InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Fed revises Municipal Lending Facility to include more cities and counties; extends expiration date
On April 27, the Federal Reserve (Fed) announced it will expand the Municipal Liquidity Facility (MLF) in important ways. As previously covered by InfoBytes, the MLF was established to provide liquidity to state and local governments so they could continue to provide services for their citizens. As when it was established on April 9, the facility will provide up to $500 billion through the purchase of state and county-issued short-term notes, with $35 billion in credit protection provided by the Treasury pursuant to the CARES Act. Revisions to the MLF include lower population thresholds for the facility. Specifically, the facility will purchase notes from counties with at least 500,000 residents, down from the original two million resident threshold, and U.S. cities with a minimum of 250,000 residents, down from the original one million residents threshold. Further, to be eligible for the revised facility, notes must mature within 36 months of issuance—an increase from the previous 24-month maximum maturity term. Issuers must also have had at least two nationally recognized statistical rating firms provide investment grade ratings, as of April 8, 2020. In addition, the Fed extended the termination date for the MLF from September 30 to December 31, 2020.
CFPB outlines lending discrimination warning signs for small businesses applying for PPP loans
On April 27, the CFPB posted a reminder that federal laws such as ECOA protect business owners from discrimination on the basis of protected characteristics when applying for loans under the CARES Act Small Business Administration’s Paycheck Protection Program or other loan programs. The Bureau’s blog post provides several examples of potential lending discrimination warning signs, including (i) being refused for an available loan or workout option even though the business meets the advertised requirements; (ii) being offered credit or workout options with higher rates or worse terms even though the business may be eligible for lower rates; (iii) being discouraged by a lender from applying due to a protected characteristic; (iv) being denied credit without being told why; and (v) receiving negative comments about race, national origin, sex, or other protected characteristics. Lending discrimination complaints may be submitted here, and the Bureau notes that it takes complaint information into account when conducting supervisory and enforcement work.
VA revises lender guidance for borrowers impacted by Covid-19
On April 27, the Department of Veterans Affairs revised Circular 26-20-10, Lending Guidance for Borrowers Affected by Covid-19. The revisions provide that the VA may delegate responsibility to an approved lender to close loans automatically, and that any loan closed under this authority is guaranteed from the date of loan closing. The circular otherwise provides guidance for VA home loan borrowers impacted by Covid-19 and creates temporary measures for loan originating, closing and guarantee. Among other measures, the circular provides that furloughs and other income curtailments as a result of Covid-19 should not be considered a break in employment for underwriting purposes. The circular is effective until July 1, 2023.
NCUA announces grants for minority depository institutions
On April 27, the National Credit Union Administration announced that it is making a total of $125,000 in mentoring grants available to small, low-income credit unions designated as minority depository institutions. Grants will be available in amounts of up to $25,000 and are intended to help recipients establish mentoring programs with larger, low-income designated credit unions that can provide guidance on how to assist low-income and underserved populations.
SBA, Treasury announce guidance on PPP loan processing
On April 26, the Small Business Administration (SBA) updated information regarding the operations of the Paycheck Protection Program (PPP) to supplement an April 24 statement from the SBA and the Department of Treasury (Treasury) announcing that the PPP would restart. Through funding from the PPP and Health Care Enhancement Act signed on April 24, the SBA’s PPP resumed processing loan applications on April 27. The SBA also issued a guidance memo for lenders describing XML file transmission of completed loan applications. The memo advises that lenders may send one bulk submission each of no less than 15,000 loans, which the SBA will process into their E-Tran system. Lenders will then receive one file from the SBA providing loan guarantee numbers and loan amounts for approved applications, as well as a report of loan applications that were not “successfully processed by the SBA loan systems.” The SBA update details additional actions it will take when processing loans, which include: (i) “[p]acing the number of loans processed in the E-Tran system”; (ii) limiting each lender to originating a maximum of 10 percent of the PPP funds available, (iii) “[i]mplementing operational standards to ensure that lenders access PPP funds based on their asset size”; (iv) making certain that applications are processed in the order submitted; and (v) providing guidance to lenders with “a significant amount of loan applications.”
SBA, Treasury issue guidance on calculating the maximum PPP loan amount
On April 24, the Small Business Administration along with the Department of Treasury issued guidance on payroll costs and determining the maximum Paycheck Protection Program (PPP) loan amount for which a small business can apply. The guidance—organized by business entity type—contains nine questions with answers that address the self-employed, partnerships, corporations, nonprofit organizations, nonprofit religious and veterans’ organizations, tribal businesses, and limited liability companies. Small businesses must also document that they were in business as of February 15, 2020. The guidance notes that “[t]he U.S. government will not challenge lender PPP actions that conform to this guidance.”
OCC reminds banks of its exclusive visitorial authority
On April 24, the OCC issued Bulletin 2020-43 to “remind[] banks that it has exclusive visitorial authority over them.” The bulletin states that it is important for banks to quickly provide the Small Business Administration’s Paycheck Protection Program loans to small businesses. As such, state and local officials cannot examine banks’ books and records without prior authorization such that they attempt to exercise visitorial authority. Moreover, banks are not required to comply with such requests, and are further encouraged to contact their OCC examiner regarding any state and local requests. State and local officials are likewise encouraged to contact the OCC with any information or questions.
Special Alert: Regulators provide important guidance on next wave of PPP funding
President Trump on April 24 signed the Paycheck Protection Program and Health Care Enhancement Act, adding $310 billion in funding to the $350 billion initially appropriated to the program under the Coronavirus Aid, Relief, and Economic Security Act. The Federal Reserve Board, Treasury Department, and the Small Business Administration have issued important guidance in recent days related to loan participations, additional Fed support, borrower eligibility, and loan forgiveness. The SBA and the Fed have also provided more information on electronic execution and collection of loan documents, as the importance of digital loans continues to loom large with signatories working remotely.
SEC announces formation of internal Covid-19 Market Monitoring Group
On April 24, the SEC announced the formation of an internal, cross-divisional Covid-19 Market Monitoring Group, which will assist the commission with (i) commission and staff actions and analysis related to the effects of Covid-19 on markets, issuers, and investors, and (ii) responding to requests for information, analysis and assistance from other regulators and public sector partners.
Federal Reserve provides updates on facilities in Section 13(3) report to Congress
On April 24, the Federal Reserve filed a report with Congress regarding various new credit facilities developed to combat liquidity issues caused by the Covid-19 pandemic. The report provides the initial update to Congress regarding the Primary Dealer Credit Facility, Commercial Paper Funding Facility, and Money Market Mutual Fund Liquidity Facility pursuant to Section 13(3) of the Federal Reserve Act as of April 14, 2020.