September 11, 2020

4 things to know this week

Capitol HillNAFCU's widely-read NAFCU Today is credit union leaders' go-to source for the latest on issues impacting the credit union industry. For those short on time, here's a roundup of this week's top need-to-know news, including NAFCU's participation at the Federal Housing Finance Agency's (FHFA) listening session on its capital proposal, the Senate's failed vote on a "skinny" relief package, and more.

NAFCU details GSE capital proposal concerns at listening session

NAFCU Senior Regulatory Counsel Elizabeth LaBerge spoke at the FHFA's listening session Thursday to offer more insights into the association's concerns about its proposed capital requirements for the government-sponsored enterprises (GSEs). LaBerge focused her comments on the proposal's treatment of credit risk transfers (CRTs), which NAFCU believes "severely disincentivizes these transactions in favor of private mortgage insurance." She argued that CRTs have helped to improve the health of the GSEs and provide certainty amid poor market conditions.

"CRTs are a safe, stable vehicle for transferring credit risk out of the GSEs and the housing finance sector as a whole," LaBerge said. "The re-proposal’s treatment of CRT is a significant course change away from what has been a successful tool in rehabilitating the GSEs up to this point."

Continuing CRTs is one of NAFCU's housing finance reform principles. The FHFA is set to hold another listening session on Monday.

Senate fails to advance 'skinny' package

The Senate Thursday failed to advance a "skinny" version of Senate Republicans' Phase 4 coronavirus relief package as Democrats opposed its "piecemeal approach." The bill was roughly half the cost of the original proposal released in July, but mirrored several provisions, including NAFCU-sought language to help simplify the Small Business Administration's (SBA) paycheck protection program (PPP) forgiveness process for loans $150,000 and under, and also provided funding for schools, jobless benefits, and small businesses.

Prior to the vote, NAFCU Vice President of Legislative Affairs Brad Thaler called on Senate leaders to include more relief for credit unions to ensure the industry can continue to effectively serve consumers and borrowers who are facing significant financial hardships. NAFCU also joined with other trade groups focused on financial services and business to flag a provision of the skinny proposal that would have rescinded a section of the CARES Act intended to lessen the financial burden of borrowers with certain SBA-program loans. The association will continue to fight for credit union priorities to be included in the next relief package.

Big bank employees fired for misusing relief funds

JPMorgan Chase has fired several employees for allegedly obtaining economic injury disaster loans (EIDLs) – meant to help businesses survive and recover from the coronavirus pandemic – by fraudulent means. Earlier this week, it was reported that the bank was investigating "instances of customers misusing Paycheck Protection Program [PPP] Loans, unemployment benefits and other government programs" and how some "employees have fallen short."

In addition, several other cases of coronavirus-related loan fraud continue to make headlines. A Massachusetts man, who had been charged and arraigned for his alleged participation in a PPP fraud scheme seeking more than $500,000, faked his own death before being apprehended in Georgia. Following a report on PPP fraud from the House Select Subcommittee on the Coronavirus Pandemic, the Justice Department announced that it has identified almost 500 people suspected of coronavirus-related loan fraud, has several hundred investigations open, and has criminally charged 50 people for PPP fraud.

Jobless claims disappoint expectations

While economists had predicted the number of initial jobless claims to fall to 850,000, the number was unchanged at 884,000 for the week ending Sept. 5. In addition, the number of continuing claims – those who have filed at least two weeks in a row – rose 93,000 from the previous week to 13.385 million total.

The disappointing report comes on the heels of a "solid" August jobs report, which showed an increase of 1.4 million jobs and a declining unemployment rate. NAFCU Chief Economist and Vice President of Research Curt Long noted that a problem area is workers suffering permanent job loss, as "there are now 3.4 million such workers, which is halfway to the peak of the Great Recession."