House Financial Services Committee to mark up stimulus legislation that may affect banks
On February 8, 2021, the House Financial Services Committee (the “Committee”) announced that, on February 10, it would mark up legislation that would implement certain provisions of the Biden Administration’s stimulus package, the American Rescue Plan. The Committee has been directed by Concurrent Resolution No. 5 to recommend uses for an appropriation totaling $75 billion. There are three notable provisions for banks that make either small business loans, home mortgage loans, or mortgage loans to rental property owners.
First, the Committee’s Committee Print of the legislation would reauthorize the State Small Business Credit Initiative (“SSBCI”). The Small Business Jobs Act of 2010 established the SSBCI, but the Treasury Department’s authority to administer the program expired in 2017. In the new iteration, $10 billion would be appropriated for allocation by Treasury through the SSBCI among the states through two channels, in order to leverage up to $100 billion in small business loans (assuming a leverage ratio of slightly under 10%).
The Treasury Department would allocate the majority of the $10 billion appropriation -- $7 to 7.5 billion – in three phases among qualifying states in the same way that Treasury allocated funds under the Small Business Jobs Act. Of this amount, $500 million would be reserved for Tribal governments. In order to qualify for an allocation of this amount, a state would be required to submit a plan detailing the participation of community development financial institutions and minority depository institutions, a pandemic response plan, and a technical assistance plan for the provision of legal, accounting, and financial advisory services to very small businesses.
Treasury would allocate another portion – $1.5 billion – of the $10 billion appropriation to support lending to business enterprises owned and controlled by “socially and economically disadvantaged individuals.” Socially disadvantaged individuals are those who have been subject to racial or ethnic prejudices or cultural bias; individuals who are Black, Hispanic, or members of certain other minority groups are presumptively considered socially disadvantaged. An individual who is socially disadvantaged and who falls below certain net worth, personal income, or asset ceilings is considered economically disadvantaged. Treasury’s allocation of the $1.5 billion would not be subject to the allocation formula for the $7 to $7.5 billion. Treasury would set aside an additional $1 billion to supplement allocations to states that demonstrate “robust support” for disadvantaged business enterprises. Finally, Treasury could, but would not be required to, reserve up to $500 million for technical assistance provided by the states or the Minority Business Development Agency.
Two other appropriations in the Committee Print could affect banks with outstanding mortgage loans to either homeowners or rental property owners as follows:
$10 billion in assistance to homeowners. Nearly all of this amount would be provided to states, territories, and Tribes to assist homeowners with mortgage payments and various other housing-related costs.
$25 billion in emergency rental assistance. Of this amount, $19.05 billion would be provided to the Treasury Department, which would have broad discretion to allocate these funds both to stabilize renters and to help rental property owners cover their costs. Another $5 billion would be provided for emergency Housing Choice Vouchers to assist those at risk of homelessness or fleeing domestic violence or human trafficking. The remaining $950 million would support unassisted households in USDA-subsidized properties, housing needs of Native Americans, and housing counseling services. This $25 billion is in addition to the $25 billion in rental assistance provided in the December 2020 COVID-19 relief legislation.
In addition, the Committee Print to be marked up provides $10 billion for Defense Production Act spending, $5 billion in financing for state and local governments to provide affordable housing and other services to the homeless, and $15 billion to support workers in the airline industry.