COVID-19 UPDATES / FEDERAL GOVERNMENT RELATIONS
New Interim Final Rule Released for Paycheck Protection Program
Last night the Small Business Administration issued an interim final rule that provides additional implementation guidelines and requirements for its Paycheck Protection Program to aid small businesses hit hard by the COVID-19 crisis. In the new guidance, SBA makes significant changes from its original plan, including raising the fixed interest rate on loans made under the program from 0.5% to 1% in response to feedback that the terms could prevent community banks from participating in the program.
The IBA, ABA, ICBA and other state bankers associations have advocated extensively with Treasury and SBA, sharing feedback from the state associations and a broad range of bankers to ensure the PPP works as designed and that all banks can participate efficiently.
The new rule provides greater clarity on several issues that industry advocates have raised. For example, it specifies underwriting expectations, which are limited to the application form and the certifications in it, the borrower’s payroll documentation and applicable Bank Secrecy Act requirements. Lenders may rely on borrower documentation for loan forgiveness, providing greater protection for lenders should borrowers misrepresent information in their application.
"The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs," the rule said. "The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower."
After seven weeks, lenders may request that SBA purchase the expected forgiveness amount of PPP loans; these requests may be submitted in advance, and SBA will purchase the expected forgiveness amount of the loan within 15 days after it receives a complete report.
Banks already certified as 7(a) lenders may begin approving loan applications with SBA delegated authority today. The rule said that all banks not currently in troubled condition will be "automatically qualified" to make loans with delegated authority once they submit SBA Form 3506, which as of last night was expected to be posted promptly on the SBA and Treasury websites, along with the official application form and the form lenders must submit to receive the 7(a) guaranty, which are linked below.
The guidance in the rule complements other PPP details released Tuesday, including the processing fees SBA will pay to lenders, SBA’s 100% guaranty of PPP loans and the eligibility of the loans to be sold into the secondary market. Authorized by the CARES Act and administered under the SBA 7(a) loan program as part of the federal response to the coronavirus pandemic, the PPP makes up to $349 billion in forgivable loans available to small businesses that use the funds to cover payroll costs and certain other operating expenses.
In related news, the FDIC said yesterday that it will not criticize banks' good-faith, prudent efforts to use the PPP to work with coronavirus-affected small business borrowers.
For banks that are unsure of their SBA status, the IBA has obtained a list of all SBA approved lenders. To determine if your bank is an SBA approved lender, contact Josh Myers.
IBA Press Release on PPP
Late last night, the IBA issued a press release to media, legislators and state and local chambers of commerce to confirm that banks will be ready to assist customers, but strongly encouraged patience as the Paycheck Protection Program launches.
FHFA Authorizes Loan-Processing Flexibilities
The Federal Housing Finance Agency announced several loan-processing flexibilities from Fannie Mae and Freddie Mac to help customers. The updates allow desktop appraisals on new construction loans, provide flexibility on demonstrating construction has been completed, authorize borrowers to provide documentation for renovation disbursements, and expand the use of power of attorney and remote online notarizations.
Indiana Department of Financial Institutions Announce COVID Relief Efforts
The Indiana Department of Financial Institutions announced on Thursday a number of relief efforts being taken to provide relief to banks during the COVID-19 pandemic. In the letter, DFI addressed efforts that included a pause in examination activity, temporary suspension of branch closing procedures and extending the timing of audit submission requirements.
Regulators Clarify Optional CECL Delay
Regulators issued a joint statement clarifying the interaction between the interim final rule that provides a five-year Current Expected Credit Loss transition period and the temporary CECL relief provided by the Coronavirus Aid, Relief, and Economic Security Act.
The agencies last week announced an optional extension of the regulatory capital transition for the CECL standard. The interim final rule allows banking organizations that are required to adopt CECL this year to delay for two years the estimated impact of CECL on regulatory capital, in addition to the three-year transition period already in place.
Fed Delays Revised Control Framework
The Federal Reserve Board announced it will delay by six months the effective date for its revised control framework. The Fed in January finalized simpler rules for determining control of banking organizations. The final rule lays out several factors and thresholds that the board will use to determine if a company has control over a bank, including total voting and non-voting equity investment.
Fed Establishes Temporary Repurchase Facility
The Federal Reserve established a temporary repurchase agreement facility for foreign and international monetary authorities to help support the smooth functioning of financial markets, including the U.S. Treasury market. The FIMA Repo Facility will allow FIMA account holders, consisting of international monetary authorities, to temporarily exchange U.S. Treasury securities for U.S. dollars.
Fed Temporarily Changes Supplementary Leverage Ratio Rule
To ease strains in the Treasury market and increase access to credit, the Federal Reserve Board announced a temporary change to its supplementary leverage ratio rule. The change would exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the rule for holding companies. It will be in effect until March 31, 2021.
CFPB Indicates Accurate Credit Reporting Benefits Consumers
The Consumer Financial Protection Bureau released a policy statement outlining the responsibilities of credit reporting companies and furnishers during the COVID-19 pandemic.
The CFPB reported many lenders are responding to the pandemic by being flexible with consumer payments. The statement underscores that consumers benefit if lenders report accurate information about these arrangements to credit bureaus so consumer credit reports are accurate.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.
STATE GOVERNMENT RELATIONS
2020 Legislative Summary Now Available
Indiana lawmakers concluded all legislative business for the 2020 Indiana General Assembly session late into the evening on Mar. 11. This date was several days earlier than the legislative calendar dictated for the end of session, but widely anticipated based on comments from leadership at the start of session. For the 2020 session, legislators introduced 903 bills concerning topics from education and healthcare to financial institutions and general business. Of those 903 bills, 168 bills passed both the House and Senate to be eligible for the Governor’s signature into law. Click here to access the IBA’s 2020 Legislative Summary. For questions, contact Lizzie Ketzenberger, 317-333-7148.