – loan performance will adjust.”
• To download the survey, click here.

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

8. Rent Control Map and State Trackers

• Given the ongoing proposals and ballot initiatives across the country, MBA has published an online map that provides an overview of state and local rent control laws. MBA will follow ongoing developments on this issue and will update the map accordingly.
• The 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.

9. Register Today: MBA’s National Advocacy Conference – April 18-19

Registration is open for MBA’s National Advocacy Conference (NAC) on April 18-19 in Washington, D.C. This critical event allows you to connect directly with elected officials in our nation’s capital. Your story matters – share it with key policymakers as they consider legislation that affects all of us.

• Why it matters: The last few years have been unprecedented for millions of Americans, and the real estate finance industry is no different as we navigate new terrain. NAC gives you the opportunity to share your narrative with the key staff and decision-makers while networking with your industry colleagues. 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 18-19! As in the past, there is a tailored CREF track for our commercial/multifamily members. Register for yourself – and encourage your colleagues to attend – today at mba.org/nac .
For more information, please contact Bill Killmer at (202) 557-2736.

10. Upcoming MBA Education Webinars on Critical Industry Issues

MBA Education continues to deliver timely single-family and commercial/multifamily programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:

• Achieving Success in Ginnie Mae’s Digital Collateral Program – March 14
• Meet the Homeseeker: 2023’s Most Important Borrower – March 30
• Deciphering ESG in Affordable Multifamily Lending – March 30
• Warehouse Lending: Latest Activity, Trends and Developments – April 12
• Multifamily Finance Faces Headwinds Head-On – April 18