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Fannie and Freddie offer new Covid-19 payment deferral
On May 13, the FHFA, Fannie Mae, and Freddie Mac, announced a new Covid-19 payment deferral option that will be available starting on July 1. According to Fannie Mae Lender Letter LL-2020-07 and Freddie Mac Bulletin 2020-15, the new Covid-19 payment deferral is “a new workout option specifically designed to help borrowers impacted by a hardship related to Covid-19 return their mortgage to a current status after up to 12 months of missed payments.”
The new option is for borrowers who (i) are on a Covid-19 related forbearance plan, or (ii) have a resolved financial hardship due to Covid-19. Specifically, the servicer is required to confirm that the borrower is now able to continue making the full monthly contractual payment of their loan but is unable to reinstate the mortgage loan or afford a repayment plan to cure the previous delinquency. If a borrower is eligible for the Covid-19 payment deferral, the servicer must allow the borrower to resume their contractual monthly payments; however, the delinquency amount (which includes up to 12 months of past-due principal and interest payments; out-of-pocket escrow advances paid to third parties; and servicing advances paid to third parties in the ordinary course of business) must be deferred as a non-interest bearing balance, due and payable at liquidation, refinance, or maturity. Among other requirements detailed by the Lender Letter and Bulletin, servicers must report the loan in accordance with the Fair Credit Reporting Act, as amended by the CARES Act, which requires lenders to report as current any loans subject to Covid-19 forbearance or other accommodation. Additionally, servicers must waive all late charges, penalties, and fees upon completing the Covid-19 payment deferral.
In addition to the new Covid-19 payment deferral, borrowers will continue to have other hardship options including repayment plans, lump-sum repayment, or permanent modification. Servicers must begin evaluating borrowers for the Covid-19 payment deferral beginning July 1.
SBA, Treasury won’t audit PPP loans beneath $2 million
On May 13, the Small Business Administration (SBA) in consultation with the Treasury Department updated the Paycheck Protection Program (PPP) Frequently Asked Questions (FAQs) to provide additional borrower guidance. Borrowers that submit PPP applications must certify, in good faith, that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” FAQ #46 establishes a safe harbor that “[a]ny borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” According to SBA, this safe harbor is appropriate because borrowers with loans of less than $2 million are generally less likely to have access to other forms of liquidity than borrowers who are able to obtain larger loans. Also, the safe harbor will provide more certainty to PPP borrowers with more limited resources, and it will allow SBA to use its resources efficiently to prioritize reviews of larger loans, where compliance audits may yield higher returns.
SBA’s guidance noted, however, that borrowers with loans greater than the $2 million threshold “may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.” Those loans will be subject to review by the SBA, and if the SBA determines a borrower lacks an adequate basis for certification, the borrower will not be eligible for loan forgiveness and must pay the outstanding balance. If a borrower repays a loan after receiving notification from the SBA, the SBA states that it will not pursue administrative enforcement or make referrals to other agencies based on its determination concerning the certification of necessity.
Additionally, in FAQ #47, the SBA extended until May 18 the PPP safe harbor repayment deadline for borrowers who received PPP loans but had access to other sources of capital. Borrowers who applied for a PPP loan and repay the loan in full by May 18 will be deemed by the SBA to have made the required certification regarding necessity of the loan request in good faith. The extension is intended to provide borrowers an opportunity to consider FAQ #46. The SBA’s interim final rule providing the safe harbor (covered by InfoBytes here) will be revised to reflect the extension.
New Jersey Department of Banking and Insurance issues bulletin regarding reductions in premiums
On May 12, the New Jersey Department of Banking and Insurance issued Bulletin No. 20-22 to certain insurance-related entities, including licensed, admitted, and surplus lines insurers transacting property and casualty insurance in New Jersey. In light of the reduced risk of loss for certain insurance as a result of Covid-19, the bulletin requires premium reductions for those lines of insurance. Where applicable, insurers are ordered to make an initial premium refund or other adjustment to adversely impacted New Jersey policy-holders, and for each month that the public health emergency is in effect. Instructions are provided for submitting the components of the refund program via the System for Electronic Rates and Forms Filing. Insurers that can demonstrate that their rates are not excessive, inadequate, or unfairly discriminatory, or that otherwise contend they should not be subject to the terms of the bulletin, may submit the basis for this position and supporting documentation by June 1, 2020.
Colorado issues guidance to critical financial institutions
On May 12, Colorado issued additional guidance to critical financial institutions during the Safer at Home for Public Health Order 20-28. The guidance clarifies that financial and professional institutions are considered “Critical Business/Critical Service” under the public health order. It also provides responses to frequently asked questions, including how to follow guidance at the city, county, and state level, whether banks and credit union branches are considered “Critical Retailers,” the requirements for monitoring employee health, and cleaning procedures at the financial institutions’ facilities.
OCC issues guidance about health-related changes to annual meetings
On May 12, the Office of the Comptroller of the Currency issued guidance for national banks and federal savings associations that are considering changing the date, time, or location of their annual meetings as a result of stay-at-home orders or other health concerns. The OCC clarified that, for national banks, the requirement to hold an annual meeting is governed by state laws and the bank’s governing documents. OCC regulations require federal savings associations to hold annual meetings within 150 days after the end of the fiscal year and to incorporate the time frame for conducting the meeting into their bylaws. Although federal savings associations must receive OCC approval to amend their bylaws to incorporate a longer time frame, the OCC will deem such an amendment as approved and effective if it meets the conditions set out in the guidance. The OCC also strongly encourages all banks to use electronic methods for submitting licensing filings during the COVID-19 emergency.
Federal Reserve publishes revised terms, other information regarding lending and liquidity facilities
On May 12, the Federal Reserve Board issued additional information regarding the Term Asset-Backed Securities Loan Facility (TALF) and the Payment Protection Program Liquidity Facility (PPPLF). It issued a revised term sheet for TALF, indicating that eligible borrowers include businesses that (i) are created or organized in, or under the law of the United States; (ii) have significant operations in and a majority of their employees based in the United States; and (iii) maintain an account relationship with a primary dealer. The board also announced that, on a monthly basis, it will publicly disclose the name of each participant in the TALF and the PPPLF, as well as amounts borrowed and interest rate charged. In addition, the board issued FAQs regarding the TALF.
New Jersey Department of Banking extends filing deadlines for certain annual reports
On May 12, the New Jersey Department of Banking Insurance issued a bulletin regarding the extension of deadlines for certain entities and individual regulated by the Division of Banking to file annual reports. Certain enumerated licensees, including check cashers, insurance premium finance companies, motor vehicle installment sellers, and money transmitters, are granted an extension until June 1 to file annual reports. However, licensees must file their subsequent annual report by April 1, 2021. Mortgage lenders and mortgage brokers who are required to file an annual report on or before May 1, are also granted an extension to June 1. The next annual report must be filed by May 1, 2021.
FINRA provides guidance on qualification examinations
On May 12, FINRA added a new question to its frequently asked questions page regarding the availability of the waiver process for qualification examinations. FINRA has clarified that its waiver process is currently functional and FINRA may, in exceptional cases and where good cause is shown, waive the applicable qualification examinations and accept other standards as evidence of an applicant’s qualification for registration. Guidance is provided regarding how to submit a waiver request.
Tennessee governor extends authorization of remote notarization
On May 12, Tennessee Governor Bill Lee issued Executive Order No. 37 allowing for remote notarizations and witnessing of documents until June 30, thereby extending the relief previously granted in Executive Order No. 26, which was set to expire on May 18.
Tennessee extends timeline for bank examinations and authorizes virtual shareholder meetings during pandemic
On May 12, Tennessee Governor Bill Lee issued Executive Order No. 36 suspending or amending a variety of statutory and regulatory requirements to facilitate the treatment and containment of Covid-19. These include, among other things, extending examination cycles for financial institutions, extending timing requirements for securities registrations, and allowing for virtual shareholder meetings. The order will be in effect until June 30, unless amended or revised.