The Wall Street Journal - 04.04.2020 - 05.04.2020

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THE CORONAVIRUS PANDEMIC

accounts in order to speed up

the approval process.

“First, we have to focus on

the borrowing clients to make

sure we can take care of them,”

Bank of America CEO Brian

Moynihan said on CNBC. “And

then secondly, the people with

the core relationship that don’t

borrow, we’ll handle them

also.”

Sen. Marco Rubio (R., Fla.),

chairman of the Senate Small

Business Committee, criticized

the bank and said it should re-

ceive all comers. “This money

is 100% guaranteed by fed

govt,” he said in a tweet.

Based on Ms. Carranza’s fig-

ures, the average loan amount

approved was about $325,000.

At that rate, the roughly

$350 billion allotted by Con-

gress would run out after one

million applications are ap-

proved. The government has

said it approves loans on a

first-come, first-served basis.

“If funds run low, there will

be immense political pressure

on Congress for funding to

make sure that people aren’t

shut out because they are at

the end of the queue,” said Har-

ris Simmons, CEO ofZions

Bancorp, a big Utah lender.

Treasury Secretary Steven

Mnuchin has said he would ask

Congress for more money if the

Paycheck Protection Program

needs more funding.

About one-fourth of small

businesses have already closed,

according to a survey of 500

firms released Friday by the

U.S. Chamber of Commerce and

MetLife. Another 40% said it is

likely they will have to close at

least temporarily within the

next two weeks.

Questions about the pro-

gram remained even as it got

under way. One issue is

whether the 1% interest rate is

simple interest or compounded

and what banks should do in

case borrowers miss payments,

said Scott Pearson, a financial

services expert at the law firm

of Manatt, Phelps & Phillips.

Also missing was a standard

loan agreement that sets out

the terms of the loan and con-

ditions.

Chris Hurn, chief executive

ofFountainhead Commercial

Capital, a nonbank lender that

specializes in SBA loans, said

that as of Friday he was await-

ing guidance from the SBA on

several issues, including how to

submit the forms that both ap-

plicants and lenders are re-

quired to fill. Mr. Hurn said he

couldn’t begin processing appli-

cations without such guidance.

The SBA didn’t respond to a

request for comments on the

complaints.

Other small-business owners

say they are frustrated by poli-

cies, such as the one outlined

by Bank of America, that put

certain customers ahead of oth-

ers. Giving those with existing

lending relationships priority

penalizes small businesses that

have taken a prudent approach

to debt but are still suffering fi-

nancially from the pandemic.

Jen Storey, co-owner of Re-

dhill Painting in San Francisco,

has a business-checking ac-

count with Bank of America

and a business credit card with

JPMorgan Chase. She said the

eight-person company that she

and her husband have run since

2004 doesn’t meet the stan-

Many bars and restaurants have closed because of the impact of the coronavirus pandemic.

AGENCE FRANCE-PRESSE/GETTY IMAGE

rower,”saidTedTozer,afor-

mer head of Ginnie Mae who

is now a senior fellow at the

Milken Institute.

Adding to the confusion,

many servicing call centers

have been shut down, meaning

customer-service reps are

working from home and jug-

gling child-care and technical

difficulties.

Mr. Colgan, the Northern

Virginia real-estate agent,

started calling his mortgage

company,NewRezLLC, in early

March. He filled out an online

form about three weeks ago ex-

plaining that his commission-

based job might be put on hold

as potential home buyers stay

out of the market. Someone

would get back to him within

three days, the company’s web-

site said, but Mr. Colgan said

he never heard from anyone.

The Wall Street Journal con-

tacted NewRez about Mr. Col-

gan’s mortgage on Thursday.

NewRez called Mr. Colgan later

that day and offered to sus-

pend payments for April and

May, both to be paid July 1. He

has decided to make his pay-

ment this month, but is unsure

what he will do after that.

Mr. Matthews isn’t sure

what he will do. He has asked

United Wholesale Mortgage to

turn off the autopay feature

on his loan. The company

didn’t comment.

Allowing a flood of borrow-

ers to stop their payments

temporarily could bring about

a massive cash crunch for

mortgage companies, which are

generally still on the hook to

make payments to mortgage

investors even if borrowers are

in arrears. (Taxpayers, though,

are ultimately on the hook for

federally backed loans.)

That has proved daunting

to the companies, many of

which are nonbanks and don’t

have deposits or other busi-

ness lines to cushion them.

It is unclear how much

money the companies will

need, but the industry antici-

pates tens of billions of dol-

lars. Ginnie Mae, a govern-

ment agency that backs some

$2 trillion of mortgages, an-

nounced last week it would

work with nonbank lenders to

help them stay afloat.

“Until the funding is more

certain...they’re going to tend

to be less generous to the bor-

sion level is extremely high.”

The Department of Housing

and Urban Development

sought to clear up some of the

confusion this week, telling

servicers they can compile the

missed payments into a sec-

ond, interest-free home loan

for the borrower to pay off af-

ter the original mortgage. The

guidelines apply to FHA-in-

sured mortgages, which make

up about 15% of all active

mortgages in the U.S.

The federal regulator for

Fannie Mae and Freddie Mac,

the mortgage finance compa-

nies that back about half of

the U.S. mortgage market, has

instructed servicers to work

with borrowers and to con-

sider letting them tack their

missed payments on to the

end of their loan.

The AT&T store in down-

town Washington, D.C., where

Reggie Matthews works, was

shut down about two weeks

ago. He said United Wholesale

Mortgage, the servicer on his

FHA loan, said that he was eli-

gible for a short-term forbear-

ance but that he couldn’t defer

missed payments by tacking

them on to the end of his loan.

said that any borrower who

“tells one of our customer-ser-

vice representatives that they

have been impacted by the

coronavirus” will be accepted

as eligible for mortgage for-

bearance.

The law says nothing about

when borrowers have to make

up the missed payments, fuel-

ing some of the confusion.

Some borrowers are assuming,

wrongly, that they don’t have

to make up the payments later,

industry officials and regula-

tors say.

Some regulators say bor-

rowers should have the option

to make up the payments at

the end of their loan. Home-

owners say mortgage compa-

nies generally haven’t offered

that option. Instead, many say

they are being told they must

make up their missed pay-

ments in one big lump sum as

soon as the relief period is

over.

“The messaging has not

matched what’s established in

policy yet,” said David Stevens,

a former head of the Federal

Housing Administration, which

mostly insures loans for first-

time home buyers. “The confu-

Struggling homeowners are

flooding their mortgage com-

panies with requests for help

as the coronavirus pandemic

wrecks the economy. Many are

having a hard time getting it.

Homeowners say they are

waiting hours on the phone

just to reach a real person.

When they do, some are told

that getting an answer could

take weeks. That is a trouble-

some timeline for the many

borrowers whose mortgage

payments are due in the first

half of April.

“I’m frustrated and scared,”

said Chris Colgan, a real-estate

agent from Northern Virginia.

He said he called his servicer

some 15 times in the past

month.

The $2 trillion stimulus

package is supposed to make

it easier for homeowners to

suspend their monthly pay-

ments and temper a potential

foreclosure crisis. The diffi-

culty in doing so threatens to

squeeze Americans further

just as the pandemic puts mil-

lions of people out of work.

The stimulus legislation that

was signed by President Trump

says homeowners hurt by the

coronavirus or its fallout can

ask their mortgage servicer for

a so-called forbearance, in

which their monthly payments

are interrupted for up to six

months, and can also request

an additional six months.

Borrowers don’t have to

show documented proof that

they have been hurt by the

coronavirus. If the loan is

backed by the government, the

mortgage servicer is generally

supposed to grant the request.

About 70% of U.S. mortgages

are backed or insured by a

federal agency.

Some borrowers fear that

help might not come soon

enough. David Jenkins, a prod-

uct manager for a tech com-

pany, said he askedFifth Third

Bancorpabout a forbearance

last week. His wife’s job teach-

ing Pilates exercises has be-

come less certain, weighing on

the family’s income. The bank

told him that if he qualifies, he

should receive written ap-

proval in the mail.

“Snail mail of forbearance

approval is ridiculous,” Mr.

Jenkins said.

A Fifth Third spokesman

BYORLAMCCAFFREY

ANDANDREWACKERMAN

Homeowners Struggle to Halt Payments

Some regulators say borrowers should be able to make up payments at the end of their loan. Borrowers say they haven’t been offered that option.

LINDSEY WASSON/REUTERS

dards for processing the new

SBA loans set by either bank.

Mr. Amaral of Ally Right said

he rose before sunrise to get an

early start applying for a loan

at a local SBA lender listed on

the agency’s website. The

lender closest to his home said

it no longer makes SBA loans,

the second didn’t know any-

thing about the new program

and the third was closed be-

cause of the Covid-19 virus. He

also tried Wells Fargo, where

he has business and personal

banking accounts, but said bank

employees didn’t know about

the program.

A Wells Fargo spokeswoman

said the bank would only ac-

cept applications for the loans

online and that it has signs in

its branches informing custom-

ers of that policy.

Some banks were working to

update their systems to deal

with what they expected to be

an avalanche of loan applica-

tions. Boston-based Eastern

Bank won’t begin processing

applications until next week be-

cause it needs to update its

technology, according to Quincy

Miller, president and vice chair.

Mr. Miller said guidance

came too late from federal

agencies to make all the neces-

sary changes in time to start

processing loans Friday.

Live Oak Bancshares, Inc.,

the largest lender in an SBA

flagship program, said it is

working through a pipeline of

over 1,000 loan applications

from its roughly 4,000 existing

customers. Then, it plans to

open up the program to busi-

nesses near its North Carolina

headquarters followed by new

customers.

The bank submitted its first

paycheck protection loan appli-

cation to the administration at

4 a.m. Friday, said Huntley Gar-

riot, president of the Wilming-

ton, N.C.-based bank. It took

more than one try.

By Friday afternoon, the

bank received its first loan au-

thorizations from the SBA, and

it hoped to get the money out

to customers either by the end

of the day or Monday.

—Amara Omeokwe

and Yuka Hayashi

contributed to this article.

the novel coronavirus pan-

demic.

Businesses with 500 employ-

ees or fewer are eligible for the

loans, which have a 1% interest

rate and are designed to keep

employees on the payrolls for

eight weeks, limiting the

mounting ranks of workers ap-

plying for unemployment

checks. If a borrower doesn’t

lay off workers, the govern-

ment plans to forgive the loan,

including interest. Borrowers

may also use the money for

rent and utilities.

Many of the nation’s biggest

banks, including JPMorgan

Chase& Co., Citigroup Inc. and

Wells Fargo & Co., said Friday

morning they weren’t yet ready

to take loan applications. By

Friday afternoon Chase said

borrowers with a business

checking account could start

applying online; but the bank

warned of possible “processing

delays and system failures” due

to high volume and told cus-

tomers that some applications

wouldn’t be approved by the

SBA, given limited funds.

One reason many banks

weren’t ready to process appli-

cations was a delay in getting

final rules about the program

from the Treasury Department

and SBA, as well as uncertainty

about what kinds of documen-

tation would be accepted to

qualify prospective borrowers.

The government didn’t release

final versions of the documents

that must be filed by borrowers

and lenders until Thursday

night.

Bank of America Corp.

started accepting applications

Friday morning and had re-

ceived more than 85,000 for

loans totaling $22.2 billion as

of 5 p.m., a spokeswoman said.

But the bank said it is only con-

sidering customers with both

outstanding loans and deposit

Continued from page A

Bumpy

Start for

New Loans

WASHINGTON—Workers
will have to wait a little bit
longer for larger unemploy-
ment-insurance payments
aimed at helping millions of
people who have lost their
jobs during the coronavirus
pandemic.
A senior U.S. Labor Depart-
ment official on Friday said
federal funds promised to
states, which administer job-
less benefits, should be dis-
tributed next week.
Workers over the past two
weeks have filed for unem-
ployment-insurance benefits in
record numbers, and states
have been anticipating funding
and more specific instructions
on how to implement provi-
sions to expand unemploy-
ment benefits included in a $
trillion federal stimulus pack-
age signed into law last week.
On Monday, Labor Secre-
tary Eugene Scalia said these
funds would be distributed to
states this week, but the fed-
eral government won’t meet
that goal.
The senior Labor Depart-
ment official expects states to
have individual accounts at
the Treasury Department they
can draw upon next week, the
caveat being that states would
need to be ready with the
proper technology to access
and disburse these funds.
Some states would be ready
to release the extra $600 to
individuals within a week or
two after tapping federal
money.
For others, it could take
two to four weeks or even lon-
ger, the Labor Department of-
ficial said.
Pressure has been building
for the government to act
quickly in disbursing these
funds to states.

BYSARAHCHANEY
ANDERICMORATH

Benefits

Funding

To Come

Next Week

President Trump has nomi-
nated a White House lawyer to
serve as an oversight chief for
business loans within the
Treasury Department as part
of the $2.2 trillion coronavirus
economic rescue package
passed by Congress last week.
Mr. Trump on Friday night
nominated Brian D. Miller as
special inspector general for
pandemic recovery. The new
position, the subject of a dis-
agreement between Democrats
and the president, is intended
to watch over how $500 bil-
lion earmarked for loans to
business is spent.
Mr. Miller currently works
as special assistant to the
president and senior associate
counsel in the Office of White
House Counsel. He previously
served as inspector general for
the General Services Adminis-
tration, among other posts, ac-
cording to a White House
statement.
The stimulus bill specified
that the new watchdog, known
as SIGPR, notify lawmakers
immediately if any agency re-
fuses to comply with its infor-
mation requests. That clause
was among the oversight pro-
visions Democrats required as
a condition of their support
for the stimulus package.
In a bill signing statement,
Mr. Trump indicated that
those inspector general re-
ports must first be reviewed
by the White House. He said
the U.S. Constitution gives the
president broad discretion
over how laws are enforced.
Democrats and some Re-
publicans have since pushed
back on the president’s state-
ment. Additionally, House
Speaker Nancy Pelosi said she
is also creating a committee to
oversee the federal response
to the new coronavirus, an ef-
fort to add more supervision
of the trillions of dollars the
government is spending to
combat the economic effects
of the pandemic.
Mr. Miller’s nomination re-
quires Senate confirmation.
—Kate Davidson
contributed to this article.

BYALEXLEARY

Inspector

General

For Loans

Is Picked