Letters to Credit Unions 20-CU-07 Summary of the Coronavirus Aid, Relief, and Economic Security (CARES) Act
NCUA published LTCU 20-CU-07 to summarize HR 748, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provisions that affect credit unions.
- Central Liquidity Facility (CLF) (§ 4016)
The CARES Act made changes to NCUA’s Central Liquidity Facility (CLF) that will sunset on December 31, 2020. The CLF was created by Title III of the Federal Credit Union Act (FCUA) and governed by Part 725 of the NCUA Rules & Regulations. Information on the CLF may be found on the NCUA’s CLF Page. Four changes were made to the CLF:
- Corporate credit unions were granted temporary access to the CLF. The CARES Act removed the FCUA’s “primarily serving natural persons” requirement which had prohibited corporate credit union access.
- The CLF’s membership rules were amended to make it easier for a corporate credit union to serve as an agent for natural person credit union members by allowing the corporate to only pay the subscription of its credit union members that want access to the CLF instead of all of its members.
- The prohibition against approval of application “intended to expand the balance sheet” was replaced with a requirement the applicant first make reasonable efforts to use primary sources of liquidity, including balance sheet and market funding sources.
- The NCUA’s CLF borrowing authority was increased to 16x the subscribed capital stock and surplus of the CLF.
- Insured Deposits Threshold (§ 4008(b)):
NCUA may, in coordination with the FDIC, raise the share insurance limit on any non-interest bearing transaction accounts in FICUs until December 31, 2020. NCUA will evaluate whether an increase is needed as the COVID-19 pandemic evolves.
- Temporary Relief from Troubled Debt Restructurings (§ 4013):
The CARES Act permits financial institutions to suspend the requirement to categorize certain loan modifications related to the COVID-19 pandemic as troubled debt restructurings. NCUA has issued a separate statement on the TDR issue.
- Paycheck Protection Program (§ 1102 and § 1109):
The CARES Act authorized SBA to create the Paycheck Protection Program (PPP), a loan guarantee program that helps qualifying small businesses meet payroll needs & utilities resulting from the COVID-19 pandemic. NCUA has released separate guidance on this program. More information may also be found at the United States Treasury and Small Business Administration websites.
- Optional Temporary Relief from CECL (§ 4014):
The CARES Act delays compliance with CECL (FASB Update No. 2016-13 “Measurement of Credit Losses on Financial Instruments”) until December 31, 2020. However, credit unions are not currently required to comply with CECL.
- Credit Protection During COVID-19 (§ 4021):
The CARES Act requires institutions reporting to the credit bureaus to report loan modifications resulting from the COVID-19 pandemic as “current” or as the status reported before the accommodation unless the consumer becomes current. This requirement applies throughout the period of accommodation so long as the borrower fulfills requirements of the forbearance or modification.
- Foreclosure Moratorium on Single Family Mortgages and Consumer Right to Request Forbearance (§ 4022):
The CARES Act prohibits foreclosures on all single family, federally backed mortgage loans for 60 days, beginning on March 18, 2020, and ending on May 17, 2020. It provides up to 180 days of forbearance for borrowers of a federally backed mortgage who experience a financial hardship related to the COVID-19 pandemic. This relief ends on the earlier of 12/31/2020 or when the COVID-19 health emergency is terminated.
- Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans (§ 4023):
The CARES Act provides up to 90 days’ forbearance for borrowers with a federally backed, multifamily mortgage loan who experience a financial hardship. Borrowers who receive forbearance may not evict or charge late fees to tenants for the duration of the forbearance period. This relief ends on the earlier of December 31, 2020 or when the COVID-19 public health emergency is terminated.