2020 has certainly been an unexpected and turbulent year. The Federal Home Loan Bank of Des Moines has proudly remained a stable and reliable source of funding for our nearly 1,350 member financial institutions, with 2020 being no exception. The bank is no stranger to crisis. In fact, the Federal Home Loan Bank System was created in 1932 during the Great Depression. We’ve been tested several times over our 88-year existence, and we’ve consistently demonstrated our ability to provide liquidity through all economic cycles.
Pub 8 2020 Issue 2
The current situation with COVID-19 is creating challenges, and business owners are looking for ways to best support their business during this time. The U.S. Small Business Administration has several loan programs to help small businesses get the funds they need. The CARES Act established several new temporary programs to address COVID-19, but the traditional programs are still available. One of the largest traditional SBA programs, used to purchase real estate or large equipment, is the 504. The SBA 504 Loan program is a powerful economic development loan program.
In the months since the COVID-19 outbreak erupted in the United States, the lending market has seen a significant amount of disruption. At a time when banks would have been focused on loan volume and building their income streams, many shifted their attention to the Paycheck Protection Program (PPP) to support local business owners.
As the coronavirus (COVID-19) pandemic started to impact the U.S., banks were communicating to their customers that they will remain open for business, though with significant operational changes in place. For starters, banks closed their walk-in lobbies or established appointment-only policies for customers, reviewed headcount and lowered staffing levels by directing employees to work remotely (teleworking) to practice social distancing. Teleworking is a big change for community banks that normally rely on “face-to-face” business. As a result of COVID-19, the majority of community banks are making their initial foray into the concept of telework. From both an HR and manager’s perspective, telework necessitates additional levels of oversight and concern, since this change in environment can lead people to change their work behaviors.
If you are inclined to read bond analysts’ research reports, eventually, you’ll chance upon some commentary that addresses the performance of mortgage securities. To many of the uninitiated, which I pointedly state do not include community bankers, mortgage-backed securities (MBS) are an abstract collection of investments that have long maturities and a volatile series of principal paydowns. They seem to require a lot of effort and are only marginally tethered to the housing finance market in general.