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Everything you need to know about BMD and the industry.

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.

Explosive Growth in Pot of Gold Opportunity for Bank (and Other) Cannabis Lenders Driving Erosion of the Barriers

Our original article on bank lending to the cannabis industry anticipated that the convergence of interest between banks and the cannabis industry would draw more and larger banks to the industry. Banks were awash in liquidity with limited deployment options, while bankable cannabis businesses had rapidly growing needs for more and lower cost credit. Since then, the pot of gold opportunity for banks to lend into the cannabis industry has grown exponentially due to a combination of market constraints on equity causing a dramatic shift to debt and the ever-increasing capital needs of one of the country’s fastest growing industries. At the same time, hurdles to entry of new banks are being systematically cleared as the yellow brick road to the cannabis industry’s access to the financial markets is being paved, brick by brick, by the progressively increasing number and size of banks that are now entering the market.

2021 EEOC Charge Statistics: Retaliation & Impact of Remote Work

The U.S. Equal Employment Opportunity Commission (EEOC) released its detailed information on workplace discrimination charges it received in 2021. Unsurprisingly, for the second year in a row, the total number of charges decreased as COVID-19 either shut down workplaces or disconnected employees from each other. In 2021, the agency received a total of approximately 61,000 workplace discrimination charges - the fewest in 25 years by a wide margin. For reference, the agency received over 67,000 charges in 2020, and averaged almost 90,000 charges per year over the previous 10 years.

Ohio’s Managed Care Overhaul Delayed – New Implementation Timeline

At the direction of Governor Mike DeWine, the Ohio Department of Medicaid (ODM) launched the Medicaid Managed Care Procurement process in 2019. ODM’s stated vision for the procurement was to focus on people and not just the business of managed care. This is the first structural change to Ohio’s managed care system since the Centers for Medicare & Medicaid Services' (CMS) approval of Ohio’s Medicaid program in 2005. Initially, all of the new managed care programs were supposed to be implemented starting on July 1, 2022. However, ODM Director Maureen Corcoran recently confirmed that this date will be pushed back for several managed care-related programs.

Laboratory Specimen Collection Arrangements with Contract Hospitals - OIG Advisory Opinion 22-09

On April 28, 2022, the Department of Health and Human Services, Office of Inspector General (“OIG”) published an Advisory Opinion[1] in which it evaluated a proposed arrangement where a network of clinical laboratories (the “Requestor”) would compensate hospitals (each a “Contract Hospital”) for specimen collection, processing, and handling services (“Collection Services”) for laboratory tests furnished by the Requestor (the “Proposed Arrangement”). The OIG concluded that the Proposed Arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) if the requisite intent were present. This is due to both the possibility that the proposed per-patient-encounter fee would be used to induce or reward referrals to Requestor and the associated risk of improperly steering patients to Requestor.

Property Owner Protection from Tax Valuation Challenges

New legislation provides significant new protections for commercial property owners against challenges to valuation primarily by local school boards and prohibiting side agreements to avoid tax valuation changes. The Ohio Legislature has approved House Bill 126 which will go into effect July 2022 but will effectively apply to the 2023 tax valuation year.