SDBA eNews

October 8, 2020

SBA Updates PPP FAQs to Address Payment Deferral Extension 

The Small Business Administration and Treasury Department last night updated the Paycheck Protection Program FAQs to address the deferral period extension granted by the PPP Flexibility Act of 2020. The extension allows borrowers to defer payments of principal, interest and fees on PPP loans for 10 months.

In the FAQ, SBA and Treasury confirmed that the extension of the deferral period automatically applies to all PPP loans, and said that lenders should immediately notify borrowers of the change in the deferral period. Importantly, the FAQs note that “SBA does not require a formal modification to the promissory note,” and that “a modification of a promissory note to reflect the required statutory deferral period under the Flexibility Act will have no effect on the SBA’s guarantee of a PPP loan.

Additionally, SBA informed all lenders in a letter on Tuesday that it has begun remitting PPP loan forgiveness payments. To ensure successful payment processing, lenders should recheck their institution settings within the PPP Forgiveness Platform, perform a final check of their submitted forgiveness decisions to ensure the forgiveness amount in the platform matches their records, and confirm their institution’s interest accrual method. Once the SBA initiates payment, lender authorizing officials can view details on the payment. Read the FAQs. For more information, contact ABA’s Dan Martini.

SBA Issues Guidance on PPP Borrower Changes of Ownership

The Small Business Administration last Friday issued a notice explaining required procedures when an entity that has received a Paycheck Protection Program loan experiences a change in ownership. Borrowers must notify their PPP lenders in writing prior to the closing of any covered change in ownership, which occurs when at least 20% of common stock or other ownership interest in a PPP borrower is sold or transferred, when the borrower sells or transfers at least 50% of its assets or when the borrower merges with or into another entity.

The lender may approve a change in ownership without prior SBA approval for changes structured as a sale or transfer of common stock or other ownership interest, as a merger or as an asset sale. Sales or transfers of ownership interest and mergers are exempt from SBA approval provided the transfer or sale is 50% or less of the ownership interest or the borrower submits a PPP forgiveness application. (The borrower must escrow funds to pay any unforgiven PPP balance.) Asset sales are exempt when they amount to less than 50% of the borrower’s assets, a forgiveness application is filed and funds escrowed to pay any unforgiven balance. The notice includes notification requirements of lenders for all covered changes of ownership.

In all other cases, the PPP lender must submit a request for SBA approval to the appropriate SBA Loan Servicing Center. The notice provides a list of what these requests must include. SBA approval “will be conditioned on the purchasing entity assuming all of the PPP borrower’s obligations under the PPP loan, including responsibility for compliance with the PPP loan terms,” SBA said. Regardless of any change, the PPP borrower remains responsible for performing loan obligations, PPP-related certifications and preparing and retaining all required documentation. Read the notice. For more information, contact ABA’s Dan Martini.

SD Banking Commission to Hold Public Hearing to Adopt Rules

The South Dakota Banking Commission will hold a public hearing via phone on Oct. 29 at 1:30 p.m. CDT to consider the adoption and amendment of proposed rules numbered 20:07:10:02, 20:07:10:03 and 20:07:22:04.

The first two proposed rules would reduce certain fees charged for various bank applications to reflect changes made to the application payment process during the 2020 Legislative Session in HB 1015 and to reduce the number of copies of each application submitted to the Division of Banking. The reason for adopting the proposed rules is to adjust certain application fees downward to account for applicant banks paying publication costs directly as required following changes made in HB 1015. The processing of applications has moved to an electronic process, and paper application documents are no longer necessary.

The third proposed rule would provide public trust companies in South Dakota an additional option to meet their obligation for activities which must be performed in South Dakota. 

Those interested in presenting data, opinions and arguments for or against the proposed rules may do so via phone at the hearing or mail them to the South Dakota Division of Banking, 1601 N. Harrison Avenue, Suite 1, Pierre, SD 57501. Material sent by mail must reach the Division by Oct. 29 to be considered. To participate in the public hearing, call 605.679.7263, use conference code 860838999 and press #. Learn more.

CFPB Issues Statement on Applications for Early Termination of Consent Orders

The Consumer Financial Protection Bureau on Monday issued a policy statement outlining how institutions may apply for early termination of a consent order and how the CFPB will evaluate early termination applications. The statement takes effect Oct. 8.

In the statement, the Bureau said that entities seeking early termination must demonstrate full compliance with the consent order. “If it has not already done so, the Bureau intends to expeditiously review the entity’s compliance with the consent order and conduct follow-up work as needed to determine the entity’s compliance,” the statement said. “The Bureau generally intends to complete this compliance review within six months of receiving an application that the Bureau determines is complete.”

In addition, entities must meet certain threshold eligibility criteria and have a satisfactory compliance management system in applicable areas, the CFPB said. Applications for early termination should be submitted to the CFPB point of contact specified in the consent order, and discretion over granting or denying termination applications will remain with the CFPB director. Read the policy statement.

ABA's Vote 2020 Website Offers Important Information for Voters

With election day fast approaching, bankers and others can visit ABA’s Vote 2020 Website—part of the association’s Secure American Opportunity grassroots platform—to find important information about voting dates and deadlines.

Visitors to the nonpartisan website can look up key election dates by state, including early voting dates, absentee balloting and registration deadlines; view a list of candidates in their state or congressional district; learn about key policy issues; monitor changes related to voting processes or procedures in response to the COVID-19 pandemic; and register to receive election updates. In addition, ABA has created a “get out the vote” toolkit for employers to use to help encourage their employees to vote. Visit the site.

Next DEI Open Forum to Focus on Supplier Diversity, Racial Profiling

The ABA will host another free open forum on diversity, equity and inclusion in the banking industry on Oct. 14 at 1 p.m. CDT for bankers to discuss current DEI challenges and topics, exchange leading practices and ideas and learn more about implementing DEI programs and initiatives at individual banks. This session will include a focused discussion on supplier diversity and preventing racial profiling at banks. Register now. View ABA resources on DEI.

SDBA to Hold Virtual Security Officers Conference

The SDBA will offer the Security Officers Conference virtually on Oct. 27 via Zoom. The session will be recorded and available for 30 days. This well-rounded conference focuses on a range of issues of concern to security officers, facility personnel and management.

Using current trends and examples, a variety of topics will be covered: pandemic fraud: what’s ahead, human trafficking, elder fraud: growing faster than the speed of age, social engineering—creating accomplices, financial crime investigations and preparing your case for law enforcement.

Security officers and directors, operations managers, auditors, HR directors, legal staff, loan officers, disaster recovery managers, collection staff and fraud investigators will all benefit from this training. Learn more and register.

ABA, VBA to Host Industry's First DEI Virtual Summit

The ABA and Virginia Bankers Association will hold their first-ever joint Diversity, Equity and Inclusion Summit on Friday, Nov. 6. This virtual gathering, sponsored by Ncontracts, is part of a continuing conversation about fostering diversity and inclusion in the banking industry.

The event will bring bank leaders, industry professionals and DEI practitioners together to network and discuss new developments related to DEI. Sessions will address DEI issues through a series of live panel discussions and focused learning during breakout sessions. Learn more and register

 Compliance Alliance

Question of the Week

Question: When you have multiple 1-4 family dwelling properties securing a loan, does the bank still have to comply with the appraisal notice requirement and the appraisal acknowledgement/receipt of receiving appraisal three days before closing?

Answer: Regulation B, 12 CFR 1002.14(a)(1) requires a creditor to provide an applicant with a copy of “appraisal or other written valuations developed in connecting with an application for credit that is to be secured by a first lien on a dwelling.”

Section 1002.14(b)(2) further defines a dwelling to include residential structures of one to four units.

The Regulation does not address loans secured by multiple dwellings. Conservatively, to the extent the loan will be secured by a first lien on any 1-4 dwelling, the appraisal requirements set forth in section 1002 above would apply for each such dwelling.

Additionally, Section 1002.14(a)(2) requires the provision of a disclosure to the applicant,

C/A interprets this subsection to require only one disclosure requirement, provided that it addresses all applicable appraisals. If the disclosure has the specific address(es) or if bank policy states otherwise, the bank is not directly prohibited from sending multiple notices either.

Of course, please note, the borrower would still need to receive each appraisal promptly upon completion or within three days of closing, whichever is earlier. 

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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 and ask for our Membership Team.

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Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.