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Archive for the ‘CARES Act’ tag

States’ Reactions to Trump’s Unemployment Benefits Extension

August 24th, 2020 at 7:00 am

  

How are states responding to Trump’s Memorandum providing $400 (or maybe $300?) weekly extended unemployment benefits? It varies widely.

 

Last week we explained the President’s Memorandum of August 8 which extended reduced federal unemployment benefits. The $600 weekly benefit had expired on July 31. The House of Representatives had previously passed a bill extending the $600 benefits into early next year. The Senate had proposed to extend the benefits but at only $200 weekly. The two Houses of Congress were not resolving their differences. Then the Memorandum directed the Federal Emergency Management Agency (FEMA) to fund supplemental unemployment benefits out of its Disaster Relief Fund. This was to cover $300 of a $400 weekly benefit. The remaining $100 weekly was to come from the states.

National Developments Since the Memorandum

The Memorandum raised some confusion, especially about the states’ contribution. The President’s contemporaneous remarks indicated that the federal money would only be available for states that paid their $100 share.

But this implication was changed through a 6-page U.S. Department of Labor letter of guidance issued on August 12. It relieved states of paying the $100 share in order to receive the $300 federal contribution. States could pay the $100 share to their unemployed residents, in order to pay out a $400 weekly supplemental benefit. Or states could choose not to pay the $100, resulting in only a $300 weekly benefit.

So What Have States Decided?

States are all over the map, both in their decisions and where they are in the process. As of this writing (Saturday, August 22, 2020), many states have applied to FEMA to get started while others have not yet decided what to do.  One state—South Dakota—has decided to decline the assistance. About 14 states’ applications to FEMA for the assistance have been approved, while others are in process. Most states are going to pay $300 weekly, but at least 3 are paying $400.

Here are additional details about what’s happening at 7 states, to give an idea of the variety of situations:

Indiana

Governor Eric Holcomb announced last Wednesday (Aug. 19) that the state would apply for the federal $300 benefit. It would not be paying the state’s additional $100 weekly.

FEMA approved Indiana’s application on August 21. The commissioner of the Indiana Department of Workforce Development, Fred Payne, says that “it will take maybe 2 to maybe 4 weeks for us to get this in place.” There are additional details on the Department’s website.

Kentucky

Governor Andy Beshear announced last Wednesday (Aug. 19) that the state would apply for the federal $300 benefit. It would also add the state’s $100 additional amount for a total of $400 weekly. Since FEMA is doling out the money in 3-week increments, the current plan is to go at least these 3 weeks, longer if funds are available. Because these benefits are retroactive, this first installment covers the weeks between July 26 and August 15.

FEMA approved the application on August 21. The first $400 payments are expected to pay out in early September.

Texas

Governor Greg Abbott announced in a press release last Thursday (Aug. 20) that the state would apply for the federal $300 benefit. The press release made no reference to the state paying the additional $100.

FEMA approved Texas’s application on August 21. The above press release stated that “eligible claimants should expect to receive the additional benefits on their first payment request on or after August 23, 2020. These funds will be backdated to the benefit week ending August 1, 2020.”

New Jersey

As of Friday (Aug. 21), Governor Phil Murphy had not yet decided whether to apply for the additional federal benefit. His chief counsel, Matt Platkin said on Friday: “They’ve never run it through FEMA this way. And there’s some concern that if they were to come back – if Congress were to come back and enact an extension of the $600 that then the state would have to go back and recoup this money… .” The governor concluded: “If we can do it and we’re not on the hook for that back $100, and it doesn’t come back in the future where we’re going to have to repay any or all of that, we’ll sign up,” Murphy said. “But we’ve got to get guidance on that first.”

California

California applied last Wednesday (Aug. 19) for the federal $300 benefit. It will not be paying the additional $100 weekly.

FEMA approved its application on August 21. California’s Employment Development Department says that it will receive $4.5 billion, with the possibility of additional funding going forward.” This apparently is to cover $300 weekly benefits “for a limited period of time, a minimum of three weeks.” Coverage is for “weeks of unemployment dating back to August 1.”

West Virginia

Back on August 10, the Monday after Trump signed the Memorandum, Governor Jim Justice committed to paying the state’s $100 share. “Hands down, period, West Virginia is going to pay it,” he said. The governor added: “I believe that the federal government will eventually reverse their stance on that and that they will pay the full 100 percent in the end. But we’ve got the money set aside to make it work either way.”

According to a press release last Wednesday (Aug. 19), Workforce West Virginia is in the process of applying to FEMA. As of this writing (Aug. 21), the application has not yet been approved. According to Scott Adkins, acting commissioner of WorkForce West Virginia, “The federal government requires each state to set up a system that complies with the program. We are in the process of doing that now.”

Montana

Montana’s Department of Labor & Industry (DLI) applied to FEMA back on August 15, and sent additional information on August 17. It announced on Wednesday (Aug. 19) that FEMA approved its application for the extended benefits. Montana will be paying the additional $100 weekly. It’s doing so out of Montana’s allocation of the federal CARES Act Coronavirus Relief Fund. Montana’s DLI press release of August 20, 2020.

Acting DLI Commissioner Brenda Nordlund said. “Programming to meet the new requirements is underway and we should be up and running as soon as possible.”

 

Trump’s $400 Weekly Unemployment Benefits Extension

August 17th, 2020 at 7:00 am

Trump’s Memorandum Providing $400 Weekly Unemployment Benefits from August to December Is Complicated.

 

A Quick History

The CARES Act’s $600 per week additional federal unemployment benefits expired on July 31, 2020. Section 2104 of the CARES Act.  Back in May the U.S. House of Representatives had passed the HEROES Act extending these $600 benefits through January 31, 2021. Section 50001 of the HEROES Act. Then on July 27 the Senate announced its HEALS Act; it reduced the additional federal benefit to $200 per week. (This was to last through September, and then transition into a total unemployment amount of 70% of lost wages.) The Senate bill did not come up for a vote in the Senate.  Intense efforts to reconcile the House of Representatives’ HEROES Act and the Senate’s HEALS Act have so far gone nowhere.

Trump’s Memorandum on Authorizing the Other Needs Assistance Program

 Then on August 8, 2020, President Trump signed a “Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019.”

This Memorandum creates an “Assistance Program for Lost Wages.” This potentially provides for a weekly “lost wages assistance” of $400 per week. Theoretically it would cover the period from August 1 through December 6, 2020. See Sections 4—6 of the Memorandum.

But there are a series of practical challenges.

Can the President Act without Congress on This?

The Constitution gives Congress the power of the purse: to make laws about collecting and spending tax money. U.S. Constitution, Article 1, Section 8. Not the President. The Memorandum is clearly about spending billions of dollars of tax money. So how does Trump get around this?

He uses a law passed by Congress, the Disaster Mitigation Act of 2000. This law mostly pertains to federal housing assistance after a major disaster. But it also allows the president to provide for “Financial Assistance to Address Other Needs.” Specifically, the law allows for “financial assistance… to address… other necessary expenses or serious needs resulting from the major disaster.” 42 U.S.C Section 5174(e)(2).

This law empowers “the President, in consultation with the Governor of a State,… [to] provide [the] financial assistance… to individuals and households… .” 42 U.S.C Section 5174(a)(1).

So there’s at least a sensible argument that Trump can spend money to extend unemployment benefits needed from the pandemic.

But Where Does the Money Come From?

Under the Memorandum the new unemployment money comes from two sources.

First, the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund “has more than $70 billion in emergency assistance funding available.” The Memorandum directs “up to $44 billion” of this money to go towards the unemployment benefits. The remaining “at least $25 billion” in to be “set aside” for “ongoing… and potential 2020 disaster costs.” 75% of the $400 weekly benefits are to come from this $44 billion from the Disaster Relief Fund.

Second, the Memorandum says that the remaining 25% to fund the extended benefits is to come from the states. It references the CARES Act’s $150 billion earmarked to states and some other local governments for COVID-related costs. The Memorandum asserts that “more than $80 billion [of these] dollars remain available.”

Are These Sources of Money Actually Available?

Start with the 75% federal share. To keep it simple here, assume that above-mentioned Disaster Mitigation Act contemplates supplemental unemployment benefits to be a “serious need” for people unemployed during the pandemic.  Let’s put aside the wisdom of dedicating nearly 2/3rds of this natural disaster fund for this purpose.

One bit of reality is that the $44 billion the Memorandum earmarks for this purpose is only enough to cover 4 or 5 weeks of benefits. That barely makes a dent in the August to December period referenced.

How about the States’ Share?

As for the states’ 25% share, this provision comes with a bunch of practical challenges.

First, many states vehemently disagree with the Memorandum’s assertion that “more than $80 billion remain available” from the CARES Act. The states counter that this money is necessary for other absolutely critical pandemic purposes. In many cases already been explicitly earmarked for those purposes.

Second, beyond these CARES funds, the Memorandum has states use “other State funding,” to pay its 25% share. But states are in dire financial straits. Tax collection is significantly down and expenses are significantly up because of the pandemic. This includes huge increases in state unemployment benefit payouts, which continue at historic highs. State legislatures are going into emergency sessions to address the severe shortfall. Unlike the federal government, states must balance their budgets every year. They simply do not have money to pay for this new program.

Third, the Memorandum also says that “States should also identify funds to be spent without a federal match” if the federal money runs out. So after 5 weeks of the federal government paying 75%, the states are supposed to pay for the entire program. If there’s no money for 25%, there certainly isn’t money for 100% of the cost.

So Where Does This Now Stand?

Arguably the Memorandum was mostly meant as leverage to get Congress to agree on some kind of unemployment benefits extension. It’s been more than a week (as of this writing on August 17) but there’s been no progress there.

If you had been kept afloat by the $600 weekly federal unemployment benefits, this is an intensely frustrating time.

 

Pandemic Mortgage Forbearance

May 25th, 2020 at 7:00 am

Mortgage delinquencies skyrocketed in April. One big reason: the pandemic CARES Act provided for extraordinary mortgage payment forbearance.  

 

Epic Increase in Mortgage Delinquencies

The number of home mortgages that became delinquent in April was largest one-month increase in U.S. history. 1.6 million mortgages current in March were not paid in April, according to Black Knight, a mortgage data provider.

For some perspective, the percentage of all mortgages that became delinquent nearly doubled in that one month—from 3.39% to 6.45%. This percentage increase was also the largest in history. It broke the last record monthly percentage increase set in 2008, during the Great Recession. The April increase was nearly 3 times the monthly increase back then. This is in spite of the reality that the Great Recession was an epic mortgage crisis.

The size of April’s increase reflects the unprecedentedly sudden economic effects of the pandemic—the self-induced shut-down. 

It was also substantially fed by the mortgage relief provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Act passed by Congress in late March. As of May 19, 2020 more than 4.75 million mortgages had entered into forbearance—authorized deferred payment—plans. Black Knight Press Release, May 22, 2020.

So homeowners are clearly taking advantage of mortgage forbearances. Should you, too? It’s been nearly two months since the CARES Act became law, a good time to review its mortgage benefits. Here is what it provided.

CARES Applies Only to Federal Mortgages

At the outset be aware that CARES applies only to federally- owned or -backed mortgages. About three-quarters of all mortgages are federally owned or backed by a federal agency or entity. These include U.S. Department of Housing and Urban Development (HUD), U. S. Department of Agriculture (USDA Direct  and USDA Guaranteed Federal Housing Administration (FHA) (includes reverse mortgages) ), U.S. Department of Veterans Affairs (VA), Fannie Mae (check here to see if your loan is backed by Fannie Mae) , Freddie Mac (check here to see if your loan is backed by Freddie Mac).

Also check out the U.S. Consumer Financial Protection Bureau’s How can I tell who owns my mortgage?

If You Don’t Have Federal Mortgage

Contact your mortgage servicer if you have a mortgage not owned or backed by a federal agency or entity. Financial regulators have urged all financial institutions to work with borrowers in this extraordinarily disruptive time. Interagency Statement on Loan Modifications…, April 7, 2020.  

Here’s a list of some of the pandemic-related services offered by a huge number of the nation’s banks. Many include references to mortgage payment deferrals and forbearance.

CARES’ Mortgage Relief Options

For federally owned or backed mortgages, the CARES Act provided two separate forms of relief. These included a short moratorium on foreclosures and forbearance of monthly payments.

The foreclosure moratorium was so short that it’s already expired. It was in effect for only 60 days starting from March 18 through May 17, 2020. During this period CARES prevented the starting or completion of a judicial or non-judicial foreclosure. CARES Section 4022(c)(2).

The forbearance part of the law is the focus of the rest of this blog post.

Mortgage Servicer “Shall Provide the Forbearance”

The CARES law is quite straightforward. The mortgage servicer (the entity you make mortgage payments to) “shall… provide the [requested] forbearance”:

  • to a borrower who “submit[ted] a request”
  • including an “affirm[ation] that the borrower is experiencing a financial hardship during the COVID–19 emergency”              

The servicer can’t:

  • require “any additional documentation … other than the borrower’s attestation to a financial hardship caused by the COVID–19 emergency”
  • charge any “fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract)”
  • require that the mortgage be in any particular “delinquency status” in order to provide the forbearance

CARES Section 4022 (b) and (c)(1).

Length of Forbearance

“Upon a request by a borrower for forbearance… such forbearance shall be granted for up to 180 days, and shall be extended for an additional period of up to 180 days at the request of the borrower, provided that, at the borrower’s request, either the initial or extended period of forbearance may be shortened.”

CARES Section 4022 (b)(2).

There’s a potentially important timing condition when the borrower submits the extension for an additional 180 days of forbearance. “[T]he borrower’s request for an extension [must be] made during the covered period.” CARES Section 4022 (c)(1). “Covered period” is a phrase used earlier in the Section, referring almost certainly to the officially declared national “COVID-19 Emergency.” That is, the borrower must submit the request for a 180-day extension while this emergency is still in legal effect.

After Getting Your Mortgage Forbearance

The CARES Act does not say anything about the timing for repayment of the deferred payments. That crucial issue is the topic of our next blog post.

 

Student Loan Changes in the CARES Act

April 20th, 2020 at 7:00 am

The recent coronavirus relief law includes help for some student loan borrowers—suspending payments, interest, collections, credit reporting.  

 

The 880-page Coronavirus Aid, Relief, and Economic Security Act (“CARES”) has 4 pages of help for certain student loan borrowers. Section 3513 of CARES. It provides meaningful albeit temporary help, for those who qualify by having the right kind of student loan.

The Kinds of Student Loans Covered

First, the relief applies only to federal student loans, not to private student loans. The private loan portion of student loans has been growing but still only consists of about 8% of student loans. Nevertheless, private student loans total about $125 billion. The CARES Act does not help if you owe any of this.

Second, not all federal student loans are included. Direct Loans—those made directly by the federal government’s Department of Education—are covered. Federal Family Education Loans—FFELs—are covered if they’re currently owned by the federal Department of Education. FFEL loans held by commercial lenders and campus-based Perkins loans are not covered. These non-covered loans amount to only about 12 percent of federal student loan dollars, so most federal student loans are covered.

The Key Benefits

For the applicable federal student loans, CARES accomplishes the following:

  1. Suspends all loan payments through September 30, 2020.
  2. Waives interest during this suspension period.
  3. For credit reporting purposes, the lender must treat each suspended payment as if the borrower actually paid the payment.
  4. Student loan creditors must suspend involuntary collection during the suspension period.
  5. The payment suspension time counts for purpose of loan forgiveness and loan rehabilitation.

1. Payment Suspension

The new law suspends “all payments due for [applicable student] loans… through September 30, 2020.” Section 3513(a), CARES Act. The law did not specify when this non-payment period started. But since then the U.S. Department of Education has specified that the “administrative forbearance will last from March 13, 2020 through September 30, 2020.” (Administrative forbearance means a “temporary suspension of payments.”) Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

If you’ve already made a payment during the same March 13 through September 30, 2020, your student loan servicer should refund it to you. This includes auto-debit payments, which are supposed to stop automatically during this same period. Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

2. Interest Waiver

“[I]nterest shall not accrue on a[n applicable student] loan… for which payment was suspended for the period of the suspension.” Section 3513(b), CARES Act. So no interest will accrue during the March 13 through September 30, 2020 period. This should happen automatically, without requiring any action by you. Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

3. Credit Reporting

“During [this same] period… , for the purpose of reporting information about the loan to a consumer reporting agency, any payment that has been suspended is treated as if it were a regularly scheduled payment made by a borrower.” Section 3513(d), CARES Act. The suspended payments should show as actually made payments on your credit reports.

4. Collection Freeze

“During the [same ]period [the loan servicers] shall suspend all involuntary collection related to the loan.” Section 3513(e), CARES Act. The law lists three specific types of collection that are explicitly included: wage garnishment, tax refund offset, and administrative offset by “a reduction of any other Federal benefit payment.” But it also broadly adds “any other involuntary collection activity.” Section 3513(e)(1-4), CARES Act. So during the March 13 through September 30 period, no collection activity of any kind should happen on the applicable student loans.

5. Non-Payments Count

“[E]ach month for which a loan payment was suspended [counts] as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program… for which the borrower would have otherwise qualified. Section 3513(c), CARES Act.

This means that if you are now in an Income-Driven Repayment (IDR) plan, these months of non-payment count towards loan forgiveness as if you had made the payments. The same is true for monthly credit towards Public Service Loan Forgiveness (PSLF). Also, if you are working on “rehabilitating” your defaulted student loan, the suspended payments count as payments made for that purpose. Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

 

Note: Please see our last several blog posts for information on other relevant aspects of the CARES Act. Contact your local bankruptcy lawyer to apply these to your own unique circumstances.

 

Enhanced Unemployment Benefits Under the CARES Act

April 6th, 2020 at 7:00 am

The greatly enhanced unemployment benefits mean much more money each week, for longer, for many more kinds of workers, and for many others.


Our blog post last week was about the emergency $1,200 Economic Impact Payment that’s “rapidly” coming to most American adults. (Plus $500 for each qualifying dependent child.) For updates on this payment since then, see the IRS’ special “Coronavirus Tax Relief” webpage. That links you to its News Release IR-2020-61, which came out on March 30, 2020. It was modified and updated on April 1, specifically about Social Security recipients.

Today’s blog post is about the new greatly enhanced unemployment benefits provided by the same law. The $2.2 Trillion Coronavirus Aid, Relief, and Economic Security Act (“CARES”) includes about $260 Billion for expanded unemployment benefits. Although that’s only about one-eighth of the whole package, it’s still a huge amount of money. By way of comparison, $260 Billion is almost 40% of last year’s entire defense budget.

These new unemployment benefits include the following distinct components.

Larger Checks—Federal Pandemic Unemployment Compensation

Individuals who already qualify for unemployment benefits under state law will get an additional $600 per week. This extra is called Federal Pandemic Unemployment Compensation. The states will pay this extra $600 per week in addition to the regular amount of unemployment benefit. Section 2104 of CARES.

This is quite a big increase, especially compared to the usual weekly amount. That usual amount varies widely. In Connecticut the maximum benefit is $631, in Florida it’s $275. No matter your state, the additional $600 per week is a very meaningful increased benefit. 

Longer Payment Period—Extended Unemployment Compensation

Individuals usually get up to 26 weeks of unemployment benefits under state law. Some states provide less. For example, Florida gives only 12 weeks of benefits. CARES adds up to 13 more weeks of benefits, for up to 39 weeks of benefits. Section 2102(c)(2) of CARES.

These additional weeks of benefits include BOTH the regular state unemployment benefit amount PLUS the $600 per week referred to above. Section 2102(d)(1)(A) of CARES.

Extension of Exhausted Benefits—Available to Work but Can’t Find Work

The new law also reinstates unemployment benefits for those “have exhausted all rights to regular compensation under the State law or under Federal law” for the benefit year. This assumes that the individual is “able to work, available to work, and actively seeking work.” Section 2107(a)(2) of CARES.

The unemployment benefit amount under this part of the law includes the regular state-determined weekly amount plus $600, as discussed above. Section 2107(a)(4) of CARES.

Pandemic-Related Individuals—Virtually Everyone Who’s Impacted

The law gives unemployment benefits to a wide array of individuals affected by the health emergency, covering 10 categories. An individual who doesn’t otherwise qualify for the unemployment benefits receives them by providing a “self-certification” stating that he or she is “unemployed, partially unemployed, or unable or unavailable to work because” of the following conditions. The individual:

  1. has been diagnosed with COVID-19 or has symptoms and is currently being diagnosed
  2. has a household member who’s been diagnosed with COVID-19
  3. is caring for a family or household member diagnosed with COVID-19
  4. has a child or other dependent who can’t go to school or a care facility because of the health emergency
  5. can’t get to the workplace because of a quarantine
  6. can’t get to the workplace because of being “advised by a health care provider to self-quarantine due to concerns related to COVID–19”
  7. was scheduled to return to work but can’t because of the health emergency
  8. became the “breadwinner or major support for a household “because the head of the household has died as a direct result of COVID–19”
  9. “has to quit his or her job as a direct result of COVID–19”
  10. lost a job because the “place of employment is closed as a direct result of the COVID–19 public health emergency”

Section 2102(a)(3)(A) of CARES.

Consistent with the other parts of the law, the amount of weekly benefit is the regular state-determined amount plus $600. Section 2102(d)(1)(A) of CARES.

Nontraditional Workers Get Benefits—More “Covered Individuals”

Self-employed and independent contractors are usually not covered by state unemployment benefits. Very significantly, many of the benefits we’re discussing here do apply to these nontraditional workers. The law says that

The term “covered individual”—(A) means an individual who

(II) is self-employed, is seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under State or Federal law or pandemic emergency unemployment compensation under section 2107 and meets the requirements of subclause (I)

Section 2102(d)(1)(A) of CARES. The reference to Section 2107 is to those who already qualify for benefits otherwise, as discussed two sections above. The other reference to subclause (l) is to the list of 10 COVID-19-related circumstances listed in the section immediately above. So the self-employed and independent contractors receive unemployment benefits if they fit any of the 10 conditions.

However, these benefits to the self-employed and independent contractors are not available to those who can work remotely—who can “telework with pay.” Also individuals “receiving paid sick leave or other paid leave benefits” don’t qualify. That’s true even if they fit into any of the 10 COVID-19-related categories discussed above.

 

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