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President Joe Biden Tuesday signed into law legislation to extend the paycheck protection program's (PPP) loan application deadline to May 31 and allow the Small Business Administration (SBA) to continue processing pending applications until June 30. In addition, the SBA issued a second procedural notice to provide guidance related to hold codes on first-draw paycheck protection program (PPP) loans and other error messages.

NAFCU has raised concerns about the amount of loans backlogged due to hold codes and has called on the SBA to clear the codes before the program ends. The association has also highlighted improvements needed for a smoother approval and forgiveness processes.

The procedural notice, issued Monday, highlights that the agency is now using a machine learning scoring model that allows automated dispositioning of first draw loans with hold codes that are minimal risk of non-compliance, fraud, or abuse in hopes of reducing the amount of hold codes.

Lenders are still asked to clear hold codes through lenders' certification as outlined in the SBA’s first procedural notice on this topic until the new model is fully deployed. In addition, the procedural notice updates the lender certification method for Table 1 holds. The SBA has noted it is allowing lenders to resolve hold codes or compliance check error messages by obtaining a written borrower certification that must be signed under penalty of perjury and must attest to the accuracy of the certification and supporting documentation – alleviating the burden placed on lenders to certify certain information.

The association has previously asked for the SBA to take a holistic approach to the review of PPP loans when determining whether there is an indication of risk or fraud, rather than arbitrarily reviewing loans.

NAFCU will continue to advocate for program improvements and transparent guidance to ensure credit unions can lend effectively through the PPP. Access the association's PPP FAQs here.