Tag: Coronavirus

Recommendations on how to encourage a national recovery from the economic effects of the pandemic – and improve access to Federal Reserve credit facilities for businesses such as manufacturing, retail, restaurants, real estate owners, and other asset-based borrowers – was the focus of testimony by Roundtable President & CEO Jeffrey DeBoer (above) on Sept. 9 before the Senate Banking, Housing and Urban Affairs Committee. (International Council of Shopping Centers news release)

The Roundtable’s written statement and oral presentation also provided the commercial real estate industry’s shared recommendations on how to provide critical federal assistance to the U.S. workforce, renter households, and business tenants to help them weather the COVID-19 crisis.  (Hearing video and witness statements)

• The Senate hearing focused on the effectiveness of the Federal Reserve’s Main Street Lending Program (MSLP) – a $600 billion loan facility established in March as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist small and mid-sized businesses weather the economic fallout from the pandemic.  (CQ News, Sept. 9)

• Chairman Mike Crapo (R-ID), Ranking Member Sherrod Brown (D-OH) and other Banking Committee Members heard testimony from DeBoer; Hal Scott, President of the Committee on Capital Markets Regulation; and William Spriggs, Professor of Economics, Howard University and Chief Economist, AFL-CIO. (Witnesses written testimony)

• Chairman Crapo (photo below) noted in his opening statement that the hearing would provide an update on “why the (commercial real estate) CRE market lacks access to needed support, including through the Main Street Program; and recommendations for options to get support to commercial real estate.”  (Sen. Crapo’s Opening Statement, Sept. 9)

• DeBoer emphasized the goal of the MSLP is to provide capital to mid-sized businesses that are disproportionally owned by minorities, women and veterans, who are unable to obtain capital due to COVID-related economic problems. (Law360, Sept. 9)

• The Main Street program is not working, DeBoer testified, because there is little incentive for banks to make the loans – and the program’s eligibility, affiliation and underwriting rules are not designed to meet the needs of the businesses in need.

• “The result: countless mid-sized retail businesses, restaurants, hotels, commercial and multifamily building owners are moving closer to shutting their doors forever,” DeBoer stated. (Roundtable Oral Comments)

• DeBoer recommended that to incentivize banks to participate on a larger scale, the Fed should purchase 100 percent of a Main Street loan, instead of the current 95% limit.

• He also encouraged administrative actions to expand the MSLP’s eligibility rules “… to stabilize the weakening condition of many businesses, particularly real estate owners whose businesses support millions of jobs nationwide and whose health is directly related to the health of local communities.”  (Washington Post, Sept. 9)

• “The recommendations that I have made on the Main Street Lending Program … really require no additional funds from the federal government,” DeBoer said. “They are administrative. They could be done tomorrow by the Treasury and the Fed if they wanted to.” 
• Sen. Chris Van Hollen (D-MD) commented, “I wish there was a broader recognition that getting funds into the hands tenants to pay their landlord on the residential side and also on the commercial side is something that would be very important at this time.”  (American Banker, Sept. 9)

• During Q&A with several committee members, DeBoer also addressed the importance of preserving the “rent obligation chain” – the stream of tenant rent revenues that travel through the financial system to support business workers, local government services and mortgage markets, safeguarding billions in Americans’ pension and retirement savings invested in real estate assets.  (Video of DeBoer’s Testimony and Q&A with Senators)

• Committee Chairman Crapo on July 31 sent a letter to Secretary Mnuchin and Chairman Powell urging them to quickly expand the Main Street Program by setting up an asset-based lending facility, and to address commercial real estate either through access to the Main Street Program or in a separate facility.”  (Roundtable Weekly, August 14)

DeBoer’s testimony, the Fed’s efforts and prospects for congressional action regarding the economic repercussions of the coronavirus will be a focus of discussion during The Roundtable’s September 22 Virtual Fall Meeting.  (Video of DeBoer’s Testimony and Q&A with Senators)

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President Donald Trump signed four executive orders (EOs) on August 8 that seek to counter the negative economic repercussions of the pandemic by preventing residential evictions and foreclosures; providing additional unemployment payments; and deferring the collection of payroll taxes and student-loan payments.

• The EOs were signed after White House officials and Democratic leadership could not agree on a fourth comprehensive coronavirus aid package. (Roundtable Weekly, Aug. 7) Republicans and Democrats urged each other this week to continue negotiations. (Wall Street Journal, Aug 10.)

• Whether the president has the authority to issue some of these Executive Orders is questionable, since taxing and spending power is generally under the purview of Congress. (NPR, Aug. 8) President Trump’s four executive orders include: 

Assistance to Renters and Homeowners

This order calls upon several federal agency heads to take steps within their existing authorities and programs to minimize evictions and foreclosures. These efforts would apply only to federally originated, backed, or securitized mortgages.

• The order does not purport to reauthorize the CARES Act federal eviction moratorium that expired at the end of July.  (Wall Street Journal, July 16)
• The EO instructs the Secretary of the Treasury, the Secretary of Housing and Urban Development (HUD) and the Director of the Federal Housing Finance Agency (FHFA) to take all lawful measures to prevent evictions and foreclosures of residential tenants and owners who have been financially impacted by the pandemic.  
• The HUD Secretary is also instructed to encourage and provide assistance to landlords, public housing authorities, federal grant recipients and affordable housing owners to minimize evictions and foreclosures. 
• Roundtable President and CEO Jeffrey DeBoer commented on federal rental assistance efforts: “Seeking to optimize existing programs and resources to minimize evictions and foreclosures makes sense.  For example, the existing Section 8 housing choice voucher program successfully provides housing assistance to lower income tenants.”
• DeBoer continued, “However, millions of additional families have pre-qualified for rental assistance yet are on stand-by wait lists for Section 8 housing vouchers and therefore do not receive the assistance for which they qualify. HUD should work quickly to reduce what are, in many cases, multi-year Section 8 housing assistance wait times.” 
• The residential relief EO complements a series of FHFA guidance for lenders and servicers since the start of the pandemic, collected on the agency’s  “COVID-19 Information and Resources” website.  For example, FHFA announced on August 6 that multifamily owners with mortgages backed by Fannie Mae or Freddie Mac who enter into forbearance agreements must inform tenants in writing about eviction protections.

• FHFA Director Mark Calabria, below right, addressed his agency’s oversight of Fannie and Freddie, which own or guarantee $5.6 trillion in single and multifamily mortgages, during The Roundtable’s January 2020 State of the Industry Meeting in a discussion with Roundtable Member Willy Walker, chairman & CEO, Walker & Dunlop, left.

Unemployment Payments 

Weekly federal unemployment payments of $600 that were authorized in the CARES Act expired on July 31.

• This order directs a $400 weekly payment to those unemployed due to the pandemic through December 6, 2020 – or whenever $44 billion from the Department of Homeland Security’s Disaster Relief Fund is depleted to $25 billion.
• The benefit would be funded 75% by the federal government and 25% by states, who are encouraged – but not required – to provide their share of $100 per week. Several governors this week insisted their states do not have the funds budgeted for the proposed allocation. (Roll Call, Aug. 10)
• A senior Labor Department official said the additional $300 weekly federal share would likely take weeks to reach the unemployed and could run out six weeks after initial disbursement. (Wall Street Journal, Aug. 12)

Deferring Payroll Tax Obligations 

This order directs the Treasury Department to defer the withholding, deposit, and payment of the employee-share of payroll taxes for Sept. 1, 2020 through Dec. 31, 2020 – essentially suspending the 6.2% Social Security tax on wages for employees making less than about $104,000 annually on a pre-tax basis. (Brownstein Hyatt Farber Shreck EO Summary, August 12)

• The president said that if he is reelected, he will work to turn the temporary deferral into a permanent tax cut while also seeking to reduce the payroll tax going forward. (Washington Post, Aug. 8)  Treasury Secretary Mnuchin later clarified that the payroll tax deferral would be optional for employers and not mandatory.  (Forbes, Aug. 12).  

• The CARES Act previously authorized businesses to defer the employer-share of payroll taxes until the end of the 2020.  (Click to enlarge image above )

• The executive action on payroll taxes, along with recent comments by President Trump in support of a capital gains tax cut, has renewed speculation that the President could act to reduce capital gains taxes administratively by directing Treasury to allow taxpayers to adjust the basis of assets for inflation when measuring gain.  (MarketWatch, Aug. 12)

Deferring Student Loan Payments

• Student loan payment relief granted under the CARES Act expires on Sept. 30, 2020.  This EO instructs the Secretary of Education to pause monthly payments and interest for student loan borrowers until Dec. 31.

September 30th Funding Deadline

• Most policymakers have left Washington for the August recess, but senators and House members will receive a 24-hour notice to return if a coronavirus deal is reached or if a vote is scheduled.  Both chambers are scheduled to return on September, and no votes are scheduled until the week of September 14 – just weeks before government funding is scheduled to expire on September 30.

• In today’s Bisnow, several commercial real estate industry leaders are quoted in the article, “‘They’re Playing A Dangerous Game’: CRE Leaders On Congress Leaving Without Passing Relief Bill.”

• Referring to the executive orders signed by President Trump, DeBoer states in the article, “The presidential executive orders are positive measures, but they are not a full substitute for legislation.  Legislation that builds on the short-term relief enacted this spring is sorely needed.”

DeBoer also notes, “Congress will face even greater relief needs when they return in September, but at the same time politics will make negotiations even more difficult.”  (Bisnow, August 14) 

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Negotiations this week between congressional lawmakers and the White House on a fourth comprehensive coronavirus relief package continued through this afternoon, as significant policy and funding differences remain between Democrats and Republicans. (POLITICO Playbook PM, August 7)  

• The GOP’s $1 trillion package released July 27 contrasts with the $3.4 trillion proposal House Democrats passed in May. (Brownstein Hyatt Farber Schreck, July 31 – “HEALS Act Comparison to HEROES Act and Current Law,” and CNet, August 5 – “HEALS vs. CARES vs. Heroes stimulus packages: Key differences between Democratic and Republican proposals”)
• President Donald Trump tweeted yesterday that if a deal cannot be made soon, he would sign executive orders extending the CARES Act’s residential tenant eviction moratorium and some enhanced unemployment benefits, while also establishing a payroll tax cut. Unilateral executive action on these matters, however, would likely result in legal challenges. (Bloomberg, August 6)
• Senate Minority Leader Chuck Schumer (D-NY) commented on the negotiations with Treasury Secretary Steven Mnuchin, White House Chief of Staff Mark Meadows and House Speaker Nancy Pelosi (D-CA). “We’re still slogging through step by step by step. They made some concessions, which we appreciated. We made some concessions, which they appreciated. We’re still far away on a lot of the important issues, but we’re continuing to go at it,” Schumer said. (Wall Street Journal, August 4)  
• The House of Representatives is out of session next week but members have been notified they will be called back if a deal is reached. In the Senate, Majority Leader Mitch McConnell (R-KY) announced yesterday that he will allow senators to leave Washington until an agreement is reached. (The Hill, August 6)
• “Exactly when that deal comes together I couldn’t tell you, but I think it will at some point in the near future,” McConnell said yesterday on “Squawk on the Street,” which also featured an interview with Pelosi. (CNBC interviews, August 6)

Paycheck Protection Program (PPP) Loans

The PPP is set to expire on August 9. It has provided over five million loans and more than $521 billion since April to help small businesses meet expenses for payroll, benefits, rent, and other obligations. (Small Business Administration statistics through July 31).

• Senate Small Business Chair Marco Rubio (R-FL) has unveiled two amendments for the next coronavirus relief package to extend the PPP. (Politico Pro, August 5)
• Sens. Rubio and Susan Collins (R-ME) on July 27 introduced the “Continuing Small Business Recovery and Paycheck Protection Program (CSBRPPP) Act” that would fund PPP “second draw” loans, establish a new loan program for “Recovery Sector Businesses,” and make other PPP reforms.  (Section-by-section summary and one-pager.)
• Businesses with 300 or fewer workers, that can also show a 50 percent quarterly revenue loss compared to last year, could qualify for a second round of PPP loans under the Rubio-Collins proposal.
• The Real Estate Roundtable joined 120 business groups (including the International Franchise Association (IFA), U.S. Chamber of Commerce, and U.S. Travel Association) in an August 5 letter urging Congress to expand “second draw” PPP loan eligibility beyond the scope of the Rubio-Collins bill. (IFA press release, Aug. 5)
• The coalition’s August 5 letter stresses that “the 50 percent decline as proposed in the CSBRPPP Act is simply too high.” A revenue decline of 20 percent or greater for small businesses could mean the difference between staying open or closing, according to the letter.
• Meanwhile, CEOs of major retail, hospitality, and technology companies separately urged Congress in an August 3 letter to enable more businesses to qualify for government-backed loans beyond the current PPP. (Politico, August 3) 
• The CEOs expressed support for the “Reviving the Economy Sustainably Towards a Recovery in Twenty-twenty (RESTART) Act” (S. 3814), introduced by Senators Michael Bennet (D-CO) and Todd Young (R-IN).  The measure currently has 52 bipartisan Senate cosponsors. It would allow businesses with up to 5,000 employees to qualify for federally-backed, forgivable loans if they sustained a 25 percent revenue loss in 2020 (with reference to a comparable 2019 quarter). (Press release, May 21).   
• The Roundtable supports S. 3814 to help small and mid-sized businesses meet up to six months of payroll, rent, and other obligations during the pandemic. RESTART loans would be repaid up to seven years, with loan forgiveness amounts calculated based on the business’s employee size and extent of revenue loss. (RESTART Act summary)  
• Sen. Bennet commented on Sen. Rubio’s PPP proposal, “We’ve got to expand the ambition of the program. $100 billion of loans is a great start, but it’s not going to meet the large portion of the need. The amount is substantially greater than that.” (Politico, August 3)

The ongoing efforts of policymakers to provide COVID-19 economic relief was a focus of a discussion last week featuring Real Estate Roundtable President and CEO Jeffrey DeBoer and other real estate industry trade group leaders in a Walker & Dunlop webinar “All Eyes On Washington: What will the next stimulus bill do for CRE?”— moderated by Roundtable member and W&D Chairman and Chief Executive Officer Willy Walker.  (Roundtable Weekly, July 31)

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Negotiations between Democrats and Republicans over the next round of COVID-19 relief stalled this week after policymakers could not bridge significant differences between the GOP’s $1 trillion package released Monday and the $3.4 trillion proposal House Democrats passed in May.  (BGov, July 30 and Roundtable Weekly, May 22)

• “We’re still very far apart on a lot of issues,” Treasury Secretary Steven Mnuchin said on July 29 after three days of meetings with House Speaker Nancy Pelosi (D-CA), Senate Minority Leader Charles Schumer (D-NY) and White House Chief of Staff Mark Meadows. “I do think there is a subset of issues that we do agree on, but overall we’re far from an agreement.”  (RollCall, July 29)
• Mnuchin added that negotiating a compromise on unemployment insurance, state and local government assistance, and liability protections for businesses are especially challenging. “It makes it the pending business for next week,” said Majority Leader Mitch McConnell (R-KY) [CQ, July 29]. 
• CARES Act benefits regarding $600 weekly unemployment insurance and the federal residential tenant eviction moratorium expire today – placing additional pressure on lawmakers to reach agreement before the congressional recess, scheduled to start on August 8.

HEALS Act Provisions

• Senate Republicans on July 27 unveiled the “Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act.”  The GOP package would reduce the expanded unemployment benefit to $200 per week, authorize another round of $1,200 stimulus checks to most Americans, provide more than $100 billion for reopening schools, among other provisions. (Appropriations Committee news release, July 27 and Republican Policy Committee summary, July 28)
• The GOP’s HEALS Act is comprised of eight bills that form a base for negotiations with Democrats, who passed the $3.4 trillion “Health and Economic Recovery Omnibus Emergency Solutions Act [HEROES] Act” (H.R. 6800) in the House in May. (How the HEALS Act compares to the HEROES Act, CNBC, July 30 and HEALS Act Comparison to HEROES Act and Current Law, Brownstein Hyatt Farber Schreck, July 31)

The HEALS Act includes:

• Liability protections in the “Safeguarding America’s Frontline Employees To Offer Work Opportunities Required to Kickstart the Economy (SAFE TO WORK) Act,” introduced by Sens. John Cornyn (R-TX) and Mitch McConnell (R-KY).  A  billsummary notes it would “create a federal cause of action for coronavirus exposure claims” that preempts state laws outside of workers’ compensation regimes. A business defendant would lose the liability shield if it engaged in “gross negligence” or “willful misconduct” in causing the plaintiff’s COVID-related injuries.  (Summary of the Act)
  

  The Real Estate Roundtable joined approximately 480 business groups in a July 30 letter urging Congress to support the liability relief provisions.  (The Hill, July 30)

• The Safe and Healthy Workplaces Tax Credit in the “American Workers, Families and Employers Assistance Act” introduced by Senate Finance Committee Chairman Charles Grassley (R-IA). [Section-by-section summary] The proposal would provide a refundable payroll tax credit for 50% of the costs associated with protecting employees (testing, PPE, cleaning, etc.), reconfiguring workplaces, and upgrading workplace technology to prevent the spread of COVID-19.  Expenses between March 13 and the end of this year would qualify, and the maximum credit would be based on the number of employees. The measure reflects stand-alone legislation recently introduced by Senator Rob Portman (R-OH) and Rep. Tom Rice (R-SC). [Roundtable Weekly, July 24]
• A Wall Street Journal video released yesterday profiles the extensive efforts of commercial real estate companies to accommodate the safe return of workers to offices, featuring Roundtable member Scott Rechler (Chairman and Chief Executive Officer, RXR).  The video features the use of new technological tools, revised layout plans and enhanced ventilation systems to enhance the well-being of building occupants.
• A second round of funding for the Paycheck Protection Program (PPP) would be provided in the “Continuing Small Business Recovery and Paycheck Protection Program Act,” introduced by Sens. Marco Rubio (R-FL) and Susan Collins (R-ME).  The $190 billion bill would fund PPP “second draw” loans; a new Section 7(a) loan program for Recovery Sector Businesses; and numerous program criteria reforms.  (Section-by-section summary and one-pager.)
• In other pandemic relief news, a bill introduced on July 29 by members of the House Committee on Financial Services, Van Taylor (R-TX), Al Lawson (D-FL), and Andy Barr (R-KY), would provide economic support to the commercial real estate market, especially for businesses with Commercial Mortgage-Backed Securities (CMBS) debt.  The “Helping Open Properties Endeavor (HOPE) Act” (H.R. 7809) would establish a Treasury facility to encourage bank loans in the form of preferred equity to help struggling CMBS borrowers.  (Wall Street Journal and Rep. Taylor news release, July 29)
• Federal Reserve Chairman Jay Powell on July 29 held a news conference after a two-day meeting of the Federal Open Market Committee (FOMC) to address interest rates and the repercussions of the pandemic.  Powell stated, “To support the flow of credit to households and businesses, over the coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning.” (FOMC statement and new conference video, July 29)

As pandemic negotiations continue in Congress, The Roundtable and its real estate industry partners remain engaged in issues of vital importance to CRE.  See the story below for more details presented this week in a webinar held by Walker & Dunlop.

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• Rep. Andy Barr (R-KY) referred Powell and Mnuchin to a letter sent June 22 by more than 100 members of Congress to urging support for real estate borrowers unable to keep up with payments on debt tied to CMBS.  (Roundtable Weekly, June 26)

• Barr added that without federal intervention, the commercial real estate sector could experience a wave of foreclosures and defaults.  He asked if the Federal Reserve has the authority to establish a credit lending facility to service commercial real estate. 

• Powell responded, “I’ve been very focused on this. You’ve got people who can’t currently service debt, you’ve got these inflexible arrangements. So there’s a serious problem here that needs to get fixed and we’re racking our brains to see how – how it could be something we could do by lending, but that’s really all what we can do … is create more debt.”

• Mnuchin acknowledged the June 22 letter and responded that CRE sectors such as hotels may be considered for direct aid in the next round of coronavirus relief. 

• Mnuchin stated, “This is a large challenge. So, we have been working with the Fed, we have not yet figured out a way to set up a facility. So, it’s not out of a lack of interest or a lack of it desire. There are structural problems. And let me just add, in many of these cases, these companies don’t need more debt. They need support. So, one of the things we will want to look at in the next CARES Act, as I said, is additional support for these hardest hit industries. As the (Fed) Chair has said, there’s a difference between lending and spending.”

• Rep. Bill Posey (R-FL) warned that hoteliers’ inability to make payments threatens the servicing of CMBS. Munchin responded that the CMBS industry has restrictive covenants limiting their ability to utilize relief programs. “And that’s why one of the things I do think we need to look at in the next CARES Act is additional funding for these industries that are the hardest hit so they can continue to rehire people so that, as occupancy increases, that they have employees that they can maintain. We need to look at additional support for these hard hit industries,” Munchin said. 

The House and Senate this week passed an extension to the Paycheck Protection Program (PPP), allowing small businesses to apply for these loans until August 8. President Trump is expected to sign the extension into law. (CQ, July 1)  

• Mnuchin’s testimony on June 30 came on the same the day that the (PPP) was set to expire, with approximately $130 billion of the original $670 billion allocated unused.  The PPP was created by Congress in March to enable small businesses to apply for forgivable loans during the pandemic.

• Mnuchin stated that as of June 27, the PPP had approved 4.8 million small businesses loans totaling $520 billion, supporting an estimated 50 million jobs. (ThinkAdvisor, June 30)

Mnuchin also told the House Financial Services Committee (HFSC) that he supports congressional legislation to repurpose the remaining PPP funds.  “There appears to be bipartisan support in the Senate to repurpose the (funds) for PPP, extending it to businesses that are most hard hit, that had a requirement that their revenues have dropped significantly, things like restaurants and hotels and others where it is critical they get people back to work.”

House Passes Eviction Moratorium Extension

HFSC Chairwoman Maxine Waters (D-CA) led the effort for House passage this week of the Emergency Housing Protections and Relief Act of 2020 (H.R. 7301), which supplements housing assistance provisions passed in May as part of the HEROES Act.  (Rep. Waters House floor statement, June 30 and Roundtable Weekly, May 15.)

• The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) sent a June 29 letter to Congressional leadership expressing concerns about the bill’s expansion of the federal eviction moratorium that would undermine the benefits of other provisions within the legislation.  

• The bill also would also provide multifamily building owners who are economically impacted by the pandemic the ability to obtain forbearance on making mortgage payments for a maximum of 360 days, whether those loans are federally-regulated or from a non-federal lender.  

• The NMHC letter offers strong support for several measures within H.R. 7301, including liquidity for multifamily mortgages and servicers, additional funding for Section 8 Housing Choice Vouchers and support for rural housing.

• However, the letter also notes that the bill substantially expands the federal eviction moratorium established in the CARES Act to virtually all single family and multifamily homes for 12 months.  The moratorium extension is also untethered to any actual COVID-19 impact on a renter and disconnected from a renters’ qualification or acceptance of emergency rental assistance.

The letter states, “A protracted eviction moratorium does not provide a sustainable, long-term solution for American families facing financial hardship and we oppose the inclusion of this provision for the severe consequences it will have that ultimately blunt the impact of the positive components of the legislation.”  (NMHC, June 29)

Next COVID-19 Relief Package

This week’s action on COVID-19 related policy comes as Democrats and Republicans consider an additional coronavirus relief package after they return from the congressional July 4 recess.

• The House in May passed its own $3 trillion pandemic recovery package, which includes billions in aid for state and local governments.  Republicans have signaled they may be open to another COVID-19 bill, but on a measured basis. (Forbes, May 21 and Roundtable Weekly, May 22) 

• Senate Majority Leader Mitch McConnell (R-KY) this week said the goal for finishing the next coronavirus package would be before Congress breaks for its lengthy August break.

• McConnell assessed that when policymakers return on July 20, it “dovetails nicely with the perfect time to take an assessment of the economy and the progress we’re making on the health care front and see if there is additional assistance needed for our health care providers,” McConnell said. (Politico, June 30) 

Congress will have an 11-day window in late July to act on another stimulus package.  President Trump yesterday said he supports another round of direct stimulus payments as part of a potential phase four coronavirus relief package.  “We’re working on a ‘phase four.’ We’re working with Congress,” Trump said. “Work has started.”  (Axios, July 1 and Fox Business, July 2)

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