I

104TH CONGRESS

2D SESSION H. R. 3719

To amend the Small Business Act and Small Business Investment Act of

1958.

IN THE HOUSE OF REPRESENTATIVES

JUNE 26, 1996

Mrs. MEYERS of Kansas introduced the following bill; which was referred to

the Committee on Small Business

A BILL

To amend the Small Business Act and Small Business

Investment Act of 1958.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Small Business Programs Improvement Act of 1996’’.

6 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents.

Sec. 2. Administrator defined.

Sec. 3. Effective date.

TITLE I—AMENDMENTS TO SMALL BUSINESS ACT

Sec. 101. References.

Sec. 102. Risk management database.

Sec. 103. Section 7(a) loan program.

Sec. 104. Disaster loan program.
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Sec. 105. Microloan demonstration program.

Sec. 106. Small business development center program.

Sec. 107. Women’s demonstration grant program.

Sec. 108. Nonjudicial foreclosure.

Sec. 109. Miscellaneous authorities to provide loans and other financial assistance.

Sec. 110. Small business competitiveness demonstration program.

Sec. 111. Amendment to Small Business Guaranteed Credit Enhancement Act

of 1993.

TITLE II—AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT

Sec. 201. References.

Sec. 202. Modifications to development company debenture program.

Sec. 203. Required actions upon default.

Sec. 204. Loan liquidation pilot program.

Sec. 205. Registration of certificates.

1 SEC. 2. ADMINISTRATOR DEFINED.

2 In this Act, the term ‘‘Administrator’’ means the Ad3 ministrator of the Small Business Administration.

4 SEC. 3. EFFECTIVE DATE.

5 Except as otherwise expressly provided, this Act and

6 the amendments made by this Act shall take effect on Oc7 tober 1, 1996.

8 TITLE I—AMENDMENTS TO

9 SMALL BUSINESS ACT

10 SEC. 101. REFERENCES.

11 Except as otherwise expressly provided, whenever in

12 this title an amendment or repeal is expressed in terms

13 of an amendment to, or repeal of, a section or other provi14 sion, the reference shall be considered to be made to a

15 section or other provision of the Small Business Act (15

16 U.S.C. 631 et seq.).
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1 SEC. 102. RISK MANAGEMENT DATA BASE.

2 Section 4(b) (15 U.S.C. 633) is amended by inserting

3 after paragraph (2) the following:

4 ‘‘(3) RISK MANAGEMENT DATABASE.—

5 ‘‘(A) ESTABLISHMENT.—The Administra6 tion shall establish, within the management sys7 tem for the loan programs authorized by sub8 sections (a) and (b) of section 7 of this Act and

9 title V of the Small Business Investment Act of

10 1958, a management information system that

11 will generate a database capable of providing

12 timely and accurate information in order to

13 identify loan underwriting, collections, recovery,

14 and liquidation problems.

15 ‘‘(B) INFORMATION TO BE MAINTAINED.—

16 In addition to such other information as the

17 Administration considers appropriate, the

18 database established under subparagraph (A)

19 shall, with respect to each loan program de20 scribed in subparagraph (A), include informa21 tion relating to—

22 ‘‘(i) the identity of the institution

23 making the guaranteed loan or issuing the

24 debenture;

25 ‘‘(ii) the identity of the borrower;
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1 ‘‘(iii) the total dollar amount of the

2 loan or debenture;

3 ‘‘(iv) the total dollar amount of gov4 ernment exposure in each loan;

5 ‘‘(v) the district of the Administration

6 in which the borrower has its principal of7 fice;

8 ‘‘(vi) the borrower’s principal line of

9 business, as identified by Standard Indus10 trial Classification Code (or any successor

11 to that system);

12 ‘‘(vii) the delinquency rate for each

13 program (including number of instances

14 and days overdue);

15 ‘‘(viii) the number of defaults in each

16 program (including losses and recoveries);

17 ‘‘(ix) the number of deferrals or

18 forbearances in each program (including

19 days and number of instances); and

20 ‘‘(x) comparisons on the basis of loan

21 program, lender, Administration district

22 and region, for all the data elements main23 tained.

24 ‘‘(C) DEADLINE FOR OPERATIONAL CAPA25 BILITY.—The database established under sub-
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1 paragraph (A) shall be operational not later

2 than March 31, 1997, and shall capture data

3 beginning on the first day of the first quarter

4 of fiscal year 1997 beginning after such date

5 and thereafter.’’.

6 SEC. 103. SECTION 7(a) LOAN PROGRAM.

7 (a) SERVICING AND LIQUIDATION OF LOANS BY PRE8 FERRED LENDERS.—Section 7(a)(2)(C)(ii)(II) (15 U.S.C.

9 636(a)(2)(C)(ii)(II)) is amended to read as follows:

10 ‘‘(II) complete authority to serv11 ice and liquidate such loans without

12 obtaining the prior specific approval

13 of the Administration for routine serv14 icing and liquidation activities.’’.

15 (b) CERTIFIED LENDERS PROGRAM.—Section

16 7(a)(19) (15 U.S.C. 636(a)(19)) is amended to read as

17 follows:

18 ‘‘(19) CERTIFIED LENDERS PROGRAM.—

19 ‘‘(A) ESTABLISHMENT.—In addition to the

20 Preferred Lenders Program authorized by the

21 proviso in section 5(b)(7), the Administration is

22 authorized to establish a Certified Lenders Pro23 gram for lenders who establish their knowledge

24 of Administration laws and regulations concern-
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1 ing the guaranteed loan program and their pro2 ficiency in program requirements.

3 ‘‘(B) DESIGNATION OF CERTIFIED LEND4 ERS.—

5 ‘‘(i) REQUIREMENT.—The Adminis6 tration may designate a lender as a cer7 tified lender only if the lender has made in

8 each of the preceding 2 fiscal years—

9 ‘‘(I) 8 or more loans guaranteed

10 under this subsection to small busi11 ness concerns located in areas other

12 than a rural area; or

13 ‘‘(II) 4 or more loans guaranteed

14 under this subsection to small busi15 ness concerns located in a rural area.

16 ‘‘(ii) SUSPENSION AND REVOCA17 TION.—The designation of a lender as a

18 certified lender shall be suspended or re19 voked at any time that the Administration

20 determines that the lender is not adhering

21 to its rules and regulations or that the loss

22 experience of the lender is excessive as

23 compared to other lenders, but such sus24 pension or revocation shall not affect any

25 outstanding guarantee.
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1 ‘‘(iii) RURAL AREA DEFINED.—In this

2 subparagraph, the term ‘rural area’ has

3 the meaning given such term by subsection

4 (m)(11)(C).

5 ‘‘(C) UNIFORM AND SIMPLIFIED LOAN

6 FORMS.—In order to encourage all lending in7 stitutions and other entities making loans au8 thorized under this subsection to provide loans

9 of $50,000 or less in guarantees to eligible

10 small business loan applicants, the Administra11 tion shall develop and allow participating lend12 ers to solely utilize a uniform and simplified

13 loan form for such loans.

14 ‘‘(D) LOW DOCUMENTATION LOAN PRO15 GRAM.—The Administration may carry out the

16 low documentation loan program for loans of

17 $100,000 or less only through preferred lenders

18 and certified lenders.’’.

19 (c) LIMITATION ON CONDUCTING PILOT

20 PROJECTS.—Section 7(a) (15 U.S.C. 636(a)) is amended

21 by adding at the end the following new paragraph:

22 ‘‘(25) LIMITATION ON CONDUCTING PILOT

23 PROJECTS.—

24 ‘‘(A) IN GENERAL.—Not more than 10

25 percent of the total number of loans guaranteed
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1 in any fiscal year under this subsection may be

2 awarded as part of a pilot program established

3 by the Administration.

4 ‘‘(B) PILOT PROGRAM DEFINED.—In this

5 paragraph, the term ‘pilot program’ means any

6 lending program initiative, project, innovation,

7 or other activity not specifically authorized by

8 law.’’.

9 (d) SECURITIZATION OF UNGUARANTEED PORTIONS

10 OF SBA LOANS.—Section 5(f)(3) (15 U.S.C. 634(f)(3))

11 is amended by adding at the end the following: ‘‘The Ad12 ministration may not prohibit a lender from securitizing

13 the non-guaranteed portion of any loan made under sec14 tion 7(a) pursuant to the regulations contained in section

15 120.420 of title 13, Code of Federal Regulations, solely

16 due to the status of the lender as a depository institu17 tion.’’.

18 (e) CONDITIONS ON PURCHASE OF LOANS.—

19 (1) SERVICING FEE.—Section 5(g)(5) (15

20 U.S.C. 634(g)(5)) is amended by adding at the end

21 the following:

22 ‘‘(C) In the event the Administration pays a claim

23 under a guarantee issued under this Act, the servicing fees

24 paid to the lender from the earliest date of default to the
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1 date of payment of the claim shall be no more than the

2 agreed upon rate, minus one percent.

3 (2) PAYMENT OF ACCRUED INTEREST.—Section

4 7(a)(17) is amended—

5 (A) by striking ‘‘(17) The Administration’’

6 and inserting ‘‘(17)(A) The Administration’’;

7 and

8 (B) by adding at the end the following:

9 ‘‘(B) Any bank or other lending institution

10 making a claim for payment on the guaranteed por11 tion of a loan made under this subsection shall be

12 paid the accrued interest due on the loan from the

13 earliest date of default to the date of payment of the

14 claim at a rate not to exceed the rate of interest on

15 the loan on the date of default, minus one percent.

16 (f) TRANSFER OF LOAN SERVICING FUNCTIONS TO

17 CENTRALIZED CENTERS.—Not later than 60 days after

18 the date of the enactment of this Act, the Administrator

19 shall complete the transfer of loan servicing functions of

20 the Administration, including arrangement for the trans21 fer of appropriate personnel, from district offices to cen22 tralized loan servicing centers.

23 (g) PREFERRED LENDER STANDARD REVIEW PRO24 GRAM.—Not later than 30 days after the date of the en25 actment of this Act, the Administrator shall implement the
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1 standard review program for the Preferred Lender Pro2 gram established pursuant to section 5(b)(7) of the Small

3 Business Act (15 U.S.C. 634(b)(7)). The Administrator

4 shall require such standard review for each new entrant

5 to the Preferred Lender Program.

6 (h) INDEPENDENT STUDY OF LOAN PROGRAMS.—

7 (1) STUDY REQUIRED.—The Administrator

8 shall conduct a comprehensive assessment of the

9 performance of the loan programs authorized by sec10 tion 7(a) of the Small Business Act (15 U.S.C.

11 636(a)) and title V of the Small Business Invest12 ment Act of 1958 (15 U.S.C. 661) addressing the

13 matters described in paragraph (2) and resulting in

14 a report to Congress pursuant to paragraph (5).

15 (2) MATTERS TO BE ASSESSED.—In addition to

16 such other matters as the Administrator considers

17 appropriate, the assessment required by paragraph

18 (1) shall address, with respect to each loan program

19 described in paragraph (1) for each of the fiscal

20 years described in paragraph (3), the following:

21 (A) the number and frequency of deferrals

22 and defaults;

23 (B) default rates;

24 (C) comparative loss rates, by—
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1 (i) type of lender (separately address2 ing preferred lenders, certified lenders, and

3 general participation lenders);

4 (ii) term of the loan; and

5 (iii) dollar value of the loan at dis6 bursement; and

7 (D) the economic models used by the Of8 fice of Management and Budget to calculate the

9 credit subsidy rate applicable to the loan pro10 grams.

11 (3) PERIOD OF ASSESSMENT.—The assessments

12 undertaken pursuant to paragraph (2) shall address

13 data for the period beginning with the first full fiscal

14 year of the implementation of each loan program de15 scribed in paragraph (1) through fiscal year 1995.

16 (4) PERFORMANCE BY THE PRIVATE SECTOR.—

17 (A) CONTRACTOR PERFORMANCE.—A pri18 vate sector contractor shall be used by the Ad19 ministrator to conduct the assessment required

20 by paragraph (1) and to prepare the report to

21 Congress required by paragraph (3).

22 (B) SOLICITATION AND AWARD.—The con23 tract shall be awarded pursuant to a solicitation

24 issued not later than 60 days after the date of

25 the enactment of this Act, which shall provide
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1 for full and open competition. The Adminis2 trator shall make every reasonable effort to

3 award the contract not later that 60 days after

4 the date specified in the solicitation for receipt

5 of proposals.

6 (C) ACCESS TO INFORMATION.—The Ad7 ministrator shall provide to the contractor ac8 cess to any information collected by or available

9 to the Administration with regard to the loan

10 programs being assessed. The contractor shall

11 preserve the confidentiality of any information

12 for which confidentiality is protected by law or

13 properly asserted by the person submitting such

14 information.

15 (D) CONTRACT FUNDING.—The Adminis16 trator shall fund the cost of the contract from

17 the amounts appropriated for the salaries and

18 expenses of the Administration for fiscal year

19 1997.

20 (5) REPORT TO CONGRESS.

21 (A) CONTENTS.—The contractor shall sub22 mit a report of—

23 (i) its analyses of the matters to be

24 assessed pursuant to paragraph (2);
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1 (ii) its independent recommendations,

2 with respect to each loan program, regard3 ing the following:

4 (I) improving the Administra5 tion’s timely collection and subsequent

6 management of data to measure the

7 performance of each loan program de8 scribed in paragraph (1); and

9 (II) reducing loss rates for each

10 such loan program.

11 (B) SUBMISSION BY CONTRACTOR.—The

12 contractor shall submit the report required by

13 subparagraph (A) not later than 6 months after

14 the date of the contract award.

15 (C) SUBMISSION TO CONGRESS.—The Ad16 ministrator shall submit the report received

17 from the contractor pursuant to subparagraph

18 (B) to the Committees on Small Business of the

19 House of Representatives and the Senate within

20 15 days of receipt of the report.

21 SEC. 104. DISASTER LOAN PROGRAM.

22 (a) INTEREST RATE.—Section 7(c)(5) (15 U.S.C.

23 636(c)(5)) is amended to read as follows:

24 ‘‘(5) INTEREST RATE FOR DISASTERS COM25 MENCING AFTER OCTOBER 1, 1996.—Notwithstand-
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1 ing any other provision of law, the interest rate on

2 the Federal share of any loan made under para3 graph (1) or (2) of subsection (b) on account of a

4 disaster commencing on or after October 1, 1996,

5 shall be the rate determined by the Secretary of the

6 Treasury, taking into consideration the current aver7 age market yield on outstanding marketable obliga8 tions of the United States with remaining periods to

9 maturity comparable to the average maturities of

10 such loan plus an additional charge of 2 percent per

11 year, adjusted to the nearest one-eighth of 1 per12 cent.’’.

13 (b) REPEAL OF OBSOLETE PROVISIONS.—

14 (1) The undesignated paragraph following sub15 paragraph (D) of section 7(b)(2) (15 U.S.C. 636(b))

16 is amended by striking the sentence that begins

17 ‘‘Notwithstanding any other provision of law’’

18 through the end of subsection (b).

19 (2) Paragraphs (3) and (4) of section 7(c) (15

20 U.S.C. 636(c)) are repealed.

21 (c) OUTSOURCING OF LOAN SERVICING.—

22 (1) PILOT PROGRAM.—The Administrator shall

23 carry out a pilot program under which the servicing

24 of not less than 20 percent of the total portfolio of

25 loans made to homeowners under section 7(b) of the
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1 Small Business Act (including loans made before the

2 date of the enactment of this Act) will be carried

3 out by 1 or more private entities under contracts

4 entered into by the Administration.

5 (2) INITIATION DATE.—Not later than 90 days

6 after the date of enactment of this Act, the Adminis7 trator shall begin implementation of the pilot pro8 gram.

9 (3) REPORT.—Not later than 2 fiscal years

10 after the date of award of the contracts provided for

11 in paragraph (1), the Administrator shall transmit

12 to Congress a report containing a description and

13 assessment of the results of the pilot program.

14 SEC. 105. MICROLOAN DEMONSTRATION PROGRAM.

15 (a) TECHNICAL ASSISTANCE GRANT REQUIRE16 MENTS.—Section 7(m)(4) (15 U.S.C. 636(m)(4)) is

17 amended—

18 (1) in subparagraph (A) by striking ‘‘25 per19 cent’’ and inserting ‘‘20 percent’’; and

20 (2) in subparagraph (B) by striking ‘‘25 per21 cent’’ and inserting ‘‘35 percent’’.

22 (b) LIMITATION ON SPENDING.— Section 7(m)(12)

23 (15 U.S.C. 636(m)(12)) is amended by adding at the end

24 the following new subparagraph:
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1 ‘‘(D) LIMITATION ON SPENDING.—None of the

2 amounts appropriated to carry out this subsection

3 for fiscal year 1997 may be expended until such date

4 as the Administrator has implemented the pilot pro5 gram under this paragraph.’’.

6 SEC. 106. SMALL BUSINESS DEVELOPMENT CENTER PRO7 GRAM.

8 (a) ELIMINATION OF REQUIREMENT FOR LOCATION

9 AT INSTITUTIONS OF HIGHER LEARNING.—Section

10 21(a)(1) (15 U.S.C. 648(a)(1)) is amended by striking

11 ‘‘: Provided, That’’ and all that follows through ‘‘small

12 business community’’.

13 (b) AUTHORITY TO CHARGE REASONABLE FEES.—

14 (1) IN GENERAL.—Section 21(a)(3) (15 U.S.C.

15 648(a)(3)) is amended by adding at the end the fol16 lowing:

17 ‘‘(D) FEES.—Small business development

18 centers may charge reasonable and necessary

19 fees for their services. Such fees may not exceed

20 $15.00 per hour and may not be mandated by

21 the Administration.’’.

22 (2) CONFORMING AMENDMENTS.—Section 21

23 (15 U.S.C. 648) is amended—

24 (A) in subsection (a)(3)—
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1 (i) by striking ‘‘(3) The Small Busi2 ness’’ and inserting the following:

3 ‘‘(3) ADMINISTRATION OF PROGRAM.—

4 ‘‘(A) GENERAL MANAGEMENT AND OVER5 SIGHT.—The Small Business’’;

6 (ii) by striking ‘‘(A) Small Business’’

7 and inserting the following:

8 ‘‘(B) ASSOCIATION OF SMALL BUSINESS

9 DEVELOPMENT CENTERS.—Small Business’’;

10 (iii) by striking ‘‘(B) Provisions’’ and

11 inserting the following:

12 ‘‘(C) AUDITS, COST PRINCIPALS, AND AD13 MINISTRATIVE REQUIREMENTS.—Provisions’’;

14 and

15 (iv) by aligning the remainder of the

16 text of each of subparagraphs (A), (B),

17 and (C), as designated by clauses (i), (ii),

18 and (iii) of this subparagraph, with the

19 text of subparagraph (D), as added by

20 paragraph (1) of this subsection; and

21 (B) in subsection (k)(2) by striking ‘‘sub22 section (a)(3)(A)’’ and inserting ‘‘subsection

23 (a)(3)(B)’’.

24 (c) ASSOCIATE ADMINISTRATOR FOR SMALL BUSI25 NESS DEVELOPMENT CENTERS.—
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1 (1) DUTIES.—Section 21(h) (15 U.S.C. 648(h))

2 is amended to read as follows:

3 ‘‘(h) ASSOCIATE ADMINISTRATOR FOR SMALL BUSI4 NESS DEVELOPMENT CENTERS.—

5 ‘‘(1) APPOINTMENT AND COMPENSATION.—The

6 Administrator shall appoint an Associate Adminis7 trator for Small Business Development Centers who

8 shall report to an official who is not more than one

9 level below the Office of the Administrator and who

10 shall serve without regard to the provisions of title

11 5 governing appointments in the competitive service,

12 and without regard to chapter 51, and subchapter

13 III of chapter 53 of such title relating to classifica14 tion and General Schedule pay rates, but at a rate

15 not less than the rate of GS–17 of the General

16 Schedule.

17 ‘‘(2) DUTIES.—

18 ‘‘(A) IN GENERAL.—The sole responsibility

19 of the Associate Administrator for Small Busi20 ness Development Centers shall be to admin21 ister the small business development center pro22 gram. Duties of the position shall include, but

23 are not limited to, recommending the annual

24 program budget, reviewing the annual budgets

25 submitted by each applicant, establishing appro-
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1 priate funding levels therefore, selecting appli2 cants to participate in this program, implement3 ing the provisions of this section, maintaining a

4 clearinghouse to provide for the dissemination

5 and exchange of information between small

6 business development centers and conducting

7 audits of recipients of grants under this section.

8 ‘‘(B) CONSULTATION REQUIREMENTS.—In

9 carrying out the duties described in this sub10 section, the Associate Administrator shall con11 fer with and seek the advice of the Board estab12 lished by subsection (i) and Administration offi13 cials in areas served by the small business de14 velopment centers; however, the Associate Ad15 ministrator shall be responsible for the manage16 ment and administration of the program and

17 shall not be subject to the approval or concur18 rence of such Administration officials.’’.

19 (2) REFERENCES TO ASSOCIATE ADMINIS20 TRATOR.—Section 21 (15 U.S.C. 648) is amended—

21 (A) in subsection (c)(7) by striking ‘‘Dep22 uty Associate Administrator of the Small Busi23 ness Development Center program’’ and insert24 ing ‘‘Associate Administrator for Small Busi25 ness Development Centers’’; and
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1 (B) in subsection (i)(2) by striking ‘‘Dep2 uty Associate Administrator for Management

3 Assistance’’ and inserting ‘‘Associate Adminis4 trator for Small Business Development Cen5 ters’’.

6 (d) EXTENSION OR RENEWAL OF COOPERATIVE

7 AGREEMENTS.—Section 21(k)(3) (15 U.S.C. 648(k)(3)) is

8 amended to read as follows:

9 ‘‘(3) EXTENSION OR RENEWAL OF COOPERA10 TIVE AGREEMENTS.—

11 ‘‘(A) IN GENERAL.—In extending or re12 newing a cooperative agreement of a small busi13 ness development center, the Administration

14 shall consider the results of the examination

15 and certification program conducted pursuant

16 to paragraphs (1) and (2).

17 ‘‘(B) CERTIFICATION REQUIREMENT.—

18 After September 30, 2000, the Administration

19 may not renew or extend any cooperative agree20 ment with a small business development center

21 unless the center has been approved under the

22 certification program conducted pursuant to

23 this subsection; except that the Associate Ad24 ministrator for Small Business Development

25 Centers may waive such certification require-
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1 ment, in the discretion of the Associate Admin2 istrator, upon a showing that the center is mak3 ing a good faith effort to obtain certification.’’.

4 (e) TECHNICAL CORRECTION.—Section 21(l) (15

5 U.S.C. 648(l)) is amended to read as follows:

6 ‘‘(l) CONTRACT AUTHORITY.—The authority to enter

7 into contracts shall be in effect for each fiscal year only

8 to the extent and in the amounts as are provided in ad9 vance in appropriations Acts. After the administration has

10 entered a contract, either as a grant or a cooperative

11 agreement, with any applicant under this section, it shall

12 not suspend, terminate, or fail to renew or extend any

13 such contract unless the Administration provides the ap14 plicant with written notification setting forth the reasons

15 therefor and affording the applicant an opportunity for a

16 hearing, appeal, or other administrative proceeding under

17 the provisions of chapter 7 of title 5, United States

18 Code.’’.

19 SEC. 107. WOMEN’S DEMONSTRATION GRANT PROGRAM.

20 Section 29(g) (15 U.S.C. 656(g)) is amended by

21 striking ‘‘1997’’ and inserting ‘‘1996’’.

22 SEC. 108. NONJUDICIAL FORECLOSURE.

23 The Small Business Act (15 U.S.C. 631 et seq.) is

24 amended by redesignating section 30 as section 31 and

25 by inserting after section 29 the following:
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1 ‘‘SEC. 30. NONJUDICIAL FORECLOSURE.

2 ‘‘(a) GENERAL RULE.—The Administrator may fore3 close a mortgage upon a breach of a covenant or condition

4 in a debt instrument or mortgage if such debt instrument

5 or mortgage authorizes acceleration or foreclosure.

6 ‘‘(b) DESIGNATION AND REMOVAL OF TRUSTEE.—

7 ‘‘(1) DESIGNATION.—The Administrator shall,

8 in writing, designate by name, title, or position, a

9 foreclosure trustee who shall have the power to con10 duct a foreclosure sale pursuant to this section and

11 shall supersede any trustee designated in the mort12 gage. The Administrator may designate as fore13 closure trustee—

14 ‘‘(A) an officer or employee of the Small

15 Business Administration;

16 ‘‘(B) an individual who is a resident of the

17 State in which the security property is located;

18 or

19 ‘‘(C) a partnership, association, or corpora20 tion authorized to transact business under the

21 laws of the State in which the security property

22 is located.

23 ‘‘(2) AUTHORIZATION FOR MULTIPLE FORE24 CLOSURE TRUSTEES.—The Administrator may des25 ignate such foreclosure trustees as the Administrator

26 determines necessary to carry out the purposes of
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1 this section. The Administrator may designate one

2 or more foreclosure trustees for the purpose of pro3 ceedings with multiple foreclosures or a class of fore4 closures.

5 ‘‘(3) REMOVAL OF FORECLOSURE TRUSTEES.—

6 The Administrator may remove a foreclosure trustee

7 and designate a successor trustee as provided in this

8 section. The foreclosure sale shall continue, notwith9 standing the removal of the foreclosure trustee and

10 designation of a successor foreclosure trustee, unless

11 otherwise postponed by the successor foreclosure

12 trustee.

13 ‘‘(c) NOTICE OF FORECLOSURE SALE.—

14 ‘‘(1) IN GENERAL.—

15 ‘‘(A) Not earlier than 21 days nor later

16 than twenty years after acceleration of a debt

17 instrument or demand on a guaranty, the fore18 closure trustee shall serve a notice of a fore19 closure sale in accordance with this section. In

20 computing the time period, all periods during

21 which there is in effect a judicially imposed stay

22 of foreclosure or a stay imposed by section 362

23 of title 11, United States Code, shall be ex24 cluded.
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1 ‘‘(B) In the event of partial payment or

2 written acknowledgement of the debt after ac3 celeration of the debt instrument, the right to

4 foreclosure shall be deemed to accrue again at

5 the time of each such payment or acknowledge6 ment.

7 ‘‘(2) REQUIREMENTS OF FORECLOSURE

8 SALE.—The notice of foreclosure sale shall include—

9 ‘‘(A) the name, title, and business address

10 of the foreclosure trustee as of the date of the

11 notice;

12 ‘‘(B) the names of the original parties to

13 the debt instrument and the mortgage, and any

14 assignees of the mortgagor of record;

15 ‘‘(C) the street address or location of the

16 security property, and a generally accepted des17 ignation used to describe the security property,

18 or so much thereof as is to be offered for sale,

19 sufficient to identify the property to be sold;

20 ‘‘(D) the date of the mortgage, the office

21 in which the mortgage is filed, and the location

22 of the filing of the mortgage;

23 ‘‘(E) a statement that a default has oc24 curred, and the date of the acceleration of the

25 debt instrument;
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1 ‘‘(F) the date, time, and place of the fore2 closure sale;

3 ‘‘(G) a statement that the foreclosure is

4 being conducted in accordance with this Act;

5 ‘‘(H) the types of costs, if any, to be paid

6 by the purchaser upon transfer of title; and

7 ‘‘(I) the terms and conditions of sale, in8 cluding the method and time of payment of the

9 foreclosure purchase price.

10 ‘‘(3) SERVICE OF NOTICE OF FORECLOSURE

11 SALE.—

12 ‘‘(A) RECORD NOTICE.—Not later than 21

13 days before the date of the foreclosure sale, no14 tice of foreclosure sale shall be filed in the man15 ner authorized for filing a notice of an action

16 concerning real property according to the law of

17 the State in which the security property is lo18 cated.

19 ‘‘(B) NOTICE BY MAIL.—

20 ‘‘(i) Not later than 21 days before the

21 date of the foreclosure sale, notice of the

22 foreclosure shall be sent by registered or

23 certified mail, return receipt requested

24 to—
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1 ‘‘(I) the current owner of record

2 of the security property as the record

3 appears on the date that the notice of

4 foreclosure sale is recorded pursuant

5 to subsection (a);

6 ‘‘(II) all debtors, including the

7 mortgagor, assignees of record of the

8 mortgagor, and guarantors of the debt

9 instrument;

10 ‘‘(III) all persons having liens,

11 interests or encumbrances of record

12 upon the security property, as the

13 record appears on the date that the

14 notice of foreclosure sale is recorded

15 pursuant to subsection (a); and

16 ‘‘(IV) any occupants of the secu17 rity property.

18 If the names of the occupants of the security

19 property are not known to the agency, or the

20 security property has more than one dwelling

21 unit, the notice shall be posted at the security

22 property.

23 ‘‘(C) NOTICE BY PUBLICATION.—Notice of

24 a foreclosure sale shall be published for three

25 successive weeks prior to the sale in a news-
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1 paper of general circulation in any county or

2 counties in which the security property is lo3 cated. In a case in which no newspaper has a

4 weekly general circulation in at least one county

5 in which the security property is located, a copy

6 of the notice of foreclosure sale shall be posted

7 at least 21 days prior to the sale at the court8 house of any county or counties in which the

9 property is located and at the place where the

10 sale is to be held.

11 ‘‘(d) CANCELLATION OF FORECLOSURE SALE.—

12 ‘‘(1) IN GENERAL.—The foreclosure trustee

13 shall cancel the foreclosure sale, at any time prior to

14 the sale—

15 ‘‘(A) if the debtor or the holder of any sub16 ordinate interest in the security property

17 tenders the performance due under the debt in18 strument and mortgage, including any amounts

19 due because of the exercise of the right to accel20 erate, and the expenses of proceeding to fore21 closure incurred to the time of tender; or

22 ‘‘(B) if the security property is the prin23 cipal dwelling of the debtor, and the debtor—
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1 ‘‘(i) pays or tenders all sums which

2 would have been due at the time of tender

3 in the absence of any acceleration;

4 ‘‘(ii) performs any other obligation

5 which would have been required in the ab6 sence of any acceleration; and

7 ‘‘(iii) pays or tenders all costs of fore8 closure incurred for which payment from

9 the proceeds of the sale would be allowed;

10 or

11 ‘‘(C) or any reason approved by the Ad12 ministrator.

13 ‘‘(2) LIMITATION.—The debtor may not, with14 out the approval of the Administrator, cure the de15 fault under paragraph (1)(B) if, within the preced16 ing 12 months, the debtor has cured a default after

17 being served with a notice of foreclosure sale pursu18 ant to this Act.

19 ‘‘(3) NOTICE OF CANCELLATION.—The fore20 closure trustee shall file a notice of the cancellation

21 in the same place and manner provided for the filing

22 of the notice of foreclosure sale under paragraph (2).

23 ‘‘(e) STAY.—If, prior to the time of sale, foreclosure

24 proceedings under this section are stayed in any manner,

25 including the filing of bankruptcy, no person may there-
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1 after cure the default under the provisions of subsection

2 (d)(1)(B) without the approval of the Administrator. If

3 the default is not cured at the time a stay is terminated,

4 the foreclosure trustee shall proceed to sell the security

5 property as provided in this section.

6 ‘‘(f) CONDUCT OF SALE.—

7 ‘‘(1) SALE PROCEDURES.—Any foreclosure sale

8 conducted pursuant to this section shall be at a pub9 lic auction between the hours of 9:00 a.m. and 4:00

10 p.m. The foreclosure sale shall be held at the loca11 tion specified in the notice of foreclosure sale, which

12 shall be a location where real estate foreclosure auc13 tions are customarily held in the county or one of

14 the counties in which the property to be sold is lo15 cated or at a courthouse therein, or upon the prop16 erty to be sold. Sale of security property situated in

17 two or more counties may be held in any one of the

18 counties in which any part of the security property

19 is situated. The foreclosure trustee may designate

20 the order in which multiple tracts of security prop21 erty are sold.

22 ‘‘(2) BIDDING REQUIREMENTS.—Written one23 price sealed bids may be accepted by the foreclosure

24 trustee, if submitted by the Administrator or other

25 persons for entry by announcement by the fore-
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1 closure trustee at the sale. The sealed bids shall be

2 submitted in accordance with the terms set forth in

3 the notice of foreclosure sale. The Administrator or

4 any other person may bid at the foreclosure sale,

5 even if the Administrator or other person previously

6 submitted a written one-price bid. The Adminis7 trator may bid a credit against the debt due without

8 the tender or payment of cash. The foreclosure

9 trustee may serve as auctioneer, or may employ an

10 auctioneer who may be paid from the sale proceeds.

11 If an auctioneer is employed, the foreclosure trustee

12 is not required to attend the sale. The foreclosure

13 trustee or an auctioneer may bid as directed by the

14 Administrator.

15 ‘‘(3) POSTPONEMENT OF SALE.—The fore16 closure trustee shall have discretion, prior to or at

17 the time of sale, to postpone the foreclosure sale.

18 The foreclosure trustee may postpone a sale to a

19 later hour the same day by announcing or posting

20 the new time and place of the foreclosure sale at the

21 time and place originally scheduled for the fore22 closure sale. The foreclosure trustee may instead

23 postpone the foreclosure sale for not fewer than 9

24 nor more than 31 days, by serving notice that the

25 foreclosure sale has been postponed to a specified
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1 date, and the notice may include any revisions the

2 foreclosure trustee deems appropriate. The notice

3 shall be served by publication, mailing, and, if ap4 propriate, posting in accordance with subsection (c),

5 except that publication may be made on any of three

6 separate days prior to the new date of the fore7 closure sale, and mailing may be made at any time

8 at least 7 days prior to the new date of the fore9 closure sale.

10 ‘‘(4) LIABILITY OF SUCCESSFUL BIDDER WHO

11 FAILS TO COMPLY.—The foreclosure trustee may re12 quire a bidder to make a cash deposit before the bid

13 is accepted. The amount or percentage of the cash

14 deposit shall be stated by the foreclosure trustee in

15 the notice of foreclosure sale. A successful bidder at

16 the foreclosure sale who fails to comply with the

17 terms of the sale shall forfeit the cash deposit or, at

18 the election of the foreclosure trustee, shall be liable

19 to the agency on a subsequent sale of the property

20 for all net losses incurred by the agency as a result

21 of such failure.

22 ‘‘(5) EFFECT OF SALE.—Any foreclosure sale

23 held in accordance with this Act shall be conclusively

24 presumed to have been conducted in a legal, fair,

25 and commercially reasonable manner. The sale price
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1 shall be conclusively presumed to constitute the rea2 sonably equivalent value of the security property.

3 ‘‘(g) TRANSFER OF TITLE AND POSSESSION.—

4 ‘(1) DEED.—After receipt of the purchase price in

5 accordance with the terms of the sale as provided in

6 the notice of foreclosure sale, the foreclosure trustee

7 shall execute and deliver to the purchaser a deed

8 conveying the security property to the purchaser

9 that grants and conveys title to the security property

10 without warranty or covenants to the purchaser. The

11 execution of the foreclosure trustee’s deed shall have

12 the effect of conveying all of the right, title, and in13 terest in the security property covered by the mort14 gage. Notwithstanding any other law provision of

15 law, the foreclosure trustee’s deed shall constitute a

16 conveyance of the security property.

17 ‘‘(2) DEATH OF PURCHASER PRIOR TO CON18 SUMMATION OF SALE.—If a purchaser dies before

19 execution and delivery of the deed conveying the se20 curity property to the purchaser, the foreclosure

21 trustee shall execute and deliver the deed to the rep22 resentative of the purchaser’s estate upon payment

23 of the purchase price in accordance with the terms

24 of sale. Such delivery to the representative of the
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•HR 3719 IH

1 purchaser’s estate shall have the same effect as if

2 accomplished during the lifetime of the purchaser.

3 ‘‘(3) PURCHASER CONSIDERED BONA FIDE PUR4 CHASER WITHOUT NOTICE.—The purchaser of prop5 erty under this Act shall be presumed to be a bona

6 fide purchaser without notice of defects, if any, in

7 the title conveyed to the purchaser.

8 ‘‘(4) POSSESSION BY PURCHASER; CONTINUING

9 INTERESTS.—A purchaser at a foreclosure sale con10 ducted pursuant to this Act shall be entitled to pos11 session upon passage of title to the security prop12 erty, subject to any interest or interests senior to

13 that of the mortgage. The right to possession of any

14 person without an interest senior to the mortgage

15 who is in possession of the property shall terminate

16 immediately upon the passage of title to the security

17 property, and the person shall vacate the security

18 property immediately. The purchaser shall be enti19 tled to take any steps available under Federal law or

20 State law to obtain possession.

21 ‘‘(5) RIGHT OF REDEMPTION; RIGHT OF POS22 SESSION.—This Act shall preempt all Federal and

23 State rights of redemption or possession under stat24 utory or common law. Upon conclusion of the public
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•HR 3719 IH

1 auction of the security property, no person shall

2 have a right of redemption.

3 ‘‘(6) PROHIBITION OF IMPOSITION OF TAX ON

4 CONVEYANCE BY THE AGENCY.—No tax, or fee in

5 the nature of a tax, for the transfer of title to the

6 security property by the foreclosure trustee’s deed

7 shall be imposed upon or collected from the fore8 closure trustee or the purchaser by any State or po9 litical subdivision thereof.

10 ‘‘(h) RECORD OF FORECLOSURE AND SALE.—

11 ‘‘(1) RECITAL REQUIREMENTS.—The fore12 closure trustee shall recite in the deed to the pur13 chaser, or in an addendum to the foreclosure trust14 ee’s deed, or shall prepare an affidavit stating—

15 ‘‘(A) the date, time, and place of sale;

16 ‘‘(B) the date of the mortgage, the office

17 in which the mortgage is filed, and the location

18 of the filing of the mortgage;

19 ‘‘(C) the persons served with the notice of

20 foreclosure sale;

21 ‘‘(D) the date and place of filing of the no22 tice of foreclosure sale under subsection (c)

23 ‘‘(E) that the foreclosure was conducted in

24 accordance with the provisions of this Act; and

25 ‘‘(F) the sale amount.
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1 ‘‘(2) EFFECT OF RECITALS.—The recitals set

2 forth in paragraph (1) shall be prima facie evidence

3 of the truth of such recitals. Compliance with the re4 quirements of paragraph (1) shall create a conclu5 sive presumption of the validity of the sale in favor

6 of bona fide purchasers and encumbrancers for value

7 without notice.

8 ‘‘(3) DEED TO BE ACCEPTED FOR FILING.—

9 The register of deeds or other appropriate official of

10 the county or counties where real estate deeds are

11 regularly filed shall accept for filing and shall file

12 the foreclosure trustee’s deed and affidavit, if any,

13 and any other instruments submitted for filing in re14 lation to the foreclosure of the security property

15 under this Act.

16 ‘‘(h) EFFECT OF SALE.—A sale conducted under this

17 Act to a bona fide purchaser shall bar all claims upon the

18 security property by—

19 ‘‘(1) any person to whom the notice of fore20 closure sale was mailed as provided in this Act who

21 claims an interest in the property subordinate to

22 that of the mortgage, and the heir, devisee, executor,

23 administrator, successor, or assignee claiming under

24 any such person;
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•HR 3719 IH

1 ‘‘(2) any person claiming any interest in the

2 property subordinate to that of the mortgage, if such

3 person had actual knowledge of the sale;

4 ‘‘(3) any person so claiming, whose assignment,

5 mortgage, or other conveyance was not filed in the

6 proper place for filing, or whose judgment or decree

7 was not filed in the proper place for filing, prior to

8 the date of filing of the notice of foreclosure sale as

9 required by subsection (c), and the heir, devisee, ex10 ecutor, administrator, successor, or assignee of such

11 a person; or

12 ‘‘(4) any other person claiming under a statu13 tory lien or encumbrance not required to be filed

14 and attaching to the title or interest of any person

15 designated in any of the foregoing subsections of

16 this section.

17 ‘‘(i) DISPOSITION OF SALE PROCEEDS.—

18 ‘‘(1) DISTRIBUTION OF SALE PROCEEDS.—The

19 foreclosure trustee shall distribute the proceeds of

20 the foreclosure sale in the following order:

21 ‘‘(A)(i) First, to pay the commission of the

22 foreclosure trustee, other than an agency em23 ployee, in an amount not to exceed 5 percent of

24 the sum collected, plus the foreclosure trustee’s

25 costs.
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1 ‘‘(ii) The amounts described in clause (i)

2 shall be computed on the gross proceeds of all

3 security property sold at a single sale.

4 ‘‘(B) Thereafter, to pay the expense of any

5 auctioneer employed by the foreclosure trustee,

6 if any, except that the commission payable to

7 the foreclosure trustee pursuant to subpara8 graph (A) shall be reduced by the amount paid

9 to an auctioneer, unless the Administrator de10 termines that such reduction would adversely

11 affect the ability of the Administrator to retain

12 qualified foreclosure trustees or auctioneers.

13 ‘‘(C) Thereafter, to pay for the costs of

14 foreclosure, including—

15 ‘‘(i) reasonable and necessary adver16 tising costs and postage incurred in giving

17 notice pursuant to subsection (c);

18 ‘‘(ii) mileage for posting notices and

19 for the foreclosure trustee’s or auctioneer’s

20 attendance at the sale at the rate provided

21 in section 1921 of title 28, United States

22 Code, for mileage by the most reasonable

23 road distance;
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•HR 3719 IH

1 ‘‘(iii) reasonable and necessary costs

2 actually incurred in connection with any

3 search of title and lien records; and

4 ‘‘(iv) necessary costs incurred by the

5 foreclosure trustee to file documents.

6 ‘‘(D) Thereafter, to pay valid real property

7 tax liens or assessments, if required by the no8 tice of foreclosure sale.

9 ‘‘(E) Thereafter, to pay any liens senior to

10 the mortgage, if required by the notice of fore11 closure sale.

12 ‘‘(F) Thereafter, to pay service charges

13 and advancements for taxes, assessments, and

14 property insurance premiums.

15 ‘‘(G) Thereafter, to pay late charges and

16 other administrative costs and the principal and

17 interest balances secured by the mortgagee in18 cluding expenditures for the necessary protec19 tions preservation, and repair of the security

20 property as authorized under the debt instru21 ment or mortgage and interest thereon if pro22 vided for in the debt instrument or mortgage,

23 pursuant to the agency’s procedures.

24 ‘‘(2) INSUFFICIENT PROCEEDS.—In the event

25 there are no proceeds of sale or the proceeds are in-
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1 sufficient to pay the costs and expenses set forth in

2 paragraph (1), the Administrator shall pay such

3 costs and expenses as authorized by applicable law.

4 ‘‘(3) SURPLUS MONEYS.—

5 ‘‘(A) After making the payments required

6 by paragraph (1), the foreclosure trustee

7 shall—

8 ‘‘(i) distribute any surplus to pay liens

9 in the order of priority under Federal law

10 or the law of the State where the security

11 property is located; and

12 ‘‘(ii) pay to the person who was the

13 owner of record on the date the notice of

14 foreclosure sale was filed the balance, if

15 any, after any payments made pursuant to

16 paragraph (1).

17 ‘‘(B) If the person to whom such surplus

18 is to be paid cannot be located, or if the surplus

19 available is insufficient to pay all claimants and

20 the claimants cannot agree on the distribution

21 of the surplus, that portion of the sale proceeds

22 may be deposited by the foreclosure trustee

23 with an appropriate official authorized under

24 law to receive funds under such circumstances.

25 If such a procedure for the deposit of disputed
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1 funds is not available, and the foreclosure trust2 ee files a bill of interpleader or is sued as a

3 stakeholder to determine entitlement to such

4 funds, the foreclosure trustee’s necessary costs

5 in taking or defending such action shall be de6 ducted first from the disputed funds.

7 ‘‘(j) DEFICIENCY JUDGMENT.—

8 ‘‘(1) IN GENERAL.—If after deducting the dis9 bursements described in section 13, the price at

10 which the security property is sold at a foreclosure

11 sale is insufficient to pay the unpaid balance of the

12 debt secured by the security property, counsel for

13 the agency may commence an action or actions

14 against any or all debtors to recover the deficiency,

15 unless specifically prohibited by the mortgage. The

16 agency is also entitled to recover any amount au17 thorized by section 11 and costs of the action.

18 ‘‘(2) LIMITATION.—Any action commenced to

19 recover the deficiency shall be brought within 6

20 years of the last sale of security property.

21 ‘‘(3) CREDITS.—The amount payable by a pri22 vate mortgage guaranty insurer shall be credited to

23 the account of the debtor prior to the commence24 ment of an action for any deficiency owed by the

25 debtor. Nothing in this subsection shall curtail or
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1 limit the subrogation rights of a private mortgage

2 guaranty insurer.’’.

3 SEC. 109. MISCELLANEOUS AUTHORITIES TO PROVIDE

4 LOANS AND OTHER FINANCIAL ASSISTANCE.

5 (a) FUNDING LIMITATION; SEMINARS.—Section 7(d)

6 (15 U.S.C. 636(d)) is repealed.

7 (b) TRADE ADJUSTMENT LOANS.—Section 7(e) (15

8 U.S.C. 636(e)) is repealed.

9 (c) WAIVER OF CREDIT ELSEWHERE TEST FOR COL10 LEGES AND UNIVERSITIES.—Section 7(f) (15 U.S.C.

11 636(f)) is repealed.

12 (d) LOANS TO HANDICAPPED PERSONS AND ORGANI13 ZATIONS FOR THE HANDICAPPED.—Section 7(h) (15

14 U.S.C. 636(h)) is repealed.

15 (e) LOANS TO SMALL BUSINESS CONCERNS LO16 CATED IN URBAN OR RURAL AREAS WITH HIGH PROPOR17 TIONS OF UNEMPLOYED OR LOW-INCOME INDIVID18 UALS.—Section 7(i) (15 U.S.C. 636(i)) is repealed.

19 (f) LOANS TO SMALL BUSINESS CONCERNS FOR

20 SOLAR ENERGY AND ENERGY CONSERVATION MEAS21 URES.—Section 7(l) (15 U.S.C. 636(l)) is repealed.

22 SEC. 110. SMALL BUSINESS COMPETITIVENESS DEM23 ONSTRATION PROGRAM.

24 (a) EXTENSION OF DEMONSTRATION PROGRAM.—

25 Section 711(c) of the Small Business Competitiveness
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•HR 3719 IH

1 Demonstration Program Act of 1988 (15 U.S.C. 644 note;

2 102 Stat. 3890) is amended by striking ‘‘September 30,

3 1996’’ and inserting ‘‘September 30, 2000’’.

4 (b) REPORTING OF SUBCONTRACT PARTICIPATION IN

5 CONTRACTS FOR ARCHITECTURAL AND ENGINEERING

6 SERVICES.—Section 714(b)(5) of the Small Business

7 Competitiveness Demonstration Program Act of 1988 (15

8 U.S.C. 644 note; 102 Stat. 3892) is amended to read as

9 follows:

10 ‘‘(5) DURATION.—The system described in sub11 section (a) shall be established not later than Octo12 ber 1, 1996 (or as soon as practicable thereafter on

13 the first day of a subsequent quarter of fiscal year

14 1997), and shall terminate on September 30,

15 2000.’’.

16 (c) REFERENCES TO ARCHITECTURAL AND ENGI17 NEERING SERVICES.—

18 (1) IN GENERAL.—The Small Business Com19 petitiveness Demonstration Program Act of 1988

20 (15 U.S.C. 644 note; 102 Stat. 3889 et seq.) is

21 amended by striking ‘‘architectural and engineering

22 services (including surveying and mapping)’’ each

23 place it appears and inserting ‘‘architectural and en24 gineering services (including surveying, mapping,

25 and landscape architecture)’’.
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1 (2) DESIGNATED INDUSTRY GROUPS.—Section

2 717(d) of the Small Business Competitiveness Dem3 onstration Program Act of 1988 (15 U.S.C. 644

4 note; 102 Stat. 3894) is amended by inserting

5 ‘‘standard industrial classification codes 0731 and

6 0739 (if identified as pertaining to mapping serv7 ices),’’ after ‘‘(if identified as pertaining to mapping

8 services),’’.

9 (d) SMALL BUSINESS PARTICIPATION GOALS.—

10 (1) ENHANCED GOALS FOR DESIGNATED IN11 DUSTRY GROUPS.—Section 712(a) of the Small

12 Business Competitiveness Demonstration Program

13 Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3890)

14 is amended to read as follows:

15 ‘‘(a) ENHANCED GOALS FOR DESIGNATED INDUSTRY

16 GROUPS.—Each participating agency shall establish an

17 annual small business participation goal (calculated on the

18 basis of the total dollar value of contract awards) that is—

19 ‘‘(1) 35 percent in the case of the designated

20 industry group for architectural and engineering

21 services (including surveying, mapping, and land22 scape architecture); or

23 ‘‘(2) 40 percent in the case of each of the other

24 designated industry groups.’’.

25 (2) EMERGING SMALL BUSINESS CONCERNS.—
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1 (A) REPEAL OF RESERVE.—Section 712(b)

2 of the Small Business Competitiveness Dem3 onstration Program Act of 1988 (15 U.S.C.

4 644 note; 102 Stat. 3890–3891) is amended to

5 read as follows:

6 ‘‘(b) øReserved¿.’’.

7 (B) CONFORMING AMENDMENT.—Section

8 713(b) of the Small Business Competitiveness Dem9 onstration Program Act of 1988 (15 U.S.C. 644

10 note; 102 Stat. 3892) is amended by striking ‘‘,

11 which are in excess of the reserve thresholds speci12 fied pursuant to section 712(b)’’.

13 (3) MODIFICATIONS TO SOLICITATION PRACTICES.—

14 Section 712(d)(3) of the Small Business Competitiveness

15 Demonstration Program Act of 1988 (15 U.S.C. 644 note;

16 102 Stat. 3891) is amended by striking ‘‘40 percent of

17 the contract awards’’ and inserting ‘‘the percentage appli18 cable to the designated industry group pursuant to sub19 section (a)’’.

20 (e) PARTICIPATING AGENCY.—Section 718(c) of the

21 Small Business Competitiveness Demonstration Program

22 Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3894) is

23 amended—

24 (1) by striking ‘‘as part of the Program test

25 plan’’;
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1 (2) by redesignating paragraphs (2) through

2 (10) as paragraphs (3) through (11), respectively;

3 and

4 (3) by inserting after paragraph (1) the follow5 ing:

6 ‘‘(2) the Department of Commerce,’’.

7 (f) REPORTS TO CONGRESS.—

8 (1) IN GENERAL.—Section 716 of the Small

9 Business Competitiveness Demonstration Program

10 Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3893)

11 is amended—

12 (A) in subsection (a), by striking ‘‘fiscal

13 year 1991 and 1995’’ and inserting ‘‘each of

14 fiscal year beginning with fiscal year 1991 and

15 ending with fiscal year 1999’’;

16 (B) in subsection (a), by striking ‘‘results’’

17 and inserting ‘‘cumulative results’’; and

18 (C) in subsection (c), by striking ‘‘1996’’

19 and inserting ‘‘1999’’.

20 (2) CUMULATIVE REPORT THROUGH FISCAL

21 YEAR 1995.—A cumulative report of the results of

22 the Small Business Competitiveness Demonstration

23 Program for fiscal years 1991 through 1995 shall be

24 submitted not later than 60 days after the date of

25 the enactment of this Act pursuant to section 716(a)
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1 of the Small Business Competitiveness Demonstra2 tion Program Act of 1988 (15 U.S.C. 644 note; 102

3 Stat. 3893), as amended by paragraph (1) of this

4 subsection.

5 SEC. 111. AMENDMENT TO SMALL BUSINESS GUARANTEED

6 CREDIT ENHANCEMENT ACT OF 1993.

7 Section 7 of the Small Business Guaranteed Credit

8 Enhancement Act of 1993 (Public Law 103–81; 15 U.S.C.

9 634 note) is repealed effective September 29, 1996.

10 TITLE II—AMENDMENTS TO

11 SMALL BUSINESS INVEST12 MENT ACT

13 SEC. 201. REFERENCES.

14 Except as otherwise expressly provided, whenever in

15 this title an amendment or repeal is expressed in terms

16 of an amendment to, or repeal of, a section or other provi17 sion, the reference shall be considered to be made to a

18 section or other provision of the Small Business Invest19 ment Act of 1958 (15 U.S.C. 661 et seq.).

20 SEC. 202. MODIFICATIONS TO DEVELOPMENT COMPANY

21 DEBENTURE PROGRAM.

22 (a) INCREASED LOAN TO VALUE RATIOS.—Section

23 502(3) (15 U.S.C. 696(3)) is amended to read as follows:

24 ‘‘(3) CRITERIA FOR ASSISTANCE.—
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1 ‘‘(A) IN GENERAL.—Any development com2 pany assisted under this section must meet the

3 criteria established by the Administration, in4 cluding the extent of participation to be re5 quired or amount of paid-in capital to be used

6 in each instance as is determined to be reason7 able by the Administration.

8 ‘‘(B) COMMUNITY INJECTION FUNDS.—

9 ‘‘(i) SOURCES OF FUNDS.—Commu10 nity injection funds may be derived, in

11 whole or in part, from—

12 ‘‘(I) State or local governments;

13 ‘‘(II) banks or other financial in14 stitutions;

15 ‘‘(III) foundations or other not16 for-profit institutions; or

17 ‘‘(IV) the small business concern

18 (or its owners, stockholders, or affili19 ates) receiving assistance through a

20 body authorized by this title.

21 ‘‘(ii) FUNDING FROM INSTITU22 TIONS.—Not less than 50 percent of the

23 total cost of the project to be financed

24 shall come from the institutions described
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1 in subclauses (I), (II), and (III) of clause

2 (i).

3 ‘‘(C) FUNDING FROM A SMALL BUSINESS

4 CONCERN.—The small business concern (or its

5 owners, stockholders, or affiliates) receiving as6 sistance through a body authorized by this title

7 shall provide—

8 ‘‘(i) at least 15 percent of the total

9 cost of the project financed, if the small

10 business concern has been in operation for

11 a period of 2 years or less;

12 ‘‘(ii) at least 15 percent of the total

13 cost of the project financed if the project

14 involves the construction of a limited or

15 single purpose building or structure;

16 ‘‘(iii) at least 20 percent of the total

17 cost of the project financed if the project

18 involves both of the conditions set forth in

19 clauses (i) and (ii); or

20 ‘‘(iv) at least 10 percent of the total

21 cost of the project financed, in all other

22 circumstances, at the discretion of the de23 velopment company.’’.

24 (b) GUARANTEE FEE FOR DEVELOPMENT COMPANY

25 DEBENTURES.—Section 503(b)(7)(A) (15 U.S.C.
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1 697(b)(7)(A)) is amended by striking ‘‘0.125 percent’’ and

2 inserting ‘‘0.625 percent’’.

3 (c) FEES TO OFFSET SUBSIDY COST.—Section

4 503(d) (15 U.S.C. 697(d)) is amended to read as follows:

5 ‘‘(d) CHARGES FOR ADMINISTRATION EXPENSES.—

6 ‘‘(1) LEVEL OF CHARGES.—The Administration

7 shall continue to impose charges for administrative

8 expenses with respect to each debenture for which

9 payment of principal and interest is guaranteed

10 under subsection (a) at the level in effect on the

11 date of the enactment of this paragraph. To the ex12 tent that such charges exceed the administrative

13 costs of the program as provided by non-govern14 mental employees, such excess proceeds shall be used

15 to offset the cost (as such term is defined in section

16 502 of the Credit Reform Act of 1990) to the Ad17 ministration of making guarantees under subsection

18 (a).

19 ‘‘(2) PARTICIPATION FEE.—The Administration

20 shall also impose a one-time fee of 50 basis points

21 on the total participation in any project of any insti22 tution described in subclause (I), (II), or (III) of

23 section 502(3)(B)(i). Such fee shall be imposed only

24 when the participation of the institution will occupy

25 a senior credit position to that of the development
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1 company. Such fee shall be collected by the develop2 ment company, forwarded to the Administration,

3 and used to offset the cost (as such term is defined

4 in section 502 of the Credit Reform Act of 1990) to

5 the Administration of making guarantees under sub6 section (a).

7 ‘‘(3) DEVELOPMENT COMPANY FEE.—The Ad8 ministration shall collect annually from each devel9 opment company a fee of .0125 percent of the out10 standing principal balance of any debenture guaran11 teed by the Administration. Such fee shall be derived

12 from the servicing fees collected by the development

13 company pursuant to regulation, and shall not be

14 derived from any additional fees imposed on small

15 business concerns. All proceeds of the fee shall be

16 used to offset the cost (as such term is defined in

17 section 502 of the Credit Reform Act of 1990) to

18 the Administration of making guarantees under sub19 section (a).’’.

20 (d) FEES COLLECTED BY AGENTS FOR CENTRAL

21 REGISTRATION OF TRUST CERTIFICATES.—Section

22 505(d) (15 U.S.C. 697b(d)) is amended by adding at the

23 end the following: ‘‘The excess of any fees collected for

24 the functions described in subsection (f)(2) shall be used

25 to offset the cost (as such term is defined in section 502
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1 of the Credit Reform Act of 1990) to the Administration

2 of making guarantees under subsection (a).’’.

3 SEC. 203. REQUIRED ACTIONS UPON DEFAULT.

4 Section 503 (15 U.S.C. 697) is amended by adding

5 at the end the following:

6 ‘‘(f) REQUIRED ACTIONS UPON DEFAULT.—

7 ‘‘(1) DEADLINES.—

8 ‘‘(A) INITIAL ACTIONS.—Not later than

9 the 45th day after the date on which a payment

10 on a loan funded through a debenture guaran11 teed under this section is due and not received,

12 the Administration shall—

13 ‘‘(i) take all necessary steps to bring

14 such a loan current; or

15 ‘‘(ii) implement a formal written de16 ferral agreement.

17 ‘‘(B) PURCHASE OR ACCELERATION OF DE18 BENTURE.—Not later than the 65th day after

19 the date on which a payment on a loan de20 scribed in subparagraph (A) is due and not re21 ceived, and absent a formal written deferral

22 agreement, the Administration shall take all

23 necessary steps to purchase or accelerate the

24 debenture.
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1 ‘‘(2) PREPAYMENT PENALTIES.—The Adminis2 tration shall—

3 ‘‘(A) negotiate the elimination of any pre4 payment penalties on defaulted loans made

5 prior to September 30, 1996;

6 ‘‘(B) decline to pay any prepayment pen7 alty on the default based purchase of loans is8 sued after September 30, 1996; and

9 ‘‘(C) for any project financed after Sep10 tember 30, 1996, decline to pay any default in11 terest rate on the portion of any project funded

12 through community injection funds described in

13 section 502(3).’’

14 SEC. 204. LOAN LIQUIDATION PILOT PROGRAM.

15 (a) IN GENERAL.—The Administrator shall carry out

16 a loan liquidation pilot program (in this section referred

17 to as the ‘pilot program’) in accordance with the require18 ments of this section.

19 (b) SELECTION OF DEVELOPMENT COMPANIES.—

20 Not later than 60 days after the date of the enactment

21 of this Act, the Administrator shall—

22 (1) select no more than 35 and no less than 15

23 development companies authorized to make loans

24 and issue debentures under title V of the Small

25 Business Investment Act of 1958 to participate in
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1 the pilot program. The development companies se2 lected shall—

3 (A) have a minimum of 6 years experience

4 in the program established by such title V;

5 (B) have made an average of 10 loans per

6 year through the program established by such

7 title V; and

8 (C) have shown at least 2 years experience

9 in liquidating loans under the authority of some

10 other Federal, State, or local lending program.

11 (c) AUTHORITY OF DEVELOPMENT COMPANIES.—

12 The development companies selected under subsection (b)

13 shall, for all loans in their portfolio of loans made through

14 debentures guaranteed under title V of the Small Business

15 Investment Act of 1958 that are in default after the date

16 of enactment of this Act, be authorized to—

17 (1) perform all liquidation and foreclosure func18 tions, including the acceleration or purchase of com19 munity injection funds; and

20 (2) liquidate such loans in a reasonable and

21 sound manner and according to commercially accept22 ed practices.

23 (d) AUTHORITY OF THE ADMINISTRATOR.—In carry24 ing out the pilot program, the Administrator shall—
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1 (1) have full authority to rescind the authority

2 granted any development company under this section

3 upon a showing of good cause;

4 (2) consider the inclusion of additional develop5 ment companies in the pilot program (subject to the

6 criteria of subsection (b)(1)) in the event an insuffi7 cient number of liquidations occur to enable a valid

8 sample of the effectiveness of the pilot program; and

9 (3) implement the pilot program no later than

10 90 days after the selection of the development com11 panies specified in subsection (b).

12 (e) REPORT.—

13 (1) IN GENERAL.—The Administrator shall

14 issue a report on the results of the pilot program to

15 the Committees on Small Business of the House of

16 Representatives and the Senate. The report shall in17 clude information relating to—

18 (A) the total dollar amount of each loan

19 and project liquidated;

20 (B) the total dollar amount guaranteed by

21 the Administration;

22 (C) total dollar losses;

23 (D) total recoveries both as percentage of

24 the amount guaranteed and the total cost of the

25 project; and
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1 (E) a comparison of the pilot program in2 formation with the same information for liq3 uidation conducted outside the pilot program

4 over the period of time.

5 (2) REPORTING PERIOD.—The report shall be

6 based on data from, and issued not later than 90

7 days after the close of, the first eight 8 fiscal quar8 ters of the pilot program’s operation after the date

9 of implementation.’’.

10 SEC. 205. REGISTRATION OF CERTIFICATES.

11 (a) CERTIFICATES SOLD PURSUANT TO SMALL BUSI12 NESS ACT.—Section 5(h) of the Small Business Act (15

13 U.S.C. 634(h)) is amended—

14 (1) by redesignating paragraphs (1) through

15 (4) as subparagraphs (A) through (D);

16 (2) by striking ‘‘(h)’’ and inserting ‘‘(h)(1)’’;

17 (3) by striking subparagraph (A), as redesig18 nated by paragraph (1) of this subsection, and in19 serting the following:

20 ‘‘(A) provide for a central registration of all

21 loans and trust certificates sold pursuant to sub22 sections (f) and (g) of this section;’’; and

23 (4) by adding at the end the following:

24 ‘‘(2) Nothing in this subsection shall prohibit the uti25 lization of a book entry or other electronic form of reg-
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1 istration for trust certificates. The Administration may,

2 with the consent of the Secretary of the Treasury, use the

3 book-entry system of the Federal Reserve System.’’.

4 (b) CERTIFICATES SOLD PURSUANT TO SMALL BUSI5 NESS INVESTMENT COMPANY PROGRAM.—Section 321(f)

6 (15 U.S.C. 6871(f)) is amended—

7 (1) in paragraph (1) by striking ‘‘Such central

8 registration shall include’’ and all that follows

9 through the period at the end of the paragraph; and

10 (2) by adding at the end the following:

11 ‘‘(5) Nothing in this subsection shall prohibit the use

12 of a book-entry or other electronic form of registration for

13 trust certificates.’’.

14 (c) CERTIFICATES SOLD PURSUANT TO DEVELOP15 MENT COMPANY PROGRAM.—Section 505(f) of the Small

16 Business Investment Act of 1958 (15 U.S.C. 697b(f)) is

17 amended—

18 (1) by redesignating paragraphs (1) through

19 (4) as subparagraphs (A) through (D);

20 (2) by striking ‘‘(f)’’ and inserting ‘‘(f)(1)’’;

21 (3) by striking subparagraph (A), as redesig22 nated by paragraph (1) of this subsection, and in23 serting the following:

24 ‘‘(A) provide for a central registration of all

25 trust certificates sold pursuant to this section;’’ and
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1 (4) by adding at the end the following:

2 ‘‘(2) Nothing in this subsection shall prohibit the uti3 lization of a book entry or other electronic form of reg4 istration for trust certificates.’’.

Æ