Page 9 - Bulletin 05_14_20
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aRTiCLeS


        standards for C&I loans for firms of all sizes – substantially larger   Fed Expands Scope of ‘Main
        shares seen than in previous reports. Banks tightening were most   Street’ Program with ABA-Urged
        likely to tighten by increasing spreads and using interest rate
        floors. Banks saw divergent demand trends for C&I loans, with   Changes
        about a third seeing stronger demand from large and midsize
        firms (driven mostly by falling customer revenues or protective   The Federal Reserve has expanded the
        demand for liquidity), about a quarter seeing weaker demand   scope of its Main Street Lending Program
        (due mostly to falling investment and M&A financing needs) and   to accommodate more businesses and
        four in 10 seeing the same levels of demand.            more loan options for participating
                                                                banks. The revised term sheets for
        CRE. On the commercial real estate side, more than half of banks   the program include several changes,
        said they tightened standards somewhat on construction and land   including permitting the use of the
        development loans and loans secured by nonfarm nonresidential   London Interbank Offered Rate, lowering the minimum loan size
        properties, while just under half tightened on multifamily   somewhat and providing flexibility on the maximum loan size.
        residential property loans. No banks reported easing standards for
        CRE loans.                                              Eligible MSLP loans will be originated after April 24 and have
                                                                a four-year term with a minimum loan size of $500,000 in the
        Mortgages. Small net percentages reported tightening standards   Main Street New Loan Facility and Main Street Priority Loan
        for conforming mortgages, while on net 5.5% said they eased   Facility. The minimum size will be $10 million in the Main Street
        on government mortgages. Just under 20% said they tightened   Expanded Loan Facility. In the MSNLF and the MSELF, lenders
        standards on jumbo loans. As many as half of banks reported   will retain 5% of the risk on each loan, while retaining 15% in
        stronger demand for mortgages in every category, with one in five   the newly created MSPLF.
        reporting “substantially stronger” demand for GSE-eligible loans,
        most likely driven by low rates. About 20% of banks also reported   The Fed will provide a more flexible calculation method for
        tightening on home equity lines of credit.              maximum loan sizes. In the MSNLF, the maximum loan size will
                                                                be $25 million or four times adjusted 2019 EBITDA, whichever
        Cards, Auto. Nearly four in 10 banks reported tightening   is less; in the MSPLF, it will be the lesser of $25 million, or six
        standards on credit cards, mostly by cutting credit limits and
        increasing minimum credit scores, and the long-running
        tightening trend on auto loans accelerated, with 16% of banks
        tightening. Banks reported weaker or unchanged demand in both
        categories.
        To read more visit: https://www.federalreserve.gov/data/sloos/
        sloos-202004.htm
        New IRS, Treasury Guidance

        Reduces Benefits of PPP Loan
        Forgiveness

        New guidance issued by
        the IRS confirmed that
        any loan amounts forgiven
        under the CARES Act will
        be excluded from taxable
        gross income. However,
        the guidance also stated
        that no deduction will be allowed for an expense if the payment
        of the expense results in forgiveness of a covered loan under the
        CARES Act.  This could have an adverse after-tax impact on PPP
        borrowers by effectively eliminating the deductibility of payroll
        and other expenses that qualify for forgiveness under the PPP.
        To read the guidance  visit: https://www.irs.gov/pub/irs-
        drop/n-20-32.pdf



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