MBA Commercial/Multifamily Real Estate Finance Priorities
Commercial and multifamily real estate finance professionals will visit Washington, D.C. next week to present the 2017 Mortgage Bankers Association Policy Priorities to policymakers during the MBA National Advocacy Conference.
“We are committed to working with policymakers to strengthen the commercial and multifamily real estate finance system,” said MBA Senior Vice President of Commercial/Multifamily Thomas Kim. “The $3 trillion commercial and multifamily real estate finance market is an essential part of the economy that provides financing for the properties that house the nation’s businesses and for multifamily rental housing in which 17 million households reside.”
Kim noted that the advocacy conference–taking place June 20-21 at the Grand Hyatt Washington–will include both residential and commercial/multifamily tracks with distinct policy issues for each track.
The 2017 Mortgage Bankers Association C/MF policy priorities include enhancing capital formation and liquidity in commercial and multifamily real estate, strengthening portfolio lending, supporting the multifamily rental housing finance market, strengthening the commercial mortgage-backed securities market’s long-term viability and promoting regulatory clarity to facilitate compliance and leverage technology.
A summary of all commercial and multifamily priorities is below; click here for more information about each issue.
TAX POLICY
Fundamental to efficient capital availability are stable, consistent and predictable tax policies that promote long-term economic growth. We strongly support laws that strengthen the commercial real estate market, such as the Like-Kind Exchange rules, the Low-Income Housing Tax Credit and the Business Interest Deduction for the financing of real estate
ROLE OF MORTGAGE BANKERS
Mortgage Bankers, who work with a range of capital sources to facilitate the loan execution that best meets the needs of their clients, enable the efficient delivery of financing to the real estate market and to a variety of property types.
Mortgage bankers perform this vital role throughout the economic cycle and for borrowers in virtually all locations and markets. MBA supports legislative and regulatory initiatives that facilitate this intermediary role.
CREF ECOSYSTEM
The commercial real estate finance ecosystem fosters investment in commercial real estate, distributes investment risk and return, and reduces the cost of constructing and maintaining properties. The interplay among capital sources that finance commercial and multifamily real estate should be recognized by policymakers. Capital sources in a position to do so should be allowed to step in when market disruptions occur.
LIFE INSURANCE COMPANIES
Life companies are a steadfast source of capital for commercial real estate. MBA is actively working with the National Association of Insurance Commissioners on developing appropriate risk-based capital rules for equity holdings. At the same time, MBA will seek to preserve the NAIC’s regulatory capital regime for commercial real estate mortgages that helps diversify and strengthen life companies’ investment portfolios.
In addition, MBA is seeking modifications and clarifications to proposed Federal Reserve rules that would impact life companies with affiliated bank operations, as well as systemically important insurance companies. These proposals should be narrowly tailored.
BANK PORTFOLIO LENDING
MBA supports policies that enhance banks’ ability to lend in local communities and that promote balanced regulatory and examination regimes. In light of the federal banking agencies’ increased focus on real estate lending, we recommend that banking regulators use a transparent and flexible examination approach that avoids a one-size-fits-all methodology.
MBA also strongly seeks clarifying guidance incorporating a consistent and reasonable application of the High Volatility Commercial Real Estate rule to construction lending. We advocate for modifications to various proposals issued by the Basel Committee, such as the Net Stable Funding Ratio and the Liquidity Coverage Ratio that present concerns to the industry.
GSE MULTIFAMILY POLICY
In the context of multifamily housing finance and GSE reform, MBA will continue to advocate for legislative reform that is consistent with these principles, as well as the important role of private capital and competition in financing multifamily housing. Given the strong diversification of capital sources in multifamily finance at this time, MBA will encourage policymakers to continue to support GSE multifamily activities that strengthen liquidity and stability, monitor ongoing market dynamics, and support transparent and reasonable multifamily lending caps that avoid market disruption.
MBA will engage with policymakers to develop GSE-related policies intended to support affordable housing and underserved markets while emphasizing that multifamily housing, by its very nature, tends to be affordable, and support of the broad multifamily housing market is essential to families of modest incomes.
FHA MULTIFAMILY AND HEALTHCARE PROGRAMS
These programs have performed well, and MBA will work with policymakers to ensure that FHA remains a stable and consistent source of liquidity throughout economic cycles, working in partnership with private sector lenders.
MBA will advocate for (1) stable and sufficient resources at FHA, including commitment authority, to support both workforce and affordable rental housing, (2) mitigate regulatory barriers to financing, (3) continued organizational transformation of HUD operations, including asset management functions, with opportunity for ongoing industry input, and (4) flexibility in HUD underwriting, production and asset management to reflect the competitive multifamily landscape.
STRENGTHEN THE LONG-TERM VIABILITY OF THE CMBS MARKET
MBA supports the continued role of the commercial mortgage-backed securities market as an integral source of private capital. Essential to the future of CMBS is clear regulation of the securitization markets, including under the risk retention regulatory framework. In light of its detrimental impact on the market liquidity of CMBS instruments, we have strong concerns with the Basel Committee’s Fundamental Review of the Trading Book proposal and urge significant modifications. Likewise, MBA recommends significant clarifications to the ability of U.S. regulators to opt out of the Step-In Risk Proposal as to securitization vehicles.
PROMOTE REGULATORY CLARITY TO FACILITATE COMPLIANCE AND TO LEVERAGE TECHNOLOGY
MBA will seek greater clarity in applicable regulatory regimes to strengthen investor and counterparty confidence, improve process efficiencies, and support commercial real estate servicing. Rules should be narrowly tailored and construed based on underlying purposes and common-sense construction. The Home Mortgage Disclosure Act rule, for example, requires clarification and modifications, given that its primary focus is on consumer-facing lending rather than business-to-business lending in commercial real estate finance and the implementation period for recent changes should be extended.
The scope and applicability of the National Flood Insurance Program should be examined in the context of reauthorization, given the unintended consequences on the commercial real estate market.
MBA will assist members in compliance efforts on these and other federal regulatory matters, as well as state law issues, including through MBA’s updated State-by-State Licensing Resource.
Finally, MBA will monitor and seek regulatory clarity where necessary on evolving technology impacting various elements of commercial real estate finance.
