WASHINGTON - After hearing from constituents in their Congressional Districts, U.S. Congressmen and members of the House Committee on Financial Services, Van Taylor (R-TX-03), Al Lawson (D-FL-05), and Andy Barr (R-KY-06), today introduced legislation in the House of Representatives to provide economic support to the commercial real estate (CRE) market, especially for businesses with Commercial Mortgage-Backed Securities (CMBS) debt, and the millions of Americans they employ.
Author of the legislation, Congressman Van Taylor (TX-03) said, "Millions of jobs and the prosperity of entire communities depend on keeping these properties open. These industries don't need a bailout, but they do need flexibility and support provided in the HOPE Act to keep their doors open, drive local their local economies, and support families across the country."
Specifically, H.R. 7809, the HOPE Act, provides borrowers of commercial mortgages, who have been hit the hardest economically by COVID-19, financial assistance through the HOPE Preferred Equity lending facility. Guaranteed by the Department of the Treasury, financial institutions will originate preferred equity instruments to borrowers.
Text of H.R. 7809 can be found here and a summary of the bill can be found here.
The commercial real estate market encompasses hotel, retail, multi-family housing, industrial, and commercial property, industries which support millions of jobs throughout the United States. For example, 8.3 million jobs throughout the United States, and more than 600,000 in Texas are supported by the hotel industry while the retail industry directly supports 29 million American jobs.
As a result of the COVID-19 pandemic, businesses across the country have experienced revenue declines and cash flow shortages, making it difficult to meet monthly debt obligations and ultimately, threatening the livelihood of their business. While Congress and federal agencies have provided critical assistance to many businesses experiencing financial hardship through programs such as the Paycheck Protection Program and Main Street Lending Programs, these initiatives do not fit the needs of the commercial real estate market.
Businesses with CMBS debt have a particular challenge since their loan covenants are governed by multiparty state law contracts which typically prohibit additional indebtedness. Further, CMBS borrowers have less flexibility to modify their loans since bondholders of CMBS trusts expect principal and interest payments to be maintained.
In June, Congressman Taylor led a letter, signed by 104 Members of Congress from both sides of the aisle, urging the U.S. Secretary of Treasury Steven Mnuchin and Chairman of the Federal Reserve Jerome H. Powell to provide economic support to the commercial real estate (CRE) market.