You have probably heard that Secretary Mnuchin was on CNBC this morning and made two significant comments:
- SBA will be doing a “full review of any loan over $2M before there is loan forgiveness” to ensure that the “intent of the taxpayers” was being followed. He said that SBA would be putting out an announcement on this “this morning”, but we haven’t seen it yet. I’d been hoping to get that and send this, but because of the questions we’ve received, I wanted to go ahead and get this out. We will revert with more detail on that after it comes out. In the meantime, note that the CARES Act appears to put the forgiveness authority on the lenders (while absolving them of liability for relying on borrower certifications), but it now seems that, for larger loans at least, SBA will be reviewing at least forgiveness and possibly eligibility determinations.
- He upped the rhetoric another notch saying “It’s the borrowers who have criminal liability if they made this certification and it’s not true.” We are working with our Investigations, Enforcement and White Collar Team to analyze what, if anything, this means beyond the False Claims Act risks we noted earlier. In the meantime, (we will be posting on Hub) an update that analyzes what we might be able to predict about CARES Act enforcement actions based on some of the lessons learned from TARP enforcement.
There was one largely overlooked bright spot in his comments: He said that the safe harbor for repayment by May 7 was intended so that the repaid funds can be “reprocessed.” I think, and hope, this means that PPP loan proceeds repaid by May 7 will not count against the program funding limit and thus can be re-loaned to other PPP borrowers.
For those who want to hear his tone, here’s the actual video (of a phone interview).
This will unfortunately be the first of a couple emails today, but as I mentioned, I wanted to get this out quickly because we are getting numerous questions about it. Stay tuned.