Prepared Remarks of MBA President and CEO Bob Broeksmit, CMB, at the 2024 MBA Commercial/Multifamily Convention and Expo
February 12, 2024
SAN DIEGO (February 12, 2024) – Bob Broeksmit, CMB, MBA President and CEO, delivered the following remarks at MBA's 2024 Commercial/Multifamily Convention and Expo.
[Please Note: These are prepared remarks. Mr. Broeksmit may add to or subtract from these remarks during the course of his presentation. Portions of the text may be omitted during the speech.]
It’s great to be back.
Welcome to CREF24.
By now, you’ve all heard that Dave Stevens died last month after a long and valiant battle against cancer.
He was the MBA’s former CEO, and a towering figure in our industry…
The tributes that poured in as the news spread included these descriptions:
A great, passionate leader; A fierce advocate; A mentor; A boss; A friend; A true visionary; A powerful voice;
Optimistic; Endless energy; An industry icon; A legend; A giant; An inspiration; A fighter.
He was certainly all of these things, but he was, first and foremost, a husband and a father, as was made clear to the hundreds of people who attended the celebration of life held in his honor ten days ago in Virginia.
Please join me in remembering Dave with a moment of silence.
Dave was devoted to the MBA and members like you. He spent years fighting for the policies and respect you need to thrive.
We honor his legacy by doubling down on this noble work, and today, the MBA is doing more for you than ever before.
The times demand it. Some parts of our industry are flourishing, while others are struggling.
For those of you who specialize in office lending, these are tough times indeed.
Other types of commercial lending, along with multifamily, are generally in a better place.
As our own Jamie Woodwell wrote in a recent article,
"For the CRE market this year, broad brushstrokes need not apply."
Our chair, Mark Jones, will say a bit more shortly. But for my part, I simply want to say:
No matter the challenges you face or the opportunities you see, the MBA is here to help you succeed.
Our mission is simple.
While you strengthen communities across the country, we strengthen you by shaping policy at the highest levels.
At the moment, we’re largely fighting defensive battles.
From our nation’s capital to state capitals, you and your customers face a slew of heavy-handed, harmful policies.
It’s shocking, really. During the pandemic, your companies moved heaven and earth to keep the economy afloat.
Yet instead of thanking you, lawmakers and regulators are holding you back, and making it harder for you to help Americans move forward. Let me be clear:
You deserve better, and on your behalf, the MBA demands better from Washington, D.C.
The proposed Basel III capital requirements are a case in point. They’re called the “end-game proposal,”
but only one of those words is accurate.
Basel III could be the end of bank real-estate finance as we know it.
Let me explain. Basel III targets banks, and banks handle about 50 percent of all commercial real estate lending.
It would force many of your companies to hold even MORE capital against most securitization exposures.
Why? Nobody knows--and that’s no exaggeration.
There is no sound research to support this policy.
If the federal government is going to roll out such a massive new mandate, it better have damn good evidence.
But we do know that unreasonable capital requirements will stifle lending.
Every dollar that banks hold back could go toward rebuilding downtowns and helping job creators and hardworking families.
Instead, it’s going to sit there, doing nothing. Washington, D.C. should be helping you lend more-- not forcing you to lend less.
The second big problem is Basel III’s new system for defaulted commercial real estate loans.
If just one loan goes bad, regulators want to assign a 150% risk weight not only to that loan, but to ALL of that borrower’s loans.
It reflects the old adage that “one rotten apple spoils the whole barrel.”
But while that may be true in other industries, it has absolutely no bearing on ours.
The fact is that each commercial financial transaction is separate and distinct.
If you have an office loan that goes bad in Manhattan, it has nothing to do with a loan on a multifamily property in Miami.
By the same token, a warehouse complex is nothing like a healthcare facility.
Your companies are sophisticated enough to understand this.
Basel III, on the other hand, is absurdly simplistic on this score.
Make no mistake: This mandate will chill bank lending.
A tiny number of bad loans could drag down a much larger number of healthy loans.
To choose just one example, a single bad office building loan could bring down a portfolio of grocery-anchored retail centers that are performing.
Forget the adage about rotten apples.
Regulators should instead remember that you don’t throw the baby out with the bathwater.
We’re fighting Basel III, tooth and nail, and we’ll continue to do so.
And we’re in good company.
A recent analysis showed that 97% of the 356 comment letters submitted opposed the rule-- only 9 letters were supportive.
And on the multifamily front, we’re continuing the fight against rent control.
Unfortunately, government officials and agencies continue to face pressure to enact this foolish policy, under the guise of “tenants’ rights.”
Yet as any economist will tell you, no one will suffer more from rent control than tenants.
The evidence is clear.
Rent control leads to lower-quality rental properties, and fewer properties, too.
By our estimates, if rent control were required by Fannie Mae and Freddie Mac, it would eliminate half of all multifamily financing in America.
That’s right-- half.
It would be a disaster, especially for low-income families and young people just getting started in their careers.
I want to make clear that MBA and our members are committed to making housing more affordable.
The good news is that rents have stabilized, after pandemic-driven increases.
We want to keep up the progress, which is why we support expanding the supply of housing.
Zoning and permitting reform are the real answer to rent increases.
I beat this drum every chance I get.
In fact, last year, I argued against rent control in the White House, just outside the Oval Office.
And I told senior White House staff that we’re ready to do more on affordable housing.
We just need Washington to get out of the way.
It’s the darndest thing.
The White House, Congress, federal agencies-- they all say they want more affordable housing, and they want it now.
But oftentimes they’re the ones blocking you from delivering it.
FHA, for example.
On the plus side, it’s made some steps in the right direction, like increasing the large loan limit threshold and removing the LIHTC cap.
But it needs to do a whole lot more.
There is no good reason FHA should be one of the most expensive places to produce a loan.
It should be one of the least expensive.
And HUD has a lot of work to do.
To start, it’s time for HUD to increase the wind/named storm insurance deductible
They announced they would change this policy at this very conference last year, but we still haven’t seen it.
It never should have taken this long, particularly as everyone acknowledges the widespread disruption caused by soaring insurance premiums and reduced availability of coverage.
Last October, President Biden announced plans to crack down on “junk fees” to consumers.
For that matter, HUD needs to reduce or eliminate its own unnecessary and duplicative fees.
There are more than 20 fees at FHA alone.
The Administration should start by ending the junk fees at FHA.
It’s also time to examine the Mortgage Insurance Premium.
Our members tell us that $177 billion (with a B) of FHA multifamily loans originated from fiscal year 2011 through 2022 have paid FHA in excess of $3.8 billion (with a B) in premiums.
Among all those loans, only 7, with an original balance of $28 million (with an M), have led to filed claims.
Clearly, the premium rate far outweighs the risk to the taxpayer.
I could go on.
If FHA wants to us to produce more affordable rental housing, it has to encourage more affordable borrowing. Instead, it’s turning borrowers off.
Tomorrow morning you’re going to hear from FHA Commissioner Julia Gordon.
I’m going to thank her for what she’s done and acknowledge the challenges she faces. These are complicated issues, and FHA has to get them right.
But it would be nice if Commissioner Gordon had more support. FHA and HUD need the administration to take off the brakes, so we can finally move affordable housing into high gear.
A few minutes ago, I said that we’re mainly fighting bad ideas.
There aren’t many opportunities to pass good policies. But when those opportunities arise, we must seize them.
And right now, we need Congress to expand the Low-Income Housing Tax Credit.
Simply put, the LIHTC program works.
Less than two weeks ago, the House of Representatives overwhelmingly passed a bipartisan bill that increases LIHTC.
The increased state tax credit allocations and private activity bond changes in the bill-- if enacted-- will help produce an estimated 200,000 additional rental units over the next two years.
Now, we need your help to get it through the U.S. Senate.
The Mortgage Action Alliance or “MAA” is MBA’s FREE grassroots advocacy network.
It is our army of advocates who actively participate by responding to Calls to Action and meeting with Members of Congress.
It’s a critical tool to ensure your elected officials understand how legislation and policy directly affect you, your clients, and the communities you serve.
There are 275,000 people employed in the mortgage finance industry and only 20% are active MAA members.
That’s a ratio we can improve in the next
Please pull out your phone and start a text message to 5-0-4-5-7.
In the text field, type “M-A-A” and send.
You’ll receive a link, redirecting you to the online form. It’s just that easy.
As I said, the LIHTC ball is now in the Senate’s court, and the MBA is determined to get a slam dunk. We are actively engaged with key Senators on both sides of the aisle, as well as the White House and our trade association partners. But our best chance of achieving victory rests with you.
We need you to take action NOW-- using the QR Code on the screen-- and urge your Senators to support moving the bill-- and its improvements to the Low Income Housing Tax Credit program-- as soon as possible.
It’s free, and it will take you just a couple minutes.
Your action can make the difference.
MBA is a constant buzz in policymakers’ ears, letting them know what’s helpful and harmful.
But every now and again, lawmakers need to hear a louder voice, and that’s you.
They listen to US, but they hear YOU because you are their constituents.
MAA-- and MORPAC, which is MBA’s voluntary, bipartisan political action committee-- work together to ensure that we have a seat at the table on ALL issues pertaining to real estate finance.
It is the only federal PAC directly representing the interests of our entire industry.
MORPAC enables MBA staff to build deep relationships with decision-makers on Capitol Hill.
It is crucial that our input is heard when policymakers are discussing industry issues that impact MBA members, our customers, and the communities we all serve.
The final piece of the MBA advocacy puzzle is our National Advocacy Conference.
As you heard, everyone in this room needs to attend the National Advocacy Conference.
We will once again offer a tailored track to allow MBA’s Commercial/Multifamily members a chance to demonstrate a unified voice to lawmakers, regulators, and other key partners.
Your participation at NAC ensures that members of the 118th Congress and the Administration will understand how proposed legislation affects our industry.
Get your calendars out and make sure to register and join us in Washington, DC, on March 19th
Use the code on the bottom of this slide to save $100.
Many of you are already involved in these initiatives.
Yet many of you aren’t, including those of you who are new to the MBA community.
In this time of policy threats and widespread inaction, we need your help.
Thank you again for your membership, your partnership, and above all else, your leadership. Representing you is the honor of a lifetime.