PH FedACTion: Financial Regulatory Updates
Daily Financial Regulation Update - Friday, May 1, 2020
May 01, 2020
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Major Developments
Federal Reserve Board Announces it is Expanding the Scope and Eligibility for the Main Street Lending Program
April 30, 2020
The Federal Reserve Board (Board) announced expansion of the scope and eligibility for its Main Street Lending Programs (the Main Street Program). The Board expanded the loan options available to businesses, and increased the maximum size of businesses that are eligible for support under the Main Street Program to entities with either no more than 15,000 employees or 2019 revenues of $5 billion or less, and lowered the minimum loan size for new loans to $500,000. The Federal Reserve confirmed that the Small Business Administration’s complex affiliation rules apply for purposes of calculating employee and revenue thresholds for Main Street Program eligibility. The Federal Reserve also created a third loan facility for entities with up to 6 times 2019 adjusted EBITDA, by increasing the risk shared by lenders for borrowers with greater leverage.
SBA Issues Interim Final Rule Limiting Aggregate PPP Loans to Corporate Groups and Guidance for Additional Non-Bank and Non-Insured Depository Institution Lenders
April 30, 2020
The Small Business Administration (SBA) issued an Interim Final Rule on corporate groups and non-bank and non-insured depository institution lenders. The Interim Final Rule clarifies that businesses part of a single corporate group may not receive more than $20 million of Paycheck Protection Program (PPP) loans in the aggregate, and the limitation shall be immediately effective with respect to any loan that has not been fully disbursed as of April 30, 2020. Moreover, the SBA provided guidance that a non-bank or non-insured depository institution can be eligible to be a PPP lender if the lender has originated, maintained or serviced more than $50 million in business loans or other commercial financial receivables during a 12-month period in the past 36 months, in addition to satisfying certain other requirements. In addition, a non-bank lender may be approved to make PPP loans if it has originated, maintained or serviced more than $10 million in business loans or other commercial financial receivables during a 12-month period during the past 36 months, if the non-bank lender is (a) a community development financial institution (other than a federally insured bank or credit union) or (b) a majority minority-, women-, or veteran/military owned lender, in addition to satisfying certain other requirements.
Federal Reserve Expands Access to its Paycheck Protection Program Liquidity Facility (PPPLF) to Additional Lenders
April 30, 2020
The Federal Reserve expanded access to its Paycheck Protection Program Liquidity Facility (PPPLF) to additional lenders. As a result, all Paycheck Protection Program (PPP) lenders approved by the Small Business Administration, including non-depository institution lenders, are now eligible to participate in the PPPLF. Additionally, eligible borrowers will be able to pledge whole PPP loans that they have purchased as collateral to the PPPLF.
Congress
Click here to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), 116 HR. 748, Enacted March 27, 2020.
Click here to view the full text of the Paycheck Protection Program Increase Act of 2020, Enacted April 24, 2020.
Click here to view a running list of proposed legislation from the Senate Committee on Banking, Housing, and Urban Affairs, Senate Committee on Small Business and Entrepreneurship, House Committee on Financial Services, and House Committee on Small Business.
U.S. Senate
Committee on Small Business and Entrepreneurship
Senators Rubio and Cardin Lead Bipartisan Letter to Treasury and SBA on an Administrative Fix to the 7(a) Loan Program Authorization
April 30, 2020
U.S. Senators Marco Rubio (R-FL) and Ben Cardin (D-MD), Chairman and Ranking Member of the Senate Committee on Small Business and Entrepreneurship, led a bipartisan letter to Steven T. Mnuchin, Secretary of the U.S. Department of the Treasury, and Jovita Carranza, Administrator of the Small Business Administration (SBA), urging the agencies to provide an immediate administrative fix to ensure the continued operation of the SBA 7(a) loan program. Due to a technical drafting error, the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act did not create separate authorization levels for the SBA 7(a) loan program and the Paycheck Protection Program (PPP). As a result, the SBA 7(a) loan program’s fiscal year 2020 $30 billion lending authority will be voided until July 1, 2020 once the amount authorized for PPP is committed, which will leave numerous businesses seeking access to capital without access to the SBA 7(a) loan program. In addition to Chairman Rubio and Ranking Member Cardin, 20 Senators signed the letter.
Senators Cardin and Portman Urge SBA Not to Penalize Small Business Owners with Previous Criminal Records During Coronavirus Pandemic
April 30, 2020
U.S. Senators Ben Cardin (D-MD), Ranking Member of the Senate Small Business Committee, and Rob Portman (R-OH) sent a letter to U.S. Treasury Secretary Steven T. Mnuchin and Small Business Administration (SBA) Administrator Jovita Carranza, urging the SBA to allow small business owners with criminal records to apply for the Paycheck Protection Program (PPP). Currently, the PPP denies applicants if the business has “an owner of 20 percent or more of the equity of the applicant [who] is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years.” The application also includes several questions that make it unclear as to whether other types of criminal records or past involvement with the justice system may prohibit access to PPP loans.
Federal Agencies
Consumer Financial Protection Bureau
CFPB Issues Two Factsheets on the Equal Credit Opportunity Act (ECOA) Valuations Rule
April 30, 2020
The Consumer Financial Protection Bureau released two factsheets on the Equal Credit Opportunity Act (ECOA) Valuations Rule (the Rule) in response to frequently asked questions. The factsheets provide information on transaction coverage under the Rule, the delivery method and timing requirements for appraisals and other written valuations under the Rule, and the conditions for obtaining a waiver of the Rule’s delivery timing requirements.
Small Business Administration
Small Business Economic Bulletin: April 2020
April 30, 2020
The Office of Advocacy of the Small Business Administration has published the Small Business Economic Bulletin for April 2020 (the Bulletin). The Bulletin charts pre-COVID-19 pandemic trends for the small business economy. Prior to the COVID-19 pandemic, small businesses were increasing in number and outpacing large firms in net job creation. Currently, small businesses face historic challenges and severe financial vulnerability from the COVID-19 crisis. Although current economic data is limited, early data suggest that small businesses have been disproportionately affected across all industries, especially those in the accommodation and food services industry.
Fannie Mae
Fannie Mae has Published Updated Single-Family and Multifamily Mortgage-Backed Securities (MBS) Prospectuses, effective May 1, 2020
April 30, 2020
Fannie Mae has updated the Single-Family Mortgage-Backed Securities (MBS) Prospectus and the Multifamily MBS Prospectuses.
The updated Single-Family MBS Prospectus is effective for Single-Family MBS issued on or after May 1, 2020, and the updated Multifamily MBS Prospectuses will be used for Multifamily MBS issued on or after May 1, 2020.
Press Release
Fannie Mae Lender Letter Issued to All Fannie Mae Single-Family Servicers on the Impact of COVID-19 on Servicing
April 29, 2020
Fannie Mae issued a Lender Letter to all Fannie Mae Single-Family Servicers that communicates temporary policies to enable servicers to better assist borrowers impacted by COVID-19. The letter includes guidance on its intent to limit servicer obligations to advance scheduled monthly principal and interest payments for certain delinquent loans.
U.S. Department of Labor
Unemployment Insurance Weekly Claims During COVID-19
April 30, 2020
The Department of Labor released information on unemployment insurance weekly claims. In the week ending April 25, 2020, the advance figure for seasonally adjusted initial claims was 3,839,000, a decrease of 603,000 from the previous week’s revised level. The previous week’s level was revised up by 15,000, from 4,427,000 to 4,442,000. The four-week moving average was 5,033,250, a decrease of 757,000 from the previous week’s revised average. The previous week’s average was revised up by 3,750, from 5,786,500 to 5,790,250.
U.S. Department of Education
Secretary DeVos Delivers Nearly $1.4 Billion in Additional CARES Act Relief Funds to Historically Black Colleges and Universities (HBCUs), Minority Serving Institutions (MSIs), and Colleges and Universities Serving Low-Income Students
April 30, 2020
U.S. Secretary of Education Betsy DeVos announced that nearly $1.4 billion in additional funding will be directed to Minority Serving Institutions, including HBCUs and Tribally Controlled Colleges and Universities, as well as institutions serving low-income students to help ensure learning continues during the coronavirus national emergency. Institutions may use the funding to cover the cost of technology associated with a transition to distance education, grants to cover the costs of attendance for eligible students, and faculty and staff trainings. Funds may also be used to cover operational costs, such as lost revenue, reimbursements for prior expenses, and payroll.
Federal Reserve Bank of New York
New York Fed to Release Q1 2020 Household Debt and Credit Report on May 5, 2020
April 30, 2020
The Federal Reserve Bank of New York will release its Q1 2020 Household Debt and Credit Report on May 5, 2020, at 11 a.m. Eastern. The latest report captures consumer credit data as of March 31, 2020. Because individual credit accounts are typically updated monthly, the data does not fully reflect the potential effects of COVID-19 that materialized in the second half of March 2020 and continue.
International
UK Financial Conduct Authority
The Financial Conduct Authority’s Statement on Strong Customer Authentication and Coronavirus
April 30, 2020
The Financial Conduct Authority issued a statement that, in light of the exceptional circumstances of the COVID-19 crisis, it is giving the industry an additional six months to implement strong customer authentication for e-commerce. The new timeline of September 14, 2021 replaces the March 14, 2021 date. Firms are required to take all necessary steps to comply with the revised detailed phased implementation plan and critical path to avoid the risk of enforcement action.