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SEC issues a statement on the importance of disclosures to investment company investors
On April 14, the SEC Division of Investment Management issued a statement on the importance of delivering timely and material information to investors of investment companies. Investment company issuers are reminded of their statutory obligations to update the information in their prospectuses, including the required underlying certified financial statements. Investment companies also are encouraged to consider the impact of Covid-19-related events when drafting their disclosures, including risk disclosures. The statement also includes the SEC’s expectations regarding timely delivery of disclosures to fund investors.
Fannie and Freddie extend URLA implementation timeline
On April 14, Fannie Mae and Freddie Mac issued a joint statement to announce that—due to the Covid-19 pandemic—the effective date of the revised Uniform Residential Loan Application (URLA) and Automated Underwriting Systems—is extended to January 1, 2021. Lenders must begin use of the redesigned URLA by March 1, 2021, and the current URLA will be retired on March 1, 2022. The revised URLA implementation timeline may be found here. Additional URLA information may be found on Fannie Mae’s URLA FAQs web page here, and on Freddie Mac’s URLA web page here.
Additional InfoBytes coverage on URLA can be found here.
OCC to host info sessions on PPP
On April 14, the OCC announced that the Office of Innovation will host three Paycheck Protection Program (PPP) listening sessions in April. The sessions will discuss questions and possible solutions for three PPP related topics. The first session covering payroll verification will be held on April 16, from 11:00 am to 1:00 pm (EDT), and will discuss how to make payroll verification quicker and more efficient for PPP loans. The second session, fraud identification, will be held on April 20, from 1:00 pm to 3:00 pm (EDT), to discuss possible methods for financial institutions to detect instances of fraud regarding the PPP. The third session will discuss backend processes, including identifying possible issues that may arise for financial institutions in monitoring PPP loans and in PPP loan forgiveness. This last session will be held on April 21, from 1:00 pm to 3:00 pm (EDT). Participants may share PPP concerns prior to the sessions by contacting the Office of Innovation here.
SBA provides additional guidance on PPP loans for self-employed, independent contractors
On April 14, the Small Business Administration (SBA) released an interim final rule to supplement the first Paycheck Protection Program (PPP) Interim Final Rule issued April 2 (covered by InfoBytes here). This interim final rule provides additional guidance for filers of IRS Form 1040 Schedule C (individuals with self-employment income), information concerning eligibility issues for certain business concerns, and requirements for certain pledges of PPP loans. Specifically, self-employed individuals who filed Schedule C—such as independent contractors or sole proprietors in operation on February 15, 2020—are eligible for PPP loans, provided they meet specific criteria. The interim final rule provides instructions for calculating maximum loan amounts and states that self-employed loan recipients may use the proceeds for, among other things, owner compensation replacement, mortgage interest payments, and interest payments on debt obligations incurred prior to February 15, 2020. Details and clarification on restrictions, PPP loan forgiveness eligibility, and the types of permitted eligible businesses are also included.
The interim final rule takes effect upon publication in the Federal Register and applies to PPP applications submitted through June 30, 2020, or until funds designated for this purpose are exhausted. The SBA will also accept comments on the interim final rule for 30 days following publication.
Agencies defer real estate appraisals and evaluations affected by Covid-19
On April 14, the FDIC, Federal Reserve Board (Fed), CFPB, NCUA, and OCC (agencies), in consultation with the CSBS, issued an interagency statement addressing challenges related to appraisals and evaluations for real estate financial transactions impacted by the Covid-19 pandemic. The statement outlines flexibilities for physical property inspections and appraisals of residential properties underwritten to Fannie Mae and Freddie Mac (covered by InfoBytes here). The agencies also remind financial institutions of existing exceptions outlined in appraisal regulations previously issued by the OCC, Fed, and FDIC. “The agencies encourage financial institutions to make use of these exceptions,” the statement stresses. “The use of an existing appraisal or evaluation for subsequent transactions may be particularly relevant during the COVID-19 emergency.”
The same day, the OCC, Fed, and FDIC also issued an interim final rule to amend and temporarily defer interagency regulations that require real estate appraisals for certain transactions. Specifically, regulated financial institutions will be allowed to defer completion of appraisals and evaluations for all residential and commercial real estate transactions, with the exception of those involving the acquisition, development, and construction of real estate. Financial institutions will be allowed up to 120 days from the closing date to obtain the required appraisal or evaluation in order to expedite the liquidity needs of borrowers during the Covid-19 pandemic. However, the OCC, Fed, and FDIC expect financial institutions to “make best efforts to obtain a credible valuation of real property collateral before the loan closing, and otherwise underwrite loans consistent with the principles in the agencies’ Standards for Safety and Soundness and Real Estate Lending Standards.” The interim final rule takes effect upon publication in the Federal Register and will expire December 31, 2020.
FDIC encourages relief for Oregon borrowers affected by severe weather
On April 10, the FDIC issued FIL-42-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Oregon affected by a recent series of severe weather. In the letter, the FDIC encourages institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to borrowers affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices, can contribute to the health of the local community and serve the long-term interests of the lending institution.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider regulatory relief from certain filing and publishing requirements.
Find continuing InfoBytes coverage on disaster relief guidance here.
SBA, Treasury release additional PPP FAQs
On April 15 and 14, the Small Business Administration (SBA) and the Treasury Department (Treasury) provided additional guidance to the Paycheck Protection Program (PPP) frequently asked questions (FAQs) to address lender concerns about, among other things, application submissions, signature requirements, and applications from SBA employees and family. Some of the FAQs include the following guidance:
- Lenders may submit loan applications through E-Tran only after collecting the same borrower information and certifications contained in the application form, and performing a good faith review of the borrower’s payroll calculations.
- Lenders that submitted applications prior to April 14 without collecting the required borrower information and certifications must do so as soon as possible before loan closing.
- Lenders may accept scanned copies of loan applications, borrower certifications, and other required documents. E-sign compliant electronic signatures and consents may also be accepted.
On April 13, one of the SBA and Treasury FAQs—also included on FinCEN’s website along with FAQ 18—discusses beneficial ownership requirements for PPP loans. For new customers, lenders meet their beneficial ownership obligations by collecting the following information from natural persons with ownership stakes in the applicant of 20 percent or greater: “owner name, title, ownership %, TIN, address, and date of birth.” SBA and Treasury also released an FAQ that addressed lender submission requirements prior to issuing PPP loans. FAQ 21 states that lenders are required to sign the lender application form for the PPP (SBA Form 2484) in order to issue PPP loans, but lenders do not need a separate SBA Authorization. Terms and conditions in the lenders’ promissory note must be consistent with CARES Act sections 1102 and 1106 as well as the PPP Interim Final Rule. Additional FAQs from this date address nonbank lenders, the $10 million loan cap, and the affiliation rules applicability to various kinds of businesses.
Please see Buckley’s dedicated SBA page, which includes additional SBA resources.
FTC provides advice to mortgage borrowers impacted by Covid-19
On April 14, the FTC released guidance entitled “Coronavirus and your mortgage” to provide financial information to consumers affected by the Covid-19 pandemic. The guidance points out that many mortgage borrowers facing Covid-19-related financial hardships may benefit from CARES Act protections. Starting on March 18, borrowers with federally-backed mortgages cannot have foreclosure proceedings instituted against them for 60 days. The CARES Act also provides borrowers the right to request forbearance for up to 180 days in order to temporarily freeze or lower mortgage payments. After the forbearance period ends, borrowers may request an additional forbearance for up to 180 days if they are still having trouble making mortgage payments as a result Covid-19. The FTC’s guidance provides contact information for the GSEs so borrowers can determine if their mortgages are federally backed. In addition, the guidance encourages all borrowers to contact their servicers for available payment options and assistance. The FTC suggests that approved housing counselors may also help, and can be found on the Department of Housing and Urban Development’s website here, while the Homeownership Preservation Foundation may be able to assist borrowers in making payment arrangements with their mortgage servicers. (See website here.) The FTC advises borrowers to check state government websites for state-specific information, though the agency warns borrowers to be wary of mortgage relief scams. Finally, the guidance reminds borrowers never to pay up-front for help with their mortgage payments and provides additional links for more detailed information.
Treasury announces that over 80 million will receive economic impact payments
On April 13, the U.S. Department of the Treasury announced that it expects over 80 million Americans will receive Economic Impact Payments within the next two weeks, with tens of millions receiving direct deposit payments into their bank accounts by April 15. Additionally, the IRS will separately launch an online application called “Get My Payment” that allows taxpayers who filed in 2018 and 2019 but did not provide bank account information to submit direct deposit information for purposes of expediting their payment.
NCUA approves rule to facilitate credit union access to central liquidity facility
On April 13, the NCUA approved an interim final rule intended to make it easier for credit unions to join the NCUA’s Central Liquidity Facility, a mixed-ownership governing corporation, which can be used as a source of contingency liquidity. The rule now permits credit unions to join the facility as a direct member or through an agency relationship. It also eliminates the waiting period for new members to receive advances and eases collateral requirements.