October Newsletter
Washington Policy Update
Allison Karakis, Director of Legislative Affairs
Presidential campaigns are said to be a marathon, not a sprint. Seasoned runners advise that discipline is necessary to finish a long run and it is vital to have a plan for the final miles to overcome any unexpected obstacles. To win, you need to utilize everything you’ve got and sometimes sprint to the end.
Congress typically recesses in October during an election year. This year, however, the Senate held confirmation hearings to fill the U.S. Supreme Court vacancy. Just days before the election, Amy Coney Barrett became the fifth women confirmed to the U.S. Supreme Court. Meanwhile, House leadership and the administration continued negotiations throughout the month on the next stimulus package. Reports about the closed-door discussions raised hopes of a deal, while the president’s conflicting tweets caused confusion.
Heading into the final week of the campaign, a record numbers of voters have already cast their ballots through early voting while candidates sprint across the country to make their final appeals. Control of the Senate is extremely important to both parties. Out of the 35 Senate seats on the ballot, Republicans are defending 23. Democrats will need to pick up three or four seats to gain control, depending on the presidential outcome. Elections experts disagree on which states will likely flip, but most agree that approximately eight Republican seats and one Democratic seat are competitive.
SBA Simplifies PPP Loan Forgiveness
The Small Business Administration (SBA) began accepting Paycheck Protection Program (PPP) loan forgiveness applications from lenders on Aug. 10, 2020. With more than 5.2 million loans, lenders and borrowers advocated for a streamlined process.
In early October, the SBA released a simplified application for PPP loans at $50,000 or less that exempts borrowers from decreased forgiveness due to a reduction in full-time employees or employee wages that would otherwise apply. There are approximately 3.57 million outstanding PPP loans that are $50,000 or less, totaling approximately $62 billion. Approximately 1.71 million of those loans were made to businesses that reported having one or no employees.
CFPB Extends QM Patch
The Consumer Financial Protection Bureau (CFPB) extended the Qualified Mortgage (QM) Patch until the new QM definition is finalized. The QM Patch allows mortgages backed by Fannie Mae and Freddie Mac to be considered QMs even if the loan exceeds the 43% debt to income (DTI) ratio. The CFPB proposed a new general QM definition that replaces the DTI ratio limit with a price-based threshold and a new seasoned QM that requires a loan to be held in portfolio and meet certain performance requirements over a 36-month seasoning period.
Household Rental Debt During COVID-19
With the Centers for Disease Control (CDC) eviction moratorium expiring at year-end, concerns continue to mount that mass evictions are imminent. In October, the Federal Reserve Bank of Philadelphia released a report estimating the size of the problem. The report said, “of 32 million renter households with at least one worker in February 2020, 7.5 million (23.5%) have experienced some unemployment between March 2020 and August 2020. We estimate that by December 2020, 1.34 million renter households (4.2% of all renter households and 18% of those experiencing some unemployment) will owe $7.2 billion in rent, which is around $5,400 each. These 1.34 million households contain 3.9 million individuals: 2.8 million adults and 1.1 million children. In particular, Hispanic households, Black households, and family households headed by single women are disproportionately likely to experience rental debt. These households may be at risk of eviction when the national moratorium expires.”
The report concludes that, “polices enacted to replace lost income for workers losing jobs during the COVID-19 pandemic, particularly the enhanced UI provided by the CARES Act, have been highly effective at keeping renter households out of debt for those households that received these benefits. Additionally, as intended, these policies were far more protective than standard state UI alone would have been. By contrast, households that received nothing at all or only Economic Impact Payments are far more likely to have accumulated rental debt since March 2020.”
A large coalition of housing and financial services groups continue to advocate for federal rental assistance to help avoid mass evictions once the moratoriums are lifted.
How America Banks: Household Use of Banking and Financial Services
The Federal Deposit Insurance Corporation (FDIC) released its biennial survey “How America Banks: Household Use of Banking and Financial Services.”
Key findings from the 2019 How America Banks survey:
  • Nearly 95% (124 million) of U.S. households had at least one bank or credit union account in 2019, while 5.4% (7.1 million) of households did not.
  • Mobile banking continued to increase sharply, more than doubling as the primary means of access since 2017 and leading all other methods of account access, including tellers, ATMs and online banking.
  • Nearly half of unbanked households reported that they did not have a bank account because they did not have enough money to meet minimum balance requirements, and approximately one-third of unbanked households stated that they did not have an account because they did not trust banks.
  • The number and percent of all unbanked households declined from 2017 to 2019. Approximately 14% of Black households and 12% of Hispanic households did not have bank accounts in 2019. This is the lowest percentage of unbanked household for these groups since the FDIC began conducting the survey. Among white households, however, less than 3% were unbanked.
  • Nearly 28% of unbanked households used prepaid cards. About 31.1% of Black unbanked households used a prepaid card, as did 16.7% of Hispanic unbanked households.
  • 73% of U.S. households used bank credit, such as a credit card, personal loan or line of credit from a bank. 5% used nonbank credit, such as a payday loan or an auto title loan. The use of nonbank credit declined from 8% in 2015 to nearly 5% in 2019.