InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Oregon issues stay at home order
On March 23, the Oregon Governor issued stay at home order. The order closes certain businesses for which close personal contact “is difficult or impossible to avoid.” The order does not address financial institutions.
New Mexico issues emergency order closing non-essential businesses and non-profits
On March 23, the New Mexico Department of Health issued a public health emergency order closing all businesses and non-profit entities except for those deemed essential. Essential businesses include, among others, banks, credit unions, insurance providers, payroll services, brokerage services, and investment management firms.
Michigan Governor issues "Stay Home, Stay Safe" executive order
On March 23, the Michigan Governor issued a state-wide order to temporarily suspend in-person operations that are “not necessary to sustain or protect life.” The order takes effect on March 24, 2020, at 12:01 AM, and continues through April 13, 2020, at 11:59 PM. Businesses and operations that employ critical infrastructure workers may continue in-person operations, subject to certain conditions. Critical infrastructure workers include those in financial services. Additionally, a business or operation that employs critical infrastructure workers may designate suppliers, distribution centers, or service providers whose continued operation is necessary to enable, support, or facilitate the work of its critical infrastructure workers.
Hawaii issues stay at home order
On March 23, the Hawaii Governor issued a statewide order to stay at home and work from home starting at 12:01 AM Wednesday, March 25, 2020, through April 30, 2020. All businesses or operations not identified as federal critical infrastructure by the Cybersecurity and Infrastructure Security Agency, designated by the Director of the Hawaii emergency Management Agency, or listed in the proclamation, must cease. The proclamation permits, among others, financial institutions, including currency exchanges, consumer lenders (e.g., payday lenders, consumer installment lenders), credit unions, appraisers, title companies, financial markets, trading and futures exchanges, affiliates of financial institutions, entities that issue bonds, related financial institutions, and institutions selling financial products, to remain open.
Federal Reserve announces new measures to support the economy
On March 23, the Federal Reserve announced various new measures to support the economy during the Covid-19 crisis. The actions include:
- Purchasing Treasury securities and commercial and agency mortgage-backed securities to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.
- Establishing a new program that will provide up to $300 billion in new financing to support the flow of credit to employers, consumers, and businesses. The Treasury Department will provide $30 billion in equity to these facilities by using the Exchange Stabilization Fund (ESF).
- Establishing two facilities to support credit to large employers: (i) the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance; and (ii) the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
- Establishing a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
- Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
- Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.
Federal Reserve announces technical change to total loss absorbing capacity buffer requirements
On March 23, the Federal Reserve Board announced a technical change to support the U.S. economy and permit banks to continue lending to creditworthy households and businesses. The interim rule will phase in gradually the automatic restrictions associated with a firm's "total loss absorbing capacity” (TLAC) buffer requirements, if the levels decline, and is intended to facilitate the use of firms’ buffers to promote lending activity.
Treasury Department expands existing facilities, establishes three more facilities
On March 23, the Department of Treasury authorized the expansion of the Money Market Mutual Fund Liquidity Facility (MMLF) and the Commercial Paper Funding Facility (CPFF), and established three new facilities under section 13(3) of the Federal Reserve Act to provide liquidity to the financial system.
- The MMLF was expanded to include a wider range of securities, including municipal variable rate demand notes and bank certificates of deposit.
- The CPFF was expanded to included high-quality, tax-exempt commercial paper and its pricing was reduced.
- The following three new facilities were created: (i) the Term Asset-Backed Securities Loan Facility (TALF), under which the Federal Reserve Bank of New York will provide loans to U.S. companies that are secured by certain eligible consumer and small business asset-backed securities, such as student loans, auto and credit card loans, loans guaranteed by the Small Business Administration, and certain other assets; (ii) the Primary Market Corporate Credit Facility (PMCCF), under which the Federal Reserve Bank of New York will provide liquidity to U.S. financial and nonfinancial businesses by providing loan and bond financing to U.S. companies with investment grade debt ratings; and (iii) the Secondary Market Corporate Credit Facility (SMCCF), under which the Federal Reserve Bank of New York will purchase in the secondary market bonds issued by U.S. companies with investment-grade debt ratings. According to the Treasury, the three new programs comprise up to $300 billion in new financing.
Fannie Mae announces changes to origination requirements
On March 23, Fannie Mae issued Lender Letter LL-2020-03 addressing the impact of Covid-19 on Originations. The letter (i) establishes permissible alternatives to the verbal verification of employment requirement; (ii) encourages lenders to “practice additional due diligence” with respect to continuity of income to ensure most recent information is obtained; (iii) extends the deadline for lender submission of financial statements and Form 582 until April 30, 2020; (iv) reiterates the requirements to maintain the original copy of the promissory note and to obtain an original, non-electronic signature on promissory notes unless originated as an electronic note; (v) addresses title insurance consequences of recording office closures; and (vi) reminds lenders to follow their business continuity and resiliency plans.
Fannie Mae announces flexibility with appraisals
On March 23, Fannie Mae issued Lender Letter 2020-04 announcing temporary flexibilities to its appraisal requirements. These include allowing exterior-only or desktop appraisals when an interior appraisal is not feasible because of Covid-19 concerns, subject to specified terms. The letter also announced modified forms, developed jointly with Freddie Mac, to be used with desktop and exterior-only appraisals.
FHFA authorizes GSEs to support additional liquidity in the secondary mortgage market
On March 23, FHFA announced that is has authorized Fannie Mae and Freddie Mac to enter into additional dollar roll transactions, which provide MBS investors with short-term financing of their positions, to help support immediate needs for liquidity in the secondary mortgage market. Eligible collateral is limited to Agency MBS and the transactions must be undertaken via an auction or similar mechanism to ensure that they occur at a fair market price.