PH FedACTion: Financial Regulatory Updates
Daily Financial Regulation Update - Saturday, May 2, 2020
May 02, 2020
FedACTion Task Force
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PH Client Alerts
COVID-19: Federal Reserve Board Announces It Is Expanding the Scope and Eligibility for the Main Street Lending Program
May 1, 2020
The Board of Governors of the Federal Reserve System (the Federal Reserve) is expanding the scope and eligibility of the Main Street Lending Program (the Program) intended to assist middle-market companies (now defined to include companies with either 15,000 employees or fewer or 2019 annual revenues of $5.0 billion or less). The Federal Reserve initially announced the Program on April 9, 2020 and, at that time, requested public comments on the terms of the Program. Since then, the Federal Reserve has received more than 2,200 comments to modify the Program. In response to comments, the Federal Reserve revised the terms of the Program, expanding its scope and eligibility and adding a third facility to facilitate borrowers with greater leverage.
Click here to read more from our Coronavirus series.
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. House of Representatives
Committee on Financial Services
Waters Calls for Administration to Put Small Business Owners Over Predatory Payday Lenders
May 1, 2020
Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, sent a letter to Treasury Secretary Steven T. Mnuchin and Small Business Administrator Jovita Carranza urging them to deny predatory payday lenders access to Paycheck Protection Program loans.
Federal Agencies
Federal Reserve Board
Agencies Issue Joint Response to Question on Effect of Recent Financial Market Volatility on the Market Risk Capital Rule
May 1, 2020
The Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (the Agencies) issued a response to a public question regarding the capital implications if a banking organization reported an increase in the number of back-testing “exceptions” as part of its market risk disclosures in the first quarter of 2020. Under the “market risk capital rule” a banking organization must identify the number of business days for which the actual daily net trading loss exceeds the corresponding daily VaR-based measure (i.e., “exceptions”) that have occurred over the preceding 250 business days. The organization must then apply a multiplication factor that corresponds to the number of exceptions to determine its VaR-based and stressed VaR-based capital requirements for market risk. In light of the recent significant repricing of global financial markets, the response notes that the Agencies took supervisory action in March 2020 and April 2020 giving certain banks the option to apply the multiplication factor that applied as of December 31, 2019, rather than applying a higher multiplier based on the most recent exceptions.
Consumer Financial Protection Bureau
Consumer Financial Protection Bureau Report Shows Substantial Decline in Credit Applications in March
May 1, 2020
A Consumer Financial Protection Bureau report examining the effects of the COVID-19 pandemic found that consumer credit applications declined substantially in March 2020.
Report
Department of Housing and Urban Development/Federal Housing Administration
HUD Allocates Second Wave of Relief Funds to Help Protect Low-Income Americans
May 1, 2020
U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson announced HUD will allocate $685 million in COVID-19 relief funding to help low-income Americans residing in public housing.
Fannie Mae
Fannie Mae Issues Clarification that COVID-19 Pandemic Is a “Casualty Event” under Certain Connecticut Avenue Securities (CAS) Transactions Issued under the Fixed-Severity Framework
May 1, 2020
Fannie Mae clarified that a reference obligation that is in a forbearance period due to COVID-19 will be treated as a casualty event for Connecticut Avenue Securities (CAS) securities issued in certain transactions. For such transactions, a reference obligation that was in a forbearance period due to a casualty event at the time it became a credit event reference obligation will become a reversed credit event reference obligation if the reference obligation has a payment status reported as current at the conclusion of its forbearance period (or up to three months thereafter if necessary).
Fannie Mae Issues Clarification that COVID-19 Pandemic Is a “Casualty Event” under LSS 2017-PMT1 Transaction
May 1, 2020
Fannie Mae clarified that a mortgage obligation that is in a forbearance period due to COVID-19 will be treated as a casualty event under the LSS 2017-PMT1 transaction. For the LSS 2017-PMT1 fixed severity transaction, a mortgage obligation that was in a forbearance period due to a casualty event at the time it became a recourse event mortgage obligation will become a reversed recourse event mortgage obligation if the loan has a payment status reported as current at the conclusion of its forbearance period (or up to three months thereafter if necessary).
Department of Labor
U.S. Department of Labor Invites the Public to Participate in National Online Dialogue on Opening America’s Workplaces Again
April 30, 2020
The U.S. Department of Labor is hosting a national online dialogue on “Opening America’s Workplaces Again” to solicit ideas from the public on how best to help employers and workers re-open America’s workplaces safely. The dialogue will run from April 30 through May 7, 2020.
International
UK Financial Conduct Authority
FCA Issues Statement on Extension of Time for Notifying Mortgage Prisoners of their Ability to Switch to New Lenders
May 1, 2020
In light of the fact that lenders have removed a large number of products from the market during the COVID-19 pandemic, the Financial Conduct Authority (FCA) extended by three months the window during which lending firms must contact eligible consumers regarding their option to switch their mortgages. The FCA also reiterated that customers on variable rate mortgages originated before the financial crisis with higher risk characteristics must be treated fairly, and that lenders should be actively reviewing their rates.
FCA Seeks Legal Clarity on Business Interruption Insurance Alongside Package of Measures to Help Consumers and Small Businesses
May 1, 2020
The Financial Conduct Authority (FCA) announced it intends to seek legal clarity on business interruption insurance to resolve doubt for businesses who are facing uncertainty on their claims. The FCA is also proposing a series of measures to support both consumers and businesses who hold insurance products and are facing other issues as a result of the COVID-19 pandemic. The package of measures sets out the FCA’s expectations that insurance firms should consider whether their products still offer value to customers in the current situation and whether they can be doing more for those suffering a financial impact because of the pandemic.