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Relief for Certain Loan Payments Under Section 1112

SBA Borrowers:

Control Notice No. 5000-20079 (PDF) (“Control Notice 20079”) effective January 19, 2021, includes a guide to Section 1112 payments as implemented by the Economic Aid Act. Please note that the SBA released additional guidance by way of Control Notice No.: 5000-20095 (PDF) (“Control Notice 20095”) which became effective February 16, 2021. The Control Notices are the best source of information for this debt relief program at this time, and we encourage you to access and review the Control Notices to develop an understanding of the relief available to you.

In addition, please find below some “Frequently Asked Questions” Stearns Bank developed to assist you in your review of the Section 1112 debt relief program.

Your eligibility to receive Section 1112 payments depends on certain factors, which are outlined in the Control Notices linked above. The content below is not meant to include all of the information, or eligibility criteria, included in the Control Notices. If you have specific questions about your eligibility to receive payments under the Section 1112 debt relief program, please review the Control Notices or seek independent legal or professional advice.

Frequently Asked Questions

1. My loan was approved on or before September 27, 2020, but I did not receive First Round Section 1112 payments because my loan was not fully disbursed on or before September 27, 2020. Am I now eligible to receive First Round Section 1112 Payments?

Yes, covered loans that were approved on or before September 27, 2020 are now eligible for First Round Section 1112 Payments, even if the loan was not fully disbursed on or before September 27, 2020.

Your loan must be fully disbursed before you may start receiving First Round Section 1112 Payments. If and when your loan is fully disbursed, and if your loan is in regular servicing status, your loan is eligible to start receiving First Round Section 1112 payments for a 3-month period beginning with the next payment due or, if your loan is on deferment, beginning with the first month after the deferment period ends.

2. Am I eligible to receive Second Round Section 1112 Payments?

The SBA will make Second Round Section 1112 Payments for a covered loan that is in regular servicing status for the periods described below:

Loans approved before March 27, 2020 and not on deferment:

  • The SBA will make Second Round Section 1112 Payments for a 2-month period beginning with the first payment due on the loan on or after February 1, 2021. For any loan that is continuing to receive the First Round Section 1112 Payments on or after February 1, 2021, this 3-month period of Second Round Section 1112 Payments does not begin until the first month after SBA has completed the First Round Section 1112 Payments; and
  • For an additional 3-month period immediately following the end of the 3-month period for a borrower that, according to the records of SBA, is assigned a North American Industry Classification Systems Code beginning with 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812.

Loans approved before March 27, 2020 and on deferment:

  • The SBA will make Second Round Section 1112 Payments for a 2-month period (beginning on or after February 1, 2021) beginning with the later of (i) the next payment due on the covered loan after the deferment period; or (ii) the first month after SBA has completed the First Round Section 1112 Payments; and
  • For an additional 3-month period immediately following the end of the 2-month period for a borrower that, according to the records of SBA, is assigned a North American Industry Classification Systems Code beginning with 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812.

Loans approved during the period beginning on February 1, 2021, and ending on September 30, 2021:

  • The SBA will make Second Round Section 1112 Payments for the 3-month period beginning with the first payment due on the loan after the loan has been moved into regular servicing status.

Loans approved during the period beginning on March 27, 2020, and ending on September 27, 2020:

  • Under the Adjustment Plan, discussed in Control Notice 20095, the SBA will not make Second Round Section 1112 payments for these loans.

Loans approved during the period beginning on September 28, 2020, and ending on January 31, 2021:

  • A loan approved during the period beginning on September 28, 2020, and ending on January 31, 2021 is not eligible to receive Second Round Section 1112 payments.

3. I am receiving Second Round Section 1112 Payments, but my monthly loan payment is more than $9,000.00 per month. Am I required to pay Stearns Bank the amount over $9,000.00?

Yes, pursuant to the Control Notice, no single monthly payment of principal, interest, and associated fees that is made by SBA in a Second Round Section 1112 Payment may total more than $9,000.00. Thus, if your loan payment of principal, interest, and associated fees is more than $9,000.00, you will be responsible for paying the amount that exceeds $9,000.00 (the “Excess Due”). The Excess Due should be paid to Stearns Bank on the date of your regularly scheduled payments.

The $9,000.00 limit only applies to Second Round Section 1112 Payments. In other words, if you are now eligible to receive First Round Section 1112 Payments and your monthly loan payment of principal, interest, and associated fees exceeds $9,000.00, the SBA will pay your monthly loan payment in full for the duration of the First Round Section 1112 Payments.

4. My monthly loan payment exceeds $9,000.00 in total, and I’m now eligible to receive First Round Section 1112 Payments. I made a payment on my loan during the period the SBA is making First Round Section 1112 Payments on my loan. Can I get my payment back?

Yes, the $9,000.00 limitation does not apply to First Round Section 1112 Payments. Thus, if you’ve made a loan payment of principal, interest, and/or associated fees, in whole or in part, while the SBA is making First Round Section 1112 Payments on your loan, you may request Stearns Bank, at your option, to (i) return the payment to you; or (ii) apply the payment to further reduce your loan balance.

5. My monthly loan payment of principal, interest, and associated fees exceeds $9,000.00 in total, and I’m receiving Second Round Section 1112 Payments. I paid more than the Excess Due on my loan during the period the SBA is making Second Round Section 1112 Payments. Can I get the portion over the Excess Due back?

Yes, if you paid more than the Excess Due while the SBA is making Second Round Section 1112 Payments on your loan, you may request Stearns Bank, at your option, to (i) return the portion over the Excess Due to you; or (ii) apply the portion over the Excess Due to further reduce your loan balance.

6. My monthly loan payment of principal, interest, and associated fees does not exceed $9,000.00, and I’m receiving Second Round Section 1112 Payments. I made a payment on my loan during the period the SBA is making Second Round Section 1112 Payments. Can I get my payment back?

Yes, if your loan payment of principal, interest, and associated fees is $9,000.00 or less, you are not required to make payments on your loan during the period the SBA is making your Second Round Section 1112 Payments. If you’ve made a loan payment of principal, interest, and/or associated fees, in whole or in part, while the SBA is making Section 1112 payments, you may request Stearns Bank, at your option, to (i) return the payment to you; or (ii) apply the payment to further reduce your loan balance.

7. My monthly loan payment of principal, interest, and associated fees exceeds $9,000.00 in total and I am receiving Second Round Section 1112 Payments. I am signed up for automatic payments, will Stearns Bank pull the Excess Due on my regular due date?

Yes, as mentioned in Question 3 above, you are still required to pay the Excess Due on your loan. The Excess Due amount will be pulled on your regular due date.

8. My monthly loan payment of principal, interest, and associated fees does not exceed $9,000.00 in total and I am receiving Second Round Section 1112 Payments. I am signed up for automatic payments, will Stearns Bank pull my normal payment on my regular due date?

No, ACH loan payments of principal, interest, and associated fees will not be taken from your account during the time you are receiving relief payments. You are not required to make loan payments of principal, interest, and associated fees during the period the SBA is making your Second Round Section 1112 Payments, but if you wish to still make a payment you should contact Stearns Bank to do so.

9. I am eligible to receive First Round Section 1112 Payments, and I am signed up for automatic payments. Will Stearns Bank pull my normal loan payment of principal, interest, and associated fees on my regular due date?

No, ACH loan payments of principal, interest, and associated fees will not be taken from your account during the time you are receiving relief payments. You are not required to make loan payments of principal, interest, and associated fees during the period the SBA is making your First Round Section 1112 Payments, but if you wish to still make a payment you should contact Stearns Bank to do so.

10. My loan payment includes monthly escrow payments of taxes and/or insurance, in addition to my monthly loan payment of principal, interest, and associated fees. Will the Section 1112 payments made by the SBA cover my escrow payment?

No, payments made by the SBA only cover loan payments of principal, interest, and associated fees. You are still be required to make your regularly scheduled escrow payments. If you have authorized ACH payments, the portion of your payment applicable to escrowed taxes and insurance will continue to be debited from your account. If you pay by check, you should continue making payments sufficient to cover your escrow payment. Please contact Stearns Bank if you have any questions.