[Federal Register Volume 60, Number 42 (Friday, March 3, 1995)]
[Proposed Rules]
[Pages 11941-11942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5126]



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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 120 and 122


Business Loan Policy and Business Loans; Facsimiles of SBA Forms

AGENCY: Small Business Administration (SBA).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would authorize SBA participating lenders 
to use computer generated facsimile exact copies of SBA application and 
closing forms in making SBA guaranteed loans. SBA lenders, under the 
proposed rule, would agree to accept liability for a substantial SBA 
loss attributable to deficiencies in such forms. Under the proposed 
rule, SBA would deny liability to a lender which fails to use SBA 
provided forms or computerized facsimile exact copies of the SBA forms 
if this failure would contribute to a substantial loss by the SBA on 
the guaranteed loan.

DATES: Comments must be submitted on or before April 3, 1995.

ADDRESSES: Comments may be mailed to John R. Cox, Associate 
Administrator for Financial Assistance, Small Business Administration, 
409 Third Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: John R. Cox, 202/205-6490.

SUPPLEMENTARY INFORMATION: For many years, the SBA has required that 
its participating lenders use SBA provided forms in the SBA guaranteed 
business loan program. With advances in technology, SBA recognizes that 
such forms may be reproduced as mirror image facsimiles by computers 
and that such reproductions may be in the best interest of expedition 
of the SBA guaranteed loan program.
    Under this proposed rule, lenders participating in the SBA 
guaranteed business loan program would be authorized to use SBA 
application and closing forms which are computer generated by the 
lenders or from software prepared by third parties with whom they have 
contracted. Because SBA in the past has withheld permission to 
computerize some identified SBA forms, the proposed new Sec. 122.5-6 
would specifically include these forms in the general authority to 
utilize computer generated facsimile copies: SBA Forms 147 (Note), 148 
(Guaranty), 155 (Standby Agreement), 601 (Applicant's Agreement of 
Compliance), 928 (Mortgage), 1050 (Settlement Sheet), 1059 (Security 
Agreement).
    SBA's guaranty to a participating lender with respect to an SBA 
guaranteed business loan is conditional on the lender's actions in 
properly and prudently making, closing, servicing, and liquidating a 
loan. Accordingly, SBA's rules release the agency from its obligation 
to the lender to purchase the guaranteed portion of a business loan 
under certain prescribed conditions. SBA is proposing to amend 
Sec. 120.202-5 of its regulations so that it would be released from an 
obligation to a participating lender to purchase the guaranteed portion 
of a loan if the lender fails to utilize SBA provided forms or computer 
exact facsimile copies thereof, and this failure contributes to a 
substantial loss on the loan by the SBA. This means that if the 
computer generated SBA forms used by a lender are not exact facsimile 
copies, and such lack of conformity contributes or may contribute to a 
substantial loss by SBA on the loan, SBA could refuse to honor its 
guaranty with respect to the lender. In no event could SBA refuse to 
purchase the guaranteed portion from a registered holder (i.e., 
investor) in the secondary market. SBA's obligation to a registered 
holder always unconditional, and this proposed rule would have no 
effect on such obligation.

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

    For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., SBA certifies that this proposed rule, if promulgated in final 
form, will not have a significant economic impact on a substantial 
numbers of small entities.
    SBA certifies that this proposed rule, if promulgated in the final 
form, will not constitute a significant regulatory action for the 
purposes of Executive Order 12866, since the proposed change is not 
likely to result in an annual effect on the economy of $100 million or 
more.
    SBA certifies that the proposed rule, if promulgated in final form, 
would not impose additional reporting or recordkeeping requirements 
which could be subject to the Paperwork Reduction Act, 44 U.S.C. 
Chapter 35.
    SBA certifies that this proposed rule could not have federalism 
implications warranting the preparation of a Federalism Assessment in 
accordance with Executive Order 12612.
    Further, for purposes of Executive Order 12778, SBA certifies that 
this proposed rule, if promulgated in final form, is drafted, to the 
extent practicable, in accordance with the standards set forth in 
section 2 of that Order. (Catalog of Federal Domestic Assistance 
Programs, No. 59.012)

List of Subjects

13 CFR Part 120

    Loan programs-business, Small Businesses.

13 CFR Part 122

    Loan programs-business, Small businesses.

    Accordingly, pursuant to the authority contained in section 5(b)(6) 
of the Small Business Act (15 U.S.C. 634(b)(6)), SBA proposes to amend 
parts [[Page 11942]] 120 and 122, chapter I, title 13, Code of Federal 
Regulations, as follows:

PART 120--BUSINESS LOAN POLICY

    1. The authority citation for Part 120 would continue to read as 
follows:

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

    2. Section 120.202-5 would be amended by revising the introductory 
text to read as follows:


Sec. 120.202-5  When SBA does not purchase.

    SBA shall be released from its obligation to purchase its share of 
the guaranteed loan if the Lender has not substantially complied with 
all of the provisions of these regulations, the Guaranty Agreement and 
the Loan Authorization; has failed to disclose material facts; has made 
material misrepresentations to SBA with respect to the loan; or has 
failed to utilize SBA provided forms or exact computerized facsimile 
copies thereof; provided that any of these failures contributes or may 
contribute to a substantial loss on the loan by SBA; or upon the 
happening of any one or more the following events:
* * * * *

PART 122--BUSINESS LOANS

    1. The authority citation for part 122 would continue to read as 
follows:

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

    2. Section 122.5-6 would be added to read as follows:


Sec. 122.5-6  Facsimile Copies of SBA Application Forms.

    For guaranteed loans, a Participating Lender may use computer 
generated SBA application or closing forms which are exact facsimile 
reproductions of SBA's forms. Lenders which use computer generated 
application or closing forms agree to accept liability for a 
substantial SBA loss due to deficiencies in the use of these forms. 
(See Sec. 120.202-5). All SBA Business loan forms, including the 
following, may be computer generated: 147 (Note), 148 (Guaranty), 155 
(Standby Agreement), 601 (Applicant's Agreement of compliance), 928 
(Mortgage), 1050 (Settlement Sheet), 1059 (Security Agreement).

    Dated: December 23, 1994.
Philip Lader,
Administrator.
[FR Doc. 95-5126 Filed 3-2-95; 8:45 am]
BILLING CODE 8025-01-M