Who Pays For PPP Loan Applications?

August 19, 2020 at 9:48 am Leave a comment

So much for Those Lazy, Hazy, Crazy Days Of Summer.

On Monday a Federal District court in Florida dismissed a lawsuit brought by an accounting firm which was seeking to force a bank to pay fees it claims it was owed for preparing a PPP application on behalf of one of the bank’s borrowers.  According to Law360, the case is the first to address this key issue.

When Congress created the PPP loan under the CARES Act, it stipulated that agents could assist businesses to apply for loans and stipulated further that payment for this work could not come out of the loan proceeds.  The issue which has vexed both lenders and agents alike is whether this means that lenders must pay agents for their work.  Several proposed class action lawsuits are now pending that address this issue.

In SPORT & WHEAT, CPA, PA, v. SERVISFIRST BANK, INC., et al., Judge T. Kent Wetherell, who sits on a Federal District Court in Florida, ruled in favor of lenders.

The CARES Act does not require lenders to pay the agent’s fees absent an agreement to do so (or create a private right of action for payment) because the statutory language does not even speak to who pays the agent’s fees; it merely provides that the agent cannot collect a fee from anyone in excess of the amount established by the SBA Administrator.

The outcome would have been different had the accounting firm signed an agreement directly with the bank, but it did not do so.

I know there are credit unions out there that have to decide whether or not to pay agent fees.  This represents the first round in what may become contentious and drawn out litigation.  Leave it up to Washington to explain who doesn’t have to pay a bill but not who does.

Things Are Not as Good As They Appear When it Comes to Mortgage Lending

The delinquency rate for one-to-four-unit residential properties increased to a rate of 8.22% of all loans outstanding at the end of the second quarter of 2020.  This represents a 3.8% increase of delinquencies this quarter.  According to the MBA, FHA loans were hit particularly hard, reaching their highest delinquency rate since the MBA started conducting the survey.   Presumably, these numbers do not reflect loans placed on forbearance but not reported to credit agencies.

SPORT WHEAT CPA v SERVISFIRST BANK INC

Entry filed under: COVID-19, Economy, econony, Legal Watch, Mortgage Lending. Tags: , , , , .

NCUA Greenlights CECL Phase-In CFPB Proposes New Category of QM Loans: Does it Really Matter?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 711 other followers

Archives