Source: https://www.federalregister.gov/documents/2009/10/30/E9-26211/the-american-recovery-and-reinvestment-act-of-2009-secondary-market-first-lien-position-504-loan
Timestamp: 2016-10-24 14:15:07
Document Index: 169869900

Matched Legal Cases: ['art1', 'art2', '§\u2009120', '§\u2009121', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120', '§\u2009120']

:: The American Recovery and Reinvestment Act of 2009: Secondary Market First Lien Position 504 Loan Pool Guarantee
A Rule by the Small Business Administration on 10/30/2009
56087-56098
Subpart J—Establishment of SBA Secondary Market Guarantee Program for First Lien Position 504 Loan Pools Enhanced Content - Table of Contents Enhanced Content - Submit Public Comment
https://www.federalregister.gov/d/E9-26211
Over the years, the development of secondary markets for 504 loans facilitated the capacity of CDCs to originate such loans and small businesses to apply for them. By selling loans to investors via the secondary markets, among other benefits, lenders can receive additional funds, or liquidity, which can enable them to make more loans. Sellers, broker-dealers, and other secondary market participants make profits from the premiums that investors pay for the securities, through various fees, and through servicing the loans over time. There is a secondary market for CDC Debentures and another secondary market for the First Lien Position 504 Loans. Due to the disruption in the credit markets, there has been a significant decline in secondary market activity relating to First Lien Position 504 Loans. Section 503 of the Recovery Act provides authority to SBA to assist the secondary market for the First Lien Position 504 Loans by allowing the SBA Administrator to establish a secondary market guarantee for pools of First Lien Position 504 Loans to sell to third-party investors. The authority terminates on February 16, 2011, which is two years after enactment. First Lien Position 504 Loans are eligible to be part of a pooling if, among other things, the debenture funding the associated loan by a CDC was sold on or after February 17, 2009.Start Printed Page 56088
First Lien Position 504 Loan Pool Guarantee Agreement. The agreement, in the form approved by SBA, wherein entities agree to participate in the forming of a Pool under the Program, available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html.
Guide. The SBA First Lien Position 504 Loan Pooling Program Guide published by SBA which provides information applicable to the Program including, among other things, requirements relating to the formation of a Pool, available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html.
Program Rules and Regulations. This subpart J, as may be amended from time to time by SBA, the Program Regulations, available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html, the First Lien Position 504 Loan Pool Guarantee Agreement, available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html, any other Program agreements signed by a Program Participant, if applicable, the Guide, available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html, the Recovery Act available at Recovery.gov, and the provisions of subpart H governing Third Party Loans and Third Party Lenders available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html.
Seller. An entity that has sold a Pool Loan to a Pool Originator to be Pooled.Start Printed Page 56089
Section 120.1703 establishes the qualifications applicable to becoming a Pool Originator under the Program. An entity applying to become a Pool Originator must send an application to SBA certifying that it is an approved Pool Assembler pursuant to subpart F of this Title or it: (1) Is regulated by the appropriate agency as defined in section 3(a)(34)(G) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(34)(G)); (2) meets all financial and other applicable requirements of its regulatory authority and the Government Securities Act of 1986, as amended (Pub. L. 99-571, 100 Stat. 3208); (3) has the financial capability to originate acceptable pools consisting of eligible Pool Loans in sufficient quantity to support the issuance of Pool Certificates; and (4) is in good standing with the SBA (as the SBA determines), Office of the Comptroller of the Currency (OCC) if it is a national bank, the Federal Deposit Insurance Corporation if it is a bank not regulated by the OCC, the Financial Institutions Regulatory Authority, if it is a member, the National Credit Union Administration if it is a credit union, and (5) for any Pool Originator that is an SBA Lender, that the SBA Lender has satisfactory SBA performance, as determined by SBA in its sole discretion.
A Pool Originator must identify and submit to SBA for review Pool Loans to Start Printed Page 56090businesses with NAICS code 713940 covering Fitness and Recreational Sports Centers, as this category includes both swimming pools, which are not eligible for assistance under the Recovery Act, and other types of fitness and recreational centers which may be eligible for Recovery Act assistance. Section 1604 of the Recovery Act states that none of the funds appropriated or otherwise made available in the Act may be used by any State or local government, or any private entity, for any casino or other gambling establishment, aquarium, zoo, golf course or swimming pool. SBA may not guarantee a pool that contains a Pool Loan made to a business primarily engaged in any such activities or to a business that used the loan funds to acquire, construct, renovate or for another purpose that included the restricted uses.
Section 120.1716 establishes the servicing actions by Seller which need SBA's prior approval. It states that Seller shall not, without prior written consent of SBA, take the following actions with respect to Seller's Pool Loan: (1) Make or consent to any substantial alteration in the terms (“substantial” includes, but is not Start Printed Page 56091limited to, any changes to the principal amount or interest rate); (2) accelerate the maturity; (3) sue; or (4) waive or release any claim. Guidance on other servicing actions, some of which may need prior SBA approval, is provided in the Guide.
Although this rule is being published as an interim final rule, comments are Start Printed Page 56092solicited from interested members of the public. These comments must be submitted on or before 90 days from the date of publication. The SBA will consider these comments and the need for making any amendments as a result of these comments.
Total Estimated Hourly Cost to Respondents: The cost to the government is estimated to be approximately $17,812.00 annually. Each request for guaranty is estimated to require .5 hours of a contractor's time at $50 per hour, times 475 pool applications or $17,812.00. SBA would Start Printed Page 56093not be involved in the pool creation process and any review of the documents would have be done simultaneously with the review of First Lien Position 504 Loan Pool Guarantee Agreement and would not incur any expanses other than the cost for the contractor to perform the related duties.
Start Amendment PartFor the reasons stated in the preamble, SBA amends End Amendment Part
Start Amendment Part1. The authority forEnd Amendment Part
Start Amendment Part2. Add a new subpart J to read as follows:End Amendment Part
Subpart J—Establishment of SBA Secondary Market Guarantee Program for First Lien Position 504 Loan Pools 120.1700 Definitions used in subpart J.
120.1701 Program purpose.
120.1702 Program fee.
120.1703 Qualifications to be a Pool Originator.
120.1704 Pool Loans eligible for pooling.
120.1705 Pool formation requirements.
120.1706 Pool Originator's retained interest in Pool.
120.1707 Seller's retained Loan Interest.
120.1708 Pool Certificates.
120.1709 Transfers of Pool Certificates.
120.1710 Central servicing of the Program.
120.1711 Suspension or termination of Program participation privileges.
120.1712 Seller responsibilities with respect to Seller's Pool Loan.
120.1713 Seller's Pool Loan origination.
120.1714 Seller's Pool Loan servicing.
120.1715 Seller's Pool Loan liquidation.
120.1716 Required SBA approval of servicing actions.
120.1717 Seller's Pool Loan deferments.
120.1718 SBA's right to assume Seller's responsibilities.
120.1719 SBA's right to recover from Seller.
120.1720 SBA's right to review Pool Loan documents.
120.1721 SBA's right to investigate.
120.1722 SBA's offset rights.
120.1723 Pool Loan receivables by Seller.
120.1724 Servicing and liquidation expenses.
120.1725 No Program Preference by Seller or Pool Originator.
120.1726 Pool Certificates a Seller cannot purchase.
§ 120.1700
Affiliate. A person or entity SBA determines to be an affiliate of a Program Participant pursuant to the application of the principles and guidelines set forth in § 121.103 of this Title.
Certified Development Company or CDC. An entity that meets the definition of a Certified Development Company as defined in § 120.10 of this Part.
First Lien Position 504 Loan Pool Guarantee Agreement. The agreement, in the form approved by SBA, wherein entities agree to participate in the forming of a Pool under the Program, available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html/​.
Guide. The First Lien Position 504 Loan Pooling Program Guide published by SBA which provides information applicable to the Program including, among other things, requirements relating to the formation of a Pool, available at http://www.sba.gov/​aboutsba/​sbaprograms/​elending/​index.html/​.
Pool. The aggregate of Loan Interests formed into a single pool by the Pool Originator in accordance with the Program. The Pool is comprised of an unguaranteed portion and an SBA-Start Printed Page 56094guaranteed portion. The unguaranteed portion of the Pool backs the Pool Originator Receipt, and cannot be sold to Pool Investors. The SBA-guaranteed portion of the Pool backs the Pool Certificates sold to Pool Investors. The Seller's Loan Interest is not included in the Pool.
Pool Loan. A loan that meets the Program eligibility requirements as set forth in § 120.1704 of this subpart J and has been pooled.
Premier Certified Lenders Program. The program defined in § 120.845 of this Part.
Project. A project as defined by § 120.802 of the Part.
Seller. An entity that has sold a Pool Loan to a Pool Originator to be Pooled and any successor entity that has executed the First Lien Position 504 Loan Pool Guaranty Agreement pursuant to § 120.1707.
§ 120.1701 Program purpose.
§ 120.1702 Program fee.
(2) Meets all financial and other applicable requirements of its regulatory Start Printed Page 56095authority and the Government Securities Act of 1986, as amended (Pub. L. 99-571, 100 Stat. 3208);
§ 120.1704 Pool Loans eligible for Pooling.
(i) A Third Party Loan as defined in § 120.801(c)(3);
(iii) Secured by a first lien on the Project Property as defined in § 120.801 of this chapter;
§ 120.1705 Pool formation requirements.
(2) All cost reimbursement due and payable to the CSA prior to Pool formation owed by the Participants Start Printed Page 56096participating in the formation of the Pool.
§ 120.1706 Pool Originator's retained interest in Pool.
§ 120.1708 Pool Certificates.
§ 120.1709 Transfers of Pool Certificates.
§ 120.1710 Central servicing of the Program.
(d) CSA Monthly Report. CSA must provide SBA with a list, by Pool, of each Start Printed Page 56097Loan Interest with an underlying Pool Note that is 60 days or more in arrears on a monthly basis.
§ 120.1711 Suspension or termination of Program participation privileges.
(c) Suspension procedures. SBA may undertake suspension or enforcement actions under this section using the procedures set forth in § 120.1600(a).
§ 120.1712 Seller responsibilities with respect to Seller's Pool Loan.
§ 120.1713 Seller's Pool Loan origination.
§ 120.1714 Seller's Pool Loan servicing.
Subject to § 120.1718 of this subpart J, the Seller must service Seller's Pool Loan in a commercially reasonable manner, consistent with prudent lending standards, and in accordance with applicable Program Rules and Regulations. The Seller receives the Servicing Retention Amount for servicing the Seller's Pool Loan.
§ 120.1715 Seller's Pool Loan liquidation.
Subject to § 120.1718 of this subpart J, the Seller must liquidate and conduct debt collection litigation for Seller's Pool Loan in a prompt, cost-effective and commercially reasonable manner, consistent with prudent lending standards, in accordance with applicable Program Rules and Regulations, and with SBA approval of a liquidation plan and any litigation plan, and any amendment of either such a plan, if applicable.
§ 120.1716 Required SBA approval of servicing actions.
§ 120.1717 Seller's Pool Loan deferments.
§ 120.1718 SBA's right to assume Seller's responsibilities.
§ 120.1719 SBA's right to recover from Seller.
(d) Seller has failed to comply materially with § 120.1720 of this subpart;
§ 120.1720 SBA's right to review Pool Loan documents.
In the event that SBA purchases a Loan Interest in Seller's Pool Loan, Seller must provide to SBA copies of the Pool Loan collateral documents, Pool Loan underwriting documents, and any other documents SBA may require in writing within 15 calendar days of a written request from SBA (which SBA will review in connection with its efforts to determine if Seller is obligated to reimburse SBA pursuant to this subpart). A Seller's failure to provide the requested documentation may constitute a material failure to comply with the Program Rules and Regulations and may lead to an action for recovery under § 120.1719. SBA will also evaluate a Seller's continued Start Printed Page 56098participation in the Program and may restrict further sales under the Program until SBA determines that the Seller has provided sufficient documentation.
§ 120.1721 SBA's right to investigate.
§ 120.1722 SBA's offset rights.
§ 120.1723 Pool Loan receivables received by Seller.
§ 120.1724 Servicing and liquidation expenses.
§ 120.1725 No Program Preference by Seller or Pool Originator.
§ 120.1726 Pool Certificates a Seller cannot purchase.