U.S. Rep. Andy Barr (R-KY) last week introduced a bipartisan bill to provide economic support to the nation’s commercial real estate (CRE) market, particularly for businesses with Commercial Mortgage-Backed Securities (CMBS) debt.
Rep. Barr on July 29 cosponsored the Helping Open Properties Endeavor (HOPE) Act, H.R. 7809, which aims to protect millions of jobs across the nation by preventing CRE foreclosures, specifically to borrowers of commercial mortgages. U.S. Rep. Van Taylor (R-TX) sponsored the measure with fellow cosponsor U.S. Rep. Al Lawson (D-FL).
“The COVID-19 pandemic and the ensuing government-imposed shutdown of the economy severely threatened the commercial real estate market,” Rep. Barr said. “The HOPE Act is a lifeline for commercial borrowers so they can stay in business, avoid foreclosure, keep their employees on staff, and emerge intact on the other side of this crisis.”
Businesses with CMBS debt have a particular challenge in that their loan covenants are governed by multi-party contracts that typically prohibit additional indebtedness, according to a bill summary provided by Rep. Barr’s office, which noted that because bondholders of CMBS trusts expect timely principal and interest payments, servicers have little flexibility to modify loans.
“If this $550 billion market is left without assistance, we will witness a historic wave of foreclosures, permanently destroying millions of American jobs,” according to the summary.
If enacted, H.R. 7809 would provide financial assistance to commercial mortgages borrowers hardest hit by the COVID-19 pandemic through the HOPE Preferred Equity lending facility, which would be guaranteed by the U.S. Treasury Department to allow financial institutions to originate preferred equity instruments to borrowers.
H.R. 7809 has been referred to the U.S. House Financial Services Committee for consideration.