SDBA eNews

April 23 2020

ABA Urges House to Approve Additional PPP Funding

The ABA yesterday urged House leaders swiftly to approve a legislative package that would provide an additional $320 billion in funding for the Small Business Administration’s Paycheck Protection Program. The Senate unanimously approved the bill on Tuesday, and the House is expected to vote on the legislation this afternoon.

The ABA noted that the PPP has been a “financial lifeline” to small businesses nationwide, but that many were still awaiting assistance when the initial round of funding ran out on April 16. These additional funds “will allow America’s banks to continue to stand by their small business customers and do everything they can to deliver this relief quickly and efficiently, thereby saving jobs and limiting the economic damage from the pandemic,” the ABA said. “America’s small businesses are counting on us to come through for them, and America’s banks are eager to fulfill the demand for PPP loans to the extent possible.” Read the letter.

As of April 16, when funding for the program was exhausted, the SBA had approved 1.66 million loans totaling $342.3 billion through the PPP, according to updated figures released by SBA last Friday. Approximately 60% of those loans were made by community banks of $10 billion in assets or less. A total of 4,975 lenders were participating in the program as of that date, up from 4,664 from April 13.

The overall average loan size was $206,000, and the vast majority—74%—of PPP loans approved were $150,000 and under. The construction sector has received 13.12% of the PPP funds allocated as of the report date. The professional, scientific and technical services sector received 12.65%, manufacturing received 11.96%, and health care and social assistance received 11.65%.

Fed Officials Provide Additional Clarity on PPP Liquidity Facility

With the Federal Reserve’s Paycheck Protection Program Liquidity Facility now up and running, officials from the Fed on Monday shared additional details on the program and answered questions during a teleconference with ABA banker leadership. The PPPLF offers non-recourse loans to institutions eligible to make PPP loans, with the SBA-guaranteed loans pledged as collateral to the Federal Reserve Banks.

One question addressed the borrower certification—required for any Section 13(3) facility—that the participating bank is not insolvent and that it cannot obtain adequate credit accommodation from other sources. Fed officials clarified that this requirement is “not meant to prevent usage of this facility” and that banks “can rely on the fact that the Federal Reserve established this facility as an indication that, without using it, you would not have adequate credit accommodation.”

In addition to receiving advances through the PPPLF, banks can choose to pledge PPP loans to the discount window, Fed officials noted, highlighting several distinctions between the two. For example, advances made under the PPPLF have a fixed interest rate of 35 basis points, with the extension of credit matching the life of the underlying loan, while discount window advances made under the primary credit program have a variable interest rate—currently set at 25 basis points—and credit is extended for 90 days. They added that PPP loans pledged to the PPPLF may be excluded from leverage ratio calculations, as codified by an interim final rule issued by the federal banking agencies earlier this month.

Finally, Fed staffers said that they plan to refine and update PPPLF FAQs as new questions arise from participating depository institutions. Questions on the PPPLF may be submitted to [email protected] and to [email protected]. Read the Fed's FAQs

ABA Joins Broad Coalition Seeking Clarity on Garnishments of EIPs

The ABA on Tuesday joined a broad coalition of financial trade and consumer organizations in a letter to congressional leaders urging them to exempt the CARES Act economic impact payments from garnishment orders. While the CARES Act exempted these payments from offset for debts owed to federal and state agencies (except for child support), it failed to address court-ordered garnishments to pay creditors, the groups noted.

“Banks are obligated to comply with garnishment orders unless lifted by a court,” the groups emphasized. “We urge Congress to provide this certainty to ensure that American families are receiving these benefits as intended.”

They added that clarifying the treatment of EIPs could also encourage more consumers to provide their direct deposit information to the IRS, which would facilitate the use of electronic payments rather than digital checks—something ABA has advocated since the EIP program was first announced. Read the letter.

The ABA is working to help unbanked consumers open bank accounts so they can receive CARES Act payments electronically. The association recently unveiled a new webpage where consumers can find a partial list of institutions offering accounts that can be opened online and funded with an EIP. Banks offering digital account openings can respond to a very short survey to be featured on the webpage. Take the survey.‌ 

USDA to Provide $16 Billion in Direct Assistance to Farmers and Ranchers

The U.S. Department of Agriculture (USDA) has announced the $19 billion Coronavirus Food Assistance Program (CFAP) to support farmers and ranchers during the COVID-19 pandemic, according to Sen. John Hoeven (R-N.D.), chairman of the Senate Agriculture Appropriations Committee.

The program will include:

  • $16 billion in direct payments for farmers and ranchers, funded using the $9.5 billion emergency program in the CARES Act and $6.5 billion in Credit Commodity Corporation (CCC) funding.
  • $3 billion in purchases of agriculture products, including meat, dairy and produce to support producers and provide food to those in need. 

USDA will provide $16 billion in direct payments to farmers and ranchers including: $9.6 billion for the livestock industry ($5.1 billion for cattle, $2.9 billion for dairy and $1.6 billion for hogs), $3.9 billion for row crop producers and $2.1 billion for specialty crops producers and $500 million for others crops.Producers will receive a single payment determined using two calculations:

  • Price losses that occurred Jan. 1 to April 15, 2020. Producers will be compensated for 85% of price loss during that period
  • The second part of the payment will be expected losses from April 15 through the next two quarters and will cover 30% of expected losses.

The payment limit is $125,000 per commodity with an overall limit of $250,000 per individual or entity. Qualified commodities must have experienced a 5% price decrease between January and April. The USDA is expediting the rule making process for the direct payment program and expects to begin sign-up for the new program in early May and to get payments out to producers by the end of May or early June. Read more

FHFA to Purchase Qualified Loans in Forbearance

In a significant move yesterday, the Federal Housing Finance Agency announced that it will purchase qualified single-family mortgages in forbearance in order to support mortgage markets during the coronavirus pandemic.

Generally, loans in forbearance or delinquency may not be sold to Fannie Mae or Freddie Mac. However, FHFA said it would ease this restriction “for a limited period of time and only for mortgage meeting certain eligibility criteria.” FHFA also noted that loans in forbearance that are sold to Fannie Mae and Freddie Mac will “be priced to mitigate the heightened risk of loss to the Enterprises.”

According to the guidelines issued by the GSEs, Fannie and Freddie will impose a loan-level pricing adjustment of 500 basis points for first-time buyers and 700 basis points for all others. In addition, borrowers cannot be behind by more than one payment and the transaction must involve either a purchase transaction or a no-cash-out refinance.

“We are focused on keeping the mortgage market working for current and future homeowners during these challenging times,” said FHFA Director Mark Calabria. “Purchases of these previously ineligible loans will help provide liquidity to mortgage markets and allow originators to keep lending.”

ABA Webinar to Focus on COVID-19 Forbearance Challenges

With many mortgage borrowers seeking forbearance options for their loans during the coronavirus pandemic—and with recent legislation making this relief mandatory on most loans—ABA will host a free webinar this Friday, April 24, at noon CDT to review applicable legal and regulatory requirements and other challenges and considerations for banks.

The webinar will cover: the implications of the CARES Act forbearance provisions; the latest guidance from the CFPB, GSEs and other agencies; the interplay between CARES Act forbearance requests and the CFPB’s loss mitigation servicing rules; CARES Act forbearance requests for borrowers in foreclosure and bankruptcy; considerations for portfolio loans not subject to the CARES Act; and challenges facing borrowers nearing the end of their forbearance period. Register now.

Agencies to Host Webinar on Coronavirus Loan Modifications, Reporting

The federal financial regulatory agencies will host a joint webinar on Friday, April 24, at 2 p.m. CDT to discuss the recent interagency statement for loan modifications and reporting for financial institutions working with customers affected by the coronavirus. Regulators will address accounting and regulatory reporting questions and clarify the interaction between current accounting principles and the CARES Act. Pre-registration is required, and questions may be submitted in advance to [email protected]. Register for the webinar

Deadline Nearing to Sign Up to Serve on SDBA Committee, Work Group

The SDBA is seeking bankers to serve on four standing committees and two work groups for 2020-2021: Agricultural Credit, Credit Card, Legislative and Trust committees and Education and Technology work groups. Terms are one year beginning May 1, 2020, and ending April 30, 2021, except for the Legislative Committee which is a three-year term. Legislative committee members can serve two, consecutive three-year terms.

If you are interested in serving on a committee or work group, please complete the committee/work group appointment form. The deadline to apply is Thursday, April 30. If you know of someone else at your bank who might be interesting in serving on a committee or work group, please share this information with them. If you have any questions, contact Alisa Bousa

SDSU Extension 2020 Ag Land Value Survey Now Open

SDSU Extension is encouraging appraisers, assessors, realtors, ag lenders and extension field specialists to complete its 2020 Agricultural Land Value Survey. The survey will be open until May 15.

The principal purpose of this survey is to obtain market value and cash rental rate information, by type of agricultural land, in different regions of South Dakota.  Farmers, landowners, investors, lenders, real estate professionals and public officials are the majority users of the data provided by the survey.

The survey has been ongoing since 1991. If you have any questions or suggestions about future iterations of the survey, contact Jack Davis with SDSU Extension at 605.995.7378 or via email.

Compliance Alliance


Question of the Week

Compliance Alliance Pandemic Resources for Community Banks

Question: Should the bank return stimulus checks that are received through direct deposit for deceased or divorced recipients? Is there a possibility of reclamation?

Answer: According to a recent call in which several members of Treasury spoke, banks may accept even single-party deceased payments because they have been screened and eligible based on date of death. As for divorced parties, banks may pay into joint accounts if that's how the payment is made even if the bank is aware the parties are now divorced. The Treasury members indicated that there should be no reclamation claim on the bank if $2,400 were deposited into the account, even if the parties are divorced. They indicated that Treasury has no authority to hold the bank liable as long as the bank posted it properly according to the account number.  

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Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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Contact Alisa Bousa, SDBA, at 800.726.7322 or via email.