15 U.S.C. § 9011 — Subsidy for certain loan payments

submitted 6 years ago by Pub. L. 116-136 to r/title-15-COMMERCE-AND-TRADE · 2,188 words · no verdicts yet

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During COVID-19, the SBA had to make the loan payments — principal, interest, and fees — on certain existing SBA-guaranteed business loans, for set periods of months. Newer loans got shorter subsidy periods, and some hard-hit industries got extra months. Lenders couldn't charge late fees while the SBA was paying, and Congress authorized $17 billion for the program.

(a) Definition of covered loan A "covered loan" is a loan guaranteed by the SBA under section 636(a) — including Community Advantage Pilot Program loans, but not Paycheck Protection Program loans added by section 1102 — or under title V of the Small Business Investment Act of 1958. It also includes a loan an intermediary lender makes to a small business using money it got under section 636(m). (b) Sense of Congress Congress states its view, without making it binding law, that: all borrowers were hurt by COVID-19; it's appropriate for the SBA to make relief payments for all of them; and lenders should also offer payment deferrals and extend loan terms — avoiding lump-sum balloon payments or higher required payments — during the national emergency the President declared over COVID-19. (c) Principal and interest payments (1) In general. The SBA must pay the principal, interest, and fees owed on a covered loan in good standing, if funds are available, following a detailed schedule based on when the loan was made: - Loans made before March 27, 2020, and not in deferment: the SBA pays for 6 months starting with the next payment due. On top of that, most such loans get 3 more months of payments starting with the first payment due on or after February 1, 2021, plus 5 additional months if the borrower's industry code falls in a list of hard-hit sectors (including retail, hospitality, arts, and several manufacturing and transportation codes). Loans in a smaller category get a straight 8 months of payments instead, starting from that same February 1, 2021 point. - Loans made before March 27, 2020, and already in deferment: the SBA pays for 6 months once the deferment ends, plus the same extra 3-or-8 months (and the same extra 5 months for hard-hit industries) as above, timed to start after the deferment period or after the first 6 months, whichever comes later. - Loans made between March 27, 2020 and 6 months later: the SBA pays 6 months of payments starting with the first payment due. - Loans approved between February 1, 2021 and September 30, 2021: the SBA pays 6 months of payments starting with the first payment due. (2) Timing of payment. The SBA must start making these payments within 30 days after the first one is due. (3) Application of payment. Every SBA payment counts toward the loan, so the borrower doesn't owe that amount. (4) Limitation. No single monthly SBA payment (for the "extra months" categories above) can exceed $9,000. If the amount actually owed in a month is more than $9,000, the lender can add the extra amount as interest the borrower pays at the end of the loan. (5) Additional provisions for new loans. For loans made March 27–September 2020, the SBA can extend the subsidy period further if there's enough funding, and lenders can count these SBA payments when deciding if a borrower can repay the loan. (6) Eligibility. Whether a loan qualifies, and for how long, depends on when the SBA approved it. (7) Authority to revise extensions. The SBA must watch whether it has enough money to cover all these payments. If not, it must create a plan to cut the number of subsidized months proportionally across all loans, spend all available money, and report that plan to Congress before acting on it. (8) Additional requirements. While the SBA is making these payments, lenders can't charge late fees on the loan, and the SBA must make each month's payment by the 15th. (9) Rule of construction. Except for the $9,000 cap, nothing here stops a borrower from getting the full subsidy payments they're entitled to. (d) Other requirements The SBA must: work with the FDIC, the Comptroller of the Currency, and state bank regulators so lenders aren't forced to hold extra reserves just because they got these SBA payments; waive normal maximum loan-term limits for loans where the lender grants a deferral and extends the loan's term during the year after March 27, 2020; and, because of COVID-19 disruptions like travel limits, give lenders more time for required site visits — up to 60 days after a loan is classified as being liquidated for a reason other than missed payments, and up to 90 days after a missed payment. (e) Rule of construction The SBA can still make these subsidy payments on a covered loan even if that loan has been sold to another investor on the secondary market. (f) Eligibility for new loans For each of its lending programs, the SBA can set a minimum loan term, considering its normal underwriting rules, to prevent people from abusing the program. (g) Limitation on assistance A borrower can get this subsidy for only one loan made in the March 27–September 2020 window. (h) Reporting and outreach (1) Within 14 days of the Economic Aid Act becoming law, the SBA must publish information about how this program changed. Within 21 days, it must issue guidance on those changes. (2) By March 1, 2021, the SBA must send every lender a list of its borrowers with covered loans, including each borrower's industry code, so lenders can figure out who qualifies for extra months of payments. (3) The SBA must educate and communicate with lenders, borrowers, its district offices, and its resource partners, to make sure everyone follows the rules, to encourage participation from loans not yet approved, and to help lenders move borrowers smoothly from SBA subsidy payments into a regular deferral when that makes sense. (4) Within 30 days of the Economic Aid Act becoming law, the SBA must mail every borrower a letter explaining: an overview of the help available under this section; the borrower's rights to get it; how to complain to the SBA or lender if they didn't get it; and the borrower's right to ask their lender for a deferral, plus guidance on moving smoothly into a deferral once the subsidy payments end. (5) By the 15th of each month, the SBA must report to Congress on this program, covering: monthly and total data on payments made, broken down by number of participating borrowers, volume of payments by loan type, and volume of payments for loans made before versus after March 27, 2020; the names of any lenders that haven't reported their loan information that month; and an update on the education and outreach work described above. (i) Authorization of appropriations Congress authorized $17,000,000,000 for this program.

the actual law source: uscode.house.gov ↗public domain

(a) Definition of covered loan

In this section, the term “covered loan” means a loan that is—

(1)

guaranteed by the Administration under—

(A)

section 636(a) of this title—

(i)

including a loan made under the Community Advantage Pilot Program of the Administration; and

(ii)

excluding a loan made under paragraph (36) of such section 636(a) of this title, as added by section 1102; or

(B)

title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.); or

(2)

made by an intermediary to a small business concern using loans or grants received under section 636(m) of this title.

(b) Sense of Congress

It is the sense of Congress that—

(1)

all borrowers are adversely affected by COVID–19;

(2)

relief payments by the Administration are appropriate for all borrowers; and

(3)

in addition to the relief provided under this Act, the Administration should encourage lenders to provide payment deferments, when appropriate, and to extend the maturity of covered loans, so as to avoid balloon payments or any requirement for increases in debt payments resulting from deferments provided by lenders during the period of the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the Coronavirus Disease 2019 (COVID–19).

(1) In general

Subject to the other provisions of this section, the Administrator shall pay the principal, interest, and any associated fees that are owed on a covered loan in a regular servicing status, without regard to the date on which the covered loan is fully disbursed, and subject to availability of funds, as follows:

(A)

With respect to a covered loan made before March 27, 2020, and not on deferment, the Administrator shall make those payments as follows:

(i)

The Administrator shall make those payments for the 6-month period beginning with the next payment due on the covered loan.

(ii)

In addition to the payments under clause (i)—

(I)

with respect to a covered loan other than a covered loan described in paragraph (1)(A)(i) or (2) of subsection (a), the Administrator shall make those payments for—

(aa)

the 3-month period beginning with the first payment due on the covered loan on or after February 1, 2021; and

(bb)

an additional 5-month period immediately following the end of the 3-month period provided under item (aa) if the covered loan is made to a borrower that, according to records of the Administration, is assigned a North American Industry Classification System code beginning with 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812; and

(II)

with respect to a covered loan described in paragraph (1)(A)(i) or (2) of subsection (a), the Administrator shall make those payments for the 8-month period beginning with the first payment due on the covered loan on or after February 1, 2021.

(B)

With respect to a covered loan made before March 27, 2020, and on deferment, the Administrator shall make those payments as follows:

(i)

The Administrator shall make those payments for the 6-month period beginning with the next payment due on the covered loan after the deferment period.

(ii)

In addition to the payments under clause (i)—

(I)

with respect to a covered loan other than a covered loan described in paragraph (1)(A)(i) or (2) of subsection (a), the Administrator shall make those payments for—

(aa)

the 3-month period (beginning on or after February 1, 2021) beginning with the later of—

(AA)

the next payment due on the covered loan after the deferment period; or

(BB)

the first month after the Administrator has completed the payments under clause (i); and

(bb)

(II)

with respect to a loan described in paragraph (1)(A)(i) or (2) of subsection (a), the 8-month period (beginning on or after February 1, 2021) beginning with the later of—

(aa)

the next payment due on the covered loan after the deferment period; or

(bb)

the first month after the payments under clause (i) are complete.

(C)

With respect to a covered loan made during the period beginning on March 27, 2020, and ending on the date that is 6 months after March 27, 2020, for the 6-month period beginning with the first payment due on the covered loan.

(D)

With respect to a covered loan approved during the period beginning on February 1, 2021, and ending on September 30, 2021, for the 6-month period beginning with the first payment due on the covered loan.

(2) Timing of payment

The Administrator shall begin making payments under paragraph (1) on a covered loan not later than 30 days after the date on which the first such payment is due.

(3) Application of payment

Any payment made by the Administrator under paragraph (1) shall be applied to the covered loan such that the borrower is relieved of the obligation to pay that amount.

(4) Limitation

(A) In general

No single monthly payment of principal, interest, and associated fees made by the Administrator under subparagraph (A)(ii), (B)(ii), or (D) of paragraph (1) with respect to a covered loan may be in a total amount that is more than $9,000.

(B) Treatment of additional amounts owed

If, for a month, the total amount of principal, interest, and associated fees that are owed on a covered loan for which the Administration makes payments under paragraph (1) is more than $9,000 the Administrator may require the lender with respect to the covered loan to add the amount by which those costs exceed $9,000 for that month as interest to be paid by the borrower with respect to the covered loan at the end of the loan period.

(5) Additional provisions for new loans

With respect to a loan described in paragraph (1)(C)—

(A)

the Administrator may further extend the period described in paragraph (1)(C) if there are sufficient funds to continue those payments; and

(B)

during the underwriting process, a lender of such a loan may consider the payments under this section as part of a comprehensive review to determine the ability to repay over the entire period of maturity of the loan.

(6) Eligibility

Eligibility for a covered loan to receive such payments of principal, interest, and any associated fees under this subsection shall be based on the date on which the covered loan is approved by the Administration.

(7) Authority to revise extensions

(A) In general

The Administrator shall monitor whether amounts made available to make payments under this subsection are sufficient to make the payments for the periods described in paragraph (1).

(B) Plan

If the Administrator determines under subparagraph (A) that the amounts made available to make payments under this subsection are insufficient, the Administrator shall—

(i)

develop a plan to proportionally reduce the number of months provided for each period described in paragraph (1), while ensuring all amounts made available to make payments under this subsection are fully expended; and

(ii)

before taking action under the plan developed under clause (i), submit to Congress a report regarding the plan, which shall include the data that informs the plan.

(8) Additional requirements

With respect to the payments made under this subsection—

(A)

no lender may charge a late fee to a borrower with respect to a covered loan during any period in which the Administrator makes payments with respect to the covered loan under paragraph (1); and

(B)

the Administrator shall, with respect to a covered loan, make all payments with respect to the covered loan under paragraph (1) not later than the 15th day of the applicable month.

(9) Rule of construction

Except as provided in paragraph (4), nothing in this subsection may be construed to preclude a borrower from receiving full payments of principal, interest, and any associated fees authorized under this subsection with respect to a covered loan.

(d) Other requirements

The Administrator shall—

(1)

communicate and coordinate with the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and State bank regulators to encourage those entities to not require lenders to increase their reserves on account of receiving payments made by the Administrator under subsection (c);

(2)

waive statutory limits on maximum loan maturities for any covered loan durations where the lender provides a deferral and extends the maturity of covered loans during the 1-year period following March 27, 2020; and

(3)

when necessary to provide more time because of the potential of higher volumes, travel restrictions, and the inability to access some properties during the COVID–19 pandemic, extend lender site visit requirements to—

(A)

not more than 60 days (which may be extended at the discretion of the Administration) after the occurrence of an adverse event, other than a payment default, causing a loan to be classified as in liquidation; and

(B)

not more than 90 days after a payment default.

(e) Rule of construction

Nothing in this section may be construed to limit the authority of the Administrator to make payments pursuant to subsection (c) with respect to a covered loan solely because the covered loan has been sold in the secondary market.

(f) Eligibility for new loans

For each individual lending program under this section, the Administrator may establish a minimum loan maturity period, taking into consideration the normal underwriting requirements for each such program, with the goal of preventing abuse under the program.

(g) Limitation on assistance

A borrower may not receive assistance under subsection (c) for more than 1 covered loan of the borrower described in paragraph (1)(C) of that subsection.

(h) Reporting and outreach

(1) Updated information

(A) In general

Not later than 14 days after the date of enactment of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, the Administrator shall make publicly available information regarding the modifications to the assistance provided under this section under the amendments made by such Act.

(B) Guidance

Not later than 21 days after the date of enactment of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act the Administrator shall issue guidance on implementing the modifications to the assistance provided under this section under the amendments made by such Act.

(2) Publication of list

Not later than March 1, 2021, the Administrator shall transmit to each lender of a covered loan a list of each borrower of a covered loan that includes the North American Industry Classification System code assigned to the borrower, based on the records of the Administration, to assist the lenders in identifying which borrowers qualify for an extension of payments under subsection (c).

(3) Education and outreach

The Administrator shall provide education, outreach, and communication to lenders, borrowers, district offices, and resource partners of the Administration in order to ensure full and proper compliance with this section, encourage broad participation with respect to covered loans that have not yet been approved by the Administrator, and help lenders transition borrowers from subsidy payments under this section directly to a deferral when suitable for the borrower.

(4) Notification

Not later than 30 days after the date of enactment of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, the Administrator shall mail a letter to each borrower of a covered loan that includes—

(A)

an overview of assistance provided under this section;

(B)

the rights of the borrower to receive that assistance;

(C)

how to seek recourse with the Administrator or the lender of the covered loan if the borrower has not received that assistance; and

(D)

the rights of the borrower to request a loan deferral from a lender, and guidance on how to do 1 successfully transition directly to a loan deferral once subsidy payments under this section are concluded.

(5) Monthly reporting

Not later than the 15th of each month beginning after the date of enactment of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, the Administrator shall submit to Congress a report on assistance provided under this section, which shall include—

(A)

monthly and cumulative data on payments made under this section as of the date of the report, including a breakdown by—

(i)

the number of participating borrowers;

(ii)

the volume of payments made for each type of covered loan; and

(iii)

the volume of payments made for covered loans made before March 27, 2020, and loans made after March 27, 2020;

(B)

the names of any lenders of covered loans that have not submitted information on the covered loans to the Administrator during the preceding month; and

(C)

an update on the education and outreach activities of the Administration carried out under paragraph (3).

(i) Authorization of appropriations

There is authorized to be appropriated to the Administrator $17,000,000,000 to carry out this section.

Source credit: (Pub. L. 116–136, div. A, title I, § 1112, Mar. 27, 2020, 134 Stat. 309; Pub. L. 116–260, div. N, title III, § 325(a), Dec. 27, 2020, 134 Stat. 2032.)

history & why it existsrecord from the source credit

2020Enacted · Pub. L. 116-136 · 134 Stat. 309
2020Amended · Pub. L. 116-260 · 134 Stat. 2032

A history note hasn’t been published yet. The record shows enactment by Pub. L. 116-136 on 2020-03-27.

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