InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
SBA issues new FAQs on forgiving PPP loans
On August 4, the Small Business Administration (SBA) issued new FAQs on Paycheck Protection Program (PPP) loan forgiveness. The FAQs note that borrowers and lenders may rely on the FAQs as the SBA’s interpretation of the CARES Act, the Paycheck Protection Program Flexibility Act (Flexibility Act), and all of the Paycheck Protection Program Interim Final Rules (available here). The FAQs cover various topics including (i) general loan forgiveness; (ii) loan forgiveness of payroll and nonpayroll costs, and types of costs that constitute payroll and nonpayroll costs; and (iii) loan forgiveness reductions. For continued InfoBytes coverage on PPP loan forgiveness see here.
Kraninger discusses semi-annual report and pandemic response at congressional hearings
On July 29, CFPB Director Kathy Kraninger testified at a hearing held by the Senate Banking Committee on the CFPB’s Semi-Annual Report to Congress, which covers the Bureau’s work from October 1, 2019, through March 31, 2020. (Covered by InfoBytes here.) Kraninger’s testimony identified four key areas of focus for the Bureau: (i) providing financial education resources to prevent consumer harm; (ii) implementing “clear rules of the road” to encourage “competition, increase transparency, and preserve fair markets for financial products and services”; (iii) ensuring a “culture of compliance” through supervision; and (iv) following a consistent, purposeful enforcement regime. Kraninger also highlighted Bureau efforts to address discrimination, consumer confusion regarding forbearance options under the CARES Act, and a legislative proposal that would authorize the Bureau to award whistleblowers who report federal consumer financial law violations.
During the hearing, committee members focused on, among other things, the Bureau’s response to the Covid-19 pandemic and the agency’s recent repeal of certain underwriting provisions of its 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (covered by InfoBytes here). In response to Democratic criticism regarding the repeal of the underwriting provisions, Kraninger reiterated that a Bureau analysis of the provisions in the 2017 final rule revealed it would reduce the availability of small-dollar credit “by at least 70 percent,” and denied claims that the rulemaking process had been impacted by political appointees at the agency. Additionally, Kraninger said she intends to move ahead with putting the payment provisions of the payday rule into effect and is currently “working through” a pending legal challenge to the provisions.
Democratic committee members also questioned Kraninger regarding temporary regulatory relief to mortgage servicers and other financial services companies (covered by InfoBytes here) and the Bureau’s policy statement providing Fair Credit Reporting Act and Regulation V compliance flexibility for consumer reporting agencies and furnishers during the pandemic (covered by InfoBytes here). With regard to the U.S. Supreme Court’s June ruling in Seila Law v. CFPB (covered by a Buckley Special Alert), Committee Chairman Mike Crapo (R-ID) noted he is still advocating for “a bipartisan board of directors to oversee the CFPB” and for subjecting the Bureau to the annual appropriations process.
The next day, Kraninger appeared before the House Financial Services Committee’s hearing to discuss the semi-annual report. Similar to the Senate hearing, committee members questioned Kraninger on the payday rule, the revision to the HMDA rule, the Bureau’s pandemic-related initiatives for consumers, and on ways the Bureau is protecting struggling consumers during the pandemic, particularly with respect to the agency’s supervisory and enforcement work.
Texas Supreme Court orders CARES Act certifications in eviction proceedings
On July 21, the Texas Supreme Court issued an order requiring landlords initiating eviction proceeds to issue a sworn statement describing whether the premises at issue is subject to the CARES Act moratorium on evictions, and whether the landlord has provided the defendant with 30 days’ notice to vacate as required by the CARES Act. The order applies to eviction proceedings filed through August 24.
Fed extends temporary exception to allow bank insiders access to PPP
On July 15, the Federal Reserve Board adopted an interim final rule (IFR) extending a temporary exception from the requirements of section 22(h) of the Federal Reserve Act and corresponding provisions of Regulation O for certain loans guaranteed under the Small Business Administration’s Paycheck Protection Program (PPP). The IFR extends the exception to August 8—the new date on which the PPP is set to expire (covered by InfoBytes here). The original extension was announced on April 17 (covered by InfoBytes here) and permits banks to extend credit to bank insiders, but only for PPP loans. However, the IFR does not except a PPP loan from other restrictions that may apply, including those under section 22(g) the Federal Reserve Act, section 215.5 of Regulation O, or applicable SBA PPP lending restrictions. The IFR takes effect immediately, and comments will be accepted for 45 days after publication in the Federal Register.
House hearing on mortgage servicers’ implementation of CARES Act
On July 16, the House Financial Services Committee’s Subcommittee on Oversight and Investigations held a hearing entitled “Protecting Homeowners During the Pandemic: Oversight of Mortgage Servicers’ Implementation of the CARES Act.” The subcommittee’s memorandum regarding the hearing discussed, among other things, the HUD Office of Inspector General’s report of its review of the type of forbearance information accessible to borrowers on the top 30 mortgage servicers’ websites. The report highlighted concerns that 10 of the servicers failed to have forbearance information “‘readily available’ on their websites,” 14 servicers’ websites did not provide information about the length of the forbearance period to which borrowers are entitled under the CARES Act, and certain servicers “included information giving the impression that lump sum payments were required at the end of the forbearance period.”
Witnesses discussed widespread issues in CARES Act-related mortgage servicing, with several witnesses and lawmakers highlighting how preexisting inequalities have especially imperiled black and Latinx home ownership during the Covid-19 pandemic. One witness suggested that servicers should be required to provide written notice to borrowers of their options and rights under the CARES Act and should be held accountable for failing to provide consistent, accurate forbearance information to borrowers in a timely manner. Another witness noted that housing counselors have reported servicers providing misinformation on payment and deferral options, and stressed the need for coordinated efforts between the CFPB, FHFA, and HUD, in addition to strong supervisory and enforcement activity.
Other topics discussed during the hearing included (i) the importance of providing clear guidance for borrowers, as well as the importance of loan modifications, loss mitigation options, and long term solutions once forbearance has ended; (ii) understanding what servicers of non-federally backed mortgages not covered by the CARES Act are doing to assist borrowers, and whether there should be a safe harbor for these mortgage servicers from investor liability; and (iii) the CFPB’s responsibility for overseeing servicers. One of the witnesses noted during the hearing, however, that many mortgage servicers offered homeowners forbearance options before the CARES Act, provided forbearance to homeowners with non-federally backed mortgages, and have responded to “an evolving series of program and regulatory announcements from various programs and agencies.”
New York governor announces new Covid-19 rental assistance program
On July 14, the New York governor announced an emergency rental assistance program that will provide direct aid to tenants who have lost income due to the Covid-19 pandemic. The program is funded through the CARES Act’s Coronavirus Relief Fund and will be administered by the New York State Homes and Community Renewal, which will begin accepting applications for assistance on July 16. To qualify for the program, applicants must meet certain eligibility requirements, including loss of income and residency requirements.
Federal Reserve announces temporary revisions to Capital Assessment and Stress Testing Reports
On July 8, the Federal Reserve announced revisions to its Capital Assessments and Stress Testing Reports, Form FR Y-14A/Q/M; OMB No. 7100-0341. The temporary revisions implement changes in response to the Covid-19 pandemic, including the incorporation of data related to certain aspects of the CARES Act, the Paycheck Protection Program, and Federal Reserve lending facilities. The changes apply to reports beginning with July 31, 2020, or September 30, 2020, as-of dates. Additionally, the Federal Reserve has temporarily revised the submission frequency of FR Y–14Q, Schedule H (Wholesale) from a quarterly basis to a monthly basis for Category I–III firms, effective July 31, 2020.
Arizona Supreme Court requires CARES Act attestations in eviction proceedings
On July 7, the Arizona Supreme Court issued Administrative Order No. 2020-105 regarding the disposition of residential eviction cases during the Covid-19 public health emergency. Among other things, the order requires any complaint seeking eviction for non-payment of rent for any part of the period between March 27 and July 25, 2020 to include an attestation by the plaintiff that the property in which the tenant resides is not covered by the CARES Act.
Fed releases CARES Act credit reporting, mortgage servicing examination procedures
On July 7, the Federal Reserve Board (Fed) released CA 20-11 and related examination procedures for the credit reporting and mortgage servicing provisions of the CARES Act. The procedures apply to CARES Act provisions that created new requirements for furnishers of credit information and mortgage servicers of certain mortgage loans for consumers impacted by the Covid-19 pandemic. The CARES Act amended the FCRA and required that consumer accounts be reported by furnishers as current if the consumer was current prior to the grant of a CARES Act accommodation. For mortgage servicers, the CARES Act generally required servicers of federally backed mortgage loans to grant forbearance requests toCovid-19-impacted borrowers. Servicers of these mortgages were also prohibited from initiating foreclosures through May 17, 2020. Structured as a series of modules with similar requirements grouped together, the examination procedures are intended to provide the framework for an institution’s examination, including an evaluation of the adequacy of an institution’s compliance management system. The examination procedures’ credit reporting provisions apply to supervised institutions with total consolidated assets of $10 billion or less, whereas the mortgage servicing provisions apply to all supervised institutions, including those with total consolidated assets of $10 billion or less.
The Fed advised that in exercising supervisory and enforcement responsibilities it intends to take into account the unique circumstances impacting borrowers and institutions resulting from the Covid-19 pandemic. As such, the Fed does not expect to initiate a public enforcement action against an institution provided the circumstances were related to Covid-19, and the institution demonstrated good faith efforts to support borrowers and comply with consumer protection laws.
Oregon enacts bill providing notarization relief
On June 30, the Oregon governor signed HB 4212, which provides relief relating to wage garnishment and notarization, among other things. The bill exempts certain recovery rebate payments under the CARES Act from garnishment requirements applicable to financial institutions. The bill also permits electronic notarization, provided certain requirements are met. The bill took effect on June 30.