April 3, 2020 

MBA, Missouri Chamber Advise Patience As PPP Launches

With the launch of the Paycheck Protection Program today, MBA and the Missouri Chamber of Commerce and Industry ask for patience from the public as the program begins. In a news release, Chamber President and CEO Dan Mehan said the chamber is working to connect Missouri businesses with “trusted local banks and lenders, which are at the front lines of administering the new federal relief programs in communities across Missouri. We urge our members to collaborate with their local lenders to help stabilize our economy and put Missouri in a position for a strong recovery once this crisis ends.”

Application volume will be very high as the financial institutions qualified to offer these loans will strive to keep up with demand, but sheer volume won’t be the only reason the program will take time. Guidance from federal agencies and regulators that financial institutions need to move forward with PPP loans was just released Thursday evening. Since then, bankers have been reviewing the guidance to understand the expectations of the federal government in the steps needed to begin issuing funds. It is anticipated that further guidance may be released by the U.S. Treasury Department and the U.S. Small Business Administration over the coming days.

“Keep in mind that PPP loans aren’t the only way Missouri’s banks are helping their customers,” said Max Cook, MBA president and CEO. “They worked one-on-one with their customers to find solutions before PPP became available, and they will continue to do so after the program is done.”

Bank Industry Advocacy Wins Improvements In SBA Paycheck Protection Program

The Small Business Administration issued an interim final rule that provides additional implementation guidelines and requirements for its Paycheck Protection Program to aid small businesses hit hard by the COVID-19 crisis. In the new guidance, SBA makes significant changes from its original plan, including raising the fixed interest rate on loans made under the program from 0.5% to 1% in response to feedback that the terms could prevent community banks from participating in the program.

Since the CARES Act was passed last week, the American Bankers Association has engaged directly and extensively with Treasury and SBA, sharing feedback from the state associations and a broad range of bankers to ensure the PPP works as designed and that all banks can participate efficiently.

“Now that SBA and Treasury have shared key implementation details and made important changes to the program, I expect banks of all sizes will participate and provide this important financial lifeline to small business customers,” said ABA President and CEO Rob Nichols. “America's banks are already assisting their small business customers across the country, and they stand ready to work in partnership with the federal government to get these new funds to small businesses in need as quickly as possible.”

SBA Guidance Provides Clarity On Key Banker Concerns

The Small Business Administration's new rule provides greater clarity on several issues that banker have raised. For example, it specifies underwriting expectations, which are limited to the application form and the certifications in it, the borrower’s payroll documentation and applicable Bank Secrecy Act requirements. Lenders may rely on borrower documentation for loan forgiveness, providing greater protection for lenders should borrowers misrepresent information in their application.
“The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs,” the rule said. “The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower.”
After seven weeks, lenders may request that SBA purchase the expected forgiveness amount of PPP loans. These requests may be submitted in advance, and SBA will purchase the expected forgiveness amount of the loan within 15 days after it receives a complete report.
Banks already certified as 7(a) lenders may begin approving loan applications with SBA delegated authority today (April 3). The rule said that all banks not currently in troubled condition will be “automatically qualified” to make loans with delegated authority once they submit SBA Form 3506, along with the official borrower application form and the form lenders must submit to receive the 7(a) guaranty.
The guidance in the rule complements other PPP details released Tuesday, including the processing fees SBA will pay to lenders, SBA’s 100% guaranty of PPP loans and the eligibility of the loans to be sold into the secondary market. Authorized by the CARES Act and administered under the SBA 7(a) loan program as part of the federal response to the coronavirus pandemic, the PPP makes up to $349 billion in forgivable loans available to small businesses that use the funds to cover payroll costs and certain other operating expenses.
In related news, the FDIC said it will not criticize banks' good-faith, prudent efforts to use the PPP to work with coronavirus-affected small business borrowers.

FHA Announces COVID-19 Relief For Borrowers

The Federal Housing Administration announced relief for FHA mortgage borrowers unable to make payments because of the coronavirus pandemic. FHA servicers must extend forbearance options for up to six months, with an additional six months if requested by the borrower, pursuant to the recently enacted CARES Act.
An FHA mortgagee letter provided information on the COVID-19 National Emergency Partial Claim to be used by servicers when the coronavirus forbearance period ends. FHA also instructed its mortgage servicers to delay submitting due and payable requests for reverse mortgages for six months and to extend any flexibility they may have relative to negative credit reporting actions.

FDIC’s Consumer News Provides COVID-19 Resources

The Federal Deposit Insurance Corporation has released a special edition of its Consumer News publication the focuses on what consumers need to know about the coronavirus pandemic and what it means for their finances. The publication:
  • provides tips for keeping money safe
  • highlights how mobile banking services can help consumers maintain social distancing
  • provides information for consumers facing financial hardships
  • highlights recent scams 
  • emphasizes that funds are most secure in an FDIC-insured institution

FinCEN Provides Further Information To Financial Institutions In Response To The COVID-19 Pandemic

A notice issued by the Financial Crimes Enforcement Network provides additional information to assist financial institutions in complying with their Bank Secrecy Act obligations during the COVID-19 pandemic. The notice, which updates FinCEN’s March 16 COVID-19 notice, also announces a direct contact mechanism for urgent COVID-19-related issues. The agency is committed to promoting the success of the CARES Act, including the need to facilitate expeditious disbursal of CARES Act funds. FinCEN will issue further information, as appropriate, as the CARES Act is implemented and questions arise. 

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