CONTINUED CARES ACT GUIDANCE FOR CREDIT UNIONS

Guidance and details are coming down the line almost hourly on the various aspects of the Economic Security Act of 2020 or CARES Act.

Yesterday we provided you with an in-depth synopsis of the new law from a credit union industry perspective.

Just this afternoon the US Treasury Department made available the initial guidelines for the Paycheck Protection Program (PPP) that many credit unions are trying to get their arms around.

This provision seems to potentially apply to credit unions themselves if they have less than 500 employees. It will certainly apply to many, if not most, of your commercial account and loan members.

Below I am providing you with the language the Treasury Department used in their initial guidance to lenders with a Question and Answers format.

In addition, I providing you with the actual release from Treasury with other links for both borrowers and lenders – including the application.

Hopefully, this will be beneficial to you as you pursue this further.

We will continue to keep you up-to-date on what we learn from our inside sources as soon as we hear it and have it confirmed.

PAYCHECK PROTECTION PROGRAM (PPP) INFORMATION SHEET FOR LENDERS AS PER THE US TREASURY DEPT

Who is eligible to lend?

All existing SBA-certified lenders will be given delegated authority to speedily process PPP loans. All federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions are eligible to participate in this program. A broad set of additional lenders can begin making loans as soon as they are approved and enrolled in the program. New lenders will need to submit their application to [email protected] to apply with the SBA.

Are these loans guaranteed by the SBA?

Yes, the SBA guarantees 100% of the outstanding balance, and that guarantee is backed by the full faith and credit of the United States.

Are there guarantee fees?

The SBA waives all SBA guaranty fees, including the upfront and annual servicing fees.

What underwriting is required?

You will need to verify that a borrower was in operation on February 15, 2020. You will need to verify that a borrower had employees for whom the borrower paid salaries and payroll taxes. You will need to verify the dollar amount of average monthly payroll costs. You will need to follow applicable Bank Secrecy Act requirements.

How will lenders be compensated?

 Processing fees will be based on the balance of the financing outstanding at the time of final disbursement:

• Loans $350,000 and under: 5.00%
• Loans greater than $350,000 to $2 million: 3.00%
• Loans greater than $2 million: 1.00%

Lenders may not collect any fees from the applicant.

Who can be an agent?

 An agent is an authorized representative and can be:

• An attorney;
• An accountant;
• A consultant;
• Someone who prepares an applicant’s application for financial assistance and is employed and compensated by the applicant;
• Someone who assists a lender with originating, disbursing, servicing, liquidating, or litigating SBA loans;
• A loan broker; or
• Any other individual or entity representing an applicant by conducting business with the SBA.

How will agents be compensated?

Agent fees will be paid out of lender fees. The lender will pay the agent. Agents may not collect any fees from the applicant.

• Loans $350,000 and under: 1.00%
• Loans greater than $350,000 to $2 million: 0.50%
• Loans greater than $2 million: 0.25%

Can these loans be sold in the secondary market?

PPP loans can be sold in the secondary market. The SBA will not collect any fee for any guarantee sold into the secondary market.

The actual publication overview release from the Treasury Department with applicable links is below.

ASSISTANCE FOR SMALL BUSINESSES

The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.

Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.

• For a top-line overview of the program CLICK HERE
• If you’re a lender, more information can be found HERE
• If you’re a borrower, more information can be found HERE
• The application for borrowers can be found HERE

https://home.treasury.gov/cares

Until next time.