The Latest on PPP, FHFA, Refi Fee, HMDA, Reg Z, BSA, and More

Writing on business document

On Aug. 24 the U.S. Small Business Administration issued the 24th Paycheck Protection Program interim final rule (IFR). The IFR — Treatment of Owners and Forgiveness of Certain Nonpayroll Costs — addresses the ownership percentage that triggers the applicability of owner compensation rules for forgiveness purposes.

This IFR clarifies that owner-employees with less than a 5 percent ownership stake in a C- or S- Corporation are not subject to the owner-employee compensation rule when determining the amount of their compensation eligible for loan forgiveness because such owner-employees have no meaningful ability to influence decisions over how loan proceeds are allocated.

This IFR also explains that the amount of loan forgiveness requested for non-payroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses.

Finally, the IFR states that rent or lease payments made to a related party can be eligible for loan forgiveness if: 1) the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the covered period that is attributable to the space being rented by the business; and 2) the lease and the mortgage were entered into prior to Feb. 15, 2020. (Any ownership in common between the business and the property owner is considered a related party for these purposes. Note that mortgage interest payments to a related party are not eligible for forgiveness).

Reminder: COVID-19 Fraud Schemes Still Occurring
As reported previously in our May 18th Risk Alert and July 8th Risk Alert, fraud schemes related to COVID-19 government programs such as additional unemployment benefits and the U.S. Small Business Administration’s Paycheck Project Program (PPP) continue to occur. 
 
Just recently, a credit union notified the California and Nevada Credit Union Leagues of a credit union member receiving unemployment benefits from multiple states. In addition, the credit union notified the Leagues of two members, who were not small business owners, depositing large checks from MBE Capital (possibly PPP loan funds) and withdrawing the funds via Cash App and wire transfers.

Please be vigilant regarding these potential fraud schemes and review the previous Risk Alerts with appropriate staff.

FHFA Extends Foreclosure and REO Eviction Moratoriums
The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will extend moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least Dec. 31. The foreclosure moratorium applies to GSE-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by a GSE through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire Aug. 31.

FHFA Extends Purchase of Forbearance Loans and COVID-19 Flexibilities
The Federal Housing Finance Agency announced today that Fannie Mae and Freddie Mac will extend buying qualified loans in forbearance and several loan origination flexibilities until Sept. 30 (originally set to expire on Aug. 31). The changes will ensure continued support for borrowers during the COVID-19 national emergency. You can read more here.

FHFA Delays Adverse Market Refi Fee to Dec. 1
Yesterday, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to delay the implementation date of their Adverse Market Refinance Fee until Dec. 1. The fee was previously scheduled to take effect Sept. 1. This delay comes after heavy engagement from the Credit Union National Association, the League, system partners, as well as other financial services and mortgage industry sources voicing their concerns.

Also, Fannie Mae and Freddie Mac will exempt refinance loans with loan balances below $125,000, nearly half of which are comprised of lower income borrowers at or below 80 percent of area median income. Affordable refinance products in Fannie’s “Home Ready” and Freddie’s “Home Possible” programs are also exempt.

Freddie Mac: Disaster Relief Policies Amid CA Fires
Freddie Mac has reminded mortgage servicers of its disaster relief policies for homeowners as wildfires continue threatening parts of California. Mortgage servicers may immediately leverage Freddie Mac’s short-term forbearance programs to provide relief to homeowners who have been affected. Affected homeowners currently on a COVID-19 related forbearance or other relief plan should contact their servicer to discuss options. You can read more here.

CFPB Posts 2021 HMDA FIG and Supplemental Guide
The Consumer Financial Protection Bureau has published its Home Mortgage Disclosure Act (HMDA) Filing Instructions Guide (FIG) for data collected in 2021 and its Supplemental Guide for Quarterly Filers for 2021. Both of these resources, along with other filer resources, are available on the FFIEC Home Mortgage Disclosure Act webpage.

The CFPB also reminded filers in an Aug. 21 email that, as of March 26 and until further notice, the bureau does not intend to cite in an examination or initiate an enforcement action against any institution for failure to report its HMDA data quarterly, as noted in its Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act.

CFPB Adjusts Dollar Amounts in Reg Z Provisions
The Consumer Financial Protection Bureau has adjusted the dollar amounts for provisions in Regulation Z this year where appropriate, based on the annual percentage change reflected in the Consumer Price Index (CPI) as of June 1. The adjusted thresholds will go into effect Jan. 1, 2021. These include provisions in The CARD Act 2009, the HOEP Act of 1994, and the Dodd-Frank Act of 2010. You can read about the key provisions here.

NCUA: BSA Due Diligence Requirements for PEP Members
The National Credit Union Administration and other federal financial regulators issued a joint statement clarifying that Bank Secrecy Act (BSA) due diligence requirements for members who may be considered "politically exposed persons" (PEPs) should be commensurate with the risks posed by the PEP relationship. You can read the NCUA’s statement here. You can also view the joint regulatory statement on BSA due diligence, which discusses due diligence requirements and considerations.

NCUA Webinar on CU and NeighborWorks Partnerships
Credit unions can learn more about potential collaborations with NeighborWorks America during an upcoming free webinar hosted by the National Credit Union Administration. The webinar is scheduled for Sept. 15 at 11 a.m. (Pacific). NeighborWorks America is a leading national housing and community development organization with a nationwide network of nearly 240 local nonprofits. Participants may submit questions in advance to WebinarQuestions@ncua.gov. The email’s subject line should read, “Partnering with NeighborWorks.”

Business Continuity Planning Webinar: Natural Disasters & Pandemics
Given the ongoing California wildfires, please consider registering for the “Your Business Continuity Planning and Preparedness Plan”  archived webinar. It will focus on challenges of business continuity issues and risks in the face of costly and devastating events, as well as strategies to maintain a robust and evolving pandemic and disaster management program (including business continuity and resumption preparedness).

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