FEDERAL GOVERNMENT RELATIONS
SBA Issues Loan-Forgiveness FAQs
The Small Business Administration has released frequently asked questions on Paycheck Protection Program loan forgiveness.
The FAQs address loan-forgiveness applications, payroll and nonpayroll costs, owner-employee compensation, reductions in the forgiveness amount, and more, including new guidance on issues such as covered utility payments and eligible electricity supply charges.
The SBA indicated its new platform for submitting PPP loan-forgiveness applications and decisions to the agency will go live on Monday, Aug. 10. Additional guidance and resources are available on Treasury’s PPP webpage.
SBA Details PPP Forgiveness Platform
A Small Business Administration user guide offers details on the Paycheck Protection Program forgiveness platform scheduled to go live on Monday, Aug. 10.
The SBA user guide provides a link to the platform as well as details on the loan-forgiveness timeline, decision process, account management and more.
In a recent procedural notice, the SBA indicated all PPP lender authorizing officials in the CAFS/ETRAN system will receive a welcome email from PPPForgivenessRequests@SBA.gov with instructions. Officials who have not received the email can contact SBA’s PPP lender hotline at 833-572-0502.
PPP Application Systems to Shut Down Tomorrow Night
With the Paycheck Protection Program scheduled to expire on Aug. 8, the Small Business Administration is notifying lenders that it will shut down its Capital Access Financial System for new PPP applications on Saturday at 11:59 p.m. EDT.
FHFA: Landlords Must Inform Tenants of Protections
The Federal Housing Finance Agency announced that multifamily property owners with mortgages backed by Fannie Mae or Freddie Mac that enter into forbearance agreements must inform tenants in writing about tenant protections during the forbearance and repayment periods.
Landlords with enterprise-backed mortgages can enter new or modified forbearance if they have experienced financial hardship due to the COVID-19 emergency. While in forbearance, the property owners must agree not to evict tenants solely for the nonpayment of rent.
Fed Announces Details of Real-Time Payments Service
The Federal Reserve Board released details of its forthcoming FedNow real-time payments service, which it is seeking to launch in 2023 or 2024.
In a Federal Register notice, the Fed indicated it will take a phased approach to implementation, with the first release providing core clearing and settlement features to help banks manage the transition to a 24x7x365 service. Additional features will be introduced over time.
In a webinar, Fed Gov. Lael Brainard said core features of the service will include fraud mitigation, a liquidity management tool to cover intraday overdrafts, and standards to support interoperability with private-sector payment services.
Task Force Issues Coin Recommendations
The U.S. Coin Task Force has released initial recommendations on resolving the supply chain issues disrupting normal coin circulation, including:
• Developing materials to encourage consumer-facing campaigns that promote awareness of the need for coin recirculation and encourage consumers to act.
• Preparing best practices for financial institutions and retailers to obtain coins from consumers and to recirculate through the supply chain via their armored carriers.
• Producing toolkits and guidelines for supply chain participants to reduce points of friction, such as by providing free coin-rolling kits.
The task force indicated it will continue working through August to develop materials for public campaigns, retailers, financial institutions and armored carriers.
The task force recently issued a statement encouraging Americans to help improve coin circulation.
Crapo Presses Regulators to Extend CARES Act Relief Provisions
As reported by Politico this week, Senate Banking Committee Chairman Mike Crapo (R-Idaho) wrote to the heads of the financial regulatory agencies urging them to extend certain CARES Act relief provisions. Specifically, Crapo urged regulators to:
• Maintain the 8% community bank leverage ratio through Dec. 31, 2021.
• Extend the temporary relief from troubled debt restructuring categorizations until Jan. 1, 2022.
• Delay the implementation of the current expected credit loss standard until Jan. 1, 2023, and clarify and minimize unintended effects of mid-year adoption.
Crapo also urged regulators to consider several additional steps to strengthen minority depository institutions, which he noted have played a significant role during the pandemic. He additionally called for the extension of several existing mortgage-related relief programs, including HUD and FHFA foreclosure and eviction moratoriums and forbearance for multifamily loans backed by Fannie Mae and Freddie Mac.
Varo Money Receives National Bank Charter
Consumer-facing fintech firm Varo Money last week became the first fintech startup to receive a national bank charter from the Office of the Comptroller of the Currency. Varo Bank, NA, will enable the San Francisco-based firm to expand banking services beyond the white-label products currently offered through another bank.
FinCEN Issues FAQs on Customer Due Diligence
The Financial Crimes Enforcement Network has published three frequently asked questions regarding customer due diligence requirements. The questions address the risk-based procedures covered institutions are required to follow with regard to collecting and maintaining customer information, creating a customer risk profile and conducting ongoing monitoring of the relationship.
Among other provisions, the FAQs clarified that there is no fixed schedule for updating customer risk profiles. FinCEN also confirmed that additional analysis is not needed for customers who are assigned a low risk profile.
ICYMI - Updates to Economic Injury Disaster Loan Liens
Impact of SBA’s lien requirements on EIDL loans over $25,000 on a borrower’s ability to obtain other financing for business operations
Loans issued under the Economic Injury Disaster Loan (EIDL) program over $25,000 require a blanket lien on the assets of the business. The lien is a Universal Commercial Code (UCC-1) lien allowing the Small Business Administration to take an interest in the assets of the business. SBA’s lien does not apply to real estate or titled vehicles.
SBA has concluded that there is no prohibition on a lender with a superior lien position to the UCC-1 lien filed under the EIDL loan arrangement to continue to advance additional funds under an existing borrowing arrangement.
SBA originally required borrowers to obtain written consent from SBA before taking future advances. This requirement was rescinded and removed from the Requirement Relative to Collateral conditions in the EIDL lending arrangement effective June 18, 2020.
SBA will be modifying existing EIDL loans issued before this date through a loan modification letter. Therefore, EIDL borrowers are permitted to continue to draw from and receive additional loan funds from a lender with a superior lien position without jeopardy.
The EIDL loan agreements contain language requiring consent before selling or transferring collateral. SBA will not arbitrarily withhold consent, which is generally granted upon request when the sale or transfer benefits the business and allows it to continue to operate. The turnover of inventory is allowed in the ordinary course and does not require consent.
How does the borrower/lender request a subordination of SBA’s lien when needed for new financing?
Requests for subordination, which are currently taking about 5-7 business days to process due to volume, should be sent to pdc.pdcaccountscollateralreview@sba.gov and include the following information:
• Borrower’s Name or Company Name
• SBA EIDL Loan Number or Application Number
• For the subordination document: Lender’s Name
• Lender’s Mailing Address
• Name of Lender’s Authorized Signer & Title
• Lender’s Contact Name and Email Address for That Contact
• The Proposed Loan Amount of the Loan Extended to the Borrower by Lender
The SBA PDC can follow up with verification of borrower's consent and any additional information needed, such as copies of the filed UCC(s).
SBA PDC will review and, once approved, the SBA PDC will prepare and execute a Subordination Agreement that subordinates the collateral security in the EIDL loan to the lien of the new lender and forward the signed document to the requestor and borrower.
This completed form is then emailed exclusively through Box.com to the borrower and lender, per SBA security policy for all electronic documents presented outside of the application portals. Some lenders are unable to access the Box.com links for electronic documents; in such cases, lenders should note that the documents are also provided to the borrowers in the same fashion and borrowers are able to freely share their personal documents to suit their businesses. Physical documents are mailed USPS.
ICYMI - FFIEC Addresses Treatment of Borrowers Nearing End of COVID-19 Accommodations
With many COVID-19-related accommodations for loans nearing their initial expiration dates, the Federal Financial Institutions Examination Council has issued a joint statement outlining prudent risk management and consumer protection principles for financial institutions to consider while working with affected borrowers.
“The FFIEC members encourage financial institutions to consider prudent accommodation options that are based on an understanding of the credit risk of the borrower; are consistent with applicable laws and regulations; and, that can ease cash flow pressures on affected borrowers, improve their capacity to service debt, and facilitate a financial institution’s ability to collect on its loans,” according to the statement. “Such arrangements may mitigate the long-term impact of a financial challenge on borrowers by avoiding delinquencies or other adverse consequences.”
When executing an additional accommodation, the agencies noted that institutions should provide “clear, accurate and timely information” to borrowers and guarantors and ensure that the accommodation offered is “well-structured and sustainable.” The statement also addresses the accounting and regulatory reporting requirements for COVID-19-related loan modifications, as well as expectations for internal control systems.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.