Last-Minute Changes to P.P.P. Rules Cause Gridlock

Goran Dautovic Image
ByGoran Dautovic
March 16,2021

Highly anticipated changes to Paycheck Protection Program rules set in motion earlier in March and designed to deliver generous relief to the most vulnerable small businesses might be coming too late.

With the program set to expire in just a few weeks, lenders say they don’t have enough time to adapt to the changes. As such, newly eligible loan-seekers are having difficulty finding lenders willing to accept applications before the deadline.

Under the program’s previous rules, unprofitable businesses weren’t eligible for loans. But the new formula introduced by the Biden administration allows sole proprietors to get loans based on their income before expenses while expanding eligibility to include minority-owned, veteran-owned, and women-owned businesses. This opens the door to small businesses, self-employed people, and non-profit organizations devastated by the coronavirus pandemic.

However, the move comes dreadfully close to the March deadline. Major lenders that already have a severe backlog of applications, including JPMorgan Chase and Bank of America, refused to adapt to the changes. The latter has stopped accepting new applications altogether.

Bill Halldin, a Bank of America spokesman, justified this by pointing to more than 30.000 applications that need to be processed before the deadline.

Meanwhile, the policy changes are only fueling confusion among borrowers who were initially advised by lenders to submit their applications after the new, more lenient standards were set in place.

Those who applied as soon as the White House made the overhaul announcement are now either being approved under old requirements or asked to repeat the application process. There is also no route for those already approved to apply again under better terms.

Considering that there is still $119 billion left out of $284 billion authorized for the program, both lenders and borrowers are calling for an extension with admirable tenacity. The Biden administration hasn't asked for an extension yet, but key congressional leaders are open to the idea. The P.P.P. status will come under the spotlight during an upcoming hearing at the House Small Business Committee.

In the meantime, small businesses across America are hoping for an extended deadline to get much-needed funds to keep their businesses alive during this unprecedented crisis.

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The House legislation passed Saturday narrowed the income eligibility for $1,400 stimulus checks. If the changes make it into the final bill, fewer Americans will see the stimulus payments. The newly-set thresholds would leave millions of families without this round of financial relief, the Penn Wharton Budget Model estimates. The decision has come as a result of a compromise between president Joe Biden and moderate democrats, who suggested tightening the income eligibility for the third round of stimulus checks. Most of the Republican members of Congress are against Biden’s relief plan. Even though they recognize the importance these payments have for the recovery of the US economy, they disagree on the eligibility requirements. Biden’s initial proposal was to set the cap at $100,000 for individuals, $150,000 for single parents, and $200,000 for couples. Voicing Republicans’ and some moderate Democrats’ concerns, this new legislation is supposed to make the final bill lower while setting the income thresholds higher.  The proposal suggests lowering income caps to $80,000 for individuals, $120,00 for single parents, and $160,000 for married couples. It is a modest 5% change, as stated by Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, with roughly 12 million adults still without the relief payments. The economy is looking anemic, and the new stimulus package would be more than welcome. However, some seven million upper-middle-class families do not meet the new eligibility requirements and those that do will receive smaller sums, based on the quicker phase-out rate. Those who criticize the proposed legislation suggested that cutting down the $1.9 trillion relief package could have been done differently, by reducing the volume of local and state aid.  Some are skeptical, saying that the Democrats’ proposal was far from a relief effort and that the citizens’ cry for help in these unprecedented times should be addressed more vigorously. Among them, Congresswoman Alexandria Ocasio-Cortez tweeted on Wednesday that working people need “more generous relief checks, $15 min wage, ending the filibuster to protect our democracy”. Some also argue that the phase-out rates are exceedingly steep, resulting in worse low-income households’ situations.  The bill is about to move forward this week. Democrats would need the support of the whole caucus, given the fact that the party has only fifty votes in the Senate and uncertain GOP support.
By Goran Dautovic · March 14,2022
The multinational corporation, Costco Wholesale, is planning on increasing its minimum wage in the United States to $16 per hour. Costco’s long history stretches back to 1976 when Sol Price opened the world’s first membership warehouse club – Price Club. Several years later, Price Club’s executive vice-president of merchandising, Jim Sinegal, co-founded Costco Wholesale with Jeff Brotman. In 1983, the two enterprises merged and became the company we know today. On February 25, 2021, during a US Senate Budget Committee hearing, Craig Jelinek - Costco’s president and CEO - announced that the retailer would boost its workers’ minimum wages to $16. Jelinek also stated that more than half of the company’s 180,000 US employees earn upwards of $25 per hour and that the average Costco employee earns around $24/hour. According to The Wall Street Journal, the retail chain raised its starting rate from $13 to $14 per hour in 2018, adding another dollar less than a year later. Costco’s latest increase puts it ahead of its competitors such as Amazon and Target, whose minimum hourly wages are still $15 per hour. Despite all these positive changes in the retail industry, the world’s largest company by revenue, Walmart, persists in maintaining its payments at $11/hour. President Biden’s $15-minimum-wage proposal offered some hope in these troubled times, as it was supposed to be included in the $1.9 trillion COVID-relief stimulus package. However, the suggested increase recently suffered a significant setback due to an unfavorable ruling by a Senate official, so the future of America’s workers remains uncertain. For now, Senate Democrats are looking into alternative methods of providing the wage increase: The options include tax credits for small businesses if they pay their employees higher hourly compensations or penalties for large corporations that avoid providing their staff with the specified sum. At the moment, the federal minimum wage is $7.25 per hour - a woefully inadequate amount in the 21st century due to the steady climb of living costs. Fortunately, many states have adopted their own minimum-wage laws, of which some more than double the federal amount. In his address to the Senate Budget Committee, Jelinek also said: “I want to note: this isn’t altruism. At Costco, we know that paying employees good wages and providing affordable benefits makes sense for our business and constitutes a significant competitive advantage for us. It helps us in the long run by minimizing turnover and maximizing employee productivity, commitment, and loyalty." Jelinek didn’t specify whether Costco supports the minimum wage hike, but when asked if he would support a bill that mandates a federal minimum wage of $11 per hour, he responded with: “11 dollars? It’s better than $7.25.”
By Julija A. · March 03,2021
Mortgage rates are steadily climbing for a sixth consecutive week, prompting buyers to steer clear of the market. The latest data shows an increase to 2.98% for a 30-year fixed-rate mortgage offer. According to the Mortgage Bankers Association, the demand for mortgages fell, with total application volume decreasing by 5.1% the same week. Joel Kan, MBA’s associate vice president of economic and industry forecasting, stated that the rates had been climbing ever since hitting the survey’s lowest point in December last year. Last week, the rates reached their highest level since November 2020, according to MBA’s weekly survey, which the organization started more than 30 years ago. When comparing these figures to the ones from last year, the rates are still 0.79% lower than in February 2020. Mortgage refinancing experienced a 5% drop in the past week but is 51% higher than it was the year before. Mortgage applications to purchase a home fell 6% in the past week, following the trend over the past six weeks. Yearly, it is still 17% higher than the total mortgage applications for purchasing a home the previous year. However, while the spike heavily influences refinancing mortgage rates, the overall surge in mortgage interest is attributed to a record low inventory of homes available. The total number of homes available for sale is lower by nearly 43% compared to the year before. The most significant shortage is in the availability of lower-end homes, impacted heavily by the seller’s overall unwillingness to go through the trouble of putting their home on the market due to the coronavirus pandemic. As such, homes available on the market are not only scarce but also cost more. The average loan size for purchasing a home hit $412,200, another survey high. This is the result of both the inaccessibility of lower-end homes and a shift in the way people buy houses. A new survey by the National Association of Home Builders suggests that over 40% of buyers were outbid for their desired property. Joel Kan also stated that “purchase applications cooled the first week of February, but homebuyers are still very active.” In other words, despite the rising rates, homes are now sold ten days faster on average. 
By Julija A. · February 18,2021

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