PH FedACTion: Financial Regulatory Updates
Daily Financial Regulation Update - Saturday, May 16, 2020
May 16, 2020
FedACTion Task Force
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Major Developments
Small Business Administration and Treasury Release PPP Loan Forgiveness Application
The Small Business Administration (SBA) and U.S. Department of the Treasury (Treasury) released the Loan Forgiveness Application and Instructions for Borrowers. The Application and supporting materials including a PPP Loan Forgiveness Calculation Form and related certifications as to use of proceeds and confirmation that non-payroll costs in excess of 25% of the amount requested are not included, are to be submitted to the PPP Lender. The application notes that a false statement to obtain forgiveness of an SBA-guaranteed loan is punishable under the law, including:
18 U.S.C. §§ 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000;
15 U.S.C. § 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and
if submitted to a federally insured depository institution, under 18 U.S.C. § 1014, by imprisonment of not more than 30 years and/or a fine of not more than $1 million.
New York Fed Releases Notice of Interest for the Municipal Liquidity Facility
May 15, 2020
The Federal Reserve Bank of New York (the New York Fed) released a Notice of Interest (NOI) for Eligible Issuers to express interest in selling notes to the special purpose vehicle (SPV) Municipal Liquidity Facility LLC. Eligible Issuers include U.S. states, the District of Columbia, U.S. cities with a population over 250,000 residents, U.S. counties with a population over 500,000 residents and certain multi-state entities. Filling out the NOI is the initial step for an Eligible Issuer to provide eligibility information to the SPV for review.
Congress
Click here to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), 116 HR. 748, Enacted March 27, 2020.
Click here to view the full text of the Paycheck Protection Program Increase Act of 2020, Enacted April 24, 2020.
Click here to view a running list of proposed legislation from the Senate Committee on Banking, Housing, and Urban Affairs, Senate Committee on Small Business and Entrepreneurship, House Committee on Financial Services, and House Committee on Small Business.
U.S. House of Representatives
Committee on Financial Services
Financial Services Committee Releases Fact Sheets on the Heroes Act
May 15, 2020
In anticipation of the U.S. House of Representatives’ vote on the Heroes Act (the Act), the House Financial Services Committee released a series of fact sheets that detail how the Act will support various parties impacted by the COVID-19 pandemic.
Federal Agencies
Federal Reserve Board
Federal Reserve Board Releases Financial Stability Report
May 15, 2020
The Board of Governors of the Federal Reserve System (the Board) released a report summarizing its framework for assessing the resilience of the U.S. financial system and presenting the Board’s current assessment. The report concludes that the outlook for the COVID-19 pandemic is uncertain and there is potential for stresses to interact with preexisting vulnerabilities stemming from financial system or fiscal weaknesses in Europe, China and emerging market economies.
Federal Reserve Board Releases Industrial Production and Capacity Utilization Report
May 15, 2020
In a report on industrial production and capacity utilization, the Board found that total industrial production fell 11.2 percent in April for its largest monthly drop in the 101-year history of the index, as the COVID-19 pandemic led many factories to slow or suspend operations throughout the month. Manufacturing output dropped 13.7%; its largest decline on record; the output of motor vehicles and parts fell more than 70%; and production elsewhere in manufacturing dropped 10.3%.
Securities and Exchange Commission
SEC Chairman Clayton Issues Remarks to the Financial Stability Oversight Council
May 14, 2020
In remarks to the Financial Stability Oversight Counsel, Chairman of the U.S. Securities and Exchange Commission (SEC) Jay Clayton reviewed the SEC’s primary responsibilities during the COVID-19 pandemic, including:
Using its authority, expertise and experience to help ensure the continuing, orderly and fair function of the securities markets;
Monitoring market prices and price movements, flows of capital and availability of credit to assess functionality and resiliency of the capital markets; and
Monitoring and providing guidance concerning, and emphasizing, timely and accurate issuer and other disclosures.
Consumer Financial Protection Bureau
CFPB, CSBS Issue Consumer Guide on Mortgage Relief Options
May 15, 2020
To guide homeowners with federally backed loans through the process of obtaining mortgage relief, the Consumer Financial Protection Bureau (Bureau) and the Conference of State Bank Supervisors released a Consumer Relief Guide with borrowers’ rights to mortgage payment forbearance and foreclosure protection under the CARES Act.
Ginnie Mae
APM 20-06: Treatment of Mortgage Delinquency Ratios for Issuers Affected by COVID-19
May 14, 2020
Ginnie Mae issued All Participant Memorandum 20-06, which provides issuers temporary relief from the acceptable delinquency rate threshold requirement identified in Ch. 18, Part 3, § C of the Mortgage-Backed Securities (MBS) Guide (the Guide). Pooled mortgages for which no scheduled monthly payments were received due to forbearance are reported as delinquent within the context of MBS investor reporting guidelines. Under Chapter 18, Part 3, § D of the Guide, any issuer that fails to maintain delinquency rates below the applicable threshold levels described in Ch. 18, Part 3, § C, may be subjected to Ginnie Mae sanctions. Recognizing that a significant number of issuers may experience increasing delinquency rates as a result of extending forbearances to borrowers experiencing COVID-19-related hardships (as required under the CARES Act), Ginnie Mae will exclude any new issuer delinquencies occurring on or after April 2020 when calculating the delinquency ratios for the purposes of enforcing the provisions in Ch. 18, Part 3, §§ C & D of the Guide.
International
UK Financial Conduct Authority
FCA Issues Statement on Business Interruption Insurance during the COVID-19 Crisis
May 15, 2020
The Financial Conduct Authority (FCA) issued a statement inviting policyholders and insurance intermediaries who are aware of unresolved disputes with insurers over the terms of business interruption (BI) insurance policies to engage with the FCA if they want their concerns to be taken into account as part of a test case the FCA intends to file in court. The statement is a follow-up to the FCA’s statement on May 1, 2020 in which it indicated its intention to obtain court declarations aimed at resolving contractual uncertainty in selected BI insurance policies. In particular, the FCA is inviting parties to put forward their arguments as to why they believe coverage should be available, together with details of policies that they consider have not responded appropriately to a claim, as well as brief relevant facts of their case.