May 27, 2020                                                                                                      No copyright infringement intended
 
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SBA Issues Interim Final Rules on PPP Requirements     
 
The Small Business Administration on Friday night issued two interim final rules on Paycheck Protection Program requirements.
 
One interim final rule focuses on loan review procedures and related borrower and lender responsibilities, including:
  • SBA reviews of individual PPP loans.
  • Borrower representations and statements that SBA will review.
  • What lenders should review.
  • The timeline for lender decisions on loan forgiveness applications.
  • What lenders should do if notified that SBA is reviewing a PPP loan.
  • Lender fees subject to clawback if SBA determines a borrower is ineligible.
 
The other interim final rule provides details on loan forgiveness:
  • The general process to obtain loan forgiveness.
  • Payroll and nonpayroll costs eligible for loan forgiveness.
  • Reductions to the Loan Forgiveness Amount based on reduced employees or compensation.
  • Documentation requirements, including SBA Form 3508.
 
The new rules follow the release of a Procedural Notice on submitting the initial SBA Form 1502 to report on PPP loans and collect the processing fees on fully disbursed loans. Under a separate interim final rule, the deadline to submit the initial SBA Form 1502 for PPP loans is now the later of: (1) May 29, 2020, or (2) 10 calendar days after disbursement or cancellation of the PPP loan.
 
ICBA provided its comprehensive recommendations for Congress to include in the next legislative package responding to the coronavirus pandemic, including PPP reforms that would support more flexible spending by small-business borrowers and a straightforward approach to loan forgiveness.
   
 
$1 Billion in Loans for Rural Businesses, Ag Producers     
 
Many rural businesses and agricultural producers facing financial challenges as a result of COVID-19. The Department of Agriculture announced that it will make available up to $1 billion in loan guarantees for these entities through Farm Service Agency loan programs and through the USDA Business and Industry CARES Act Program, a new program that provides working capital loans to help rural businesses prevent, prepare for or respond to the effects of the pandemic.
 
Under these changes, agricultural producers that are not eligible for FSA programs will be eligible for B&I CARES Act Program loans. Additionally, USDA said it will provide 90% guarantees on B&I CARES Act Program loans and extend the maximum term for working capital loans to 10 years. It will also set the application and guarantee fee at 2% of the loan, accept appraisals completed within two years of the loan application date and not require discounting of collateral for working capital loans. Rural businesses that were operational as of Feb. 15, 2020, may take advantage of B&I CARES Act Program loans.
 
Loan applications will be considered in the order they are received, though USDA noted that it may give priority to certain projects if the demand for funds exceeds availability. USDA will host an upcoming webinar for borrowers and lenders on the B&I CARES Act program on June 3 at 1 p.m. CDT .
 
 
Bill Separates PPP, 7(a) Advances           
 
The Senate passed legislation that would decouple the SBA 7(a) authorization from the Paycheck Protection Program authorization. S. 3782 would ensure that when the PPP runs out of funds, the 7(a) program would not shut down as well. ICBA is urging the House to quickly pass the bill.
 
 
OCC Issues CRA Final Rule    
 
The OCC released its final rule to reform Community Reinvestment Act regulations. Because the FDIC and Federal Reserve declined to sign on to the rule, it will apply only to national banks and savings associations.
 
The 372-page final rule clarifies what qualifies for CRA consideration, updates how banks define assessment areas, and introduces quantitative measures to assess the volume and value of activity, among many other provisions. The rule is set to take effect in October, though examination standards will not be in place for two years.
 
The FDIC said it will not join the OCC in finalizing the agency proposal and that it recognizes the outsized effort of community banks to support small businesses and families amid the COVID-19 pandemic. The Federal Reserve said in December that it would not join the other agencies when the rule was proposed.
   
 
CFPB Issues No-Action Letter Templates to Encourage Innovative Lending   
 
To help financial service providers assist struggling borrowers during the coronavirus pandemic, the Consumer Financial Protection Bureau issued two no-action letter templates that are intended to help institutions make their own NAL applications for certain consumer financial products and services, as allowed under the CFPB's innovation policy.
 
The first NAL template-which is intended for mortgage servicers seeking to offer foreclosure prevention and other loss mitigation efforts-was requested by Brace Software, Inc. It would enable servicers to use Brace's online loss-mitigation platform, an online version of the Fannie Mae Form 710. The bureau noted that "digitizing the loss mitigation application process has the potential to improve a process that is experiencing an increase in loss mitigation requests from consumers due to the COVID-19 pandemic."
 
The CFPB issued a second NAL template on small-dollar lending-requested by the Bank Policy Institute-that insured depository institutions may use to apply for a NAL covering their small-dollar credit products. The NAL template comes as financial regulators, including the CFPB, have encouraged banks to offer responsible small-dollar lending products to help meet consumers' financial needs during the pandemic.
   
 
Electric Cooperatives Eligible for PPP Loans           
 
Electric cooperatives are eligible for Paycheck Protection Program loans, the SBA said in an interim final rule on the program. The rule says electric cooperatives must satisfy the employee-based size standards established in the CARES Act to participate. 
   
 
FHFA Reissues Capital Proposal for Fannie, Freddie     
 
The Federal Housing Finance Agency reissued a proposed rule to establish a new regulatory capital framework for Fannie Mae and Freddie Mac that would require the government-sponsored enterprises to hold a combined $240 billion in capital after they are released from conservatorship.
 
The FHFA said the proposed rule is based on the agency's 2018 capital plan and preserves its mortgage risk-sensitive framework while increasing the quantity and quality of required capital. The FHFA suspended regulatory capital requirements on Fannie and Freddie after placing them into conservatorships in September 2008.
   
 
Answer of the Week
 
Question: 

For the Regulation CC availability threshold adjustments, effective July 1, 2020, does the bank need to send a change in terms?
   
Answer:
 
The final rule which addresses the threshold adjustments effective July 1, 2020 states that the bank does need to send the change in terms (aka fund availability policy). However, the bank may make arrangements for electronic delivery or providing the change in terms in the monthly statement.
 
The final rule also states: In addition, a bank need not set forth the entirety of its revised funds-availability policy in its change-in-terms notice.  If a bank chooses to provide the notice by sending a completely new availability disclosure, the bank must direct the customer to the changed terms in the disclosure by use of a letter or insert, or by highlighting the changed terms in the disclosure.
 
A change to the bank's availability policy requires notice 30 days before the change regarding accounts; or 30 days after implementation if the change expedites funds availability.
 
Reference: Regulation CC: 12 CFR 229 final rule. Federal Register, July 3, 2019, page 31694.


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