Trump Eviction Ban Tests Limits of CDC Authority

Trump Eviction Ban Tests Limits of CDC Authority

ABI Bankruptcy Brief

September 3, 2020

ABI Bankruptcy Brief

Trump Eviction Ban Tests Limits of CDC Authority

The Trump administration’s new eviction ban faces a slew of legal and political challenges that could undercut an ambitious and unorthodox attempt to save tens of millions of Americans from homelessness, The Hill reported. The Centers for Disease Control and Prevention (CDC) on Tuesday issued an order banning landlords from evicting tenants who can no longer afford to pay rent due to a pandemic-related expense or hardship through the end of 2020. That order, along with previously issued federal protections, could ensure that all of the nation’s 40 million rental households keep their residences during the pandemic. But the eviction ban is a groundbreaking test of the CDC’s power that experts say will undoubtedly prompt several legal challenges. And advocates for both tenants and the real estate industry fear that the expiration of the protections at the end of the year could create a dangerous housing crisis at the start of 2021. The $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act signed by Trump in late March imposed a national ban on evictions and foreclosures through July. But the subsequent stalemate over another aid package threatened roughly 20 million households with losing their homes, according to experts. The CDC’s order seeks to prevent that crisis by prohibiting landlords from kicking out tenants solely because they can no longer afford to pay rent. The ban covers any renter who expects to make less than $99,000 this year who seeks federal housing aid, would fall into homelessness if evicted, and is attempting to pay rent. The same protections apply to joint-filing couples that expect to make less than $198,000.

Another 881,000 Americans Filed New Unemployment Claims Last Week, as New Counting Method Takes Effect

Another 881,000 Americans filed for first-time unemployment insurance benefits last week, with the number of individuals newly put out of work last week dipping to a pandemic-era low, but remaining stubbornly elevated on a historical basis, YahooFinance reported. That sum marked just the second time during the pandemic that new weekly jobless claims came in below 1 million. Today’s report, however, also represented the first time the U.S. Department of Labor (DOL) counted new and continuing jobless claims under an updated system, which had been expected to lower the level of claims reported. Last week, the DOL announced that it would change the way it adjusts its initial and continuing jobless claims figures to account for seasonal effects, since layoffs over the past few months were inflated by the pandemic and broke from typical seasonal work patterns seen in years past. The change was expected to lead to fewer headline claims being reported than would have been under the previous method. It also rendered comparisons to previous weeks of headline seasonally adjusted initial and continuing unemployment filings useless. Unadjusted new claims were unaffected and remained comparable over previous weeks and months. Unadjusted new weekly jobless claims totaled 833,352 in the week ending August 29, rising by nearly 7,600 over the prior week and diverging directionally from the decrease reported in the new seasonally adjusted claims. Seasonally adjusted jobless claims for the week ended August 22 totaled 1.011 million under the old counting system.

‘That Kept Us Going’: Small Businesses Stay Alive with Local Help

Across the country, local governments are sending out small financial lifelines to small businesses even though their budgets are already devastated, with some cities expecting revenue shortfalls of 20 percent, the New York Times reported. But city councils, mayors and governors see this help as a matter of survival — especially with Congress still wrangling over a second stimulus plan — after an estimated 3.3 million businesses had to close their doors, at least temporarily, during the pandemic, according to a report by the National Bureau of Economic Research. So far, they have given out at least $5 billion in aid. They are squeezing the money out of their own limited budgets along with donations from corporate benefactors and philanthropic organizations. But the biggest source was the first stimulus package, the CARES Act. As part of that, Congress allocated $150 billion to states — and cities with more than a half-million people — to cover costs related to COVID-19. Most places are using a portion of the stimulus funds to offer loans and grants, but others are more innovative. Since pumping $30 million worth of grants and loans into the economy, officials in Charlotte, N.C., have put an additional $20 million toward their “thrive” phase. They created a workforce training program that promises jobs in advanced technology and renewable energy. So far, officials have secured 45 job placements and are working on 90 more. They are also offering grants for business innovation and subsidizing businesses to hire people who were laid off because of the pandemic.

Subprime Credit Card Users Are Seeing Their Limits Fall the Most

Subprime borrowers, who rely more on credit cards than any other group, are seeing their limits cut the most as banks reduce exposure during the coronavirus pandemic, Bloomberg News reported. The risk-management strategy shows a squeeze is coming for households with the most precarious finances as the U.S. government pares assistance for people who have lost their jobs amid the COVID-19 crisis. Banks cut overall borrowing limits for subprime borrowers by about 19 percent during the second quarter, according to data provided to Bloomberg by credit-reporting firm TransUnion. That compares with an average reduction of just 1.2 percent across all card accounts during the same period. Subprime borrowers leaned heavily on their cards to make ends meet even before the pandemic, which has sent unemployment soaring. The group’s so-called utilization rate — a measure of outstanding balances compared with available credit — is 16 times higher than for super-prime customers, the least-risky class of card customers.

Buy Now, Pay Later: How COVID-19 Is Aiding the Installment Payment Model

U.S. consumers are noticing an increased recurrence of payment offers while shopping online that tout interest-free payments in installments, Fortune reported. Klarna, QuadPay, Affirm, Sezzle — these are just a few of the most familiar banking providers financing installment plans for e-commerce merchants. And as online purchases continue to increase and consumers look for more ways to save owing to COVID-19, “buy now, pay later” (BNPL) services have accelerated in popularity. This week, PayPal is introducing a new BNPL product in the U.S., dubbed “Pay in 4,” an interest-free installment plan. Consumers who opt for the plan can make a purchase and pay the merchant back over four interest-free installments, between $30 and $600, over a six-week period. Buy now, pay later is not a new concept, notes Mark A. Cohen, director of retail studies at the Columbia University Graduate School of Business, underscoring that the practice has been the underlying basis of consumer credit since World War II and fueled the late 20th-century emergence of the American middle class. The rapid growth and improvement of fintech brands over the past decade have broadened the market for BNPL services, says Gerard Griffin, CEO and founder of wage access and financial services firm AnyDay, from accelerating the credit underwriting process (now instant at the time of purchase where before it required manual preapproval) to broadening and expediting distribution (merchants can offer the service to customers via the existing merchant processor as opposed to developing capacity itself or negotiating an arrangement with a local bank).

In Coming Wave of Pandemic-Induced Vacancies, Some See Opportunity

The pandemic is expected to drastically reshape commercial real estate, leaving thousands of vacant and underused spaces nationwide. But some developers and investors are keen to seize the chance to convert those properties into other uses, the New York Times reported. Lord & Taylor’s flagship department store in Manhattan, for example, will soon house office workers for Amazon, and a tourist destination in the heart of Hollywood is getting a $100 million face-lift that includes converting underused retail spaces into offices. Conversion waves in the past were often localized. For instance, more than 13.8 million square feet in Lower Manhattan changed over after the Sept. 11 terrorist attacks in 2001, according to the Alliance for Downtown New York. But those shifts were nothing on the scale that is expected in the next 18 to 24 months, experts say. In retail alone, at least 7,700 stores totaling 115 million square feet were expected to close this year as of early August, according to data provided by CoStar Advisory Services. Most of these closures will be in malls, which were struggling long before the pandemic pushed department stores like J.C. Penney and Neiman Marcus into bankruptcy.

Proposed Amendments to Bankruptcy Rules and Forms Published for Public Comment

On June 23, 2020, the Judicial Conference Committee on Rules of Practice and Procedure (Standing Committee) approved publication of proposed amendments to the following:

• Appellate Rule 25;
• Bankruptcy Restyled Rules Parts I and II; Rules 1007, 1020, 2009, 2012, 2015, 3002, 3010, 3011, 3014, 3016, 3017.1, 3017.2 (new), 3018, 3019, 5005, 7004, and 8023; and Official Forms 101, 122B, 201, 309E-1, 309E-2, 309F-1, 309F-2, 314, 315, and 425A;
• Civil Rule 12 and Supplemental Rules for Social Security Review Actions Under 42 U.S.C. § 405(g); and
• Criminal Rule 16.

The comment period is open from Aug. 14, 2020, to Feb. 16, 2021. For information on the proposed amendments and instructions on how to submit comments, please click here.

Next Big Wave of Chapter 11s, Force Majeure and Business Insurance and Bankruptcy Issues Related to PPP Loans Among ABI Sessions Featured at Insolvency 2020 Summit

ABI sessions at the Insolvency 2020 Restructuring, Insolvency and Distressed Debt Virtual Summit will highlight and examine the key issues facing the commercial bankruptcy landscape. Sixteen leading insolvency organizations are participating in the Virtual Summit from Sept. 16 – Oct. 27 to bring thought leaders from the worlds of restructuring, insolvency and distressed debt for insightful online programming and engaging networking via a state-of-the-art virtual platform. ABI will be contributing its top-rated sessions, including Great Debates, to add the Summit's flexible schedule of online sessions, creative optional events and virtual networking opportunities. More than 170 leading industry professionals will be taking part on panels at the Summit to offer more than 50 hours of educational content.

ABI sessions at the Insolvency 2020 Restructuring, Insolvency and Distressed Debt Virtual Summit include:

• Views from the Bench: Great Debates
Force Majeure and Business-Interruption Insurance
• Views from the Bench: Dilemmas of an Official Committee
• Views from the Bench: Mass Torts
• Views from the Bench: Sales — Chapter 11 or § 363?
• Views from the Bench: Confirmation Roundtables: Competing Interests in Today's Chapter 11
• ABI: How to Restructure an Industry that Has Been Shut Down, and How to Prove Feasibility When You're Starting from Ground Zero
• ABI: Next Big Wave of Chapter 11's: Corporate Real Estate
• ABI: Bankruptcy Issues Related to PPP Loans and Other Pandemic Governmental Lending Programs
• Views from the Bench: Ethics

For more information and to register, please click here.

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New on ABI’s Bankruptcy Blog Exchange: CFPB’s Latest Underwriting Revamp Seen as Boon to Fintechs, GSEs

The CFPB’s plan to extend the “qualified mortgage” stamp of approval to more loans could help lenders that rely on alternative data and cushion the blow of other QM changes for Fannie Mae and Freddie Mac.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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