Implementing the CARES Act – successes, frustrations

We’re almost a week into the process of implementing the CARES Act, and still there seem to be more questions than answers.

“We have been trying to keep our member banks up to date on various aspects of the PPP (Paycheck Protection Program),” said Adrian Beverage, OBA’s chief of staff. “It just seems like once we think we have an answer, the next set of FAQs or the next form we get have been changed. I know some of our banks are as frustrated as we are, but we are keeping current as best we can. Nothing is more important to our banks than taking care of their customers, and nothing is more important to us than taking care of Oklahoma banks and their employees.

“For example, on Tuesday, April 7, the SBA provided guidance about the disbursement of a PPP loan. We were told that the first disbursement had to occur five days after the loan was approved. The next day, the set of FAQs was published amending the earlier guidance to require first disbursement within 10 days of approval. It makes you scratch your head and ask, ‘so, which is it – five days or 10 days?’”

Beverage explained the sheer magnitude of the PPP effort was staggering, appropriating $250 billion to be distributed to small businesses for payroll purposes. That amount was exponentially higher than anything the SBA had ever done before.

The guidance that had to be written was also something that no one at Treasury or elsewhere had ever done before.

And it was all mandated to be up and running in six days.

“When you stop and think about all of that, you begin to understand the enormity of the task,” Beverage said. “None of us are surprised at the challenges this program presents; it’s just frustrating because we have to be tentative in providing information or, worse, not being able to provide any answers at all.

“Lenders need the guidelines and rules. They need the details that will take it through the full operational mechanics of what’s required of a bank – from origination to forgiveness, to sale, to guarantee. As this issue goes to press, we still don’t have that process down pat yet.

“Right now, lenders are in a quandary. It’s difficult to proceed without clear guidance, especially when it comes to disbursement.”

He also mentioned what’s concerning to a lot of OBA members is what happens after all of the preliminary steps have been taken, with no firm guidelines or rules in place, and something wasn’t done correctly.

“What happens to the upfront servicing fee?” Beverage said. “The guarantee? The ability to sell these PPP loans into the secondary market, or into the new vehicle that the Federal Reserve is creating?

“No one has an answer. Not surprisingly, the lack of proper direction and being unable to move quickly creates both friction and stress among both borrowers and lenders. And some bankers worry about how, on an after-the-fact basis, SBA will regard the actions that have been taken without specific disbursement guidance from SBA/Treasury.

“God bless our member banks, which, in spite of uncertainties about forms and other disbursement questions, are focused solely on helping their customers, working 12-15 hours a day in some instances, in the middle of the worst pandemic in more than a generation.”