May 13, 2020

Pelosi unveils HEROES Act for more coronavirus relief

Capitol domeHouse Speaker Nancy Pelosi, D-Calif., Tuesday unveiled House Democrats' $3 trillion proposal for the next phase of coronavirus relief – the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act – which focuses on providing assistance to workers, renters and homeowners, state and local governments, and more. The House is expected to vote on the package as early as Friday.

"We appreciate the efforts of House Democratic leadership to continue to advance pandemic relief efforts," said NAFCU President and CEO Dan Berger. "The HEROES Act provides important support for the CDFI Fund and the PPP for smaller lenders. However, the bill released [Tuesday] fails to contain key provisions that will allow credit unions to do even more for small businesses and consumers.

"We would also caution that efforts to require broad mortgage forbearances under the HEROES Act could have negative impacts on the mortgage industry and the economy as a whole. We look forward to continuing to work with the House, Senate and Administration on these concerns as the next phase of COVID-19 relief moves forward," Berger concluded.

NAFCU's advocacy team has been working closely with the House and Senate to get key credit union provisions, such as relief under the member business lending (MBL) cap, added into new relief packages and prevent any harmful provisions from being included. Last Friday, Berger wrote to House Financial Services Committee Chairwoman Maxine Waters, D-Calif., regarding the House’s Phase 4 relief effort.

While the HEROES Act does not include language to exclude certain small business loans made during the coronavirus pandemic and its recovery from credit unions' MBL cap, it does contain some positive provisions, including:

  • $1 billion for economic support and recovery in distressed communities by providing financial assistance to Community Development Financial Institutions (CDFIs);
  • an additional $10 billion for emergency injury disaster loan grants;
  • safe harbors for financial institutions that provide services to marijuana-related businesses (mirroring the House-passed SAFE Banking Act); and
  • additional support for minority depository institutions.

It also makes several changes to the Small Business Administration's (SBA) paycheck protection program (PPP), including:

  • expanding eligibility for PPP loans to all non-profits;
  • extending the coverage period of loans from 8 weeks to 24 weeks;
  • extending the loan term from 2 years to a minimum of 5 years in an effort to lower payments;
  • requiring mandatory reporting on certain demographics and data collection related to forgiveness;
  • establishing technical assistance grants for small community financial institutions with less than $10 billion in assets;
  • ensuring that debt forgiveness is not considered taxable income;
  • eliminating the requirement that at least 75 percent of the PPP loan forgivable amount must be used toward payroll; and
  • clarifying the "hold harmless" provision for lenders, for which NAFCU has advocated.

For other SBA programs, the HEROES Act separates the PPP from the 7(a) loan program to ensure the 7(a) loan program continues to operate once PPP loans are depleted, waives borrower and lender fees for regular 7(a) and 504 loans, and increases the guarantee up to 90 percent for 7(a) and 504 loans.

While the HEROES Act does not contain many provisions NAFCU has advocated against including, such as expanding interchange fees to credit cards, it does broaden mortgage forbearance to all single-family covered mortgages, not just those backed by the government. Read more about the forbearance provisions.

NAFCU will continue working with lawmakers to address credit unions' concerns and provide more relief to the industry. As this bill is expected to pass on party lines in the House, it is not likely the Republican-led Senate will take up the bill and could instead draft its own package. NAFCU will keep credit unions informed of developments.