How Mortgage Brokers Can Take Advantage of the Coronavirus Aid, Relief, and Economic Security Act (CARES)
Since our inception, Velocity has been committed to supporting mortgage brokers in their endeavor to strengthen their businesses. In the wake of the COVID-19 pandemic, we’ve spoken to several brokers who weren’t aware that they could qualify for financial assistance from the government under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
In continuing with our mission to provide guidance and education, our team has pulled together information to help determine if the recently enacted financial assistance programs can aid in sustaining your business during the current crisis.
The U.S. federal government recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Small Business Administration (SBA) and the Department of Treasury have begun releasing information about the programs created by this act. Many brokers may wonder if they can apply for relief under it, and we have provided a few answers below.
While we’ve done our best to compile an accurate overview of the CARES Act, we are not and cannot offer legal advice to brokers. The guidance provided in this article should be viewed as informational only. Before acting on it, you may want to consult with a financial or legal professional.
As of the publishing date of this article, the initial $349 billion in funding for the Paycheck Protection Program has been allocated to small businesses on a first-come, first-served basis. However, Congress may allocate additional funds to the program. If you did not apply for assistance but are now considering it for your business, be sure to submit your application with an approved financial institution (details below) as soon as additional funds become available.
What is the CARES Act?
The act and associated programs were created to assist individuals and business owners during this time of uncertainty. Two of the resources involved are meant to provide cash-flow assistance to affected businesses:
- Paycheck Protection Program (PPP) – this program was set up to provide small businesses with cash-flow assistance through 100% federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven (more on this below).
- Emergency Economic Injury Grant – this grant is meant to provide a quick infusion of a smaller amount of cash to cover more immediate business needs.
Does your mortgage business qualify for a PPP loan?
Many small and independent mortgage brokers may qualify for relief under the PPP by applying for a loan through their local bank/lender.
PPP features include forgiveness of up to eight weeks of payroll based on employee retention and salary levels, no SBA fees, and at least six months of deferral with maximum deferrals of up to a year.
Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020. This program is retroactive to February 15, 2020, to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020.
The government’s additional qualifications for these loans, which apply to many mortgage brokers and brokerage firms, are as follows:
- Businesses and entities must have been in operation on February 15, 2020.
- Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher.
- Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.
- Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72, for which the affiliation rules are waived.
- Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company.
How can you use the funds?
Brokers can use the funds obtained through the PPP program for a variety of business-related costs including:
- Payroll costs
- Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
- Employee salaries, commissions, or similar compensations
- Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
- Rent (including rent under a lease agreement)
- Interest on any other debt obligations that were incurred before the covered period
How do you get forgiveness on the PPP loan?
To qualify for forgiveness of your loan, brokers must apply through their lenders. Your application must include:
- Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings
- Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities
- Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use
Where and how do you apply?
All current SBA 7(a) lenders are eligible lenders for PPP. The Department of Treasury will also be authorizing new lenders, including nonbank lenders, to help meet the needs of small business owners. Contact your local bank or lender to inquire about this program.
Emergency Economic Injury Grant
These grants are meant to provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL).
Does your mortgage business qualify for an Emergency Economic Injury Grant?
Businesses must have 500 or fewer employees — which includes most brokerage firms — and must have been in operation since January 31, 2020, when the public health crisis was announced. This includes sole proprietorships, (with or without employees), independent contractors, cooperatives, employee-owned businesses and tribal small businesses.
How can you use the grant and does it have to be repaid?
The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
How long are Emergency Economic Injury Grants available?
These grants are available from January 31 – December 31, 2020. The grants are backdated to January 31, 2020 to allow those who have already applied for EIDLs to be eligible to also receive a grant.
Where and how do you apply?
To access the advance, you first apply for an EIDL and then request the advance. To apply for an EIDL online, please visit https://disasterloan.sba.gov/ela/. Your SBA District Office is an important resource when applying for SBA assistance.
The government is also providing additional funds to resource partners such as your local Small Business Development Center (SBDC), Women’s Business Center (WBC), or SCORE mentorship chapter so they can provide additional free guidance and counseling to businesses impacted by the current crisis. To find a local resource partner, visit https://www.sba.gov/local-assistance/find/.
The government is working to support businesses by infusing billions of dollars into the U.S. economy. By leaning on this financial assistance, you will be best poised to weather the storm.
The Coronavirus pandemic is a significant business challenge for mortgage brokers. We hope the information contained in this article will help you overcome the hardships and challenges to your business and its employees. While the immediate future is still uncertain, we remain committed to helping brokers emerge from this crisis and resume lending as quickly as possible.