CREF Policy Update Nov. 2
CRA Final Rule Released
Last Tuesday, the Federal Reserve Board, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation (the “Agencies”) released a final rulemaking to reform and align each agency’s Community Reinvestment Act (CRA) framework that depository banks must comply with.
Go deeper: The final rule makes certain changes from the proposed rule, which help to better achieve some of the Agencies’ goals of ensuring that regulations continue to reflect the original intent of the statute, especially in light of significant changes in the banking industry over the last few years.
• These changes are fully applicable to large banks (asset size of $2 billion and above) and partially applicable to intermediate banks (asset sizes between $600 million and $2 billion). Small banks (asset sizes of less than $600 million) will continue to be evaluated under the current CRA framework but may choose to opt into the application of the new rules.
Why it matters: Last year, MBA expressed support for the objectives to update the regulatory framework implementing the CRA and offered recommendations to ensure that the final rule achieves the intended goals of the statute without resulting in unnecessary burdens for the banks that have to implement them.
Our thought bubble: The final rule includes several of MBA’s recommendations, including to increase the threshold for delineating additional assessment areas, revising the weightings assigned to the overall Retail Lending and Community Development tests, maintaining full CRA credit for LIHTC investment, and recognizing Special Purpose Credit Programs in a bank’s CRA rating. The final rule also extends the implementation timeline as requested by MBA, with the first applicability date not until January 2026.
Our thought bubble: An MBA summary can be found here.
What’s next: MBA is still reviewing the nearly 1,500-page final rule and will provide any relevant updates.
For more information, please contact Fran Mordi at (202) 557-2860 or Stephanie Milner at (202) 557-2747.
Final Principles Released for Climate-Related Financial Risk Management for Large Financial Institutions
Also last Tuesday, the Agencies released their Final Principles for Climate-Related Financial Risk Management for Large Financial Institutions. The final set of principles are substantially similar to the draft proposals previously issued and are for use by financial institutions with $100 billion or more of total assets.
Go deeper: MBA submitted comments to each of the draft proposals that expressed appreciation of Agencies’ reliance on a principles-based approach to managing climate-related financial risk. Read MBA comment letters using the following links: Fed, OCC, and FDIC.
Why it matters: The principles aim to provide a high-level framework for the safe and sound management of exposures to climate-related financial risks that leverages existing risk management and supervisory processes.
What’s next: MBA will continue to monitor and update members on climate-related policy developments.
For more information, please contact Stephanie Milner at (202) 557-2747.
White House Announces Initiatives to Incentivize Commercial-to-Residential Conversions
The White House announced several programs to encourage the redevelopment of vacant commercial spaces into housing units. The actions include incentives from the Department of Transportation through grants for transit-oriented development; Community Development Block Grant funds for conversions, and an expansion of the sale of surplus government property.
What they’re saying: MBA President and CEO Bob Broeksmit, CMB, in a press statement said, “The initiatives announced today should help facilitate more commercial-to-residential projects. We encourage state and local governments to ensure zoning laws, tax credits, and subsidies are aligned to take full advantage of these programs.”
Why it matters: Lack of housing supply remains a problem in many communities. With the changes in the office market, there is significant interest in converting vacant commercial properties into viable housing.
What’s next: MBA will continue to advocate for incentive-based initiatives to expand access to housing and will work with the Administration, members of the House and Senate that have crafted related legislation, and other engaged stakeholders.
For more information, please contact Megan Booth at (202) 557-2740.
USDA RHS Proposes New Insurance Guidelines
Last Wednesday, the Department of Agriculture’s Rural Housing Service (RHS) published a proposal to reduce insurance costs on RHS properties. While the current proposal only relates to RHS direct loans (515) – and not guaranteed loans (538) loans – the approach taken is a step in the right direction. The goal of the proposal is to “allow higher deductible limits and will provide flexibility to the owner to select a deductible that can lower the premium costs.” RHS also said that “the agency intends to align RD insurance coverages and deductible limits with affordable housing industry standards.”
Why it matters: Property insurance costs continue to rise and obtaining coverage is difficult, especially with increased instances of federal programs creating requirements that are more challenging to meet.
What’s next: MBA will continue to work with RHS, the Department of Housing and Urban Development, and Fannie Mae and Freddie Mac to advocate for reasonable insurance requirements that can be flexible enough to meet the availability of the marketplace.
For more information, please contact Megan Booth at (202) 557-2740.
Federal Judge Extends Order Blocking Enforcement of CFPB’s 1071 Small Business Reporting Rule
Last Thursday, the U.S. District Court for the Southern District of Texas issued an order that extends to all financial institutions a previous decision to block enforcement of the Consumer Financial Protection Bureau’s (CFPB) small business loan reporting final rule that implements Section 1071 of the Dodd-Frank Act.
Go deeper: The initial injunction only applied to members of the American Bankers Association and/or Texas Bankers Association. However, Thursday’s order extends to all covered financial institutions and remains valid until the Supreme Court’s final decision in the case Community Financial Services Association v. Consumer Financial Protection Bureau (CFSA v CFPB).
• The Court further ordered that following a decision in CFSA v CFPB, the CFPB must extend all implementation dates to account for the time awaiting final decision by the Supreme Court. The Supreme Court is expected to release a ruling by July of next year.
Why it matters: The small business reporting final rule will require some MBA members to collect and report data on commercial real estate loans. MBA’s comments in response to CFPB’s proposed rule argued that the rule should only apply to small business lending and exempt most commercial and multifamily real estate loans. Original implementation dates required that lenders that originate at least 2,500 small business loans annually must collect data starting October 1, 2024, lenders that originate at least 500 loans annually must collect data starting April 1, 2025 and lenders that originate at least 100 loans annually must collect data starting January 1, 2026.
What’s next: MBA will update members on any further developments related to this issue.
For more information, please contact Stephanie Milner at (202) 557-2757.
Senate Judiciary Subcommittee Holds Hearing on Housing Market Competition
Last Tuesday, the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights held a hearing titled, “Examining Competition and Consumer Rights in Housing Markets.” A summary of the hearing dialogue can be found here.
Why it matters: The hearing focused on mergers in the housing industry and other anti-competitive behaviors in both the single-family and rental markets. The discussion also highlighted the negative impact of the Federal Reserve’s short-term Fed funds rate hikes on housing affordability.
What’s next: Senators may seek greater anti-trust enforcement in industry mergers and continue to review occurrences of “algorithmic collusion” as new technology is deployed in real estate management.
For more information, please contact Ethan Saxon at (202) 557-2913 or George Rogers at (202) 557-2797.
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:
• Strategies for Serving Millennial and Gen Z Homebuyers – Nov. 2
• CREF Career Conversations – Nov. 9
• Avoiding TCPA Class Actions and Do Not Call Complaints – Nov. 9
• Adopting Best Practices for Prefunding QA and Post-Close QC – Nov. 14
• Originating and Succeeding with High-Net-Worth Borrowers – Nov. 29
MBA members can register for any of the above events and view recent webinar recordings by clicking here.
For any questions, please contact David Upbin at (202) 557-2931.
