Temporary CARES Act Relief and Financial Institutions: What You Need to Know

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated more than $2 trillion in emergency aid to help bolster certain distressed sectors of the economy impacted by COVID-19. The Act includes a number of key provisions the affect financial institutions, including these in Title IV: “Economic Stabilization and Assistance to Severely Distressed Sectors of the U.S. Economy.”

Debt Guarantee Authority. Section 4008 amends Section 1105 of the Dodd-Frank Act to authorize the FDIC to temporarily establish, through December 31, 2020, a debt guarantee program to back noninterest-bearing transaction accounts at banks. The section also allows the National Credit Union Administration, through a board vote, to increase the share insurance coverage for noninterest-bearing transaction accounts in any federally insured credit union until December 31, 2020.

Temporary Lending Limit Waiver. Section 4011 allows the Office of the Comptroller of the Currency (‘OCC’) to exempt nonbank financial companies from the OCC’s lending limits as well as exempt transactions from the lending limits if they are in the public interest. The relief expires on December 31, 2020 or the end of the national emergency, whichever is earlier.

Temporary Relief for Community Banks. Section 4012 reduces the requirement of the Community Bank Leverage Ratio to 8% for qualifying banks. The relief expires on December 31, 2020 or the end of the national emergency, whichever is earlier.

Temporary Relief from Troubled Debt Restructurings. Section 4013 allows financial institutions to suspend the requirements under U.S. GAAP for applicable loan modifications (including impairment) related to COVID-19 that would otherwise be classified as a troubled debt restructuring. The suspension discontinues 60 days after the end of the national emergency.

Optional Temporary Relief from Current Expected Credit Loss. Section 4014 allows banks and credit unions to defer compliance with the FASB’s new Current Expected Credit Losses (CECL) standard. The option expires on December 31, 2020 or the end of the national emergency, whichever is earlier.

Non-applicability of restrictions on Exchange Stabilization Fund (ESF) during national emergency. Section 4015 temporary suspends Section 131 of the Emergency Economic Stabilization Act allowing the use of the ESF for guarantee programs for U.S. money market mutual fund industry. The guarantees will be limited to the shareholder’s account in a participating fund as of the close of business on the day before the announcement of the guarantee and terminates on December 31, 2020.

Credit Protection during COVID–19. In situations where lenders / furnishers of information to credit reporting agencies agree to modify loan terms on an account of a consumer affected by COVID-19, Section 4021 requires such lenders / furnishers to report the account as “current” or similar status as was before the modification. The credit protection ends 120 days after enactment or 120 days after the national emergency is terminated, whichever is later.

Foreclosure Moratorium and Consumer Right to Request Forbearance. Section 4022 prohibits foreclosures of federally-backed mortgage loans for not less than 60 days beginning March 18, 2020. In addition, this section allows for forbearance of up to 180 days to a borrower facing hardships due to COVID-19.  

Relief for Certain Multifamily Borrowers. Section 4023 allows for relief from eviction or late fee charges for up to 90 days to a multifamily borrower with federally-backed multifamily mortgage loans.

Temporary moratorium on eviction filings. Section 4024 prohibits eviction filings or charges related to nonpayment where the landlord’s mortgage is federally-backed. This prohibition ends on July 25, 2020.

We will continue to share regulatory, operational and tax updates to help you manage during the pandemic. We also invite you to visit Weaver’s Resilience & Recovery Resource Center and contact us for more information.

Authored by Umair Haroon, CPA, CA.

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