CUs see ‘near-record’ mortgage refinancings during COVID-19
The Federal Reserve Board met the COVID-19 crisis head-on with a variety of decisive, impactful and far-reaching policy responses that clearly steadied financial markets and the broader economy, CUNA wrote for the record of a House Financial Services Committee hearing featuring Fed Chair Jerome Powell’s semiannual testimony. Among the actions CUNA supported is the creation of and changes made to the Fed’s Main Street Lending Program.
The program supports lending to small and medium-sized businesses that were in sound financial condition before the onset of the pandemic. The Fed enacted changes recently to make small businesses eligible to borrow through the program.
- Lowering the minimum loan size for certain loans to $250,000 from $500,000;
- Increasing the term of each loan option to five years, from four years;
- Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
- Raising the Federal Reserve Bank's participation to 95% for all loans.
“The first three bulleted changes will help smaller businesses borrow and increasing the Federal Reserve Bank’s participation to 95% will help reduce risk to lenders from loans made through the Main Street Lending Program,” the letter reads. “CUNA will continue provide feedback to the Board on the Main Street Lending Program as credit unions make loans and sell the participation to the Federal Reserve Bank.”
CUNA also thanked the Fed for its actions to change regulations and create new lending programs.
“For credit unions these changes have helped to keep member loan demand fairly steady and mortgage pipelines in particular have been near capacity,” the letter reads. “Near-record numbers of members have refinanced into lower-rate mortgages and effectively freed up cashflow to meet daily needs and build precautionary savings.”
CUNA-supported actions include the Main Street Lending Program and:
- A March 15 decision to reduce reserve requirement ratios of transaction accounts, as well as the April 24 interim final rule deleting the six-account-transfer-per-month limit; and
- The quick creation of the Paycheck Protection Program Liquidity Facility to provide liquidity to eligible financial institutions making PPP loans.