Bank Concerns

During this difficult time all businesses have been effected from the pandemic. This even includes financial institutions. Employees are exposed to the virus and banks need to know what avenues are available to them.

Worker’s Comp Not Covering All Complaints

Each state has a different worker’s compensation system. However, these systems provided an administrative remedy for those injured on the job. This should include those who are injured due to COVID-19, however the laws aren’t supportive of it yet. 

Best Practices 

If fighting against woker’s compensation schemes from employees, it helps to limit employee exposure. This includes curbside pickup, limiting store guests, providing antibacterial soap or face masks. This includes having a sanitization schedule along with training staff. Being proactive now will prevent against lawsuits later.

Bank and CARES Act

 The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), helps businesses affected from the pandemic.

  • Expanded SBA lending through the Paycheck Protection Program, with banks as a primary delivery channel
  • Temporary relief from troubled debt restructurings (TDRs)
  • Delay in compliance with the current expected credit losses methodology for estimating allowances for credit losses (CECL)
  • Temporary reduction of the Community Bank Leverage Ratio
  • Revival of the Bank Debt Guarantee Program
  • Removal of limits on national bank lending to nonbank financial firms
  • Support for liquidity programs established by the Treasury Department and the Federal Reserve, with banks as potential lenders and servicers under these programs

Paycheck Protection Program 

Paycheck protection loans are designed to fund payroll costs, interest on mortgage payments, rent obligations, and utilities, and will be made by banks, credit unions, and other lenders. SBA guarantees 100% of the loan. 

Troubled Debt Restructuring

Under Section 4013 of the CARES Act, it offers Troubled Debt Restructuring. TDR relief can help with the entire life of the loan. Banks need to maintain records of modified loans.

CECL Delay

 Measurement of Credit Losses on Financial Instruments (CECL) helps measure the estimated credit losses. On March 27, 2020, the Federal Reserve, FDIC and OCC issued an interim final rule that allows banking organizations that are required to adopt CECL this year to mitigate the estimated cumulative regulatory capital effects for up to two years. The relief afforded by the CARES Act and interim final rule are in addition to the three-year transition period already in place.

Temporary Reduction of the Community Bank Leverage Ratio 

Section 4012 of the CARES Act reduces the Community Bank Leverage Ratio from 9% to 8% until the earlier of the end of the National Emergency or December 31, 2020.  

Revival of Bank Debt Guarantee Program

Section 4008 of the CARES Act amends Section 1105 of the Dodd-Frank Act to provide the FDIC with the authority to guarantee bank-issued debt and noninterest-bearing transaction accounts that exceed the FDIC’s $250,000 limit through December 31, 2020. This provision grants the FDIC with the authority to revive the financial crisis-era program that provided a temporary guarantee on all noninterest transaction accounts. The FDIC will determine whether and how to exercise this authority.

Removal of Limits on National Bank Lending to Nonbank Financial Firms

Section 4011 of the CARES Act authorizes the Comptroller of the Currency, from the date of enactment of the CARES Act to the earlier of the end of the National Emergency or December 31, 2020, to exempt, by order, any transaction or series of transactions from limits on loans or other extensions of credit, commonly referred to as “loan-to-one borrower” limits, to nonbank financial companies upon a finding by the Comptroller that such exemption is in the public interest. 

Mortgage Forebearance

The CARES Act includes the suspension for 60 days of foreclosures on federally-backed mortgages and that servicers must grant forbearances to borrowers affected by COVID-19.

Foreclosure Moratorium and Consumer Right to Forbearance on One-to Four-Family Mortgages

Section 4022 of the CARES Act sets forbearance requirements and terms for loans insured or guaranteed by a federal government agency or purchased or securitized by Fannie Mae or Freddie Mac (Federally-Backed Mortgage Loans) from January 21, 2020 and ending on the later of 120 days after enactment of the CARES Act or the end of the National Emergency (the Covered Period).  The law requires companies servicing Federally-Backed Mortgage Loans to grant up to 180 days of forbearance to borrowers who request and make an affirmation of financial hardship due to COVID-19. Servicers are not required to document the borrower’s hardship. The initial 180-day forbearance period must be extended up to an additional 180 days at borrower’s request.  During this forbearance period, servicers of Federally-Backed Mortgage Loans may not assess fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract.  The law also imposes a foreclosure moratorium on Federally-Backed Mortgage Loans of at least 60 days beginning on March 18, 2020. 

Liquidity Programs

Section 4003 of the CARES Act appropriates $500 billion for a government-backed lending package include:

  • Loans and bond financing to U.S. companies with investment grade debt ratings through the Primary Market Corporate Credit Facility (PMCCF).
  • Secondary market purchases of bonds issued by U.S. companies with investment-grade debt ratings though the Secondary Market Corporate Credit Facility (SMCCF).
  • Loans to U.S. companies that are secured by asset-backed securities with underlying credit exposure to consumer and small business loans, including student loans, auto and credit card loans, equipment loans, loans guaranteed by the Small Business Administration, and certain other assets through the Term Asset-Backed Securities Loan Facility (TALF).
  • Loans to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds through the Money Market Mutual Fund Liquidity Facility (MMLF) in order to assist money market funds in meeting demands for redemptions by households and other investors.
  • Purchase by a special purpose vehicle of unsecured and asset-backed commercial paper rated A1/P1 directly from eligible companies through the Commercial Paper Funding Facility (CPFF).
  • A yet to be detailed Main Street Business Lending Program to support lending to eligible small- and medium-sized businesses.

Free Consultation

If you or someone you love was negatively impacted by COVID-19, compensation may be available. Our attorneys are experienced with complex litigations. These claims could be complicated and problematic if you do not have the right team in place who are dedicated to fighting for your justice. Our consultations are free. Contact us today.

Information thanks to Godwin Law.

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