CFPB Guidance on PPP Applications and Flood Guidance from the Federal Reserve and OCC

The CFPB has provided some clarification on Regulation B’s notification requirements for institutions taking Paycheck Protection Program (PPP) applications. 

For purposes of Regulation B, a PPP application is only complete after a loan number or a response about the availability of funds has been received from the SBA.  So, any time spent waiting on this information does not need to be included in the 30 days you have to notify an applicant about the action you’re taking on an application.  You also cannot deny an application for incompleteness if you have enough information to make a credit decision, but are waiting on a loan number or a response on whether funds are available from the SBA.  If you deny an application without ever sending it on to the SBA, however, you must give an adverse action notice within 30 days. 

The Federal Reserve issued CA Letter 20-7, clarifying flood insurance requirements in light of loan extensions and the NFIP’s change to a 120-day grace period.  First off, the Federal Reserve clarifies that extending a loan’s maturity date will trigger flood insurance requirements (determination, notice, escrow, as applicable). 

While not as relaxed as the Federal Reserve’s statement, the OCC also provided some FAQs stating it would not look to take action against a bank for “reasonable delays” in the force-placement process in light of the 120-day grace period, as long as “good faith efforts” were being made to comply with the rule and support borrowers.  We’re not aware of anything from the OCC stating it’s okay to delay your force-placement process to align with the 120-day grace period.

If you’re a Federal Reserve or OCC bank, we advise you to look at the guidance closely.  Only the Federal Reserve has really indicated it’s okay to change your force-placement process to fall in line with the changes in the NFIP grace period.  Remember as well, the 120-day grace period only applies to NFIP policies.  We still have yet to hear from other regulators.

Published
2020/05/07

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