CREF Policy Update: Fed Vice Chair Michael Barr Unveils MBA-Supported Changes to Basel III Re-Proposal
Fed Vice Chair Michael Barr Unveils MBA-Supported Changes to Basel III Re-Proposal
Last Tuesday at a speech delivered to the Brookings Institution, Federal Reserve Vice Chair Michael Barr confirmed his intent to recommend to the Board sweeping changes to the Basel III Endgame (B3E) proposal issued by the federal regulators in July 2023.
• According to Barr, this recommendation would include a re-proposal, which the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) would also have to agree to.
• Barr outlined some of the high-level highlights of the recommended changes to the proposal, including revisions that appear to address several of MBA’s top concerns regarding the mortgage market impact of the rule.
Why it matters: MBA has consistently called for changes to the proposal, including in testimony before Congress, speeches, comment letters, and ongoing conversations with federal regulators. MBA’s comments highlighted several concerns with the B3E proposal that would hurt the entire mortgage market, not just large banks.
Go deeper: Barr’s outline of the re-proposal appears to include MBA’s recommendation that the regulators eliminate the “gold plating” (higher) of single-family mortgage risk weightings, and instead, use the Basel Accord’s recommendations, which would result lower capital charges than current rules for single-family loans held in portfolio.
In addition, Barr indicated that most of the new Basel rule would not be applied to banks with $100-$250 billion in assets.
• This will provide relief to many regional banks from the mortgage servicing rights (MSRs) and warehouse lending provisions of the B3E proposal that MBA argued would hurt the entire mortgage market. MBA believes similar relief from excessive capital charges on MSRs and warehouse lending should be extended to banks with assets above $250 billion.
What they’re saying: MBA’s President and CEO, Bob Broeksmit, CMB, issued a press statement agreeing with Barr’s support for a re-proposal, stating: “We support Vice Chair Barr’s recommendations to recalibrate some provisions that would have had negative impacts on single-family housing and commercial real estate finance markets. This includes removing the 20-percentage point risk-weighting add-on for single-family mortgages, which would have further diminished banks’ participation in mortgage lending while reducing credit availability for low- and moderate-income homebuyers.”
Broeksmit added, “We look forward to reviewing and commenting on the re-proposal, we will continue to advocate for a bank capital framework – including reduced risk-weighting for mortgage servicing rights and warehouse lines – that ensures safety and soundness without reducing mortgage market participation and thus limiting choice and increasing costs for consumers.”
What’s next: While Vice Chair Barr stated that a B3E re-proposal, along with the release of results from the Fed’s Quantitative Impact Study, is imminent, MBA continues to urge the regulators to ensure that the re-proposal and any final rule be the result of a rigorous impact analysis that is also subject to stakeholder comment.
• A re-proposal, followed by a new comment period, potentially pushes the implementation of a final rule beyond 2025. MBA will continue to discuss this issue with federal regulators as we await the release of the re-proposed rule.
For more information, please contact Fran Mordi at (202) 557-2860 or Stephanie Milner at (202) 557-2747.
House Financial Services Subcommittee Takes on Basel III, International Governing Guidelines
On the heels of Fed Vice Chair Barr’s remarks on Basel III, the House Financial Services, Subcommittee on Financial Institutions and Monetary Policy held a hearing last Wednesday on “Transparency in Global Governance.”
• During the hearing, lawmakers took anticipated party-line positions on the value of U.S. participation in international standards-setting bodies, as well as on more granular proposals such as B3E and the Securities and Exchange Commission’s (SEC) Climate Risk Disclosure Rule. Find the full hearing here and a summary here.
Why it matters: Republicans on the panel sharply critiqued U.S. participation in multilateral financial institutions, criticizing them as avenues for foreign influence over the U.S. financial sector and raising particular concern with climate-related regulations and the impact they may have on small and community banks. They relayed a desire for greater transparency in the interactions between U.S. regulators and these institutions, noting their concern with a lack of congressional oversight.
• In contrast, Democrats defended U.S. participation in the organizations, arguing that they are partially responsible for the success of domestic capital markets. Subcommittee Democrats further argued for the importance of climate-related financial regulation, expressing concern at the potential for climate-induced economic malaise, and defending the SEC’s climate rule.
What’s next: MBA will continue to engage with lawmakers on both sides of the aisle on all government regulations pertaining to real estate finance.
For more information, please contact Rachel Kelley at (202) 557-2816 and Madisyn Rhone at (202) 557-2741.
Senate Banking Committee Ranking Member Tim Scott Introduces Broad Housing Bill
Last Wednesday, Senator Tim Scott (R-SC), along with seven GOP Senate Banking Committee cosponsors, introduced the “Renewing Opportunity in the American Dream to Housing Act” (also referred to as the “ROAD to Housing Act”).
• The bill includes several titles designed to: Improve Financial Literacy, Increase Access to Housing, Serve the Most Vulnerable, Promote Opportunity, and affect Good Governance (mandatory Department of Housing and Urban Development (HUD) testimony, Federal Housing Administration (FHA) reporting requirements, etc.)
• The bill text can be found here, a summary of the bill can be found here, and the press release (with quotes from the Senate sponsors) can be found here.
Why it matters: The bill, long in the works, is intended to be a marker for Senator Scott to use to engage initially on housing policy should Republicans win a Senate majority in November – and should he, as expected, become the Chair of the Senate Banking Committee. Given that the bill has been introduced with no Democratic co-sponsors, any legislation considered in the 119th Congress on housing policy would involve negotiations, changes, and additional policy provisions.
Go deeper: The bill’s provisions offer reforms to current housing counseling and financial literacy, rental housing assistance, manufactured housing, construction grants, and small dollar lending programs. The legislation would also require annual congressional testimony from the HUD secretary and increased congressional oversight of the Federal Housing Administration’s Mutual Mortgage Insurance Fund.
What’s next: MBA has been actively and regularly engaged with Senator Scott (and his fellow Banking Committee Republicans) on housing policy matters and will monitor developments closely on this bill (and others) this year and during the next Congress.
For more information, please contact George Rogers at (202) 557-2797 or Ethan Saxon at (202) 557-2913.
Senate Finance Committee Holds Key Tax Policy Hearing
Last Thursday, the Senate Finance Committee held a hearing titled “The 2025 Tax Policy Debate and Tax Avoidance Strategies.” A summary of the hearing can be found here.
Why it matters: The hearing kicked off a contentious debate on the upcoming yearend 2025 expiration of major provisions of the Tax Cuts and Jobs Act of 2017 and highlighted avoidance strategies utilized by certain taxpayers under the existing tax code.
• Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) presented contrasting views over the value of the tax code’s current Section 199A small business/ “passthrough” provision (set to expire in 2025), which allows taxpayers who file as sole proprietorships, partnerships, and S corporations to deduct up to 20 percent of their Qualified Business Income (QBI) from federal income tax obligations. The senators also clashed on proposals that would change the “stepped-up basis” provision for individuals calculating capital gains taxes.
Go deeper: During the hearing, Senator Maggie Hassan (D-NH) also highlighted the economic impact of housing shortages in New Hampshire and asked the witnesses for proposals to use the tax code to enhance the supply of affordable housing.
What’s next: MBA will directly, and in coalition with other trade associations, continue to advocate for the extension, preservation, and/or improvement of provisions of the tax code that support real estate finance and the appetite for real estate investment in our country.
For more information, please contact George Rogers at (202) 557-2797 or Ethan Saxon at (202) 557-2913.
Commercial Mortgage Delinquency Rates Increased in the Second Quarter of 2024
Commercial mortgage delinquencies increased in the second quarter of 2024, according to MBA’s latest Commercial Delinquency Report, released on Tuesday.
Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, “The delinquency rate for loans backed by commercial real estate increased again in the second quarter. Delinquency rates increased for bank loans and Freddie Mac loans, as well as those held in CMBS. Delinquency rates decreased for loans held by life companies and were unchanged for Fannie Mae.
Woodwell also noted, “The CRE market is large and diverse, with significant differences by property type and subtype, market and submarket, borrower, lender, vintage, and more. All of those differences come into play in terms of how an individual loan may perform.”
For more information, please contact Jamie Woodwell at (202) 557-2936.
REGISTER: MBA’s Commercial/Multifamily Insurance Conclave 2024
MBA is hosting a Commercial/Multifamily Insurance Conclave 2024 on Oct. 6-8 in Kansas City, Mo.
• This premier event brings together Insurance and Risk professionals from all capital sources to discuss insurance market trends, best practices for addressing and implementing changes in the future, and much more.
Why it matters: Rising property insurance costs and diminishing policy options are increasingly becoming a problem in several states, and insurance requirements are becoming more strict.
What’s next: Register today to secure your seat.
For more information, please contact Jacky Salazar at (202) 557-2746.
Upcoming MBA Education Webinars on Critical Industry Issues
MBA Education continues to deliver timely commercial/multifamily and single-family 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:
• Navigating Multifamily Income and Expenses from Fundamentals to Performance Metrics – Oct. 2
• Overview of Commercial Insurance Compliance – Oct. 3
Unlocking Private Credit Finance: A Conversation on Key White Papers & Research – Oct. 9
Navigating and Ensuring Accurate Reporting with the MBA Commercial and Multifamily Inspection Form – Dec. 5
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.
