InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
FHFA: Servicers obligated to advance only four months of payments on loans in forbearance
On April 21, the Federal Housing Finance Agency (FHFA) announced it has aligned Fannie Mae’s and Freddie Mac’s (GSEs) “policies regarding servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans.” The plan, which is applicable to all GSE servicers regardless of type or size, limits servicers’ obligations to advance scheduled principal and interest payments to mortgage-backed securities (MBS) investors after a servicer has advanced four months of missed borrower payments on a loan. FHFA further clarifies that loans in forbearance due to Covid-19 will not be purchased out of MBS pools by the GSEs, but will instead “be treated like a natural disaster event and will remain in the MBS pool,” reducing potential liquidity demands on the GSEs. FHFA notes that both the agency and the GSEs will continue to monitor Covid-19’s impact on the housing finance market and will make policy updates as necessary.
Data breach exposes SBA Emergency Injury Disaster Loan program applicants
On April 21, according to reports, the Small Business Association (SBA) acknowledged that it notified almost 8,000 applicants of the Economic Injury Disaster Loan (EIDL) program that their information may have been exposed as part of a data breach. Specifically, the agency stated that on March 25, the personal information of business owners applying for the EIDL program was potentially exposed to other applicants on the SBA’s website. The information exposed included names, social security numbers, birth dates, certain financial information, email addresses, and phone numbers. According to the SBA, there is no evidence that the exposed information has been misused. Notably, the breach only effected the applicants of the EIDL program, not the Paycheck Protection Program, which did not begin accepting applications until April 3.
CFPB video instructs non-tax filers how to receive stimulus payments
On April 21, the CFPB announced the release of a video—aimed at consumers who do not file taxes—that describes the steps those consumers should take in order to receive their economic impact payments. The video explains that most Americans will automatically receive their economic stimulus payments from the IRS, but those who do not may need to submit their information and specify how they would like to receive their payments. Consumers are informed that if they do not submit their information, they will be mailed paper checks, which will take longer to receive than a direct deposit. In the announcement, Bureau Director Kathleen Kraninger states that the video “is intended to help consumers navigate the economic impact payments as well as helping them avoid scams related to the payments.” The announcement also provides eligibility guidelines for the stimulus payments, a link to frequently asked questions about the payments, and a link to additional Bureau information related to Covid-19.
Pennsylvania enacts law allowing for remote/virtual notarization
On April 20, Pennsylvania enacted legislation allowing for remote or virtual notarization for the duration of the Covid-19 emergency and for 60 days thereafter. The statute details the requirements for such notarizations, including that the notary must create and retain an audio-visual recording of the notarial act.
Oregon Division of Financial Regulation issues bulletin permitting temporary work from home for employees of certain licensees
On April 20, the Oregon Division of Financial Regulation issued a revised Bulletin No. DFR 2020-6 temporarily authorizing certain licensees to work from home while transacting business when specific conditions are met. Among other things, the bulletin requires licensed companies to provide prior notice to the DFR of their intent to permit employees to work from home to prevent the spread of Covid-19.
Indiana Supreme Court issues order protecting stimulus payments from attachment or garnishment from creditors
On April 20, the Indiana Supreme Court issued an order in response to a petition for emergency rulemaking to protect stimulus payments under the CARES Act from attempts by private creditors to attach or garnish those payments during the Covid-19 emergency. Pursuant to the order, courts are prohibited from issuing new orders placing a hold on, attaching, or garnishing funds in a judgment-debtor’s account in a depository institution if those funds are attributable to a stimulus payment, with certain exceptions. With respect to previously issued court orders placing a hold on a judgment-debtor’s account in a depository institution, the judgement-debtor is entitled to a hearing, upon request, to determine what funds in the account are attributable to a stimulus payment and for the judgement-debtor to assert any exemption(s) under state or federal law. These measures are effective until the expiration of the Covid-19 public health emergency or until the Indiana Supreme Court suspends the order.
Banks face class actions for prioritizing large customers for PPP loans
On April 20, five class action lawsuits were filed in the U.S. District Court for the Central District of California against six of the nation’s largest banks, alleging that the banks prioritized existing, large customers over smaller businesses for the Small Business Administration’s (SBA's) Paycheck Protection Program (PPP) loans. The suits claim that the banks submitted PPP applications for existing large customers first, failing to process applications in the order they were received. Moreover, pursuant to the CARES Act, the SBA provided PPP lenders with origination fees on a sliding scale, from 1 percent to 5 percent, based on the amount of each loan. The complaints allege that higher origination fees provided incentive for the banks to process higher dollar loans ahead of smaller dollar loans. See the complaints here, here, here, here, and here.
Massachusetts enacts legislation imposing moratorium on certain evictions and foreclosures and requiring forbearance upon request
On April 20, the governor of Massachusetts signed legislation imposing a moratorium on certain eviction and foreclosure proceedings for the earlier of 120 days from the enactment of the legislation or 45 days after the state of emergency. In addition, the bill requires a creditor to grant a forbearance to a mortgagor that submits a request and affirms that the mortgagor has experienced a financial impact from Covid-19. Any payment subject to the forbearance must be added to the end of the term, unless otherwise agreed to. The legislation also prohibits a mortgagee or landlord from furnishing negative mortgage payment information or rental payment data to a consumer reporting agency related to payments subject to the act.
Fed provides FAQs on PPP liquidity facility
On April 20, the Federal Reserve Board (Fed) released a series of frequently asked questions (FAQs) and answers relating to the agency’s newly launched Paycheck Protection Program Liquidity Facility (PPPLF). As previously covered by InfoBytes, the PPPLF was up and running on April 16 to provide liquidity to banks making loans to small businesses pursuant to the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The SBA-guaranteed PPP loans are used as collateral for term financing provided by the PPPLF. The PPPLF extends credit to financial institutions participating in the PPP at a fixed rate of 35 basis points. Additional information regarding the PPPLF, including a term sheet, borrowing documentation, and operational documentation including samples can be found on the Fed website here.
OCC bulletin highlights Covid-19 assistance to businesses, consumers, and governments through Fed facilities
On April 20, the OCC issued a bulletin to spotlight the many Federal Reserve (Fed) lending programs established to provide relief from the effects of the Covid-19 pandemic and to highlight how the programs benefit consumers, businesses, and state and local governments. The Fed has supported the economy in a number of ways, particularly through establishing or expanding loan, credit, and liquidity facilities including (i) the Paycheck Protection Liquidity Facility (PPPLF); (ii) the Term Asset-Backed Securities Loan Facility (TALF); (iii) the Primary and Secondary Market Corporate Credit Facilities (PMCCF) and (SMCCF); (iv) the Municipal Liquidity Facility (MLF); and (v) the new Main Street Facility. As previously covered by a Buckley Special Alert, the PPPLF provides liquidity to banks to enable them to lend to small business owners so they can keep their businesses running and pay their employees. The TALF, PMCCF, and SMCCF ensure the flow of credit to consumers and businesses for things such as auto loans, credit card loans, and student loans. The MLF facilitates the flow of cash into states, counties, and cities so that their governments may continue to provide services to residents. Finally, the Main Street Facility—like the PPPLF—supports lending to businesses, in which banks originate Main Street Lending Program loans to small and medium-sized businesses by selling the majority of the loans to the Main Street Facility. Further details about the Main Street Facility can be found in a Buckley Special Alert here.