UPDATE (June 22, 2020): COVID-19 Homeowner, Tenant, and Consumer Relief Law of 2020”, last Thursday the bill failed in Assembly.  Many mortgage loan market participants breathed a sigh of relief as the bill would have enacted sweeping new forbearance standards beyond federal CARES Act mandates for residential and multifamily mortgages.

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A proposed piece of COVID-19 relief legislation could have major implications for California lenders and servicers, particularly in the mortgage lending industry, if passed into law. The assembly bill, entitled “COVID-19 Homeowner, Tenant, and Consumer Relief Law of 2020,” (“AB 2501”) is intended to provide relief to residential and multifamily mortgage borrowers, as well as borrowers under loans secured by a mobile home or motor vehicle, by requiring the loan servicers to provide forbearance to borrowers experiencing a financial hardship during the Covid-19 emergency.   It is also notable that borrowers under certain payday loans, known as deferred deposit transactions, would also benefit from AB 2501 although the specified relief is not forbearance but fee restrictions and a requirement for payment plan options in accordance with specified procedures.
Continue Reading AB 2501 – COVID-19 Homeowner, Tenant, and Consumer Relief Law of 2020

On Thursday April 30, 2020, the Board of Governors of the Federal Reserve Board released a new revised term sheet for the Paycheck Protection Program Liquidity Facility (“PPPLF”).  Under the facility, the Federal Reserve Banks will lend to eligible borrowers on a nonrecourse basis, taking loans to small businesses guaranteed by the Small Business Administration (“SBA”) under the Paycheck Protection Program (“PPP Loans”) as collateral. 
Continue Reading Update on the Paycheck Protection Program Liquidity Facility

The Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) guarantees loans from qualified lenders to small businesses impacted by the COVID-19 pandemic so that those businesses can keep workers employed.  In the Third Interim Final Rule issued on April 20, 2020 (see 85 Fed. Reg. 21747), the SBA cleared the way for members of Federal Reserve Banks (“FRB”) and Federal Home Loan Banks (“FHLB”) to pledge PPP loans to secure borrowings by excluding the FRBs and FHLBs from the pledge requirements typically applicable to SBA 7(a) loan pledges.  The exclusion of such pledges from the otherwise applicable requirements means that the SBA does not have to provide prior consent to such pledges nor will it have to approve the FRB and FHLB loan documents or require a multi-party agreement among SBA, the lender, and others.
Continue Reading Federal Reserve Banks and Federal Home Loan Banks May Accept Pledges of PPP Loans as Collateral

Responding to pressure from industry groups and members of Congress, the Federal Housing Finance Agency (FHFA) announced on April 21, 2020 that servicers of Freddie and Fannie mortgage loans will only be required to advance four months of missed payments for single family mortgage loans.  The action by the FHFA aligns the servicer advance requirements for mortgage loans in both Freddie Mac and Fannie Mae issued mortgaged-backed securities (MBS).  Prior to the change, Freddie Mac servicers were limited to a four months advance obligation while Fannie Mae servicers with scheduled payment remittance obligations were responsible for advancing missed payment regardless of borrower payments.
Continue Reading FHFA Aligns Freddie/Fannie Monthly Payment Advance Obligations

On April 9, 2020, the Federal Reserve issued an updated term sheet for the Term Asset-Backed Securities Loan Facility (“TALF”).  Under TALF, the Federal Reserve will make an equity investment of $10 billion in a special purpose vehicle (“SPV”) that will in turn make up to $100 billion of non-recourse loans fully secured by eligible ABS.   
Continue Reading Term Asset-Backed Securities Loan Facility

In order to properly address the impact of the Covid-19 crisis on today’s capital markets, the Structured Finance Association (“SFA”) is urging the Board of Governors of the Federal Reserve System and the U.S. Department of Treasury to “move as quickly as possible” to introduce a new version of the Term Asset-Backed Securities Loan Facility (“TALF”) program to include important consumer credit products and remove impediments that would delay the speed with which the program can become fully operational.  In a March 22nd letter to the Board of Governors of the Federal Reserve System and the U.S. Department of Treasury, the SFA proposed a new version of TALF, referred to as Solutions to Power the Advancement and Revitalization of Consumer Credit (“SPARCC”),  which, notably, expands the categories of assets eligible to back ABS to include non-QM mortgage loans, unsecured personal loans and MSRs.  The recommended changes include:
Continue Reading SFA Urges the Fed to Include Non-Qualified Mortgages, MSRs and Unsecured Consumer Loans in revamped TALF

Where do marketplace lenders and secondary loan market participants find themselves on the issue of preemption of state usury laws after the June 27 denial of the petition for a writ of certiorari in Madden v. Midland by the U.S. Supreme Court?

In Madden v. Midland, the US Court of Appeals for the Second Circuit refused to follow the “valid-when-made” rule when considering the scope of federal preemption of state usury laws under the National Bank Act.  The court held that the NBA did not bar the application of state usury laws to a national bank’s assignee.  In considering the applicability of the National Bank Act to a loan in the hands of a non-bank assignee, the Second Circuit considered a number of cases upholding preemption of state usury laws under the National Bank Act but invoked a seemingly new rule for applying section 85 of the National Bank Act (permitting a national bank to charge interest at the rate permitted by its home state).  The Second Circuit concluded that preemption is only applicable where the application of state law to the action in question would significantly interfere with a national bank’s ability to exercise its power under the National Bank Act.  The court reasoned further that where a national bank retained a “substantial interest” in the loan, the application of the state usury law would conflict with the bank’s power authorized by the National Bank Act.


Continue Reading Will Madden v Midland Disrupt Loan Sales and Platform Lending?