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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.

HHS Announces an Additional $20 Billion In Provider Relief Grants

The U.S. Department of Health and Human Services (“HHS”) announced an additional $20 billion in new funding for providers on October 1, 2020. Eligible providers include those that have already received Provider Relief Fund payments as well as previously ineligible providers, such as those who began practicing in 2020, and an expanded group of behavioral health providers confronting the emergence of increased mental health and substance use issues exacerbated by the pandemic. The new Phase 3 General Distribution is designed to balance an equitable payment of 2% of annual revenue from patient care for all applicants plus an add-on payment to account for revenue losses and expenses attributable to COVID-19.

DOL Proposes New Rule Regarding Independent Contractor Status - But How Will the Election Affect Its Future?

On September 22, 2020, the U.S. Department of Labor announced a new proposed rule regarding employee and independent contractor status under the Fair Labor Standards Act. The full text of the proposed rule is available here. The rule's drafters intend to reduce uncertainty and enhance the precision and predictability of the long-standing "economic reality" test, which currently relies on a multifactor balancing test.

Major Change to Franklin County, Ohio Eviction Process: Landlord Testimony Required

Although there is currently a nationwide temporary halt on all residential evictions through December 31, 2020 in place, the eviction process in Franklin County – which processes the highest number of evictions in the State of Ohio at approximately 18,000 a year – recently changed significantly.

UPDATE: Governor Dewine Signs HB 606 Granting Short Window of Immunity from COVID-19 Personal Injury Lawsuits

The Ohio General Assembly, in Am. Sub. H.B. No. 606, is in the final stages of passing a law that will prohibit lawsuits seeking damages from COVID-19. This includes injury, death, or loss to person or property if the lawsuits are based, in whole or in part, on the exposure to, or the transmission or contraction of the coronavirus, unless the defendant in the lawsuit acted intentionally or recklessly. In circumstances where this immunity does not apply, H.B. 606 prohibits such claims being aggregated and brought as a class action.

Revised Department of Labor FFCRA Guidance, Effective September 16, 2020

In response to attacks on the legality of the Department of Labor’s (“DOL”) Final Rule regarding the Families First Coronavirus Act (“FFCRA” or the “Act”), which took effect in April 2020, the Department of Labor issued new guidance on Friday, September 11th to formally address ongoing questions and concerns related to the COVID-19 legislation.