CREF Policy Update Jan. 4: FDIC (Re)Advises Caution for Banks With Large CRE Concentrations
FDIC (Re)Advises Caution for Banks with Large CRE Concentrations
At the end of 2023, the Federal Deposit Insurance Corporation (FDIC) published an advisory – which does not create any new policies or risk management principles – that urges banks to review concentrations in commercial real estate and to consider how to manage liquidity to mitigate risk.
• The guidance suggests that banks should be prepared for a possible increase in the need for loan workouts. Federal regulators have well-established and robust guidance and oversight of bank CRE concentrations.
Go deeper: This summer, regulators re-published the “Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts,” which reiterated Federal financial regulators’ policy that banks should work prudently with their borrowers who face potential distress. Both advisories align with MBA’s long-standing advocacy that current bank CRE regulation is already robust and prudent for today’s market conditions.
Why it matters: Federal financial regulators, including the Financial Stability Oversight Council, have been keeping a close eye on bank commercial real estate concentrations. The advisory largely reiterates guidance that has been in place since 2008.
What’s next: While banks remain a critical source of liquidity for commercial real estate markets, commercial real estate concentrations will remain under the regulatory microscope in the near term. MBA continues to provide data, analytics, and policy recommendations to Federal financial regulators on a regular basis to ensure commercial real estate finance is properly understood, and not painted with a broad brush.
For more information, please contact Megan Booth at (202) 557-2740.
LIHTC Bill House Authors Send Letter to Leadership in Support of Proposal’s Inclusion in Tax Package
The House authors of H.R. 3238, the Affordable Housing Credit Improvement Act (AHCIA), sent a letter to Speaker Mike Johnson and Minority Leader Hakeem Jeffries urging them to include Low Income Housing Tax Credit (LIHTC) provisions in any tax package that may emerge in the coming weeks.
Why it matters: While Congress had adjourned for the year, there are still rumors of ongoing negotiations on the potential for tax legislation. A number of tax provisions from the Tax Cuts and Jobs Act of 2017 have already expired, while other provisions from that law are authorized only through 2025. Congressional tax-writers have indicated they want to push forward a tax package that would cover major priorities until an expected larger package is negotiated after the 2024 election.
What’s next: The two-step temporary funding bill that Congress passed in November provides the best opportunity to serve as a vehicle for a tax package next year. Tax experts largely believe that the expiration of that stopgap funding bill for the first set of affected federal agencies on Jan. 19, 2024, may be the last chance this Congress to pass a tax package, as it becomes more difficult for the IRS to enact tax changes before the April 15 filing deadline.
• MBA will continue to monitor these ongoing discussions and push for the inclusion of provisions to expand and improve the LIHTC program (and other industry priorities).
For more information, please contact Rachel Kelley at (202) 302-1185 or Bill Killmer at (202) 557-2936.
MBA Updates Property Inspection Form Rating Definitions
MBA established an advisory committee to discuss redefining the property inspection rating definitions. The committee that reviewed the proposed changes included members, servicers, lenders, correspondents, mortgage bankers, Fannie Mae, and Freddie Mac.
• The group agreed to adopt the Fannie Mae rating definitions and to rebrand them as the official MBA rating definitions. The property inspection form updates are effective Jan. 1. Property Inspection Form v3.1
What’s next: Join MBA’s Asset Manager Peer Group and Servicer Council to participate in ongoing conversations regarding property inspection issues and processes.
For more information, please contact Kelli Burke at (202) 557-2742 to join the Property Inspection Advisory Committee, and Jacky Salazar at (202) 557-2746 to join the Asset Manager Peer Group and Servicer Council.
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:
• C-PACE for New Development, Refinance, Renovation, and Rescue – Jan. 30
• Transforming Lending Operations: How to Leverage Intelligent Automation – Jan. 30
• Private Credit Finance 201: A Deep Dive into Debt Funds and Their Impact to Commercial Real Estate Lending – March 6
• Builder’s Risk Insurance: Analysis & Perspectives – March 20
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.
