The Coronavirus Economic Stabilization Act: Key Provisions for the Financial Services Industry

April 03, 2020 - David B. Caughran
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act which authorizes the expenditure of $2 trillion in federal funds to combat the coronavirus. The Coronavirus Economic Stabilization Act of 2020, found in Title IV, Subtitle A of the CARES Act, provides regulatory relief to banks and other financial institutions as they attempt to address the financial needs of businesses and households affected by the COVID-19 pandemic. 

Nearly all of the provisions summarized below became effective as of the enactment of the CARES Act and will terminate upon the earlier of the termination date of the public health emergency or December 31, 2020.

Key Provisions of the Coronavirus Economic Stabilization Act

Sec. 4011. Temporary Lending Limit Waiver.

  • This section temporarily excludes from national bank lending limits, loans to nonbank financial companies, and temporarily authorizes the Comptroller of the Currency to exempt any transaction from the lending limits if such exemption is in the public interest. This Section is authorized as of the date of the Act’s enactment and terminates on the earlier of the termination date of the national emergency concerning the COVID-19 pandemic or December 31, 2020.

Sec. 4012. Temporary Relief for Community Banks.

  • This section requires the federal banking agencies to 1) issue an interim rule lowering the Community Bank Leverage Ratio (CBLR) to 8% and 2) provide a grace period to qualifying community banks that fall below the CBLR during the national emergency related to the COVID-19 pandemic or December 31, 2020, whichever is sooner.

Sec. 4013. Temporary Relief from Troubled Debt Restructurings.

  • This section allows a financial institution to elect to suspend the accounting requirements for loan modifications related to the COVID-19 pandemic. Banks and credit unions would not be required to categorize these loan modifications as troubled debt restructurings. This section would require the federal banking agencies to defer to the financial institution’s judgment in making these determinations. The suspension does not apply to 1) modifications of loans that were more than 30 days past due as of December 31, 2019 or 2) modifications where the adverse impact on the credit of the borrower is not related to COVID-19. The applicable period for qualifying loan modifications began March 1, 2020 and shall end 60 days following the date on which the national emergency declared by President Trump terminates.

Sec. 4014. Optional Temporary Relief from Current Expected Credit Losses.

  • This section temporarily suspends compliance with the Financial Accounting Standards Board, Update No. 2016-13, including the Current Expected Credit Losses (CECL) accounting standards for banks and credit unions and their affiliates until the end of the national emergency related to the COVID-19 pandemic or December 31, 2020, whichever come first.

Sec. 4015. Non-applicability of Restrictions on ESF during National Emergency.

  • This section temporarily suspends the statutory limitation on the use of the Exchange Stabilization Fund (Section 131 of the Emergency Economic Stabilization Act of 2008) for the Treasury Money Market Mutual Funds Guaranty Program for the money market mutual fund industry until December 31, 2020.

Sec. 4021. Credit Protection during COVID-19.

  • This section amends the Fair Credit Reporting Act requirements for how furnishers of information to credit reporting agencies report information about consumers who have received a forbearance or some other accommodation as a result of COVID-19. This section does not require that creditors make any accommodations for consumers, but if they do, they can report the account as current if the consumer is making payments and is no longer delinquent.

Sec. 4022. Foreclosure Moratorium and Consumer Right to Request Forbearance.

  • This section provides relief for homeowners with FHA, USDA, VA, or Section 184 or 184A mortgages and those with mortgages backed by Fannie Mae or Freddie Mac from falling behind on payments. These borrowers will have the ability to request forbearance on their payments for up to 180 days, which may be extended for an additional 180 days at the request of the borrower, without fees, penalties, or extra interest. At the request of the borrower, either the initial or extended period of forbearance may be shortened. A borrower must simply submit a request to the borrower’s servicer and affirm the borrower is experiencing financial hardship during the COVID-19 Emergency. The servicer shall require no additional documentation.
  • Homeowners with FHA, USDA, VA, or Section 184 or 184A mortgages, or mortgages backed by Fannie Mae and Freddie Mac, who are facing foreclosure will have at least 60-day relief from foreclosure or being forced to relocate, with such period beginning on March 18, 2020.

Sec. 4023. Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans.

  • This section provides up to 90 days of forbearance for multifamily borrowers with federally backed loans who have experienced a financial hardship. Property owners have to request the forbearance and document their hardship in order to qualify in 30-day increments, and each additional 30-day extension must be requested at least 15 days prior to the end of the current forbearance period. The borrower must have been current on payments as of February 1, 2020 to qualify.
  • During a forbearance period, the property owner may not evict or initiate the eviction of a tenant for nonpayment of rent and may not charge the tenant any fees or penalties for nonpayment of rent. This protection applies to loans issued or backed by federal agencies (including FHA and USDA) or Fannie Mae and Freddie Mac. The authority provided under this section terminates on the earlier of the termination date of the national emergency concerning the COVID-19 pandemic or December 31, 2020.

‚ÄčSec. 4024. Temporary Moratorium on Eviction Filings.

  • This section prevents a property owner (i.e. landlord) that receives a federal subsidy or has a federally-backed mortgage loan from filing for eviction against, or charging penalties or fees to, a tenant who cannot pay rent for a period of 120 days after enactment of this Act. The provision also prohibits a property owner from issuing a notice to vacate a property to a tenant for an additional 30 days after the moratorium. This protection covers properties that receive federal subsidies such as public housing, Section 8 assistance, USDA rural housing programs, and Low Income Housing Tax Credits, the Violence Against Women Act of 1994, as well as properties that have a mortgage issued or guaranteed by a federal agency (including FHA and USDA) or Fannie Mae or Freddie Mac.

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Additional Resources:

Overview of the SBA Economic Injury Disaster Loan (EIDL) Program

Interim Final Rule Implementing Paycheck Protection Program Issued

Tax Provisions in the CARES Act