8640 Federal Register / Vol. 62, No. 38 / Wednesday, February 26, 1997 / Proposed Rules

on September 3, 1995; (60 FR 29965).

This increase is consistent with the

increase in the annual average price of

domestic barrows and gilts for calendar

year 1996 as reported by USDA, AMS,

Livestock and Grain Market News

(LGMN) Branch. This increase in

assessments would make the equivalent

market value of the live porcine animal

from which the imported pork and pork

products were derived reflect the recent

increase in the market value of domestic

porcine animals, thereby promoting

comparability between importer and

domestic assessments. This proposed

rule would not change the current

assessment rate of 0.45 percent of the

market value.

The methodology for determining the

per pound amounts for imported pork

and pork products was described in the

Supplementary Information

accompanying the Order and published

in the September 5, 1986, Federal

Register at 51 FR 31901. The weight of

imported pork and pork products is

converted to a carcass weight equivalent

by utilizing conversion factors which

are published in the Department’s

Statistical Bulletin No. 697 ‘‘Conversion

Factors and Weights and Measures.’’

These conversion factors take into

account the removal of bone, weight lost

in cooking or other processing, and the

nonpork components of pork products.

Secondly, the carcass weight equivalent

is converted to a live animal equivalent

weight by dividing the carcass weight

equivalent by 70 percent, which is the

average dressing percentage of porcine

animals in the United States. Thirdly,

the equivalent value of the live porcine

animal is determined by multiplying the

live animal equivalent weight by an

annual average market price for barrows

and gilts as reported by USDA, AMS,

LGMN Branch. This average price is

published on a yearly basis during the

month of January in LGMN Branch’s

publication ‘‘Livestock, Meat, and Wool

Weekly Summary and Statistics.’’

Finally, the equivalent value is

multiplied by the applicable assessment

rate of 0.45 percent due on imported

pork and pork products. The end result

is expressed in an amount per pound for

each type of pork or pork product. To

determine the amount per kilogram for

pork and pork products subject to

assessment under the Act and Order, the

cent per pound assessments are

multiplied by a metric conversion factor

2.2046 and carried to the sixth decimal.

The formula in the preamble for the

Order at 51 FR 31901 contemplated that

it would be necessary to recalculate the

equivalent live animal value of

imported pork and pork products to

reflect changes in the annual average

price of domestic barrows and gilts to

maintain equity of assessments between

domestic porcine animals and imported

pork and pork products.

The average annual market price

increased from $41.99 in 1995 to $52.77

in 1996, an increase of about 25 percent.

This increase would result in a

corresponding increase in assessments

for all HTS numbers listed in the table

in § 1230.110, 60 FR 29965; June 7,

1995, of an amount equal to eighthundredths of a cent per pound, or as

expressed in cents per kilogram,

nineteen-hundredths of a cent per

kilogram. Based on the most recent

available Department of Commerce,

Bureau of Census, data on the volume

of imported pork and pork products

available for the period January 1, 1995,

through September 30, 1995, the

proposed increase in assessment

amounts would result in an estimated

$310,000 increase in assessments over a

12-month period.

List of Subjects in 7 CFR Part 1230

Administrative practice and

procedure, Advertising, Agricultural

research, Marketing agreement, Meat

and meat products, Pork and pork

products.

For the reasons set forth in the

preamble, it is proposed that 7 CFR Part

1230 be amended as follows:

PART 1230—PORK PROMOTION,

RESEARCH, AND CONSUMER

INFORMATION

1. The authority citation for 7 CFR

Part 1230 continues to read as follows:

Authority: 7 U.S.C. 4801–4819.

2. In Subpart B—Rules and

Regulations, § 1230.110 is revised to

read as follows:

§ 1230.110 Assessments on imported pork

and pork products.

(a) The following HTS categories of

imported live porcine animals are

subject to assessment at the rate

specified.

Live porcine

animals Assessment

0103.10.0000 ... 0.45 percent Customs Entered Value.

0103.91.0000 ... 0.45 percent Customs Entered Value.

0103.92.0000 ... 0.45 percent Customs Entered Value.

(b) The following HTS categories of

imported pork and pork products are

subject to assessment at the rates

specified.

Pork and pork

products

Assessment

Cents/lb Cents/kg

0203.11.0000 .... .34 .749564

0203.12.1010 .... .34 .749564

0203.12.1020 .... .34 .749564

0203.12.9010 .... .34 .749564

0203.12.9020 .... .34 .749564

0203.19.2010 .... .39 .859794

0203.19.2090 .... .39 .859794

0203.19.4010 .... .34 .749564

0203.19.4090 .... .34 .749564

0203.21.0000 .... .34 .749564

0203.22.1000 .... .34 .749564

0203.22.9000 .... .34 .749564

0203.29.2000 .... .39 .859794

0203.29.4000 .... .34 .749564

0206.30.0000 .... .34 .749564

0206.41.0000 .... .34 .749564

0206.49.0000 .... .34 .749564

0210.11.0010 .... .34 .749564

0210.11.0020 .... .34 .749564

0210.12.0020 .... .34 .749564

0210.12.0040 .... .34 .749564

0210.19.0010 .... .39 .859794

0210.19.0090 .... .39 .859794

1601.00.2010 .... .47 1.036162

1601.00.2090 .... .47 1.036162

1602.41.2020 .... .51 1.124346

1602.41.2040 .... .51 1.124346

1602.41.9000 .... .34 .749564

1602.42.2020 .... .51 1.124346

1602.42.2040 .... .51 1.124346

1602.42.4000 .... .34 .749564

1602.49.2000 .... .47 1.036162

1602.49.4000 .... .39 .859794

Dated: February 20, 1997.

Lon Hatamiya,

Administrator.

[FR Doc. 97–4772 Filed 2–25–97; 8:45 am]

BILLING CODE 3410–02–P

SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

Business Loan Programs

AGENCY: Small Business Administration.

ACTION: Proposed Rule.

SUMMARY: The U. S. Small Business

Administration (SBA) is proposing to

modify its rules regarding the financing

and securitization of the unguaranteed

portion of loans guaranteed under

Section 7(a) of the Small Business Act.

Present regulations provide these

options only to non-depository lenders.

(13 CFR 120.420, Revised as of March 1,

1996) These proposed rules would

permit both depository and nondepository lenders to pledge or

securitize the unguaranteed portions of

SBA guaranteed loans.

DATES: Comments must be received

March 28, 1997.

ADDRESSES: Comments may be mailed to

Jane Palsgrove Butler, Acting Associate
Federal Register / Vol. 62, No. 38 / Wednesday, February 26, 1997 / Proposed Rules 8641

Administrator for Financial Assistance,

U.S. Small Business Administration,

409 Third Street, SW, Washington, DC

20416, Room 8200.

FOR FURTHER INFORMATION CONTACT:

James W. Hammersley, Acting Deputy

Associate Administrator for Financial

Assistance, (202) 205–7505.

SUPPLEMENTARY INFORMATION: Over the

past several years, the average SBA

guaranty under its guaranteed business

loan program (program) has decreased

from nearly 90% to approximately 75%.

This 150% increase in lender exposure

requires lenders participating in the

program to commit substantially more

of their own capital in order to support

their dollar volume of SBA guaranteed

loans. In 1992, SBA promulgated

regulations that permitted nondepository lenders participating in the

program to pledge or securitize the

unguaranteed portions of SBA

guaranteed loans, thereby permitting

them to fund unguaranteed portions of

SBA guaranteed loans with the proceeds

of loans and securities offerings. (See 13

CFR § 120.420, revised as of March 1,

1996.)

Since that time, bank (depository)

participants have asked SBA to modify

its regulations to provide the same

ability to them, in order to offset the

increase in commitment of capital

needed to continue participation in the

program. Bankers have told SBA that, in

many cases, it is more efficient to raise

funds through a pledge or securitization

than to attract additional deposits.

Congress has now recognized the need

to permit all participants in the program

to have a level playing field in raising

capital needed to fund the increased

requirement for unguaranteed portions.

Therefore, recent legislation prohibits

any securitization under SBA’s present

regulations after March 31, 1997, unless

SBA develops regulations permitting all

participating lenders to pledge and

securitize the unguaranteed portions of

their SBA guaranteed loans. See section

103(e) of Public Law 104–408, Oct. 1,

1996, which directs SBA to promulgate

a final regulation ‘‘that applies

uniformly to both depository

institutions and other lenders * * *

setting forth the terms and maintenance

of appropriate reserve requirements and

other safeguards to protect the safety

and soundness of the program.’’

I. Advance Notice of Proposed

Rulemaking

On November 29, 1996, SBA

published an advance notice of

proposed rulemaking which requested

the views of interested parties on how

this statutory requirement might be

satisfied. 61 FR 60,649, Nov. 29, 1996.

SBA received nine responses,

including one response which had four

signatories. The comments

corresponded to questions posed in the

Advance Notice Proposed Rulemaking.

The following is a discussion of the

comments received.

Item one—How should lenders

demonstrate a retained tangible

economic interest in a guaranteed loan?

Should lenders be required to retain an

unguaranteed portion and/or a reserve?

What level of retention and/or reserve is

adequate to protect the interest of SBA?

Each of the respondents provided

comments on this item. One suggested

a 10% retention, one suggested a

retention of 50% of the unguaranteed

portion of the loan and five suggested a

retention of 5% of the total amount of

the loan. One respondent offered to

work with the Agency to develop a

retention level appropriate to the credits

and one respondent proposed that a

lender provide risk retention or supply

a credit enhancement of the lesser of (1)

the level required to cause all securities

issued under the securitization

transaction to third parties to receive an

investment grade rating, or (2) 5% of the

total outstanding principal of the loans

which unguaranteed portion are

securitized.

Item two—Should we permit

financing transactions on a periodic

scheduled basis or should lenders be

permitted to submit transactions

whenever they want?

All of the respondents who

commented on this item suggested that

there should not be a set schedule and

that issuers should decide when to take

an issue to market.

Item three—Should we permit

multiple lenders to ‘‘pool’’ transactions

in one multi-party transaction? If so,

how should this be regulated?

Of the respondents who commented

on this item, six were in favor and one

was against. Those in favor stated that

pooling will be necessary to make

securitization available to small volume

lenders. The respondent opposing this

idea suggested that multi-issuer pools

would allow lenders with poorer quality

loans to spread their risk over a larger

number of loans.

Item four—Should we use third party

resources to help process the

contemplated transactions? If so, what

type of third parties? Who should bear

the costs associated with using third

parties?

Only one respondent was against

using third parties. This respondent

wants to keep the process as simple as

possible and feels that adding third

parties will complicate the process. All

others did not object to using third

parties as long as the fee for their

services was reasonable.

II. Background

In developing these proposed

regulations, SBA attempted to balance

the needs of financial institutions,

especially non-depository financial

institutions, to raise funds for

operations with the mandate that the

program be operated on a safe and

sound basis to protect the interests of

the taxpayers.

SBA has deliberated extensively over

the issue of requiring a retained

economic interest in the loans. The

Agency continues to believe that the

risk of loss to the originating lender has

been the cornerstone of the 7(a) loan

program. For example, the Agency has

previously taken steps to reduce the

premium received by lenders upon the

sale of the guaranteed portion of a loan

when the Agency thought that

premiums had reached the level at

which they may be reducing the

economic interest in the loans to the

point that lenders would not be cautious

providers of credit.

In determining the proposed

regulatory structure, the Agency also

tried to balance the ability of lenders to

pledge the future income on the loan

with the need to maintain a level of

safety for lenders. The securitization

structures used to date attempt to put

the entire risk of loss on the lender. In

reviewing these structures, the Agency

has become concerned that there may

not be a sufficient reserve available for

the entity to survive a modest increase

in the historic loss rate. One must

remember that rating agencies involved

in these transactions are rating the

security and the cash flows associated

with it. They are not making any type

of determination as to whether the

originator will survive for the duration

of the securitization.

Absent a securitization, a lender will

have a guaranty on 75% of a loan and

have a 25% risk. If the unguaranteed

portion of loans are securitized,

underwriters will require that the

securitization be structured so that

investors are virtually protected from

any loss. To do this, securitizing lenders

have had to pledge all of the cash flow

on the unguaranteed portion and a part

of the cash flow on the guaranteed

portion that would otherwise be

received by the lender. Because the

securitization does not change the risk

of default on loans, a lender is left in the

position of assuming, in this example,

the entire risk associated with the 25%

unguaranteed portion, but not having
8642 Federal Register / Vol. 62, No. 38 / Wednesday, February 26, 1997 / Proposed Rules

the assets associated with that portion of

the loan to offset its securitization.

SBA has proposed regulations with

these concerns in mind. Clearly, it is not

in SBA’s interest to eliminate an avenue

of funding used by some of its lenders.

Therefore, the Agency will review any

final regulations after a reasonable

period of use and consider whether

changes are necessary based on

experience with the structure that is

permitted.

III. Proposed Regulations

After having carefully considered all

of these matters and the responses to the

advance notice, SBA is now proposing

the following regulations to satisfy the

statutory requirement. The regulations

being proposed extend the coverage of

the 1992 regulations to depository

lenders and propose a few changes in

those regulations.

A. Technical Change

When SBA first considered

securitization and pledging regulations

in 1992, it was confident that it had the

resources to take over the portfolio of a

securitizing lender if the lender failed or

defaulted on its obligations under a

securitization agreement. Since the

promulgation of those regulations, SBA

has greatly decreased its staff. The

reduction of personnel has reduced

SBA’s ability to absorb servicing and

liquidation responsibilities for a large

portfolio of loans in the case of failure

or default by a participating lender

which has securitized its unguaranteed

portions. Therefore, as a condition to

the approval of any securitization of

unguaranteed portions under the 1992

regulations, the Agency has required in

securitization documentation that a

lender qualified to participate in the

program, and acceptable to SBA,

identified as a back up servicer, will

take over the responsibilities required

by SBA Form 750, ‘‘Guaranty Loan

Agreement,’’ for servicing and

liquidation of loans made by a failed

participant. The proposed regulations

incorporate this requirement. Such

servicing and liquidation must be

performed under the terms of SBA’s

Blanket Guaranty Agreement.

B. Extent of Securitization

SBA has had over three years to

review the use of securitization by nondepository participants. The Agency has

decided that less than 100%

securitization of unguaranteed portions

by lenders participating in the program

will provide them with enough capital

to support adequate levels of SBA

guaranteed lending. Therefore, SBA is

proposing to modify its present

regulations to require that participating

lenders which undertake securitizations

retain the equivalent of at least a 5%

interest in each loan the unguaranteed

portion of which is securitized.

In this regard, the proposed

regulations are intended to provide a

level playing field for both depository

and non-depository lenders to securitize

assets and ensure the safety and

soundness of the program. SBA intends

to require that any securitizing lender

demonstrate its continuing economic

interest in the securitized loans by one

of the following: (1) Retaining in its own

portfolio unguaranteed portions equal to

5% of the face value of all loans

(guaranteed plus unguaranteed portions)

the unguaranteed portions of which are

contained in the securitization, (2)

retaining a subordinate tranche equal to

5% of the face value of all the loans the

unguaranteed portions of which are

contained in the securitization, or (3)

establishing a cash reserve equal to 5%

of the total face value of all of the loans

the unguaranteed portions of which are

contained in the securitization. Under

any of the options, only the

participating lender may regain use of

the proportional retained amount of

funds after each corresponding loan has

been paid in full, or, in the case of a

default, after the collateral for the loan

has been liquidated and a determination

has been made that there is no

additional collectability.

If option (1) is used, the retained

amount may be pledged as collateral for

a loan to fund the retainage. If option (3)

is used, the lender must establish the

cash reserve at the time of the

securitization. The retainage in the case

of option (3) must be held by a

custodian acceptable to SBA. In the

event of a failure by the securitizing

lender, it must become available first to

SBA to offset expenses relative to

servicing or liquidating the loans, and

secondly, to a subsequent servicer to be

available for the same purposes.

C. Pledging

The 1992 regulations provided a

method for non-depository lenders to

pledge the guaranteed and unguaranteed

portions of their loans as a means of

financing the loans. The proposed

regulations will extend the same option

to depository lenders. However under

this regulation, all lenders using a

pledge agreement will be required to

retain a cash flow equal to 1% of the

principal balance of any loan pledged if

the percentage of the loan pledged

exceeds the unguaranteed percentage of

the loan. Thus, if a lender is pledging

100% of a portfolio of loans, it must

retain a cash flow equal to 1% of the

principal balance of each loan pledged.

The documentation for the pledge must

indicate that the purpose of this

holdback is to provide a sufficient

reserve to pay the cost of a new

participating lender to take over

servicing of pledged loans in the event

of the failure of the originating lender or

its default under the pledge agreement.

D. Capital Requirements

Presently under SBA’s regulations,

Small Business Lending Companies

(SBLCs), a subset of non-depository

lenders, must maintain a minimum

private capital of $1,000,000 or 10% of

the unguaranteed portions of SBA

guaranteed loans, whichever is more.

(13 CFR 120.453) SBA is proposing to

continue the minimum capital

requirement for SBLCs. However, it is

also proposing that SBLCs which

securitize unguaranteed portions and

choose the option under these

regulations either to retain a percentage

of the loans or a tranche of the securities

must increase their private capital by

8% of the unguaranteed portions

retained or of the tranche retained. This

additional capital requirement will put

depository lenders and non-depository

SBLC lenders in an equivalent capital

position with respect to SBA loans in

which all or a part of their unguaranteed

portions are securitized. Thus, under

this proposal, an SBLC lender which

retains a 5% tranche in a securitization,

or retains unguaranteed portions equal

to 5% of the face amount of the loans

the unguaranteed portions of which are

securitized must increase its private

capital by an amount equal to 8% of the

retained tranche. If the SBLC lender

puts up a 5% cash reserve, the increase

in capital will not be necessary.

E. Custodial Agent

SBA is proposing that physical

custody of the pertinent loan documents

relevant to pledging and securitizations

be retained by the SBA’s fiscal and

transfer agent (FTA) for the Section 7(a)

loan program, acting as custodian for

the SBA and the parties to the

transaction. Although SBA has

approved securitizations using other

entities as the custodian of the loan

documents, the Agency is concerned

that increased securitization activity

could make it difficult for SBA to locate

a particular borrower’s note and

collateral documents if multiple

custodians are permitted. Therefore,

SBA is proposing that the FTA handle

this responsibility for all pledgings and

securitizations. The FTA already

performs this service for several existing

transactions, and this requirement is not

expected to have a negative effect on the
Federal Register / Vol. 62, No. 38 / Wednesday, February 26, 1997 / Proposed Rules 8643

ability of any lender to pledge or

securitize unguaranteed portions of

loans.

Under the proposed regulations

lenders which securitize will continue

to be bound by any other regulations

and requirements that otherwise apply

to lenders making SBA loans. Thus, for

example, should a denial of liability on

a guaranty or suit against a lender

become necessary, SBA will hold the

lender or subsequent servicer, if

appropriate, responsible. The fact that

unguaranteed portions of SBA

guaranteed loans have been sold to a

trust for the purpose of a securitization

will not negate the requirements of SBA

Form 750, ‘‘Blanket Loan Guaranty

Agreement,’’ and SBA’s regulations

which require the prudent servicing of

SBA loans.

Compliance With Executive Orders

12612, 12778, and 12866, the Regulatory

Flexibility Act (5 U.S.C. 601, et seq.),

and the Paperwork Reduction Act (44

U.S.C. Ch. 35).

SBA certifies that this proposed rule

does constitute a significant rule within

the meaning of Executive Order 12866

but would not have a significant

economic impact on a substantial

number of small entities within the

meaning of the Regulatory Flexibility

Act, 5 U.S.C. 601 et seq. We believe this

rule is likely to have an annual

economic effect of $100 million or more,

but we request comment from the public

on its perception of the costs and

benefits associated with this rule to

enable SBA to prepare a cost benefit

analysis in conjunction with the final

rule. It will not result in a major

increase in costs or prices, or have a

significant adverse effect on competition

or the United States economy.

The proposed rule is consistent with

the mandate of section 103(e) of Public

Law 104–208 which is to set forth terms

and conditions under which sales for

the purpose of securitization can be

permitted, including the maintenance of

appropriate reserve requirements and

other safeguards to protect the safety

and soundness of the program. We

believe that the reserve requirements

and other safeguards built into the

proposed regulations satisfy this

concern. For the reasons set forth above,

we feel that the proposed regulations

have the benefit of permitting SBA’s

lenders to support an increased volume

of SBA lending without the outlay of the

cost of unguaranteed portions. There are

reasonable alternatives involving

retention of less or no reserve

requirement, but we do not believe that

they are as likely to uphold the safety

and soundness of the program as are the

proposed regulations. Finally, the

proposed regulations have no negative

impact on State, local, or tribal

governments.

For purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this final rule contains no

new reporting or record keeping

requirements.

For purposes of Executive Order

12612, SBA certifies that this rule has

no federalism implications warranting

the preparation of a Federalism

Assessment.

For purposes of Executive Order

12778, SBA certifies that this rule is

drafted, to the extent practicable, in

accordance with the standards set forth

in section 2 of that Order.

List of Subjects in 13 CFR Part 120

Business loans.

For the reasons set forth above, SBA

proposes to amend Part 120 of title 13,

Code of Federal Regulations, as follows:

PART 120—BUSINESS LOANS

1. The authority citation for 13 CFR

part 120 continues to read as follows:

Authority: 15 U.S.C. 634(b)(6) and 636(a)

and (h).

2. Section 120.420 is revised to read

as follows:

§ 120.420 Financings by participating

lenders.

(a) A participating lender may pledge

the notes evidencing SBA guaranteed

loans or sell interests in such notes

representing the unguaranteed portions

of such loans if SBA, in its sole

discretion, gives its prior written

consent. In order to obtain that consent,

the lender must be secure financially

and have a history of compliance with

SBA’s regulations and any other

applicable state or Federal statutory and

regulatory requirements, and agree to

the terms of these regulations.

(b) A participating lender, SBA, and

any third party involved in a pledging

or securitization transaction must enter

into a written agreement satisfactory to

SBA in its sole discretion which

acknowledges SBA’s interest as

guarantor of the subject loans and in

which all relevant third parties agree to

recognize and uphold those interests

under the Act, this part, and the

contractual provisions of SBA’s Loan

Guarantee Agreement. In any such

agreement, the parties must agree to the

following conditions:

(1) Except in extremely unusual

circumstances as determined by SBA in

its sole discretion, the fiscal and transfer

agent for SBA will hold all pertinent

loan instruments as designated by SBA,

and the lender will continue to service

the loans after the pledge or transfer is

made.

(2) It must be demonstrated to SBA’s

satisfaction that the lender retains an

economic risk in and bears the ultimate

risk of loss on the unguaranteed

portions. In the case of a pledge of

notes, the lender must retain all of the

economic interest in the unguaranteed

portion of any loan which a pledged

note evidences. In the case of a sale of

unguaranteed portions of SBA

guaranteed loans to support a

securitization, the lender must agree to

either hold unguaranteed portions equal

to 5% of the total amount of the loans

the remaining unguaranteed portions of

which are contained in the

securitization, or purchase or retain a

subordinate tranche of the securitization

equal to 5% of the total principal

outstanding of the loans the

unguaranteed portions of which are

contained in the securitization, or

establish a cash reserve of 5% of the

face amount of the loans the

unguaranteed portions of which are

contained in the securitization. Any

cash reserve retainage must be held in

a bankruptcy remote environment, and

in the event of a default by the lender

under the securitization agreement shall

become the property of SBA to be used

first to cover SBA expenses and losses,

and secondly for payment of servicing

and liquidating expenses for the loans

the unguaranteed portions of which are

contained the securitization. Any

retainage covered in this paragraph shall

be proportionately decreased by the

payment in full of each correspondent

loan or when the collateral for each

correspondent loan has been fully

liquidated and a determination has been

made that there is no additional

collectability.

(c) A lender which pledges notes must

retain an income stream equal to 1% of

the face amount of any notes pledged if

the percentage of the corresponding

loan pledged exceeds the unguaranteed

percentage. The fund must become the

property of SBA in the event of a default

by the lender under the pledging

agreement to be used first to cover SBA

expenses and losses, and secondly for

payment to a backup servicer of

servicing and liquidating expenses for

the loans pledged.

(d) Other than for the pledging against

Treasury Loans and Tax Accounts, a

lender may not use SBA guaranteed

loans or the collateral supporting such

loans as collateral for any borrowing not

related to financing of the guaranteed or

unguaranteed portion of SBA loans.

(e) Any pledge or securitization

agreement must identify a successor

servicer to the pledging or securitizing
8644 Federal Register / Vol. 62, No. 38 / Wednesday, February 26, 1997 / Proposed Rules

lender, agreeable to SBA which will be

responsible for servicing and liquidating

loans in the case of default under the

agreement by the lender. A lender, or

any successor servicer under a pledge or

securitization agreement, will be

considered the lender of the loan

pledged or securitized under SBA rules,

and will be bound by all restrictions

that otherwise apply to lenders making

SBA loans as long as either continues to

act as servicer. SBA will hold the lender

or successor servicer responsible in the

case of a denial of liability or other

adjustment to the amount of any SBA

guaranty.

§ 120.470 [Amended]

3. Section 120.470(b)(3) is amended

by adding the following sentence at the

end thereof:

* * * * *

(b) * * *

If pursuant to Section 420 of these

regulations an SBLC sells the

unguaranteed portion of loans and

retains either an amount of

unguaranteed portions equal to 5% of

the total amount of the loans the

unguaranteed portions of which are

contained in securitization, or a

subordinate tranche of a securitization

equal to 5% of the face value of the

loans the unguaranteed portions of

which are contained in the

securitization, it must increase its

private capital by 8% of either the face

value of the unguaranteed portions of

the loans retained or 8% of the face

value of the subordinate tranche.

Dated: February 12, 1997.

Ginger Ehn Lew,

Acting Administrator.

[FR Doc. 97–4785 Filed 2–25–97; 8:45 am]

BILLING CODE 8025–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 96–NM–272–AD]

RIN 2120–AA64

Airworthiness Directives; McDonnell

Douglas Model DC–9–10, –15, and –30

Series Airplanes, and C–9 (Military)

Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes the

adoption of a new airworthiness

directive (AD) that is applicable to

certain McDonnell Douglas Model DC–

9–10, –15, and –30 series airplanes, and

C–9 (military) airplanes. This proposal

would require a one-time visual

inspection to determine if all corners of

the upper cargo doorjamb have been

previously modified, various follow-on

repetitive inspections, and modification,

if necessary. This proposal is prompted

by reports of fatigue cracks found in the

fuselage skin and doubler at the corners

of the upper cargo doorjamb. The

actions specified by the proposed AD

are intended to detect and correct such

fatigue cracking, which could result in

rapid decompression of the fuselage and

consequent reduced structural integrity

of the airplane.

DATES: Comments must be received by

April 7, 1997.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Transport

Airplane Directorate, ANM–103,

Attention: Rules Docket No. 96–NM–

272–AD, 1601 Lind Avenue, SW.,

Renton, Washington 98055–4056.

Comments may be inspected at this

location between 9:00 a.m. and 3:00

p.m., Monday through Friday, except

Federal holidays.

The service information referenced in

the proposed rule may be obtained from

McDonnell Douglas Corporation, 3855

Lakewood Boulevard, Long Beach,

California 90846, Attention: Technical

Publications Business Administration,

Department C1–L51 (2–60). This

information may be examined at the

FAA, Transport Airplane Directorate,

1601 Lind Avenue, SW., Renton,

Washington.

FOR FURTHER INFORMATION CONTACT:

Wahib Mina, Aerospace Engineer,

Airframe Branch, ANM–120L, FAA, Los

Angeles Aircraft Certification Office,

3960 Paramount Boulevard, Lakewood,

California 90712; telephone (310) 627–

5324; fax (310) 627–5210.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Communications shall

identify the Rules Docket number and

be submitted in triplicate to the address

specified above. All communications

received on or before the closing date

for comments, specified above, will be

considered before taking action on the

proposed rule. The proposals contained

in this notice may be changed in light

of the comments received.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the proposed rule. All comments

submitted will be available, both before

and after the closing date for comments,

in the Rules Docket for examination by

interested persons. A report

summarizing each FAA-public contact

concerned with the substance of this

proposal will be filed in the Rules

Docket.

Commenters wishing the FAA to

acknowledge receipt of their comments

submitted in response to this notice

must submit a self-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket Number 96–NM–272–AD.’’ The

postcard will be date stamped and

returned to the commenter.

Availability of NPRMs

Any person may obtain a copy of this

NPRM by submitting a request to the

FAA, Transport Airplane Directorate,

ANM–103, Attention: Rules Docket No.

96–NM–272–AD, 1601 Lind Avenue,

SW., Renton, Washington 98055–4056.

Discussion

The FAA has received reports of

fatigue cracks in the fuselage skin and

doubler at the corners of the upper cargo

doorjamb on Model DC–9 series

airplanes. These cracks were discovered

during inspections conducted as part of

the Supplemental Structural Inspection

Document (SSID) program, required by

AD 96–13–03, amendment 39–9671 (61

FR 31009, June 19, 1996). Investigation

revealed that such cracking was caused

by fatigue-related stress. Fatigue

cracking in the fuselage skin or doubler

at the corners of the upper cargo

doorjamb, if not detected and corrected

in a timely manner, could result in

rapid decompression of the fuselage and

consequent reduced structural integrity

of the airplane.

Explanation of Relevant Service

Information

The FAA has reviewed and approved

McDonnell Douglas Service Bulletin

DC9–53–276, dated September 30, 1996.

The service bulletin describes the

following procedures:

1. For airplanes on which the

modification specified in Service

Bulletin DC9–53–276 has not been

accomplished: Performing x-ray

inspections to detect cracks of the

fuselage skin and doubler at all corners

of the upper cargo doorjamb;

2. Conducting repetitive inspections,

or modifying the corner skin of the

upper cargo doorjamb and performing

follow-on action eddy current

inspections, if no cracking is detected;