Multifamily Finance Industry Asks for More Time on Margin Requirement Proposal

The Mortgage Bankers Association and other industry trade groups asked the Securities and Exchange Commission for more time to review a proposed rule that would require collateral be posted on forward-settling agency securities.

The SEC and the Financial Industry Regulatory Authority proposed a rule on October 20 intended to impose margin requirements in the single-family “to-be-announced” market, but the rule scopes in the multifamily housing finance programs of Fannie Mae and the FHA/Ginnie Mae as well.

“The proposed rule (amending “Rule 4210″) would have significant and unintended consequences on the financing of multifamily apartments, the vast majority of which are affordable to families earning below median income,” the letter said. It asked for at least a 45-day comment period given the proposed rule’s potential effects. “The proposed rule appears to scope in the multifamily finance market in an abbreviated manner,” it said.

The letter noted that the agency multifamily market has operated efficiently and competitively and is subject to appropriate safeguards including the posting of good faith deposits under both vibrant and stressed market conditions.

The proposed rule’s multifamily reference appears in a footnote and the economic impact discussion does not address the characteristics of the multifamily finance market and the potential for disruption that could result under the proposal. The letter called the absence of substantive data or discussion on the impacts to the multifamily housing finance market “problematic,” particularly when the proposed rule could lead to significant disruptions to the numerous lenders and borrowers/developers that serve the affordable multifamily rental housing sector.

“Given the depth and complexity of these issues and the need for stakeholders to have adequate time to comment on this important rule, we urge the Commission and FINRA to revise the public comment period to at least 45 days,” the organizations said.

Twelve other trade groups signed the letter in addition to MBA, including the National Multifamily Housing Council, Real Estate Roundtable, the National Apartment Association and the National Association of Home Builders.