By Thomas Abbott and Kristine Kruger

On March 27, 2020, the president signed into law the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, in response to the national emergency arising from the COVID-19 pandemic. Four key provisions of the CARES Act are likely to affect mortgage loan servicers: (1) credit protection; (2) a moratorium on foreclosures; (3) forbearance on mortgage payments; and (4) a moratorium on eviction filings. Compliance with the CARES Act may be straightforward for moratoriums but more challenging for credit reporting and regulatory compliance. This post provides an updated summary of salient portions of the CARES Act and identifies potential regulatory compliance pitfalls.

Summary of the CARES Act

  • Amendment to the Fair Credit Reporting Act
    The CARES Act amends the Fair Credit Reporting Act (FCRA) to require furnishers of credit information who make an accommodation that the consumer satisfies to report the credit obligation or account as current unless the account was delinquent before the accommodation. See 15 U.S.C. § 1681s-2(a)(1)(F)(ii)(I)-(II). The amendment is potentially retroactive, defining the covered period from January 31, 2020, to the later of July 25, 2020, or 120 days after the termination of the national emergency. See 15 U.S.C. § 1681s-2(a)(1)(F)(i)(II). Accommodations are defined broadly to include forbearances under the CARES Act in addition to a loan servicer’s deferment of payments, loan modifications, or other assistance or relief granted to a consumer affected by the COVID-19 pandemic during the covered period. See 15 U.S.C. § 1681s-2(a)(1)(F)(i)(I).


Continue Reading CARES Act Regulatory Considerations for Mortgage Servicers

By Joe Bailey, Teri A. Lindquist, Wendy L. Moore, Andrew (Andy) Smetana and Sean M. Apfelbaum

After putting much emphasis on eligibility requirements for PPP loans, the SBA has now turned its attention to the requirements for loan forgiveness.  On Friday night, the SBA released a PPP loan forgiveness application. The application

By Joe Bailey, Teri Lindquist and Andy Smetana

On May 5, 2020, the Small Business Administration (SBA) issued a new FAQ[1] announcing that it will be extending the deadline for borrowers under the Paycheck Protection Program (PPP) to repay their loans and be deemed to have made the “necessity” certification in good faith from May 7 to May 14. The extension is to be implemented through a revision to the fourth Interim Final Rule that had previously set a May 7 deadline.
Continue Reading SBA Announces Plans to Extend Deadline for Borrowers to Return PPP Loans Under “Necessity” Safe Harbor

By Kevin Feldis, Markus Funk and David Fletcher

Companies seeking PPP loans must concurrently navigate the potential minefield of public scrutiny and government enforcement, requiring a heightened level of planning and procedures.

An adequate compliance program is a must to avoid ramped-up enforcement efforts and to minimize legal and reputational risks.

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By Joseph Cutler, Will Gillis, Anna Joy, and Michelle Han

Smaller nonprofit organizations may find themselves struggling to maintain their mission under the current coronavirus (COVID-19) crisis, let alone keep abreast of the resources available to them under federal relief programs. While details about eligibility, qualification, and how to proceed may be overwhelming, it is a relief to know there are several programs specifically tailored to assist smaller organizations with their biggest concerns—including payroll, rent, and utilities. This post summarizes the programs offered through the Small Business Administration for which a nonprofit organization may qualify.

We emphasize that funds are limited, and applications are reviewed on a rolling, first-come-first-served basis. Accordingly, nonprofits should act expeditiously to determine eligibility and contact their banks to submit the applications necessary to secure a place for relief funding.


Continue Reading Nonprofits: COVID-19 Relief Resources for Smaller Organizations

By Alexander Canizares and Richard Oehler

Businesses that receive government funding under the nearly $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) should be mindful of the heightened risks of government investigations of fraud, waste, and abuse, for several reasons.

  • With the increased spending comes oversight. The CARES Act creates a new special inspector general for pandemic recovery within the U.S. Department of the Treasury to investigate misconduct, and provides resources towards identifying fraudulent activity related to the CARES Act programs.
  • Businesses are under pressure to apply for funds under the CARES Act, including government-backed loans under the $350 billion Paycheck Protection Program (PPP).
  • Borrowers applying for PPP loans are required to certify their eligibility for loans and make other representations that, if not properly substantiated, can expose them to allegations of fraud and potentially lead to damages and penalties.
  • Some businesses applying for PPP loans may not have previously dealt with the Small Business Administration (SBA) and may be unfamiliar with SBA’s affiliation rules, which are complicated and may make some entities backed by venture capital or private equity funds ineligible.

This update provides an overview of these enforcement risks and discusses the importance of diligence and documentation to mitigate these risks.


Continue Reading CARES Act Creates New Resources for Fraud Enforcement—and Risks for Businesses

By Andrew Cross and Andrew Smetana

Introduction

As has been widely reported, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides approximately $2 trillion in relief to address the COVID-19 outbreak and economic fallout.  This legislation and other recent legislation related to the COVID-19 outbreak include several programs that are designed to provide financial support to small and medium-sized business.  One such program is an expansion of the Federal Reserve Board’s Main Street Lending Program (the “Main Street Program”).  On April 9th, the Federal Reserve Board announced the established two facilities that together will provide up to $600 billion of funding for the Main Street Program. This makes funding available for businesses with up to 10,000 employees or $2.5 billion in 2019 annual revenues, including companies that may not qualify for the Paycheck Protection Program.  Notably, any business that borrows money under the Main Street Program will be subject to limitations on (i) executive compensation, (ii) its ability to pay a dividend or distribution, and (iii) if it is a public company, its ability to repurchase its shares.


Continue Reading Federal Reserve Board Announces Additional Support for Small and Medium-Sized Businesses

Authored by Joe Cutler, Michelle Han, Anna Joy and Will Gillis

We have been hearing from community organizations and our pro bono partners that some of our community’s smallest and most vulnerable small businesses either do not know about the resources available to them under federal relief programs or are overwhelmed with information and unsure about how to proceed. Still others mistakenly believe that they do not qualify for state and federal programs, even though there are several programs specifically tailored to assist them. The biggest concerns for small businesses include payroll, rent, and utilities. Fortunately, government programs exist to help meet these obligations.

This post summarizes the programs offered through the Small Business Administration for which you and your business may qualify.
Continue Reading Small Businesses, Independent Contractors, And Sole Proprietors: Take Advantage of Government COVID-19 Relief Before The Money Runs Out