Millions of Americans will receive direct payments from the federal government thanks to a $2 trillion federal funding package that was agreed to early Wednesday morning.
The bill, which could be signed by President Donald Trump later Wednesday, is in response to the coronavirus pandemic, which has shuttered non-life sustaining businesses nationwide and led to thousands if not hundreds of thousands of new unemployment claims.
Here are the details you need to know about when, and how much, you might receive.
When will the money go out?
According to CNN, relief may still be a couple of months away, as the outlet reports that checks or direct deposits might not go out until May.
“First, the IRS will have to calculate each person’s payment amount,’ CNN writes. “Then, it will need the correct direct deposit information or mailing addresses.
“To get the money to people who don’t usually file tax returns, it might have to request that information from the Social Security Administration or Veterans Affairs. In 2008, those people were required to file a return anyway in order to get their rebate.”
That, of course, will take time, and keep in mind that the IRS is still receiving tax filings, as well, even if the federal government and also Pennsylvania, among many other states, have pushed back the deadline to file.
For those looking for an optimistic timeline, mid-April seems to be the absolute earliest that checks could go out.
More: Pa. unemployment claims skyrocket to 540,000 since statewide coronavirus shutdown, shattering records
How much will I get?
Here is what the New York Times says:
“A $1,200 payment for each adult — and $500 per child — in households that earn up to $75,000 per year for individuals or $150,000 for couples. The assistance phases out for people who earn more.”
CNN has more details on what the phase-out threshold might look like.
“The payments would start to phase out for individuals with adjusted gross incomes of more than $75,000, and those making more than $99,000 would not qualify at all,” CNN writes. “The thresholds are doubled for couples.
“Qualifying income levels will be based on 2019 federal tax returns, if already filed, and otherwise on 2018 returns.”
What happened the last time this happened?
This package marks the third time since 2000 that the federal government has approved payments to citizens based on special circumstances.
As CNN notes, it took six weeks for checks to go out under a 2001 plan for tax rebates that were authorized by then-president George W. Bush. Checks during the ‘Great Recession’ of 2008 didn’t go out for three months, however.
Experts believe that an increase in electronic tax filing and the use of direct deposit for refunds could lead to expedited payments this time around, and those who have that set up are likely to receive their money faster than those who will be waiting on a check.
More: These central Pa. businesses are still open during the coronavirus pandemic
Where is the money coming from?
Syracuse.com has details:
“Taxes, essentially,” its Geoff Herbert writes.
“CNBC reports it’s unclear whether the money will be considered a loan or a gift, in which case some of it may have to be paid back.”
Why only one check?
Previous proposals that were discussed as the spread of COVID-19 continued to hurt the economy mentioned the possibility of two checks being sent out, but the agreement reached Wednesday calls for just one. It’s possible that a second round could go out, however, if schools and businesses must remain closed into the summer.
How will businesses be helped?
This part of the package is still being finalized, but Yahoo reports that the Small Business Administration will handle some requests while a new, still-to-be-named agency will handle others, likely for larger businesses and corporations. It was referred to as ‘a big credit facility’ by Pennsylvania senator Pat Toomey over the weekend.
“The facility will have two components: One will be administered by the Treasury Secretary with direct loans for a short list of “seriously distressed and absolutely essential companies,” likely including airlines,” Yahoo writes.
“The second component will be much bigger and be “a broad-based credit facility that will be available across categories, across sectors and industries.” Toomey said this program will give loans that will have to be repaid. “None of this is grant money,” he said.”
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You May Be Able to Get Mortgage Relief, But Do This Before Filing
With the coronavirus pandemic devastating the US economy, many homeowners are unable to work and unable to meet their financial obligations. Fortunately, Congress passed The Coronavirus Aid, Relief, and Economic Security Act – or CARES Act – which offers mortgage help to those affected by the outbreak.
Specifically, section 4022 of the act requires servicers of federally backed mortgages to postpone mortgage payments at the request of the borrower, provided the borrower affirms financial hardship either directly or indirectly due to COVID-19. The postponement must be granted for up to 180 days. It must also be extended for an additional period of up to 180 days at the request of the borrower.
No fees, penalties, or interest beyond interest already scheduled can accrue during the forbearance period.
Additionally, servicers must grant forbearance without requiring any documentation except one. They must only require a borrower’s “attestation to a financial hardship caused by the COVID-19 emergency.”
The act also forbids the servicer of a federally backed mortgage loan to initiate any foreclosure process for at least 60 days beginning on March 18, 2020.
The process seems straightforward – simply calling your servicer and asking for relief. However, cases where servicers added extra hoops to jump through also exist. Some also made their own rules for how the skipped payments would be recouped.
Jim and Julia Hansen lost their incomes when the tourism industry shut down in their home state of Hawaii.
They reached out to their lender to ask about deferring their mortgage payment. While they were told they could delay their payment for three months, there was one massive catch: at the end of those three months, they would need to come up with a lump-sum amount totalling four-months of mortgage payments to bring the loan current.
That’s not what guidelines indicate, and the Hansen’s are currently weighing their options to seek appropriate relief.
Servicers making their own rules is a major concern for Richard Cordray, former director of the Consumer Financial Protection Bureau. He recently co-authored a letter to the current CFPB board. In it, he implored them to do everything they can to make the servicers follow the rules.
“We saw in the last crisis how their indifference and ineptitude led many mortgage servicers to push homeowners into needless foreclosures that undermined our communities. Already, there are worrying signs that people are getting the runaround as they seek forbearance or other relief. New rules were put in place several years ago to address these problems, and the mortgage servicers cannot now be excused from complying with these rules when consumers need them the most. Servicers also must live up to the letter and spirit of the CARES Act by helping consumers avoid foreclosures wherever possible, rather than using the money made available by Treasury and the Fed simply to pad their bottom lines.”
Follow These Steps When Seeking Mortgage Relief
Are you looking for mortgage relief due to the coronavirus pandemic? Follow these steps to give yourself the best chance at a successful outcome:
- Determine who your service provider is. This may or may not be the bank or lender who holds the actual mortgage on your home. They will be the ones you need to contact to start the discussion.
- Find out if your loan qualifies for relief. Your lender should be able to tell you if either Fannie Mae or Freddie Mac backs your loan. If one of the government-sponsored enterprises backs your loan, you are eligible. If they don’t, you may still have options.
- Find out how the servicers will handle the skipped payments. Will you see them included at the end of your loan term? Can they be spread out over future payments? Get a clear answer, ideally in writing, before moving forward. You don’t want any misunderstandings down the road.
- Determine how real estate taxes and insurance will be paid. Do you have an escrow account that pays your taxes and insurance? Those two accounts likely won’t continue to be funded by your monthly payments, since they are being skipped. Find out from the lender how the taxes and insurance will be paid if the balances are short.
“If your lender pays it, find out what’s going to happen during the time you’re not making payments and what happens if they pay,” says Barry Zigas, senior fellow at the Consumer Federation of America. “How does it all get figured out at the end?”
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With Survival at Stake, Small Business Owners Frustrated by Aid Delays
Greg Hunnicutt has almost entirely shut down his Houston-based construction business. At his one remaining job site, he’s being careful to minimize the risk of anyone being exposed to the coronavirus. So he keeps fewer workers on the job.
“My electrician is there now doing some work,” he said. “It’s just him and his helper. So what I’m trying to accomplish here is reducing how people interact.”
With his income sharply reduced, Hunnicutt needs more funds, and fast. He reached out to NPR on Friday, when the Small Business Administration’s coronavirus crisis lending program opened. At the time, he was having trouble getting through online to apply for an SBA loan through his bank, Wells Fargo. I asked him this week how it was going.
“Well, it’s not,” he said, laughing. He says he filled out a form on the bank’s website over the weekend, but he hasn’t heard back yet.
But he says he needs that money soon to keep his business alive.
“I paid my guys two weeks,” he said. “Well, that was two weeks ago. Starting today, this week, they haven’t been paid.”
If the process doesn’t move quickly, he said his business will be in serious trouble.
Business problems with banks
Hunnicutt is one of dozens of small business owners that contacted NPR, describing obstacles in applying for loans. The $350 billion SBA initiative, called the Paycheck Protection Program, is designed to keep workers at small companies on the payroll during the crisis.
The Trump administration had said it hoped the program could give some businesses immediate financial assistance. And administration officials have bragged that hundreds of millions of dollars were disbursed through banks on the first day.
Some small business owners, like Hunnicutt, are waiting to hear from their banks. Others have said they haven’t been able to get through to their banks, due to crashing websites.
Several business owners cited restrictions from Bank of America as a major hurdle. On Friday, Bank of America said a deposit account with the bank was not enough to qualify for loans. Applicants would need loan or credit card accounts with the bank. That left out the many businesses without lending relationships with the bank and sparked an online backlash. Bank of America loosened its requirements over the weekend.
The SBA program reflects the difficulties of quickly setting up a massive new emergency lending effort, and running it through myriad banking institutions.
And it comes at a time when businesses desperately need money. A recent survey from the U.S. Chamber of Commerce found that one in four businesses say they are two months or less from closing permanently, and one in 10 say it’s one month or less.
Bigger problems than banks
Small businesses’ difficulties with the new program go beyond their banks, however. New rules written after Congress created the program are tripping up some businesses, according to Stephanie O’Rourk, a partner at accounting firm CohnReznick.
“The problem with the program is that it doesn’t align with the reality of the situation that a lot of businesses are going through right now,” she said.
For example, she says, the new rules now say that the loans must be paid back in two years instead of the 10 that the CARES Act says. In addition, Treasury added a rule saying three-quarters of the money must be used on payrolls in order for it to be forgiven.
For some businesses, non-payroll expenses are just too high to spend that much on employees.
Chelsea Altman, co-owner of five restaurants in New York City, says that rule will be bad for her and other businesses in high-cost cities.
“In New York state or New York City, your rent is very high,” she said. “So there is a chance that even with this 75 percent going to labor and then the other 25 percent is supposed to go to your rent, there’s times when that won’t” cover the rent.
Some banks displeased
Many banks opened the program up only to their own customers. As NPR has reported, that worried some small business advocates because it threatens to leave out smaller, and particularly, minority-owned businesses.
Banks, meanwhile, had their reasons for wanting to limit their applications, according to Aaron Klein, policy director of the Center on Regulation and Markets at the Brookings Institution.
“The Treasury Department made a major unforced error, leaving anti-money laundering rules on autopilot,” he said.
To lend money, banks have to go through a procedure called Know Your Customer to prevent money laundering. It can be a cumbersome process, Klein explained, and stands to be a serious impediment to an effort that seeks to get tens of billions out the door in a matter of days.
Other banks have voiced their own issues, including forms that changed overnight, unclear guidance from the government, and difficulty with the Small Business Administration website.
For now, at least one concern with the program is being answered: that the initial $349 billion appropriated for it is too small to meet business demand. On Tuesday, the Treasury said it was preparing to ask Congress to spend another $200 billion on the program. Senate Majority Leader Mitch McConnell said on Tuesday that he plans to work with Democrats and Treasury to put more money into the program.
Copyright 2020 NPR. To see more, visit https://www.npr.org.
The U.S. Was Already Deep in Debt. This Year’s Deficit will be ‘Mind-Boggling’
Over the years, the federal government has spent trillions of dollars more than it brings in, wracking up big deficits even in good times, when it ought to be paring debt down.
Now, as it struggles to repair the damage from the coronavirus epidemic, it’s getting ready to spend trillions more, pushing up this year’s deficit above $3 trillion.
“It’s mind-boggling. I never contemplated this,” says Douglas Holtz-Eakin, president of the American Action Forum, who headed the Congressional Budget Office under President George W. Bush.
“I can remember the quaint days when I was being yelled at because we had a $400 billion deficit and I was the CBO director. It doesn’t look so bad right now,” he says.
The economic rescue package approved by Congress and signed into law by President Trump contains $2 trillion in tax breaks and loan guarantees, throwing much-needed lifelines to troubled airlines, small businesses, hospitals, medical supply companies and municipal governments.
And more money will almost certainly be needed in the weeks to come, as the pandemic progresses.
“We are talking about massive amounts of money compared to anything we’ve ever done in this amount of time before,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
At one time, such huge levels of deficit spending set off alarm bells in Washington, where politicians such as Senate Majority Leader Mitch McConnell routinely bemoaned the lack of fiscal discipline in government.
In 2013, when the country was still recovering from the Great Recession, McConnell told CBS News: “We now have a debt of $16.4 trillion. That’s as big as our economy. That alone makes us look a lot like Greece. We have an incredible spending addiction.”
Today, the total amount owed by the federal government is about to top $25 trillion, and McConnell barely talks about it. Neither does President Trump, who has presided over a rapid increase in debt, thanks to the massive 2017 tax cuts and a big increase in defense spending.
Part of this is just raw politics, says Dean Baker, co-founder of the Center for Economic and Policy Research. Politicians tend to focus more on deficits when the other party controls the White House.
But Baker says the past few years have also brought a transformation in the way economists think about deficits.
Once, conventional wisdom said that too much federal borrowing would drive up interest rates, leading to higher inflation and reduced productivity, Baker says. But debt has soared in recent years, and interest rates are lower than ever, he notes.
“The classic story of why deficits are bad just hasn’t panned out,” Baker says.
He is among many economists now arguing that the quick collapse of the economy and the surge in layoffs is so serious that deficit concerns should be set aside.
“The amount of employment in the economy is going through the floor. And the deficit in that context … it’s almost a non sequitur. That’s not the sort of thing you should worry about,” Baker says.
Even MacGuineas, who’s something of a deficit hawk, agrees, saying times like these are precisely when the government needs to run deficits. But she says the government is that much less prepared to deal with the crisis because of deficits run up in good times, when it should have been paying off what it owed.
“It makes sense to borrow from the future today. We have a real emergency. But it also makes it harder for us to get our economy back on track once we get through this emergency,” MacGuineas says.
Copyright 2020 NPR. To see more, visit https://www.npr.org.
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