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FDIC Provides Guidance on Loan Modifications & Workout Options for Borrowers Affected by COVID-19

On March 22, 2020, the Federal Deposit Insurance Corp (FDIC) and other federal banking regulatory agencies, along with state banking regulators, the National Credit Union Administration Agency (NCUA), the regulator of credit unions, and the Consumer Financial Protection Bureau (CFPB) issued the Interagency Statement on Loan Modifications and Reporting by Financial Institutions Working with Customers Affected by the Coronavirus  to encourage financial institutions to work constructively with borrowers impacted by the disease and to provide additional information regarding loan modifications. In summary, the policies give lenders or bankers substantially more latitude to work with affected borrowers by softening the regulatory and accounting impact of having delinquent or restructured credit.

The Interagency Statement can be found here: https://www.fdic.gov/news/news/financial/2020/fil20022.html?mc_cid=c19ae173ad&mc_eid=fabbc3a33b

As described in the Interagency Statement, the FDIC:

  • Encourages financial institutions to work constructively with borrowers affected by COVID-19;
  • Will not criticize institutions for prudent loan modifications and will not direct supervised institutions to automatically categorize COVID-19-related loan modifications as troubled debt restructurings (TDRs);
  • Confirmed with staff of the Financial Accounting Standards Board (FASB) that short-term modifications made on a good faith basis for COVID-19 borrowers who were current prior to any COVID-19 relief are not TDRs;
  • Views that modification efforts described in the interagency statement for borrowers of one-to-four family residential mortgages where loans are prudently underwritten and not past due or carried in nonaccrual status do not result in loans being considered restructured or modified for the purpose of respective risk-based capital rules; and
  • Views prudent loan modification programs to financial institution customers affected by COVID-19 as positive actions that can effectively manage or mitigate adverse impacts on borrowers due to COVID-19, and lead to improved loan performance and reduced credit risk.

Borrowers, lenders, and other businesses should open early candid lines of communication with one another to negotiate forbearance agreements, extensions, refinancing, restructuring or other related relief. These arrangements must be documented and BMD attorneys can help you with this loan modification or workout process. 

For Ohio Businesses impacted by COVID-19, there are low-interest loans available to businesses in all Ohio counties. SBA low-interest federal disaster loans can provide up to $2 million of working capital to help Ohio business owners in overcoming temporary losses of revenue they are experiencing as a result of COVID 19. The assistance may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid due to economic impacts. These loans are available to small businesses and private, non-profit organizations to help alleviate economic injury caused by the coronavirus.

The following are links to the SBA programs:

Additionally, you can talk to your banker. Be proactive. Let them know you are addressing the situation and/or applying for the SBA Loan and do so immediately. While many people may ordinarily avoid contacting their banker or creditors to talk about problems, under the Interagency Statement this is a safe time to do so because everyone is experiencing the same problems.

The state of Ohio has also provided unemployment benefits for Ohio individuals impacted by COVID-19. You can access information about these benefits with the following links: Coronavirus and Unemployment Benefits Questions and Answers at: http://jfs.ohio.gov/ouio/CoronavirusAndUI/ and/or the https://unemployment.ohio.gov/.

Please contact BMD Bankruptcy Member Michael Steel at masteel@bmdllc.com or 330.374.7471, or Bankruptcy Partner Duriya Dhinojwala at dd@bmdllc.com or 330.253.5790 for further information.

Investment Training for the Second and Third Generations

Consider this scenario. Mom and Dad started the business from the ground up. Over the decades it has expanded into a money-making machine. They are able to sell the business and it results in a multimillion-dollar payday for their labors. The excess money has allowed Mom and Dad to invest with various financial advising firms, several fund management groups, and directly with new startups and joint ventures. Their experience has made them savvy investors, with a detailed understanding of how much to invest, when, and where. They cannot justify formation of a full family office with dedicated investors to manage the funds, but Mom and Dad have set up a trust fund for the children to allow these investments to continue to grow over the years. Eventually, Mom and Dad pass. Their children enjoy the fruits of their labors, and, by the time the grandchildren are adults, Mom and Dad's savvy investments are gone.

Provider Relief Funds – Continued Confusion Regarding Reporting Requirements and Lost Revenues

In Fall 2020, HHS issued multiple rounds of guidance and FAQs regarding the reporting requirements for the Provider Relief Funds, the most recently published notice being November 2, 2020 and December 11, 2020. Specifically, the reporting portal for the use of the funds in 2020 was scheduled to open on January 15, 2021. Although there was much speculation as to whether this would occur. And, as of the date of this article, the portal was not opened.

Ohio S.B. 310 Loosens Practice Barrier for Advanced Practice Providers

S.B. 310, signed by Ohio Governor DeWine and effective from December 29, 2020 until May 1, 2021, provides flexibility regarding the regulatorily mandated supervision and collaboration agreements for physician assistants, certified nurse-midwives, clinical nurse specialists and certified nurse practitioners working in a hospital or other health care facility. Originally drafted as a bill to distribute federal COVID funding to local subdivisions, the healthcare related provisions were added to help relieve some of the stresses hospitals and other healthcare facilities are facing during the COVID-19 pandemic.

HHS Issues Opinion Regarding Illegal Attempts by Drug Manufacturers to Deny 340B Discounts under Contract Pharmacy Arrangements

The federal 340B discount drug program is a safety net for many federally qualified health centers, disproportionate share hospitals, and other covered entities. This program allows these providers to obtain discount pricing on drugs which in turn allows the providers to better serve their patient populations and provide their patients with access to vital health care services. Over the years, the 340B program has undergone intense scrutiny, particularly by drug manufacturers who are required by federal law to provide the discounted pricing.

S.B. 263 Protects 340B Covered Entities from Predatory Practices in Ohio

Just before the end of calendar year 2020 and at the end of its two-year legislative session, the Ohio General Assembly passed Senate Bill 263, which prohibits insurance companies and pharmacy benefit managers (“PBMs”) from imposing on 340B Covered Entities discriminatory pricing and other contract terms. This is a win for safety net providers and the people they serve, as 340B savings are crucial to their ability to provide high quality, affordable programs and services to patients.