CREF Policy Update April 18: MBA Joins Broad Coalition Letter Defending Efficacy of Section 1031 Like Kind Exchanges
MBA Joins Broad Coalition Letter Defending Efficacy of Section 1031 Like Kind Exchanges
Last week, MBA joined a broad coalition of industry trade groups to defend the benefits Section 1031 Like Kind Exchanges bring to the broader U.S. economy, urging Congress to reject placing restrictions on the provision’s current law application.
• The letter was addressed to House Ways and Means and Senate Finance Committee Chairmen Jason Smith (R-MO) and Ron Wyden (D-OR), along with the committees’ Ranking Members Richard Neal (D-MA) and Mike Crapo (R-ID).
Why it matters: In March, President Joe Biden released his Fiscal Year 2025 budget recommendations, which included a familiar proposal that Congress limit the amount of capital gains that may be deferred through the use of Section 1031 like-kind exchanges.
• In the post-pandemic economy, like-kind exchanges remain a crucial tool to maintain the health of the commercial/multifamily real estate sector – including assisting in the development of affordable housing.
What’s next: As the debate on provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that expire in 2025 continues to intensify, MBA will work with our coalition partners to urge Congress to preserve Section 1031 – and reject efforts to curtail it as a means to pay for other potential tax policy changes.
For more information, please contact Bill Killmer at (202) 557-2736.
House Hearings Demonstrate Debate on Expiring Tax Provisions Well Underway
Last week, two House panels–the Ways and Means and Small Business Committees–heard from witnesses discussing the direct effects of either extending or altering key policies contained within the TCJA that are set to expire in 2025.
Why it Matters: Though both hearings reflected a consensus that maintaining a consistent and stable tax code is important for individual filers and American businesses, they also provided platforms to relitigate tax policy disagreements from the Bush, Obama, Trump, and Biden administrations – all with the potential to impact the CREF sector.
Go deeper: Both Republicans and Democrats praised the Tax Relief for American Families and Workers Act (H.R. 7024), the House-passed tax package with language that expands and improves the availability of Low-Income Housing Tax Credits (LIHTC). Questions at both hearings also focused on the importance of the current law Section 199A small business “pass through” deduction against Qualified Business Income (QBI), including proposals designed to make the provision permanent.
A full summary of the House Small Business Committee hearing may be found here.
What’s Next: As Congress moves closer to the TJCA 2025 expiration date, conversations on tax policy will intensify and MBA will continue to elevate the industry’s priorities.
For more information, please contact Bill Killmer at (202) 557-2736, Rachel Kelley at (202) 557-2816 or Madisyn Rhone at (202) 557-2741.
House Financial Services Committee Analyzes SEC Climate Rule
Last Wednesday, the full House Financial Services Committee hosted a hearing titled, “Beyond Scope: How the Securities and Exchange Commission’s (SEC) Climate Rule Threatens American Markets.”
• Please find a full summary of the hearing here and a recording here.
Why it matters: On March 6, the SEC voted 3-2 to adopt rules to require registrants to provide certain climate-related information in their registration statements and annual reports (See fact sheet here.)
• As a direct result of MBA’s and others’ successful advocacy, a proposed requirement for companies to report some indirect GHG emissions, known as Scope 3, was not included in the final rules. .
Go deeper: Republicans criticized the SEC rule, with many calling for its withdrawal, arguing that it will increase compliance costs, deter public listings, and confuse investors with non-material information, among other arguments.
• Democrats largely defended the rule, highlighting the necessity of standardized climate-related financial disclosures for investors. However, some Democrats, including Ranking Member Maxine Waters (D-CA), criticized the SEC for weakening aspects of the rule, especially as it relates to the removal of the Scope 3 emissions reporting requirements.
What’s next: MBA is reviewing the rules further and will provide a detailed summary in the coming days. The final rules will become effective 60 days after publication in the Federal Register. MBA will continue to work with Congress, regulators, and members on this issue.
For more information, please contact Rachel Kelley at (202) 557-2816, Madisyn Rhone at (202) 557-2741, or Stephanie Milner at (202) 557-2747.
FHFA Releases Q4 2023 Credit Risk Transfer Progress Report
On Thursday, the Federal Housing Finance Agency (FHFA) released a progress report detailing Fannie Mae’s and Freddie Mac’s (the GSEs) credit risk transfer programs, including summary data from their launch in 2013 to year-end 2023.
• Using a variety of transactions, the GSEs transfer a substantial portion of their single-family and multifamily credit risk to the private sector.
Go deeper: Fannie Mae primarily uses its Delegated Underwriting System (DUS) program to transfer a portion of its risk on multifamily loans to lenders. However, in 2023, Fannie Mae also executed one multifamily reinsurance transaction with a total UPB of $6.9 million and one multifamily reference pool transaction with a total UPB of $24 billion to transfer risk to private market participants.
• Freddie Mac primarily transfers multifamily credit risk through a senior/subordinate securitization program. In 2023, Freddie Mac also executed five credit risk note transactions with a total UPB of $17 billion to transfer a portion of risk to the private markets.
What’s next: MBA will continue to monitor reports from FHFA and communicate all relevant information to members.
For more information, please contact Stephanie Milner at (202) 557-2747 or Megan Booth at (202) 557-2740.
Get Involved in MAA Action Week: April 29-May 3!
MBA’s annual Mortgage Action Alliance (MAA) Action Week is arriving soon, April 29-May 3! Sign up today and promote the importance of advocacy within your company or organization. This industry-wide campaign allows ALL of us to take part and engage in the legislative and regulatory process on issues that directly impact real estate finance professionals. Membership in MAA can make a difference in how YOU and your company drive positive change by adding your voice to our collective efforts.
Why it matters: Advocacy happens 365 days a year. Through regular contact with your lawmakers and their staff members via MAA Calls to Action and other sustained “grasstops” efforts, you can establish yourself as a “go-to” constituent for our industry.
What’s next: Save the date for MAA’s Quarterly Webinar Series hosted by the Legislative & Political Affairs team on Thursday, May 2, at 2:00 PM ET. Hear key policy updates – along with case studies describing how the MBA staff is advocating on behalf of our association’s members to help achieve pro-industry outcomes. More information will be shared in the coming weeks.
For more information, please contact Jamey Lynch, AMP at (202) 557-2818 or Erin Reilly at (202) 557-2751.
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:
• Climate-Change Disclosure Rules and Impact on Mortgage Lending – April 18
• Minimizing Risks with GSE Borrower Verifications – April 24
• Responding to Cybersecurity Incidents – A Live Demo – April 30
• Basics of Commercial Loan Closing and Loan Documentation – May 9
• Using Data and Technology to Connect with Today’s Buyers to Increase Homeownership – May 14
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.
