COVID-19 UPDATES / GOVERNMENT RELATIONS
2020 IBA Annual Washington Trip Transitions to Virtual Format
The in-person 2020 IBA Annual Washington trip scheduled for July 26-28 has been canceled due to the COVID-19 pandemic. However, the need for high-level advocacy continues. We are pleased to announce that we will transition to a virtual format for the 2020 IBA Annual Washington Visit. The IBA will be organizing virtual meetings with regulators and legislators to be held throughout the summer. We will notify members of the meeting details as soon as they become available, and also provide background information on the issues in advance. More information is forthcoming. For questions, contact Josh Myers.
SBA Releases Long-Awaited Guidance on Form 1502 for PPP Processing Fees
Yesterday the Small Business Administration issued guidance to Paycheck Protection Program lenders on filing Form 1502, which will trigger the payment of PPP loan processing fees to lenders. SBA will begin accepting Form 1502 filings tomorrow; lenders must submit Form 1502 data for all PPP loans by May 29 or 10 calendar days after the loan is disbursed or canceled, whichever is later. The guidance comes after the SBA on Tuesday announced that it will extend the deadline for lenders to submit Form 1502 from May 22 to the new deadline of May 29..
To file Form 1502, lenders—or their service providers—must have an existing account or create a new account with SBA’s fiscal transfer agent, Colson Services. The guidance provides details on how to access Colson’s lender portal and submit Form 1502 data. Lenders must submit separate 1502 reports for PPP and other 7(a) program loans. For PPP loans that have been sold, the originating lender is responsible for the initial Form 1502 submission.
While lenders must file Form 1502 data for all PPP loans disbursed or canceled, lenders will not be paid if the PPP loan is canceled before disbursement or if the loan was canceled or voluntarily terminated after funds were disbursed and repaid by May 18.
SBA said that it will not pay processing fees for PPP loans canceled, terminated or repaid due to an SBA loan review finding the borrower ineligible. The agency added that lender processing fees may be clawed back within a year after disbursement if SBA later determines the borrower to be ineligible, although this determination will not affect the SBA guaranty for the loan, provided the lender "has complied with its obligations under section III.3.b of the initial PPP Interim Final Rule."
In other PPP news, the SBA released updated PPP lending figures. As of Thursday at 5 p.m. EDT, SBA had approved more than 4.4 million PPP loans amounting to $512.2 billion across both PPP rounds, leaving more than $156 billion in congressionally appropriated funds available. (The total loan volume was slightly lower than previous sums reported, as certain borrowers with access to other forms of liquidity returned funds.)
Otting Announces Departure from OCC; Brooks to Serve as Acting Comptroller
Comptroller of the Currency Joseph Otting yesterday announced that he would step down on May 29. Brian Brooks, a former vice chairman at OneWest Bank and general counsel at Fannie Mae who joined the OCC last month as first deputy comptroller and COO, will serve as acting comptroller upon Otting’s departure. Otting’s exit from the agency comes just after the OCC moved unilaterally to finalize its Community Reinvestment Act modernization proposal—a longstanding priority for Otting since he became comptroller in November 2017.
Governor Extends Foreclosure Protections
In a press conference on Wednesday, Gov. Holcomb announced that he is extending to July 1 his executive order halting evictions, foreclosure actions and utility disconnects. The initial executive order, executed on March 19, was structured to continue until the termination of Indiana’s state of emergency. The extended deadline of July 1 falls three days before the final stage of the governor’s Back on Track plan for reopening Indiana.
View the initial executive order
OCC Unilaterally Finalizes CRA Changes
The Office of the Comptroller of the Currency on Wednesday issued its long-awaited final rule making significant changes to the regulations implementing the Community Reinvestment Act – the first overhaul of the CRA framework in more than three decades. The 370-page final rule makes critical changes in four key areas, including:
• Qualifying activities. The final rule clarifies and expands the qualifying activities that can receive CRA consideration to include certain activities in areas of need that are not low- to moderate-income (LMI) communities and certain activities that benefit an entire community. A non-exhaustive list of qualified activities will be published on the OCC’s website in a searchable format and updated on an annual basis.
• Determining bank assessment areas. The final rule preserves facility-based assessment areas, but also requires institutions to delineate deposit-based assessment areas where they have significant concentrations of retail domestic deposits.
• Evaluating CRA performance. The final rule seeks to establish a more objective, consistent and transparent means of evaluating CRA performance that will assess a bank’s retail lending and community development activities by analyzing the distribution of retail lending activities relative to LMI populations and census tracts in a bank’s assessment area, as well as the impact of all CRA activity measured in dollars.
• CRA reporting. The final rule will impose significant data collection, recordkeeping and reporting requirements that are intended to standardize the reporting process, increase transparency and reduce the lag time in preparing CRA exam reports.
The new rule – which will apply to OCC-regulated national banks and savings associations – will be effective on Oct. 1, 2020. The agency is providing a phase-in period for the new requirements, and institutions with less than $600 million in assets choosing to opt in to the new regime will have until Jan. 1, 2024, to comply. Community banks with assets of up to $2.5 billion will also have the option to opt out of the new performance standards.
View list of qualifying activities
Bank Regulators Issue Joint Principles for Responsible Small-Dollar Loan Programs
To encourage depository institutions to engage in responsible small-dollar lending, federal financial regulators on Wednesday issued long-awaited joint guidance for offering these types of loans to consumers and small businesses. "Well-designed small-dollar lending programs can result in successful repayment outcomes that facilitate a customer’s ability to demonstrate positive credit behavior and transition into additional financial products," the agencies noted. They added that these programs should be developed in accordance with sound risk management principles.
When making small-dollar loans, the agencies indicated that lenders may underwrite loans using internal or external data sources, such as deposit account activity, to assess a customer’s creditworthiness, effectively manage risk, and lower the cost of providing responsible small-dollar loans.
Lenders also should ensure that they comply with all applicable laws and regulations, including fair lending laws, according to the agencies. Other core lending principles include effectively managing the risks associated with the products offered and underwriting small-dollar products based on prudent policies and practices. These policies and practices should generally address loan structures, pricing, underwriting, marketing and disclosures, along with servicing and safeguards for customers who may find themselves experiencing stress or unexpected circumstances.
The Federal Deposit Insurance Corp. also announced that it has rescinded its 2013 small dollar lending guidance, which imposed prescriptive underwriting requirements that conflicted with the newly released interagency guidance.
FHFA Re-Proposes Regulatory Capital Framework Changes for Fannie, Freddie
In a highly anticipated move, the Federal Housing Finance Agency re-proposed a 2018 proposal to establish a new regulatory capital framework for Fannie Mae and Freddie Mac, charting a clear path for the GSEs to exit conservatorship. The proposed framework is based around several core goals, including addressing procyclicality, facilitating the GSEs’ regulatory capital planning, and increasing the quantity and quality of capital held by the enterprises.
Under the new framework, the GSEs will be required to hold a combined $243 billion in capital – up significantly from the $45 billion they currently hold. They will also be required to satisfy several capital and leverage ratio requirements, similar to those adhered to by banks.
Read a fact sheet on the proposal
Powell, Mnuchin: MSLP to Be Operational by End of May
Top policymakers on Tuesday said that they expect the Main Street Lending Program "to be up and running by the end of the month," according to comments made by Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin in a Senate Banking Committee hearing. Both noted that starting the program – which is intended to provide up to $600 billion in credit to small and midsize firms – has been a top priority, though Powell qualified that given the complexity, the MSLP’s launch might slide "a day or two into June."
"Main Street is in a class by itself" among the Fed’s 13(3) facilities, Powell noted, acknowledging the challenges of standing up a program intended to serve small, medium and large firms from "very different industries with very different credit needs – some of them asset-based, some of them cash-flow based," he said. "It’s a very complex undertaking and people are working literally around the clock and have been for weeks to get it ready by the end of this month."
In related news, the Fed announced that it would hold a drop-in session on May 22 at 2 p.m. EDT and an informational webinar on May 28 at 2 p.m. EDT for potential lenders in the MSLP. The drop-in session will provide an opportunity for lenders to ask questions about the program, while the webinar will give lenders a chance to learn more about the infrastructure and operations of the MSLP.
Registration for these live sessions will be limited to two representatives per institution, and recordings will be available after each program. Questions may be submitted in advance to questions@askthefed.org.
Powell Warns of Longer-Term Economic Consequences of Coronavirus Pandemic
During a Senate Banking Committee hearing this week, Federal Reserve Chairman Jerome Powell flagged risks that could arise if the economic downturn associated with the pandemic continues for an extended time period. These risks include "lasting damage to the productive capacity of the economy through the labor force because of long term unemployment," along with "unnecessary, avoidable insolvencies of small and medium-sized businesses."
He added that additional fiscal or monetary policy support may be necessary, depending on how the recovery proceeds. "It comes down to sensibly, thoughtfully opening up the economy in a way that builds confidence and keeps people safe,” Powell said. “It’s really important that we do that well." Powell noted that congressional efforts to date have been "timely and forceful," adding that "I do think we need to take a step back and ask, over time, is it enough, and be ready to act if the need is there."
Powell also praised the banking industry response to the pandemic. "The banks have been strong, they’ve been making loans, they’ve been taking in deposits," he said. "We’ve tried to provide relief so they can continue to do what they’re doing."
GSEs Issue Guidance on Refi, Home Purchase Eligibility for Borrowers in Forbearance
Fannie Mae and Freddie Mac have issued temporary guidance clarifying the ability of borrowers with loans in forbearance to refinance or purchase a new home, the Federal Housing Finance Agency announced this week.
Borrowers are eligible to refinance or buy a new home if they are current on their mortgage (for example, if they are in forbearance but continuing to make their mortgage payments or reinstated their mortgage). Borrowers are also eligible to refinance or buy a new home three months after their forbearance ends and if they have made three consecutive payments under their repayment plan, payment deferral option or loan modification, according to the FHFA.
FHFA also announced that the GSEs will be permitted to purchase forborne mortgage loans with note dates on or before June 30, 2020, as long as they have only one mortgage payment that has been missed and are delivered to Fannie or Freddie by Aug. 31, 2020.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.