The RESPONSE: Federal and State Actions Affecting the Financial Services Industry - Edition 5

Like our clients, Holland & Knight's Financial Services Industry Group is committed to actively contributing to our nation's response to the coronavirus (COVID-19) pandemic and related economic fallout and recovery efforts. For our part, Holland & Knight's 300-plus lawyers and professionals who comprise our Financial Services Industry Group want to ensure that bank and non-bank financial institutions, financial intermediaries and other financial services industry participants and stakeholders have access to timely, accurate and succinct updates on federal and state legislative, regulatory and administrative responses to the COVID-19 pandemic that are most relevant to our financial services clients.

To that end, we are pleased to share with you the latest edition of The RESPONSE.

CFPB Seeks Information on Specific Impacts of COVID-19

Holland & Knight is aware that the Consumer Financial Protection Bureau (CFPB) is seeking, as part of ongoing investigations, information from CFPB-regulated entities to assess the effects that the COVID-19 pandemic is having on a financial institutions. This information request includes a range of questions geared toward understanding, among other things, 1) disruptions to business operations due to the various state-level stay at home orders and 2) workforce impacts, such as the effects of the pandemic on employees' sick leave and flexible work hours. If your organization has questions as to how responding to such a request could potentially impact the course of a CFPB investigation, Holland & Knight attorneys with extensive experience in CFPB and other regulatory investigations are available to discuss your concerns.

CFPB Explains How to Obtain CARES Act Mortgage Forbearance

On April 3, the CFPB released a video directed to consumers affected by the COVID-19 pandemic on how they can obtain mortgage forbearance. The CFPB provided further information on mortgage relief, student loan payment relief, avoiding scams, and online and mobile banking. These resources, while intended for consumers, may also be useful for financial institutions to review in determining how to work with customers through the pandemic.

Federal Reserve to Facilitate SBA Paycheck Protection Program Lending

The Federal Reserve announced on April 6 that, to facilitate lending to small businesses via the U.S. Small Business Association's (SBA) Paycheck Protection Program (PPP), the Federal Reserve will establish a facility to provide term financing backed by PPP loans. The Federal Reserve indicated that it will announce additional details regarding the facility later this week.

Federal Financial Regulators Clarify Mortgage Servicing Rules

On April 3, the CFPB, Federal Reserve, Federal Deposit Insurance Corporation (FDIC), National Credit Union Association (NCUA), Office of the Comptroller of the Currency (OCC) and Conference of State Bank Supervisors issued a lengthy joint statement informing mortgage servicers of the flexible supervisory and enforcement approach adopted by such agencies during the COVID-19 emergency. The statement further clarifies the application of Regulation X mortgage servicing rules. The statement and the FAQs published by the CFPB are considered critical in explaining the flexibility that servicers have during the crisis.

Federal Bank Regulators Announce Changes to Community Bank Leverage Ratio

The federal bank regulatory agencies on April 6 jointly announced the issuance of two interim final rules to provide temporary relief to community banking organizations. The agencies are acting to implement Section 4012 of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which requires the agencies to temporarily lower the community bank leverage ratio to 8 percent.

FDIC Extends Comment Period for Proposed Broker Deposit Regulations

On April 3, the FDIC announced a 60-day extension to the notice and comment period for the proposed updates to the brokered deposit regulations. The challenges posed by COVID-19 prompted the FDIC to allow submissions through June 9, 2020.

SEC Stresses Importance of High Quality Financial Reporting

The Office of the Chief Accountant (OCA) of the SEC on April 3 released a statement highlighting that, consistent with the Division of Corporation Finance's guidance (Topic No. 9 issued March 25), the OCA stresses the continuing need for "a regular supply of high-quality financial information." Although the OCA recognizes the financial and accounting implications of COVID-19, the statement reinforces that the OCA will continue to apply the perspective that it will not object to well-reasoned judgements made in a challenging environment of uncertainty. The statement further highlights the OCA's work with various stakeholders concerning domestic and international accounting standards, audit requirements and more.

SBA Updates CARES Act Payment Protection Program Guidance

The SBA has published additional information clarifying the affiliation requirements of the Payment Protection Program. (Interim Final Rule on Affiliation and FAQs) This new information is added to previous guidance explaining program parameters and helps lenders determine whether borrowers and affiliates will be considered together when determining program eligibility. Previous guidance is available as follows: Interim Final Rule, FAQs, and Fact Sheets for Borrowers and Lenders. Program borrower and lender application forms can be accessed on the Treasury Department website.

Fannie Mae, Freddie Mac Expand Policies on Remote Online Notarizations

Fannie Mae and Freddie Mac have expanded the ability of single-family sellers to use remote online notarizations (RONs). Common requirements include, among others, 1) the use of at least two-factor identity authentication, 2) that tamper-sealed notarized documents and system security be sufficient to prevent interference with the notarial act, corruption or loss of recording, or unauthorized use of the communication technology, electronic record and backup record, and 3) that the loan documents be accepted for recording by the applicable county recorders.

Florida Suspends Taxation for CARES Act Loans

Effective April 3, Florida Gov. Ron Desantis issued Emergency Order 20-95 regarding documentary stamps for SBA loans, suspending the assessment and collection of taxation imposed under Chapter 201 (Excise Tax on Documents), Florida Statutes, for loans made under the CARES Act. As a result, such tax amounts are not owed.

Texas Joint Financial Regulators Issue Guidance on Home Equity Loans

The Texas Department of Banking, Texas Department of Savings and Mortgage Lending, Texas Office of Consumer Credit Commissioner and the Texas Credit Union Department on April 1 issued a joint statement providing guidance to lenders working with homeowners who have an existing home equity line of credit (HELOC). The statement reminds lenders of the requirements around 1) drawing from an existing HELOC, 2) the disaster exception to refinancing a HELOC, 3) complexities around modifying an existing HELOC, and 4) maintaining social distancing requirements when closing loans.

For questions, comments or additional information on any of these areas, please reach out to the Holland & Knight professional with whom you work or one of the following contacts in our Financial Services Industry Group.

About Our Financial Services Industry Group:

Participants in the financial services industry require sophisticated legal counsel to navigate a complex, ever-changing environment and respond to opportunities and challenges as they arise. With more than 300 members throughout the firm, Holland & Knight's Financial Services Industry Group has the depth and experience to effectively serve borrowers and lenders in all of their legal matters, including corporate services, international operations, labor and employment, litigation and dispute resolution, public policy and regulation, real estate and white collar defense. The combination of our thorough knowledge and a sincere commitment to provide responsive service is why clients entrust our team to handle their legal needs.

Holland & Knight has established a COVID-19 Response Team to help clients respond to a variety of business and legal issues they may be facing in this crisis. Please visit Holland & Knight's website for the latest COVID-19 news and updates important to your business.