SBA Issues Questionnaires to Borrowers for PPP Loans of $2 Million or More

As part of its review of Paycheck Protection Program loans totaling $2 million or more, the Small Business Administration will begin sending loan necessity questionnaires to borrowers that will inform SBA’s evaluation of their good-faith certification of their economic need. SBA has developed two versions of the questionnaire—one for nonprofit borrowers and one for for-profit borrowers.

Lenders who have submitted loan forgiveness decisions for these borrowers can expect to receive notification letters through the SBA Forgiveness Platform requesting that borrowers complete the questionnaire and providing general instructions on which documents to provide to SBA. However, SBA noted that lenders are not required to verify or validate borrowers’ responses or any supporting documents related to the questionnaire. Lenders may contact [email protected] with any questions.

SDBA Congratulates Outstanding Bank Workplaces

American Banker Magazine yesterday published its eighth annual list of the best banks to work for, and two SDBA member banks and one associate member were part of the 85 honorees. Dacotah Bank in Aberdeen was named number 28, First PREMIER Bank in Sioux Falls was named number 58, and SDBA associate member Bell Bank in Fargo was named number two.

The SDBA and ABA salutes these and other banks for establishing a culture and amenities that help attract and retain top talent, from generous health insurance and retirement benefits to employee prize programs, jovial atmospheres and employee financial health programs. View the list.

ABA Works with USDA to Support Credit Needs for New Farmers, Ranchers

The ABA and other industry groups met with the U.S. Department of Agriculture and the Farm Service Agency yesterday to discuss ways to support the credit needs of new farmers and ranchers. Representing ABA at the meeting were Heather Malcolm, VP, Bank of the Rockies, Livingston, Mont.; Dinese Watson, VP, Merchants Bank of Indiana, Lynn, Ind.; and Caleb Hopkins, chief lending officer, Westside State Bank, Halbur, Iowa. The bankers participated in a panel discussion on the challenges of serving beginning farmers and ranchers and shared some of the best practices they have learned.

During the event, the groups agreed to establish a process for agricultural lenders and FSA to communicate when challenges arise in financing beginning farmers; to engage agricultural lenders and FSA staff in loan-making training sessions and farm loan conferences; and to develop working groups of lenders and FSA staff to share best practices and overcome challenges.

USDA said it wants to leverage its farm loan programs, direct loans and loan guarantee programs to more effectively benefit farmers and ranchers just starting out, noting that “these producers have unique financing needs as they strive to start, develop, and grow their operations.” Read more.

OCC Finalizes 'True Lender' Rule

The OCC Tuesday issued a long-awaited final rule establishing a clear test to determine when a bank making a loan is considered the “true lender” in the context of a partnership between a bank and a third party. Under the final rule, a bank makes a loan if, as of the date of origination, it is named as the lender in the loan agreement or funds the loan.‌

A loan originated by a bank that satisfies either part of this test would retain its status as a bank-originated loan if the loan is sold, assigned or otherwise transferred to a nonbank entity. In cases where the bank funds the loan, if a bank funds a loan as of the date of origination, the OCC concluded that it has a predominant economic interest in the loan and, therefore, has made the loan—regardless of whether it is the named lender in the loan agreement as of the date of origination. The final rule further states that “if, as of the date of origination, one bank is named as the lender of the loan agreement for a loan and another bank funds that loan, the bank that is named as the lender in the loan agreement makes the loan.”

In response to concerns raised by ABA, the OCC clarified in the preamble to the final rule that the bank would not be considered the true lender in certain traditional lending or finance arrangements such as mortgage warehouse lending, indirect automobile finance, loan syndication and other structured finance. The OCC also clarified that the rule “does not affect the applicability” of the Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act or their implementing regulations. The final rule will take effect 60 days after publication in the Federal Register. Read the final rule. For more information, contact ABA’s Jonathan Thessin.

ABA Offers Tips for Securing Branches in Event of Election-Related Unrest

Acknowledging that the 2020 election may present unique security considerations for banks, ABA’s Bank Security Committee has updated its resource guide on securing bank branches during periods of civil unrest to include information specific to the election.

Among other things, the guide encourages banks to connect with local law enforcement and businesses, conduct a risk assessment that takes into account the bank’s location to polling stations or other voting locations, ensure employee safety and situational awareness, and secure physical and digital assets. The guide also includes customizable security tips for employees. Read the election security guidelines.

Noem Expands Small Business and Healthcare Provider Relief Program

Gov. Kristi Noem last Thursday announced updates to expand the Small Business and Healthcare Provider Relief Program, which utilizes Coronavirus Relief Fund (CRF) dollars to assist small businesses, community-based health care providers and nonprofits negatively impacted by the COVID-19 pandemic.

For all grants, the application period has been extended by a week to Oct. 30, 2020. Additionally, the minimum grant amount has been decreased from $750 to $500.

For the Small Business COVID Interruption program, the Small Business Startup program and the Small Nonprofit COVID Interruption program, the maximum grant has been increased from $100,000 to $500,000. Additionally, the eligibility requirement has been expanded from a reduction in business of more than 25% to a reduction in business of more than 15%.

For assistance, contact the call center at 605.937.7243 or email [email protected] or [email protected]. To learn more about the Small Business and Healthcare Provider Relief Program, visit COVID.SD.GOV.

Americans Trust Banks Most to Keep Information Safe

U.S. adults trust banks more than any other entity--including health care providers, non-bank payment providers and the government--to keep their information secure and private, according to a new survey conducted by Morning Consult on behalf of the ABA. In addition, all age groups surveyed (Gen Z, Millennials, Gen X and Baby Boomers) trust banks the most to protect their information.

The survey, conducted in early October, also found that by a greater than three-to-one margin, U.S. adults prefer their banking services to be delivered by a bank versus a technology company. In all, 56% of U.S. adults say they prefer a bank to provide their financial services versus just 17% who prefer their banking services to be provided by a technology company with a financial services division.

Three-quarters of Americans care whether the company that handles their finances is regulated like a bank, while only 9% said they don’t care. A majority in every age group surveyed shared that view. Additionally, 74% of consumers value FDIC insurance that guarantees the safety of their money “a lot” or “some,” and a plurality identified it as their top priority when deciding where to deposit their money.

“This survey reinforces the trust consumers have in America’s banks to keep their money safe and to provide the financial services and convenience they want and need,” said Rob Nichols, ABA president and CEO. “It’s encouraging to see that adults across generations appreciate the commitment America's banks have made to protecting customer information."

The ABA also released an accompanying infographic highlighting the survey results. The data released today are the latest in a series of results gauging consumers’ preferences and opinions regarding banks and their services. Read more.

Appraisers: Learn About New Evaluations Market in South Dakota

During the 2020 South Dakota Legislature, HB 1127 was passed allowing South Dakota credentialed appraisers to do evaluations. While the bill became law on July 1, the rules defining the statute that allow South Dakota appraisers to offer evaluations do not go into effect until after the rules hearing the first part of November.

The South Dakota Appraiser Certification Program is offering a four-hour virtual seminar "Evaluations: Understanding the Brand New Product/Service that SD Appraisers Can Offer their Clients" on Monday, Nov. 16. The seminar will cover the new rules defining when and how South Dakota appraisers can provide evaluations to their clients. The seminar is designed for all real estate appraisers that work in the state.

The virtual seminar will be held via Zoom from 1-4 p.m. CST, and the cost is $125. Learn more and register.

Compliance Alliance

Question of the Week

Question: Our retail staff is looking to have changes made to our CIP policy in regard to the collection of identification regarding business accounts. The CIP regulation states that the bank should obtain documents showing the legal existence of the entity, such as articles of incorporation or business licenses. We have found that most businesses cannot produce their articles of incorporation or equivalent, and we are currently having them fill out our internal resolutions. Does the regulation require us to obtain the original documents showing the formation of the entity?

Answer: The regulation requires that your CIP policy establish a way to verify the existence of the entity through documentary and/or non- documentary processes. If you're going to verify through documents, the regulation lists as examples: articles of incorporation, a government-issued business license, a partnership agreement, etc. There is not any particular form of documentation required by regulation and so long as the bank is satisfied that the legal existence of the entity is proven through whatever documentation that the entity is able to provide, then that is all that is required by the regulation. But it is already important to remember bank policy, best practices as well as any investor requirements or examiner input.

Reference:

(A) Verification through documents. For a bank relying on documents, the CIP must contain procedures that set forth the documents that the bank will use. These documents may include:

(2) For a person other than an individual (such as a corporation, partnership, or trust), documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement, or trust instrument.

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Questions/Comments
Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.