CARES Act Loan Matters | 2020-08-27
From a compliance perspective, 2020 has started like any other year: pending the National Administration of Credit Unions‘s (NCUA) annual Letter to credit unions (LCU 20-CU-01) detailing the agency’s oversight priorities for the coming year.
No one realized that the coronavirus (COVID-19) pandemic would soon devastate compliance officers, credit unions, our country and the world. To reflect this, the NCUA released an update on prudential priorities in July via LCU 20-CU-22.
What do credit unions and boards focus on? How do you stay compliant in this rapidly changing environment with so many regulatory changes?
A good place to start is to assess credit problems due to Coronavirus Aid, Relief and Economic Security Act (CARES) provisions and other matters relating to operations and governance.
These problems include:
Paycheque Protection Program
The CARES law Paycheque Protection Program (PPP) is offering potentially 100% repayable, low-interest loans to eligible small business borrowers affected by COVID-19 to retain and pay employees, and pay mortgage interest, rent, and utilities.
The SBA has issued 24 draft final rules to provide PPP guidance to lenders and borrowers. An interim final rule in June makes revisions to the SBA’s loan cancellation guidelines and guidelines on loan review procedures.
This includes allowing borrowers to use the proceeds of PPP loans for eligible non-wage costs in an amount not exceeding 40% of the loan amount to be eligible for full loan forgiveness, an increase from 25%. original.
PPP borrowers should expect a review of their calculations by a certified public accountant to confirm that they are getting the highest possible rebate amount for which they are eligible.
Congress is considering several proposals for a relaunched PPP (which closed on August 8), including additional funding and second-draw loans for hardest-hit small businesses.
This is ripe for fair credit problems.
The CARES Act required lenders to cancel federally guaranteed mortgages for up to 180 days (borrowers can request an additional 180 days), and credit unions have had to scramble to implement these new mandates.
Fortunately, the agencies have expressed flexibility on issues such as the structuring of forbearance requests, change from restructuring, escrow payments and forced insurance.
Temporary changes to the FCRA
The CARES law amended federal law Fair Credit Reports Act (FCRA) to impose temporary COVID-19 reporting requirements on information providers to consumer news agencies.
The provision applies to “accommodation” made from January 31, 2020 no later than 120 days after March 27, 2020 or 120 days after the date of the end of the national emergency.
Credit unions that make an “accommodation” (p.
UDAAP and Fair Lending
With interest rates at rock bottom and many members feeling the need to access cash due to financial difficulties, refinances are once again hitting record highs. As a result, many lenders face resource constraints and may be forced to limit refinancing, pick and choose which members to serve.
This situation is ripe for fair credit problems if lenders serve some members rather than others. Approach these decisions in a fair and equitable manner to avoid fair loan issues when selecting who to serve from the membership.
JARED IHRIG is Chief Compliance Officer for the Credit Union National Association.