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SBA issues new PPP FAQs and clarifies appeals process
On August 11, the Small Business Administration (SBA) updated the Paycheck Protection Program (PPP) FAQs to include two new questions clarifying that (i) payment or nonpayment of fees of an agent or other third party will not affect the guarantee of a PPP loan or the SBA’s payment of lender fees; and (ii) vision and dental benefits are included in the payments required for the provision of group health care benefits. The SBA also published three new FAQs on PPP loan forgiveness, addressing PPP loan forgiveness when the borrower has also received an Economic Injury Disaster Loan (EIDL) advance. Additionally, the SBA issued a new interim final rule, which informs PPP borrowers and lenders of the appeal process for certain SBA loan review decisions under the PPP to the SBA Office of Hearings and Appeals.
Fed announces new details of the FedNow Service
On August 6, the Federal Reserve Board (Board) announced details of its new payment clearing system, the FedNow Service, which the Board plans to implement through a phased approach with a target launch date sometime in 2023 or 2024. As previously covered by InfoBytes, in August 2019, the Board issued a request for information on a “round-the-clock real-time payment and settlement service,” seeking feedback on how the service might be designed in order to support payment system stakeholders and the general functioning of the U.S. payment system. The Board notes that the newly released details are based on the input received from stakeholders. The Federal Register notice discusses the phased released approach, noting that the “approach will ensure the core features and functionality are delivered as quickly as possible,” even if “certain desirable features” are not available in the initial release. Highlights of the core features of the “24x7x365” FedNow Service include, among other things, (i) a payment flow where the receiver’s bank has an opportunity to confirm that it holds a valid account for the receiver and intends to accept the payment message, before interbank settlement occurs; (ii) the use of the “widely accepted ISO 20022 standard and adopt other industry best practices” for payment message format; (iii) a transaction limit that will be “consistent with market practices and needs at the time” of the launch of service; and (iv) a liquidity-management tool that will allow participants to transfer funds to each other to support the liquidity needs of instant payments. After the initial launch, the Board intends to offer additional features related to fraud prevention, error resolution and case management.
Fannie and Freddie announce new refinance fee
On August 12, Fannie Mae and Freddie Mac announced a new adverse market refinance fee of 50 basis points, or 0.5 percent, on certain refinance mortgages. According to Freddie Mac’s Guide Bulletin 2020-32, the refinance fee applies to cash-out and no cash-out refinance mortgages “except for Construction Conversion Mortgages that qualify for single-closing Interim Construction Financing and Permanent Financing.” The Bulletin notes that the fee is a result of economic and market uncertainty due to the Covid-19 pandemic. Fannie Mae’s Lender Letter LL-2020-12 notes that the new fee applies to limited cash-out refinances and cash-out refinances but provides a limited exception for certain single-closing construction-to-permanent loans.
The new fee is effective for applicable refinance mortgages with settlement dates on or after September 1.
Federal Reserve Board announces revised pricing for its Municipal Liquidity Facility
On August 11, the Federal Reserve Board announced revised pricing for its Municipal Liquidity Facility. The revised pricing reduces the interest rate spread on tax-exempt notes for each credit rating category by 50 basis points and reduces the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes. The MLF, originally covered here, was one of several facilities intended to support the flow of credit in the economy.
U.S.-UK Financial Innovation Partnership reports on progress
On August 6, the U.S. Treasury Department provided an overview of a recent meeting of the U.S.-UK Financial Innovation Partnership (FIP) where Regulatory and Commercial Pillars participants exchanged views on “deepening U.S.-UK ties in financial innovation.” As previously covered by InfoBytes, the FIP was created in 2019 as a way to expand bilateral financial services collaborative efforts, study emerging fintech innovation trends, and share information and expertise on regulatory practices. Topics discussed included digital payments, cross-border testing of innovative financial services, regulatory and supervisory technology, connections between financial technology firms and financial institutions, and the upcoming 2021 U.S. financial services trade mission to the UK. Participants recognized “the importance of the ongoing partnership in monitoring and analyzing trends in global financial innovation, as well as being an integral component of the U.S.-UK financial services cooperation.”
ARRC releases “SOFR Starter Kit”
On August 7, the Alternative Reference Rates Committee (ARRC) released the “Secured Overnight Financing Rate (SOFR) Starter Kit,” which includes three factsheets that are the result of a series of educational panel discussions held by ARRC in July and August. The various panel discussions were designed to educate on “the history of LIBOR; the development and strengths of SOFR; progress made in the transition away from LIBOR to date; and how to ensure organizations are ready for the end of LIBOR.” Highlights of the three factsheets include (i) background on LIBOR and the selection of SOFR; (ii) key facts on SOFR, including how it works and common misconceptions; and (iii) next steps, including SOFR best practices and recommended fallback language. Additionally, ARRC provided FAQs covering additional background details on the committee and the transition from LIBOR.
President Trump extends student loan forbearance program
On August 8, President Trump issued an executive order to Secretary of Education Betsy DeVos extending a forbearance plan on student loans through the end of the year. The executive order directs the Department of Education to take action to continue to provide “deferments to borrowers as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020.” The current forbearance program provided under the CARES Act (covered by a Buckley Special Alert) ends September 30. While the executive order states that it applies to “student loans held by the Department of Education,” it does not specifically outline which kind of federal student loans are covered under the new forbearance order.
OCC amends 2020 assessment structure
On August 7, the OCC released an amended fees and assessments structure for 2020 due to the Covid-19 pandemic. The announcement includes information on the OCC’s interim final rule (covered by InfoBytes here), which intended to lower assessments for supervised banks making assessments due on September 30 based on the December 31, 2019 Call Report for each institution, rather than the June 30 Call Report. Additionally, the OCC notes that for the 2020 assessment year, among other things, (i) there will be no inflation adjustment to assessment rates; (ii) new entrants to the federal banking system will be assessed on a prorated basis using call report information as of December 31 or June 30, depending on the entrance date; and (iii) the hourly fee for special examinations and investigations is increasing from $110 to $140.
FHFA announces that multifamily property owners in forbearance must inform tenants of tenant protections
On August 6, the Federal Housing Finance Agency (FHFA) announced that multifamily property owners with mortgages backed by Fannie Mae or Freddie Mac (the Enterprises) who enter into a new or modified forbearance agreement must inform tenants in writing about tenant protections during the multifamily property owner's forbearance and repayment periods. Landlords with Enterprise-backed mortgages can enter new, or if qualified, modified forbearance if they experienced or continue to experience a financial hardship due to the Covid-19 emergency. While in forbearance, the property owners must agree not to evict tenants solely for the nonpayment of rent. The announcement notes that the Enterprises are modifying online multifamily property loan look-up tools to make it easier for tenants to find the tenant protections and to find out if the multifamily property in which they reside has an Enterprise-backed mortgage.
CSBS: OCC’s proposed “non-branch” provisions undermine dual banking system
On August 3, the Conference of State Bank Supervisors (CSBS) issued its comment letter to the OCC’s Notice of Proposed Rulemaking (NPR) on national bank and savings association activities concerning “non-branch” offices. Specifically, CSBS wrote that the “non-branch” provisions in the NPR make “far-reaching” revisions without legal authority, undermine the dual banking system, conflict with National Bank Act (NBA) preemption limits, and would allow national banks to operate branches without complying with related Community Reinvestment Act (CRA) obligations. Additionally, CSBS contended that the OCC’s rulemaking process is “truncated and flawed,” and afforded a particularly brief period for public comments during the Covid-19 pandemic.
According to CSBS, the NPR, announced in June (covered by InfoBytes here), would “expand the scope of activities that may occur at non-branch offices purportedly without regard” to state restrictions. These activities include: (i) performing loan approval and origination functions at a single, publicly accessible office; (ii) disbursing loan proceeds through an operating subsidiary; and (iii) establishing drop boxes and other unstaffed facilities. CSBS also contended that the NPR’s non-branch provisions would undermine Congressional intent and give national banks competitive advantages over state-charted banks. CSBS further argued that the non-branch provisions conflict with Congress’ clear intention that “NBA preemption does not apply to agents, affiliates or subsidiaries of national banks.” Finally, CSBS highlighted a distinction between the proposed non-branches (but de facto branches) and actual branch offices, arguing that the NPR creates a legal loophole allowing non-branch national banks to avoid CRA obligations associated with licensed branches.