Senate extends PPP as NAHB files lawsuit

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Senate extends PPP as NAHB files lawsuit

By Andy Carlo - 07/01/2020

The U.S. Senate passed legislation last night that extends the Payroll Protection Program (PPP) through Aug. 8.

The move comes as a surprise to many following the June 30 deadline for PPP applications. According to the National Lumber and Building Material Dealers Association (NLBMDA), while the small business loan program expired yesterday, there was still $130 billion in unused funds.

Before the legislation can take effect, the extension must be passed by the House of Representatives and signed into law by President Trump.

The NLBMDA also reported that Senate Majority Leader Mitch McConnell said that Congress will attempt to pass additional small business relief through a phase 4 stimulus bill between July 20 and Aug. 7 before heading out on a month-long recess.

But the Senate’s decision to extend the PPP process arrives as the National Association of Home Builders, along with the Home Builders Association of Michigan and the Home Builders Association of Southeast Michigan, announced that they have filed a lawsuit against the U.S. Department of Treasury and the U.S. Small Business Administration (SBA).

According to the NAHB, “onerous regulations” included in PPP prevent some builders and developers from accessing a much-needed source of funding and having the loans forgiven.

The NAHB said that the SBA has imposed a pre-existing regulation and guidance document that limits eligibility for certain businesses, including “passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds,” and “speculative businesses” that include “building homes for future sale.”

In a statement issued yesterday, the NAHB said the PPP program is essentially hurting builders.

“NAHB members across the nation have been prevented from seeking PPP funds because of SBA’s regulations. Those members who did receive funds faced widely inconsistent experiences. Moreover, those members who have received PPP loans may find it difficult to have those loans forgiven.”

Additionally, the NAHB said that the SBA is using an “unlawful bait-and-switch” tactic toward the residential housing industry, along with inconsistent eligibility rules.

“While some lenders noted SBA’s eligibility rules and declined to issue loans to excluded businesses, other lenders did not enforce these rules and extended loans to businesses deemed ineligible by SBA,” the NAHB said. “These small businesses – including many home builders – applied for these loans in good faith and now fear their loans will not be forgiven because they may have been ineligible under SBA rules.”

“These small businesses, and many others, applied for and received PPP loans under the good-faith belief they were eligible for loan forgiveness,” the lawsuit states. “They have since learned that, despite receiving loans and using the proceeds to keep their employees off unemployment, they are unlikely to receive loan forgiveness because, under the Exclusion Rule, they might not have been ‘eligible’ for the loans in the first instance.”

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