12268 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

2Without an exemption, a trust selling unit

subject to a deferred sales charge could not meet the

definition of a unit investment trust under section

4(2) of the Act. Section 4(2) defines a unit

investment trust as an investment company that

issues only ‘‘redeemable securities.’’

approximately his or her proportionate

share of the issuer’s current net assets,

or the cash equivalent of those assets.2

3. Section 2(a)(35) defines the term

‘‘sales load’’ to be the difference

between the sales price and the

proceeds to the issuer, less any expenses

not properly chargeable to sales or

promotional expenses. Because a DSC is

not charged at the time of purchase, an

exemption from section 2(a)(35) is

necessary.

4. Section 22(c) and rule 22c–1

require that the price of a redeemable

security issued by an investment

company for purposes of sale,

redemption, and repurchase be based on

the investment company’s current net

asset value. Because the imposition of a

DSC may cause a redeeming unit holder

to receive an amount less than the net

asset value of the redeemed Units,

applicants seek an exemption from this

section and rule.

5. Section 22(d) requires an

investment company and its principal

underwriter and dealer to sell securities

only at a current public offering price

described in the investment company’s

prospectus. Because sales charges

traditionally have been a component of

the public offering price, section 22(d)

historically required that all investors be

charged the same load. Rule 22d-1 was

adopted to permit the sale of

redeemable securities ‘‘at prices that

reflect scheduled variations in, or

elimination of, the sales load.’’ Because

rule 22d–1 may not be interpreted as

extending to scheduled variations in

deferred sales charges, applicants seek

relief from section 22(d) to permit each

Series to waive or reduce the DSC in

certain circumstances. Any waiver or

reduction will comply with the

conditions in paragraphs (a) through (d)

of rule 22d–1 under the Act.

6. Section 26(a)(2) in relevant part

prohibits a trustee or custodian of a unit

investment trust from collecting from

the trust as an expense any payment to

a depositor or principal underwriter

thereof. Because of this prohibition,

applicants need an exemption to permit

the trustee to collect the DSC

installments from distribution

deductions or Trust assets.

7. Applicants believe that

implementation of the DSC program in

the manner described above would be

fair and in the best interests of the

unitholders of the Trusts. Thus, granting

the requested order would be

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act.

8. Section 11(c) prohibits any offers of

exchange of the securities of a registered

unit investment trust for the securities

of any other investment company,

unless the terms of the offer have been

approved by the SEC. Applicants assert

that the reduced sales charge imposed at

the time of exchange is a reasonable and

justifiable expense to be allocated for

the professional assistance and

operational expenses incurred in

connection with the exchange.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. Whenever the exchange option is to

be terminated or its terms are to be

amended materially, any holder of a

security subject to that privilege will be

given prominent notice of the

impending termination or amendment

at least 60 days prior to the date of

termination or the effective date of the

amendment, provided that: (a) no such

notice need be given if the only material

effect of an amendment is to reduce or

eliminate the sales charge payable at the

time of an exchange, to add one or more

new Series eligible for the exchange

option, or to delete a Series which has

terminated; and (b) no notice need be

given if, under extraordinary

circumstances, either (i) there is a

suspension of the redemption of units of

the Trust under section 22(e) and the

rules and regulations promulgated

thereunder, or (ii) a Trust temporarily

delays or ceases the sale of its Units

because it is unable to invest amounts

effectively in accordance with

applicable investment objectives,

policies, and restrictions.

2. The amount of the sales charge per

Unit collected from a holder at the time

of any exchange or conversion of a Unit

will be lower than the sales charge

collected on the initial purchase of the

same Unit at such time.

3. The prospectus of each Trust

offering exchanges and any sales

literature or advertising that mentions

the existence of the exchange option

will disclose that the exchange option is

subject to modification, termination, or

suspension, without notice except in

certain limited cases.

4. Each Series offering Units subject to

a deferred sales charge will include in

its prospectus the table required by item

2 of Form N–1A (modified as

appropriate to reflect the differences

between unit investment trusts and

open-end management investment

companies) and a schedule setting forth

the number and date of each installment

payment.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–5336 Filed 3–3–95; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

Preferred Lenders Program; FA$TRAK

Pilot Program

AGENCY: Small Business Administration.

ACTION: Notice of pilot program

‘‘FA$TRAK’’.

SUMMARY: the Small Business

Administration (SBA) is establishing a

pilot program in which certain lenders

will be permitted to use their own

documentation and procedures to

approve loans to small businesses using

the Section 7(a) loan program in return

for a reduced percentage of guaranty

and other modifications to SBA’s

normal lending practices. This program

will be called FA$TRAK and will be

considered a part of the Preferred

Lenders Program.

DATES: This pilot will be effective on

February 27, 1995 and will remain in

effect for 2 years.

FOR FURTHER INFORMATION CONTACT:

James W. Hammersley, Deputy Director,

Office of Financing, U.S. Small Business

Administration, 8th floor, 409 3rd St.,

SW., Washington, DC 20416; 202–205–

6493.

SUPPLEMENTARY INFORMATION: The Small

Business Administration (SBA) is

establishing the FA$TRAK pilot

program as part of the existing Preferred

Lenders Program. This program is

designed to streamline the process by

which a lender receives a guaranty from

SBA on a loan made to a qualifying

small business. It is SBA’s goal to

utilize, to the maximum extent possible,

existing documentation of participating

lenders. Therefore, for FA$TRAK loans

lenders will be permitted to use their

own application form(s), internal credit

memoranda, notes, collateral

documents, servicing documentation

and liquidation documentation. The

SBA will limit the use of governmentmandated forms to those forms

necessary to authorize the lender to

disburse the loan with a government

guaranty, record the guaranteed balance

and loan status, and ensure that the

borrower has agreed to those items

required by law and regulation.
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 12269

Lenders participating in this pilot

program will be given the ability to

attach an SBA guaranty to an approved

loan without having to submit the loan

application to an SBA field office for a

credit analysis or review. These loans

will be sent to a single location for

assignment of an SBA loan number and

a determination of borrower eligibility.

In return for this flexibility and the

ability to attach an SBA guaranty to a

loan without prior review by SBA,

lenders will agree to: limit the

maximum loan amount to $100,000;

accept a maximum guaranty of 50

percent; and, waive payment on

defaulted loans until after the lender has

completed liquidation and SBA has

reviewed the underlying documentation

supporting the loan. The payment of

interest on defaulted loans will be

limited to 120 days. Lenders will be

responsible for loan servicing and

liquidation and will be required to

indemnify SBA against any loss due to

documentation drafting errors or

negligent servicing and liquidation.

Many aspects of the existing SBA

guaranteed loan program will continue

to be utilized in FA$TRAK. Borrowers

who are not eligible for assistance under

the existing program will not be eligible

under FA$TRAK. Lenders will be

provided with general guidance on

eligibility; however, the SBA loan

processing office will make an eligibility

determination. Lenders must negotiate

interest rates that are within the SBA

maximum interest rate ceiling. The

current SBA policy on fees charged by

the lender will remain in effect. SBA

reserves the right to review any fees

charged by a lender that the applicant

considers to be unreasonable. If SBA

determines that such fees are

unreasonable, the lender agrees to

return the excess to the applicant.

During the pilot program, lenders will

not be permitted to sell the guaranteed

portion of these loans into the

secondary market because SBA will not

have reviewed the loan documentation

for these loans prior to such sale.

Lenders will be permitted to reduce

their exposure to an existing borrower of

the bank by making a FA$TRAK loan

only if the existing loan has always been

current (no payment more than 29 days

late).

The pilot program is scheduled to last

2 years, beginning on February 27, 1995.

Prior to the termination date, SBA will

review the experience with the program

and determine if final rules and

regulations will be developed.

The Rules and Regulations for the

Preferred Lenders Program may be

found at 13 CFR 120.400. During this

pilot, various sections of SBA rules will

be suspended only for FA$TRAK loans

made by lenders participating in the

FA$TRAK program. The suspended

sections include, but are not limited to,

Section 120.102–2, 120.402–2, 120.403–

2 and 120.403–4. A copy of the

FA$TRAK supplemental guaranty

agreement and the program guide are

attached to this notice. These

documents provide more detailed

information on the operation of the pilot

program.

Philip Lader,

Administrator.

Small Business Administration

Supplemental Guaranty Agreement

FA$TRAK

This agreement is made this llll

day of llll, 19ll (‘‘the effective

date’’) by and between the llll

(‘‘Lender’’) and the U.S. Small Business

Administration (‘‘SBA’’), an agency of

the United States Government.

Whereas, this is a Supplemental

Guaranty Agreement (‘‘Supplemental

Agreement’’) to the Loan Guaranty

Agreement (SBA Form 750, dated 10–

83) between the parties hereto, dated

llll, (‘‘the Guarantee Agreement’’)

all the provisions of that SBA Form 750

are applicable to loans made by lender

to small business concerns under the

FA$TRAK program, which is a process

for approving, servicing and liquidating

loans made under the Preferred Lenders

Program (PLP), except as otherwise

provided herein.

Whereas, the parties intend under this

Supplemental Agreement for the Lender

to perform the processing and most of

the servicing and liquidating tasks

associated with loans of $100,000 or less

in principal amount under the

FA$TRAK portion of the Preferred

Lenders Program;

The parties agree as follows:

1. Under this Supplemental

Agreement, Lender will be permitted to

issue an SBA guaranty for any loan of

$100,000 or less in principal amount

approved under FA$TRAK procedures

which meets the requirements and

standards for FA$TRAK loans. Except as

specifically provided herein or in the

Program Guide for FA$TRAK, such

loans are subject to all PLP Rules and

Regulations as promulgated from time to

time. Lender shall have the authority to

issue a loan guaranty agreement and

such other loan approval forms as may

be necessary in order to permit a small

business to receive a FA$TRAK loan

from the Lender.

2. In conjunction with each FA$TRAK

loan, the Lender shall be permitted to

use its own application forms and other

credit documents normally required by

it for approving loans, and its own note

and other forms of loan documentation

specifically including a settlement sheet

and all other instruments which it uses

to make, service and liquidate similar

loans in a manner consistent with

prudent lending practices and loan

documentation. After Lender performs a

thorough credit analysis relative to an

application for a FA$TRAK loan, it will

forward such summary information as

SBA requires in the Program Guide for

FA$TRAK to the SBA’s FA$TRAK

Processing Center. SBA will endeavor to

provide Lender with an SBA loan

number within one working day of

receipt of the summary information.

3. Lender assumes the responsibility

for the completeness of each FA$TRAK

application package and all

documentation it has relieved upon to

make a credit judgment for a FA$TRAK

loan. Lender agrees to require approved

borrowers to execute SBA Form 1920

prior to first disbursement {this form

contains requirements that are

mandated by Congress as a condition for

receiving federal financial assistance}.

4. The percentage of SBA’s guaranty

of a loan guaranteed under this

Supplemental Agreement shall not

exceed fifty percent (50%) of the

outstanding principal amount of the

loan at the time of disbursement.

5. Approval of a loan under

procedures established by this

Supplemental Agreement shall

constitute certification by the Lender, to

the best of its professional knowledge

and judgment at the time of loan

approval, and in accordance with

standard and prudent lending practices,

that:

a. The partners, principal owners,

officers, and management of the

applicant are of good charter;

b. There is a reasonable assurance of

repayment by the borrower according to

the terms determined by the lender;

c. Without the guaranty of the SBA,

the loan funds would not otherwise be

available on reasonable terms to the

applicant, or from the personal

resources of the principal owner of the

applicant; and

d. The Lender is not and will not be

in a superior lien position on any

collateral securing the FA$TRAK loan,

unless the application file contains an

explanation leading to the necessity of

the subordinated lien position and a

complete description of the lien

positions as a result of the

subordination.

6. Lender agrees that it will not

approve any FA$TRAK loan application

on which the Applicant has noted any

outstanding SBA business, disaster or

development company loans
12270 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

(guaranteed or otherwise), unless the

outstanding SBA loans are current at the

time of approval of the FA$TRAK loan

and the Lender does not possess any

information that could indicate

impending default on any such loan.

7. Lender shall service loans made

under this Supplemental Agreement in

accordance with the provisions of 13

C.F.R. § 120.404 {copy attached} of the

PLP regulations and the Guarantee

Agreement. Lender is permitted to

perform any servicing action on any

FA$TRAK loan in its portfolio that does

not confer a preference on the lender

except that the Lender may not

unilaterally compromise or sell the

borrower’s obligation for less than the

amount owned on that obligation.

Lender may use its own documents to

record servicing changes as necessary.

8. Lender agrees to liquidate all SBA

loans made under this Supplemental

Agreement unless written instructions

to the contrary are received from SBA.

Liquidation will be conducted in a

commercially reasonable manner and

will be consistent with SBA’s

regulations and the Guarantee

Agreement.

9. Lender agrees that interest on any

FA$TRAK loan made under this

agreement will cease to accrue after 120

days from the date of the earliest

uncured default. Further, Lender agrees

to withhold a request for SBA to honor

its guaranty on any loan made

hereunder until final liquidation of the

loan is completed by lender, including

liquidation of all worthwhile collateral

and recovery from any collectible

obligor(s). Payment will be made after

SBA has reviewed and approved all

documentation supporting the making,

closing, servicing and liquidating of the

loan.

10. Lender agrees to provide SBA

with a notification of loan status on an

as requested basis (requests will initially

be quarterly but may be changed to

monthly after an electronic reporting

mechanism is developed).

11. (a) Lender authorizes SBA to make

periodic reviews and audits of all loans

made under this Supplemental

Agreement, including making copies

and extracts from, all files, records,

papers, or other relevant information.

Lender authorizes all Federal, State and

municipal authorities to furnish reports

of examination, records and other

information relating to the condition

and affairs of the Lender and any

desired information from reports,

returns, files, and records of such

authorities upon request by SBA.

(b) Lender agrees to photocopy a

representative sample, as defined by

SBA, of its FA$TRAK loan files on an

occasional basis, as determined by SBA

and to send these copies to SBA.

12. The SBA guaranty on any loan

made under this Supplemental

Agreement shall commence

immediately upon first disbursement by

the Lender. After that time, denial of

liability on the guaranty shall take place

only upon the determination by SBA

that the Lender is guilty of fraud,

negligence, misrepresentation or other

misconduct, or violation of any

provision of this Supplemental

Agreement, the Guaranty Agreement

(SBA Form 750), SBA’s Rules and

Regulations, or the Program Guide for

FA$TRAK.

13. This agreement shall be effective

for two years from the Effective Date,

unless both parties agree in writing to a

renewal prior to the expiration of the

two-year period. Either party may

terminate this agreement without cause

upon not less than ten (10) business

days written notice by certified mail to

the other party. Termination shall not

affect the guaranty of any loan approved

by the lender pursuant to this

Supplemental Agreement.

14. The provisions of the Program

Guide for FA$TRAK are an integral part

of this Supplemental Agreement and are

incorporated herein by reference.

Lender represents to SBA that it fully

understands the Program Guide.

15. The guaranteed portion of loans

approved pursuant to this Supplemental

Agreement may not be sold in the

Secondary Market.

16. All of the terms and conditions of

the Guaranty Agreement (SBA Form

750) not expressly modified by this

Supplemental Agreement shall remain

in full force and effect.

IN WITNESS WHEREOF, Lender and

SBA have caused this agreement to be

duly executed as of the date written

above.

lllllllllllllllllllll

Institution

lllllllllllllllllllll

Signature

lllllllllllllllllllll

Typed Name

lllllllllllllllllllll

Street Address

lllllllllllllllllllll

City, State, Zip Code

U.S. Small Business Administration

lllllllllllllllllllll

Signature

lllllllllllllllllllll

Typed Name

lllllllllllllllllllll

Title

BILLING CODE 8025–01–M
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 12271

BILLING CODE 8025–01–C
12272 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

I. Introduction

This program guide contains the

policies, procedures and guidelines for

implementation of FA$TRACK. This

guide is an integral part of the

‘‘Supplemental Guaranty Agreement for

FA$TRACK’’ and has been incorporated

therein by reference. Participation in

FA$TRACK is limited to those lenders

which have been approved by SBA for

FA$TRACK program participation and

have executed the supplemental

guaranty agreement.

FA$TRACK is intended to increase

the capital available to those businesses

seeking loans of $100,000 or less by

permitting lenders to use their existing

documentation and procedures and

receive an SBA guaranty on the loan.

Eliminating the requirement that SBA

forms be used and application

procedures be followed will allow

lenders to reduce the cost of processing

an SBA guaranteed loan. SBA hopes

that reducing the cost of providing

credit will encourage lenders to make

smaller loans. To further reduce the

lender’s cost of doing business with

SBA, lenders participating in

FA$TRACK will be permitted to use

their own internal documentation for

servicing actions and will be permitted

to use their existing procedures for loan

liquidation.

In exchange for the authorities

described above and in recognition of

the increased risk assumed by SBA,

lenders participating in FA$TRACK

agree to accept a maximum guaranty of

50% on each loan. The guaranty of 50%

is designed to give participating lenders

the credit enhancement needed to

approve certain applications while

recognizing that SBA has not reviewed

the credit or the documentation of the

participating lender. Lenders desiring a

guaranty higher than 50% for a specific

case are permitted to use regular SBA

procedures and forms to submit a loan

to SBA for a guaranty up to 90%.

II. Eligibility Requirements for

FA$TRACK

The Small Business Act provides

certain requirements and restrictions on

businesses which are entitled to

government financial assistance. These

considerations are described below.

A. Size Standards

While the $100,000 maximum loan

amount will tend to limit the size of

business interested in this type of loan,

SBA’s existing size standards which are

described in Part 121 of Title 13 of the

Code of Federal Regulations apply to all

loans approved under FA$TRACK.

These size standards refer to the

applicant and any affiliates.

B. Eligible Loan Recipients

Lenders may not obtain a guaranty for

loans to certain types of businesses.

SBA rules on applicant eligibility are

located in Section 120.101 and 120.102

of Title 13 of the Code of Federal

Regulations. A copy is included as

Appendix 1 to this guide. These rules

are subject to change. Any questions

regarding eligibility may be directed to

the Sacramento FA$TRAK Processing

Center. The names and telephone

numbers for the Processing Center staff

are located in Appendix 2.

C. Conflict of Interest

Lender may not use FA$TRAK

procedures to approve a loan to a firm

in which any of the owners or managers

are also an employee of the lender or

SBA or own 10% or more of the stock

of the lender. Furthermore, FA$TRAK

may not be used to make a loan to an

associate or close relative (See 13 CFR

120.2–2, Appendix 3.) of either of the

above described individuals.

D. Ineligible Uses of Loan Proceeds

In general, loan proceeds may be used

for the same purposes as loans approved

without an SBA guaranty. Loan

proceeds may not be used for the

following purposes:

a. To pay off inadequately secured

creditors.

b. To provide funds for distribution to

the owners of a business unless these

funds fully change the ownership of a

business. Loans for a change of

ownership are eligible provided there is

a 100% change of ownership and the

transfer is not between family members.

c. To refund any debt owed to a Small

Business Investment Company.

d. To fund a gambling operation,

except that businesses that receive less

than one-third of their revenue from the

commissions on the sale of state lottery

tickets or businesses involved in state

supervised gambling operations are

eligible.

e. To finance real estate held for

investment, purchases of stock for

investment, or to make loans to nonprofit entities.

f. To fund a loan that would reduce

lender’s own or an affiliate’s exposure to

a business, unless the existing debt has

always been current (no payments more

than 29 days past due during the life of

the credit). Refinancing of the debt

owed to another lender is allowed,

however, the FA$TRAK participant

must insure that the refinancing is

beneficial for the borrower due to more

reasonable terms or the transfer of a

borrower’s account relationship from

other sources to the FA$TRAK

participant. Care should be taken to

avoid the appearance that the lender is

using FA$TRAK to bail itself out of an

inadequately secured or poorly

performing credit.

g. To fund a loan when funds are

available from other sources on

reasonable terms including disposal of

unneeded business assets and use of

personal resources provided there is no

undue hardship involved in the use of

personal funds. A self certification by

the lender that funds would not

otherwise be available on reasonable

terms, as determined by the lender, is

part of SBA Form 1920, FA$TRAK

Authorization and Request for Loan

Number.

h. To fund a loan for the purchase or

construction of real estate, the purchase

or repair of equipment, or the

refinancing of a loan used for those

purposes, when the applicant business

is not a 100% owner operator of the real

estate or personal property being

financed. In cases where the applicant

is not a 100% owner operator, the loan

may be submitted to SBA using regular

7(a) procedures. Loan proceeds may be

used to finance real property with

residential or rental space provided that

in purchasing an existing building,

residential and/or rental space must be

less than 50% of total space, location

must be conducive to the success of the

business and other facilities must not be

reasonably available and in constructing

a building, the business must need a

resident owner or manager and

residential space must not exceed

331⁄3% of the total or business growth is

reasonably projected to indicate need

for space in the reasonably near future,

later additions are not feasible, and

residential space does not exceed

331⁄3% of total space.

i. To make a loan to a recreational or

amusement enterprise that is not open

to the public and properly licensed.

j. To replenish working capital funds

used for any of the above purposes.

III. Eligible Loan Types

FA$TRAK procedures may be used

for term loans or revolving credits made

by the lender. Revolving credits must

have a termination date that cannot

exceed five years from the date of first

disbursement. If the borrower remains

creditworthy, a new revolving

FA$TRAK loan can be approved.

IV. Terms and Conditions

A. Loan Amount

The maximum loan amount that may

be approved using the FA$TRAK

procedure is $100,000.
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 12273

B. Percentage of SBA’s Guaranty

The guaranty on loans approved

under FA$TRAK will be limited to a

maximum of 50%.

C. Interest Rates

(1) Loans approved using the

FA$TRAK procedure are subject to the

same maximum interest rate as all SBA

loans. For loans in excess of $50,000 the

maximum interest rate is 2.25

percentage points above the prime rate

as published in the Wall Street Journal

(WSJ) for loans with a maturity of less

than seven years and 2.75 percentage

points above the WSJ prime rate for

loans with a maturity of seven years or

longer. FA$TRAK participants may use

the additional interest rate spread

authorized by 13 CFR 122.8–4(g) for

loans approved using the FA$TRAK

procedure. Thus for loans of $25,000 or

less, the maximum rate is the WSJ prime

plus 4.25 and 4.75 depending on the

maturity and for loans over $25,000 but

not exceeding $50,000 the maximum

rate is the WSJ prime rate plus 3.25 and

3.75 depending on the maturity.

(2) Loans may have a fixed or variable

rate of interest. If a variable interest rate

is used, the lender may use the same

base rate of interest used on similar

loans made without an SBA guaranty.

V. Fees

A. Guaranty Fee

The guaranty fee will be 2% of the

amount guaranteed for any loan with a

maturity greater than one year. If the

maturity is less than one year, the

guaranty fee will be 1⁄4 of one percent.

The fee splitting arrangement accorded

lenders using regular procedures for

loans under $200,000 will not apply to

FA$TRAK. The guaranty fee must be

paid within 90 days of the loan approval

date or immediately after first

disbursement, whichever is earlier for

loans with a maturity of one year or

greater. If the maturity is less than one

year, the guaranty fee must be submitted

with the application for an SBA loan

number. Lender may charge Borrower

for the guaranty fee only after Lender

has paid the fee and an initial

disbursement was made on the loan.

This fee may be collected at the time of

loan closing if there is a disbursement

at closing.

B. Late Payment Fee

Lenders are permitted to charge

borrowers a late payment fee of up to

5% of the payment amount for

payments not received within 10 days of

the due date.

C. Extraordinary Servicing Fee

An extraordinary servicing fee of up

to 2% of the outstanding balance may be

collected in cases involving

construction, or using accounts

receivable or inventory for collateral.

D. Other Fees

Application fees, commitment fees or

prepayment fees are not permitted on

term credits.

E. Revolving Credit Fees

Lenders will be permitted to use the

same fee schedule for revolving credits

approved by the lender without an SBA

guaranty. These fees must be reasonable

and are subject to review by SBA. Fees

determined by SBA to be unreasonable

must be returned by the lender to the

borrower.

VI. Loan Making, Servicing and

Liquidation

A. Application Forms

(1) Lenders are permitted to use their

own application forms, internal credit

memoranda and any other

documentation necessary to make a

credit determination. Lenders must

insure that their application form

includes language in which the

applicant certifies that the information

supplied is true and complete. This

language must appear on the application

form or on the financial statement from

the applicant if a specific application

form is not used. The form including

this certification must be signed by the

borrower.

(2) Lender will be required to obtain

a signed copy of SBA Form 1919,

FA$TRAK Borrower Information Form

from a sole proprietor, all partners, or

each officer, director, or each holder of

20% or more of the voting stock of a

corporate applicant, and any other

person, including a hired manager, who

has authority to speak for and commit

the borrower in the management of the

business. The form must be part of the

loan file, but does not have to be sent

to the Processing Center. If the applicant

answers ‘‘yes’’ to either of questions 1,

2, or 3, the loan may not be submitted

under FA$TRAK. It may be submitted to

the local SBA office using regular

processing procedures.

B. Credit Decision

(1) Lenders approved to use the

FA$TRAK procedure are responsible for

a thorough and complete credit analysis.

This analysis should be in the loan file

and is subject to SBA review. An

analysis for a loan that is approved

should demonstrate that the loan can be

repaid from the cash flow of the

business and that the applicant is of

good character.

(2) Applications that are declined by

the lender should be handled in the

same manner the lender handles

declined applications for conventional

loans. These applications will not be

considered applications for an SBA

guaranteed loan.

C. Notification to SBA

(1) FA$TRAK lenders may request a

loan number from SBA by submitting an

executed SBA Form 1920, FA$TRAK

Authorization and Request for Loan

Number. This document serves both as

an Authorization by the FA$TRAK

lender for the loan and a request to SBA

to issue the loan number. This form will

contain the information necessary for

SBA to issue loan number and a

certification that the funds are not

available elsewhere on reasonable

terms. This form may be faxed or sent

to the Processing Center in Sacramento,

California. The Processing Center is set

up to provide a loan number to the

FA$TRAK lender by fax.

(2) SBA’s budget is determined by

Congress on an annual basis. SBA does

not have authority to guaranty loans if

it has run out of authority. While loan

approval authority has been delegated to

the FA$TRAK lender, the loan does not

have an SBA guaranty until the SBA

Processing Center has issued a loan

number. The processing center will not

issue a loan number if funds are not

available.

D. Closing and Disbursement

(1) FA$TRAK participating lenders

will use the same closing and

disbursement procedures for FA$TRAK

loans as are used for their conventional

loans. Loans may be closed by the

lender’s attorney and lenders are

permitted to use their own closing

documentation. This documentation

includes, but is not limited to the

lender’s note, personal guaranty

statements, mortgage, deed of trust or

other security agreements, resolutions of

the Borrower’s Board of Directors, and

a review of insurance requirements.

(2) FA$TRAK participants must use

the FA$TRAK Authorization and Loan

Agreement (SBA Form 1920) for all

loans approved using the FA$TRAK

procedure. The signature block of the

Form must contain the following

language: ‘‘As a participant in the

FA$TRAK portion of the Preferred

Lenders Program and agent of and on

behalf of SBA.’’

(3) Lender must do the following prior

to disbursement for each loan for which

it issues an SBA guaranty:
12274 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

A. Receive satisfactory evidence that

there has been no unremedied adverse

change since the date of the

Application, or since any of the

preceding disbursements, in the

financial or any other condition of

Borrower which would warrant

withholding or not making any such

disbursement or any further

disbursement.

B. Receive evidence of the kind

described below from an independent

authoritative source which is sufficient

to indicate to Lender that any collateral

property is not in a special flood hazard

area. If such evidence is not provided to

Lender, Lender must obtain from

Borrower agreement to obtain, and

maintain, a Standard Flood Insurance

Policy or other appropriate special flood

hazard insurance in an amount and

coverage equal to the lesser of (1) the

insurable value of the property or (2) the

maximum limit of coverage available.

The Borrower can show that special

flood hazard insurance has been

acquired by submitting a copy of the

policy or providing evidence of

premium payment for the appropriate

coverage to a licensed insurance agent.

Borrower will not be eligible for either

any future disaster assistance or SBA

business loan assistance if the special

flood hazard insurance is not

maintained as stipulated herein

throughout the entire term of its loan.

As evidence that the property is not

located within a special hazard area

subject to flooding, mudslides, or

erosion, Lender may rely on a

determination of special flood hazard

area status by the applicant’s property &

casualty insurance company, real estate

appraiser, title insurance company, a

local government agency or other

authoritative source acceptable to SBA

which would ordinarily have

knowledge of the special flood hazard

area status for the property.

C. In the construction of a new

building or an addition to a building,

obtain agreement from the Borrower that

the construction will conform with the

‘‘National Earthquake Hazards

Reduction Program Recommended

Provisions for the Development of

Seismic Regulations for New

Buildings.’’ Compliance with these

requirements shall be evidenced by a

certificate issued by a licensed building

architect, construction engineer or

similar professional, or a letter from a

state or local government agency stating

that the issuance of an occupancy

permit is required and is subject to

conformance with building codes and

that the local building codes include the

Seismic standards.

The following codes have been

identified as being substantially

equivalent to the National Earthquake

Hazards Reduction Program (NEHRP)

Recommended Provisions: 1991

Uniform Building Code of the

International Congress of Building

Officials (ICBO); 1992 Supplement to

the Building Officials and Code

Administrators (BOCA) National

Building Code; 1992 Amendments to

the Southern Building Code Congress

(SBCC) Standard Building Code.

D. Obtain agreement from the

Borrower that it will, to the extent

feasible purchase only American-made

equipment and products with the

proceeds of this loan.

E. For any loan involving construction

of more than $10,000, require borrower

and contractor to execute SBA Form

601, Applicant’s Agreement of

Compliance. Appendix 4 is a copy of

Form 601. This form must be retained

in the loan file, but does not have to be

submitted to the FA$TRAK Processing

Center.

(4) The Small Business Act requires

that all borrowers supply information

regarding payments to loan packagers,

accountants, appraisers, lawyers, or any

other individual or entity that assisted

the borrower in obtaining the loan. SBA

Form 159 may be used for this purpose

or the lender may use its own form as

long as the information required by SBA

Form 159 is supplied by the borrower

and the service provider. Appendix 5 is

a copy of Form 159. This form must be

retained in the loan file, but does not

have to be submitted to the FA$TRAK

Processing Center. If the applicant did

not pay anyone to assist in the

preparation of the loan, a written

certification to that effect is sufficient to

meet this requirement.

VII. Loan Servicing

A. Lenders will be permitted to

service loans approved under FA$TRAK

using the same policies and procedures

used for the lender’s conventional loan

portfolio. These policies and procedures

must be based on prudent lending

practices and the FA$TRAK lender

should be prepared to demonstrate to

SBA that a servicing action taken on a

FA$TRAK loan is consistent with

actions taken on loans in the lender’s

unguaranteed portfolio.

B. There are two actions that cannot

be delegated to the FA$TRAK

participating lender. They are:

(1) Selling or accepting a compromise

settlement of any indebtedness

guaranteed by SBA for a sum less than

the total amount due on the loan, and

(2) Enforcing compliance by the

borrower with non-discrimination

regulations (13 CFR Part 113). This

enforcement shall be subject to action

by SBA.

C. SBA must be notified of any

servicing action that alters any of the

repayment terms of the loan. This

includes, but is not limited to, changes

in the interest rate on fixed rate loans or

the interest rate spread on variable rate

loans, maturity, or payment schedule.

Notification should be sent to the

servicing office responsible for the loan.

The servicing office address will be

provided to the FA$TRAK lender along

with the loan number.

D. Lender may release collateral as

necessary. Due to the perception of a

preference for the FA$TRAK lender,

care should be taken to fully document

and justify any release of collateral for

an SBA guaranteed loan that will

subsequently be pledged for a

conventional loan from the lender.

VIII. Loan Liquidation

A. A participating lender will be

expected to fully liquidate any loan

approved using FA$TRAK. The lender

must follow the same policies and

procedures it uses for its nonguaranteed portfolio and should be

prepared to demonstrate that it has done

so. All liquidations of FA$TRAK loans

must be commercially reasonable.

B. Proceeds from the sale of collateral

shall be applied first to the expenses

associated with the liquidation,

secondly, to the 120 days of interest

permitted on the balance as of the

earliest uncured default and finally to

the principal balance. SBA will not pay

to the lender an amount in excess of

50% of the loan balance at the time of

default plus 120 days of interest at the

rate in effect on the date of default. The

Lender must absorb any expenses that

exceed this amount.

C. Any action taken during the

liquidation of a loan must be fully

documented. SBA will review

liquidation actions as part of the general

review of a lender’s use of the

FA$TRAK program. It is not necessary

to provide a liquidation plan to SBA.

D. SBA reserves the right to purchase

its guaranty prior to liquidation and to

liquidate the loan using SBA personnel,

however, it is expected that this right

will be used only in very unusual

circumstances.

E. Lender is permitted to take back a

Note Receivable on the sale of collateral

on any terms negotiated between the

lender and the buyer. The Note

Receivable will not have an SBA

guaranty.

F. Lender is to insure that ordinary

protective measures are taken. Expenses

associated with the protection of
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 12275

collateral may be recovered from the

proceeds of the sale of collateral.

G. Collateral sales to the Lender’s

officers, directors, employees or

stockholders (10% or greater) or a close

relative of either are not permitted.

H. The selection of firms owned by

officers, directors, employees or

stockholders (10% or greater) to provide

care and preservation services, legal

assistance, or other services associated

with the liquidation should be avoided.

If it cannot be avoided, the lender must

be prepared to justify the benefit to SBA

of using the particular firm.

IX. Payment of the SBA Guaranty

A. Payment of the SBA guaranty will

be made after the lender has fully

liquidated all collateral and pursued all

obligors and after SBA has reviewed the

documentation that supports the loan.

Payment will consist of the SBA

guaranteed percentage of the balance

remaining after liquidation plus up to

120 days of interest based on the

balance outstanding at the time of the

earliest uncured default if liquidation

proceeds were insufficient to cover a

full 120 days of interest.

B. To receive payment, lender must

submit a transcript of account, a

summary of liquidation activities, a

detail of liquidation expenses, and a

copy of the Note and relevant loan

documents to the SBA office servicing

the loan. The servicing office will

review the account and prepare the

paperwork required to wire SBA’s

portion of the loss to the lender.

X. Lender Selection and Review

A. Lenders will be selected for

participation in FA$TRAK based on

their desire to increase lending under

$100,000 to small businesses, especially

minority and women owned businesses.

An SBA district office shall make a

nomination to the Central Office, which

will make a decision. A lender will

receive the FA$TRAK designation for its

entire system. This may involve

executing multiple copies of the

supplemental guaranty agreement

depending on the legal structure of the

lender.

B. The loan approval authority in the

supplemental guaranty agreement for

FA$TRAK will last for two years. At the

end of two years, the activity will be

reviewed and may be renewed for either

one or two years. The servicing and

liquidation provisions will last for the

life of any loan approved using

FA$TRAK.

C. SBA will monitor the progress of

the FA$TRAK loans approved by each

other. We will use the performance of

loans approved under FA$TRAK to

determine if a lender may continue to

participate in FA$TRAK. Lenders that

violate the terms of the supplemental

guaranty agreement, this guidebook, or

SBA regulations as determined by SBA

shall be removed from the program.

D. SBA reserves the right to make a

periodic on-site review of the loan files

for FA$TRAK loans. SBA may, from

time to time, ask FA$TRAK lenders to

photocopy documents in a file selected

by SBA and send the copy to SBA for

review. This procedure is intended to

limit the intrusion on the lender by SBA

reviewers and to reduce the cost to SBA

of program monitoring. Lender

acknowledges that the SBA review does

not give rise to any estoppel claim, right

or defense if SBA should determine that

it will not honor its guaranty on a loan

approved using FA$TRAK.

E. If a problem develops with part of

a lender’s operation in one location, the

lender will be notified and given a

reasonable time to correct the problem.

If the problem is not corrected, the

lender’s entire organization will be

removed from FA$TRAK.

XI. Lender Reporting

Lenders will be required to report the

status and outstanding balance of each

loan approved under FA$TRAK on SBA

form 1175. This form is submitted on a

quarterly basis to the SBA field office.

SBA is in the process of developing an

electronic data interchange (EDI) system

for lender reporting. FA$TRAK lenders

will be expected to use EDI after it has

been implemented for SBA reporting.

XII. Secondary Market

Loans approved using the FA$TRAK

procedure may not be sold in the

secondary market.

XIII. Lender Mergers

A lender’s status as a participant in

the FA$TRAK will be reviewed at the

time of a merger and a decision will be

made regarding whether the new entity

will be a participant in FA$TRAK.

XIV. IRS Tax Verification

Lenders must verify tax returns of the

business prior to disbursement of a

FA$TRAK loan. Tax verification

procedures are included in Appendix 6.

SBA has a cooperative agreement with

the IRS to provide information within

ten days. The key to a quick reply from

the IRS is to ask for a transcript of the

tax return, not a copy of the return and

to write the words ‘‘SBA Loan

Application’’ at the top of the form.

Please report any problems with the tax

verification system to the FA$TRAK

Processing Center or your local SBA

district office. Lenders are reminded

that the letters ‘‘SBA’’ must be placed at

the top of each request to insure

expedited processing and that sole

proprietorship information is obtained

from a different SBA location than

partnership or corporate tax

information.

[FR Doc. 95–5337 Filed 3–3–95; 8:45 am]

BILLING CODE 8025–01–M

DEPARTMENT OF TRANSPORTATION

Aviation Proceedings; Agreements

Filed During the Week Ended February

24, 1995

The following Agreements were filed

with the Department of Transportation

under the provisions of 49 U.S.C 412

and 414. Answers may be filed within

21 days of date of filing.

Docket Number: 50148.

Date filed: February 21, 1995.

Parties: Members of the International

Air Transport Association.

Subject: COMP Telex Mail Vote 729.

Proposed Effective Date: April 1,

1995.

Docket Number: 50149.

Date filed: February 21, 1995.

Parties: Members of the International

Air Transport Association.

Subject: TC23 Reso/P 0686 dated

January 27, 1995, Europe-Southeast

Asia Resos r-1 to r-23.

Proposed Effective Date: April 1,

1995.

Docket Number: 50150.

Date filed: February 21, 1995.

Parties: Members of the International

Air Transport Association.

Subject: TC12 Telex Mail Vote 730,

Germany-Canada Fares, r-1—076jj r2—080rr.

Proposed Effective Date: April 1,

1995.

Myrna F. Adams,

Acting Chief, Documentary Services Division.

[FR Doc. 95–5429 Filed 3–3–95; 8:45 am]

BILLING CODE 4910–62–P

Applications for Certificates of Public

Convenience and Necessity and

Foreign Air Carrier Permits Filed Under

Subpart Q During the Week Ended

February 24, 1995

The following Applications for

Certificates of Public Convenience and

Necessity and Foreign Air Carrier

Permits were filed under Subpart Q of

the Department of Transportation’s

Procedural Regulations (See 14 CFR

302.1701 et. seq.). The due date for

Answers, Conforming Applications, or

Motions to Modify Scope are set forth