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Fintechs can now apply to be lenders under the PPP
The Small Business Administration (SBA) and the Treasury Department released a lender agreement for non-bank and non-insured depository institution lenders seeking to make SBA-guaranteed financing under the Paycheck Protection Program (PPP) as part of the CARES Act. The agreement sets forth attestation requirements for two subsets of eligible lenders. Group A attestation requirements relate to depository or non-depository financing providers who have, among other things, “originated, maintained, and serviced more than $50 million in business loans or other commercial financial receivables during a consecutive 12 month period in the past 36 months.” Group B attestation requirements relate to service providers of insured depository institutions, who among other things: (i) must have a contract to support an insured depository institution’s lending activities; and (ii) within the past three years, must have been subject to an examination by the Federal Reserve, OCC, or FDIC in connection with that role. Unless an earlier termination occurs, lenders under the agreement will have “authority to make covered loans” until July 1, 2020.
As previously covered by InfoBytes, the SBA, in consultation with the Treasury Department, recently updated PPP frequently asked questions to provide additional clarifications to lenders and borrowers.
Please see Buckley’s dedicated SBA page, which includes additional SBA resources.
Connecticut regulator: PPP loans exempted from legal lending limit calculations
On April 9, the Connecticut Department of Banking issued guidance to state-chartered credit unions clarifying that they do not need to include loans made as part of the Small Business Administration’s Paycheck Protection Program when calculating limits on member business loans because those loans are fully guaranteed by the U.S. government. The guidance also encouraged credit unions to continue working with members and other financial institutions during the Covid-19 outbreak.
Nevada will grant temporary licensing exemptions for lenders to participate in PPP program
On April 9, the Nevada Financial Institutions Division announced a program to grant temporary exemptions to certain licensing requirements under Chapter 675 of the Nevada Installment Loan and Finance Act for approved Small Business Administration 7(a) lenders interested in participating in the Paycheck Protection for businesses impacted by Covid-19. The announcement included the exemption request form that must be submitted to the division by interested lenders.
CSBS requests clear guidance on PPP from SBA, Treasury
On April 9, the Conference of State Bank Supervisors (CSBS) sent a letter to Treasury Secretary Steven T. Mnuchin and Small Business Administration (SBA) Administrator Jovita Carranza regarding Paycheck Protection Program (PPP) guidance. The letter requested the SBA and Treasury to (i) “[i]nstitute clear, coordinated, and timely guidance and communication on PPP”; (ii) “[e]nsure community banks and their small business customers have equal access to PPP loans”; and (iii) “[e]stablish transparent, public disclosure on PPP loans” in order to make the PPP successful. Among other points, CSBS specifically asserted that different SBA offices are providing conflicting information regarding PPP loan funding, and lenders require guidance on required documentation, initial disbursements, and terms and structure of unforgiven amounts on the PPP loans. Additionally, community banks are experiencing difficulties with the SBA’s loan application submission portal, including access and requests for additional information. Finally, the letter urges public disclosure of PPP loan statistics.
Nevada temporarily exempts approved PPP lenders from licensing requirements
On April 9, the Nevada Financial Institutions Division (FID) issued a letter temporarily exempting from licensure under the Nevada Installment Loan and Finance Act currently approved Small Business Administration (SBA) 7(a) lenders under the Paycheck Protection Program (PPP). In order to take advantage of this relief, lenders that participate in the PPP must submit the exemption request form, which is found in the letter, for FID’s review and approval.
Please see Buckley’s dedicated SBA page, which includes additional SBA resources.
Fed, Treasury announce $2.3 trillion loan facilities
On April 9, the Federal Reserve Board (Fed) and the Department of Treasury (Treasury) announced actions to enhance liquidity in the financial system, including the expansion of recently initiated facilities and the launch of several new lending facilities. (See Fed press release here). As previously covered by InfoBytes, on March 23, Treasury announced the creation of three facilities to provide liquidity to the financial system: (i) the Term Asset-Backed Securities Loan Facility (TALF); (ii) the Primary Market Corporate Credit Facility (PMCCF); and (iii) the Secondary Market Corporate Credit Facility (SMCCF). To increase the flow of credit to consumers and businesses, the TALF will expand purchases to include “highly rated newly issued collateralized loan obligations and legacy commercial mortgage-backed securities as eligible collateral.” Treasury Secretary Steven T. Mnuchin approved a $10 billion equity investment in TALF, and—pursuant to the CARES Act—a $75 billion equity investment in PMCCF and SMCCF, which together are expected to provide up to $850 billion in credit. (See the TALF term sheet here, the PMCCF term sheet here, and the SMCCF term sheet here.)
Three new facilities approved by Secretary Mnuchin to support the flow of credit include the Paycheck Protection Program Lending Facility (PPPLF), the Main Street Business Lending Program, and a Municipal Liquidity Facility (MLF) to support the flow of credit in the economy. Pursuant to the CARES Act, the SBA’s Paycheck Protection Program (PPP) provides funding for small business loans so that they are able to pay their employees. The PPP will benefit from the PPPLF, which will provide liquidity to banks originating the PPP loans through term financing, and will then hold the PPP loans as collateral at face value. To advance the use of the PPPLF, the Fed, OCC, and FDIC issued an interim final rule, the “Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck Protection Program Loans,” which is effective immediately. The interim final rule ensures that lending banks are able to “neutralize the regulatory capital effects of participating in the facility.” In addition, the CARES Act provides that SBA PPP loans “will receive a zero percent risk weight under the agencies’ capital rule.” Comments on the rule must be received within 30 days after publication in the Federal Register. (See the PPPLF term sheet here.)
Treasury, through CARES Act funds, will provide $75 billion in equity to the Main Street facility, which will support the Main Street Lending Program with funding for up to $600 billion in loans to small and mid-sized businesses. The program extends four-year loans with deferred principal and interest payments for one year. Originating banks retain 5 percent of the Main Street loans, and sell 95 percent of the loans to the Main Street facility. Borrowers seeking Main Street loans “must commit to make reasonable efforts to maintain payroll and retain workers.” (See the Main Street New Loan Facility here, and the Main Street Expanded Loan Facility here.)
Finally, the Fed will establish an MLF to support liquidity to state and local governments. The MLF will provide up to $500 billion for which Treasury will provide credit protection of $35 billion to the Fed with CARES Act funding. (See the MLF term sheet here).
Secretary Mnuchin stated that “[t]he combination of these facilities will provide up to $2.3 trillion in new financing to support American workers by helping American businesses preserve jobs, sustain operations, and continue to serve their customers.” Likewise, the Fed asserted that it “will continue to seek input from lenders, borrowers, and other stakeholders to make sure the program supports the economy as effectively and efficiently as possible while also safeguarding taxpayer funds.”
Iowa Division of Credit Unions publishes comprehensive resource for Covid-19 updates
The Iowa Division of Credit Unions published a comprehensive resource containing information on Covid-19 regulatory updates. The document covers a range of regulatory changes applicable to credit unions, including: (i) the SBA-Paycheck Protection Program; (ii) Annual Meeting requirements; (iii) foreclosure moratoriums; (iv) remote notarizations; (v) member assistance; (vi) fraud awareness; (vii) moneys and credits tax filing deadline extensions (viii) loan deferments; and (ix) limitations of services/branch closures.
NCUA issues summary of CARES Act provisions impacting credit unions
In April, the NCUA issued guidance to federally insured credit unions providing a summary of provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that impact credit unions. Such provisions touch upon the Central Liquidity Facility, insured deposits thresholds, temporary relief from troubled debt restructurings, the Paycheck Protection Program, optional temporary relief from current expected credit losses, credit protection during Covid-19, and foreclosures of certain mortgages.
NCUA provides guidance regarding Small Business Administration loan programs
In April, the NCUA issued guidance to federally insured credit unions regarding the U.S. Small Business Administration’s (SBA) loan programs to help small businesses. The guidance provides an overview of the Paycheck Protection Program, including eligibility criteria for both lenders and borrowers, loan terms, loan forgiveness, and lender compensation. The guidance provides that the NCUA will not criticize credit unions’ good faith efforts to prudently use the SBA programs with members affected by Covid-19.
Lawmakers want accountability for colleges receiving CARES Act funds
On April 8, Senators Elizabeth Warren (D-MA), Dick Durbin (D-IL), Sherrod Brown (D-OH), and Richard Blumenthal (D-CT) sent a letter to the Department of Education urging the Department to focus the CARES Act funding for institutions of higher education on public and nonprofit schools. In addition, the lawmakers call for “strong accountability polices” if for-profit colleges are eligible for the funds. The recommended policies “to protect students and taxpayers” include: (i) requiring that all funding must be used for “student instruction, emergency financial aid to students, and student support services”; (ii) preventing for-profit colleges from using the funds for executive compensation and freezing executive compensation; (iii) preventing publicly-traded for-profit colleges from buying back their stock; (iv) preventing for-profit colleges from using the funds for recruiting, marketing and advertising; (v) preventing for-profit colleges that receive funds from receiving other CARES Act funds; (iv) “[c]onsider[ing] CARES Act funding as federal funding for 90/10 compliance”; and (v) requiring that Congress receive a report detailing “how for-profit colleges used the funds.” The letter requests replies to the questions by April 21.