sba fresno commercial loan servicing center … sba fresno commercial loan servicing center presents...

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SBA Fresno

Commercial Loan Servicing Center

Presents

GUIDANCE ON SBA 7A LOAN SERVICING & PURCHASING

1. INFORMATION ON THE SERVICING CENTER

2. WHAT REQUESTS ARE SUBMITTED TO SERVICINGAFTER FINAL DISBURSEMENT7A MATRIX (12/05/2015 VERSION)

3. UNILATERAL ACTIONS (PN 5000-1329)

4. 1502 REPORTINGMOST COMMON ERRORSCOLSON CONTACT INFORMATION

5. ACTIONS REQUIRING SBA APPROVALWHAT INFORMATION IS NEEDED FOR SBA REVIEWSOP 50-57SOP 50-10 MOST COMMON SERVICING REQUESTS2237 FORM

6. HOW TO PROTECT YOUR GUARANTY

7. RESOURCES

8. QUESTIONS

AGENDA

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Green = FresnoYellow = Little Rock

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Changes After Final DisbursementSBA considers a partially disbursed revolver as fully disbursed.

Servicing Center services all 7a Loan Programs including ARC Loans in its jurisdiction (borrower physical address).

Use 7a Lender Matrix for guidance on what requests require SBA approval.

Loan Processing SOP 50-10 that is in effect at the time loan was approved for increases, interest changes, guaranty percentage changes, loan program requirements and assumptions/ownership changes.

Loan Servicing SOP 50-57-2 (7A).

Delegated versus Non-Delegated Once loan fully disbursed, all 7a lenders have delegated

authority.

Servicing and Liquidation 7(a) Lender Matrix, Version 12 – 12/01/15

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7(a) Lender Matrix (continued)

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SBA Procedural Notice

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Servicing Center E-Tran Servicing 1502 ReportTermination of Guaranty on loan in “Liquidation” status (Express/Pilot loans).

Returning loan from “Liquidation” to “Regular Service” status (Express/Pilot loans)

Marking a loan “Paid in Full”

Classifying loan in “Liquidation” status

Marking a loan “Paid in Full”, status code “6”

Classifying loan in “Liquidation”status, status code “5”

Decrease loan amount or guarantypercentage on disbursed loan

Change interest rate; spread; and/or base rate.

Cancellation of undisbursed loan

Change loan from revolver to term.

Basic clerical error such as changes to EIN, SS#, and/or Tax ID #

Change legal/trade name and address.

Adding obligor, which does not include a release of any obligor

Change maturity date on loan that has not been matured.

Change of use of proceeds, which does not involve an increase/decrease to loan amount

E-Tran Codes – From E-Tran Central – SBA E-Lend Servicing Page

How Do I Get the Codes Required by Some XML Elements?

All codes required by XML elements in E-Tran are defined in the SBA system called "Code Tables".

If you don't already have access to the Code Tables system:

Return to Choose Function by clicking the Exit button at top of page.

From the Choose Function page, click the Access button at top of page.

Open the "Code Tables" folder.

Check the first checkbox ("Code Tables").

Scroll down to bottom of page and press the Submit button.

After receiving access to Code Tables, a new Code Tables hotlink will appear on your Choose Function page. Use this hotlink to retrieve the codes and their meanings.

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For Center Assistance on E-Tran Servicing: Please contact your local District Office for E-Tran

Guidance and Training

Contact for Fresno CLSC800-347-0922

Laura Crombie [email protected]

extension 2903

Monica Williams [email protected]

extension 2905

Percy [email protected]

Extension 2957

Loan disbursed and guaranty fee not paid within 90 days of approval.

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1502 Common Errors (continued)

Colson Services Webpage

Colson Services has a lot of good information on their website.

You can check on current and past SBA loan rates.

See the latest SBA updates relating to your SBA loan reporting.

Get training on how to prepare and submit your monthly 1502 report.

http://www.colsonservices.com/main/index.shtml

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The Colson 1502 Reporting Center

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Colson Services has useful information on a whole series of 1502 questions.•1502 connection•Reporting Information•Forms and Calculators•Data Accuracy Info.•Filing Information•SBA Links•Misc. Information•Contact US

http://www.colsonservices.com/main/1502_reporting.shtml

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Helpful numbers for Colson Services

Use the Contact US option to find people who can help or offer training on 1502 reporting

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http://www.colsonservices.com/main/contact.shtml

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SOP 50 -10 SOP 50-10-4

Loans approved 01/29/99 to 07/31/08

SOP 50-10-5 (A)


SOP 50-10-5 (B)


SOP 50-10-5 (C)


SOP 50-10-5 (D)


SOP 50-10-5 (E)


SOP 50-10-5 (F)


SOP 50-10-5 (G)

Loans approved 10/01/14 to April 30, 2015

SOP 50-10-5 (H) Loans approved 05/01/15

or after

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It is not necessary to include a copy of the borrower’ financial statement or supporting documents provided that they are adequately analyzed in the credit memo.

SOP 50-57-2“Should” versus “Must”

Should =Guideline. Recommended but not required. Lender will

have to document file to ensure credit decision based on prudent lending practices followed when “should” requirement is not followed.

Must = Required. Will need exception to policy by SBA.

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Increases – Express Revolvers Not allowed on Recovery Act or Jobs Bill Loans. Funds have

exhausted.

Increase on these types of loans must be requested within 7 years from the date of approval.

For maximum loan amount, refer to the SOP 50-10 which was in effect at the time the loan was approved.

Any increase request on an Express Revolver Loan that is above 33% above the original loan amount must include an analysis of appropriate credit and risk factors.

Additional guaranty fee due within 30 days from Date of SBA approval of increase. Note: if lender increases in E-TRAN fee is due.

CAPLines Maturity on CAPLines approved after 10/1/11 = Revolving period no greater than

10 years, except on Builder’s Capline which cannot exceed 5 years.

Maturity on CAPLines approved prior to 10/1/11 = Revolving period no greater than 5 years.

Increases:

Not allowed on Recovery Act or Jobs Bill Loans. Funds have exhausted.

Increases on loans approved prior to 10/1/2011, limited to one increase and no more than 33.3% above the original loan amount. On what is required for increase request, please refer to the 50-10 that was in effect at time loan was approved.

Loans approved on or after 10/1/11, SOP 50-10-5-D, Subpart B, Chapter 3, Paragraph D-2 that revolver loans must be requested within 10 years from the date of loan approval. Lender’s request must include an analysis of the appropriate credit and risk factors along with the borrower’s cash flow can support the increased payment amount.

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Increases – Term Loans

Not allowed on Recovery Act or Jobs Bill Loans. Funds have exhausted.

Increases on principal balance not allowed. Except for care and preservation expenses (real estate taxes, hazard/life/flood insurance). If loan sold on secondary market, separate note receivable is to be created.

Any increase request on a Standard 7 (a), CLP, PLP, SBA Express and Pilot Loan Program term loan that is more than 20% of the original loan amount or is more than 18 months after the original approval date, the lender must include with its request its analysis showing the purpose of the increase is the same as the original purpose of the loan and the borrower’s cash flow can support the increased payment amount.*

For maximum loan amount, refer to the SOP 50-10 that was in effect at the time the loan was approved.

*Applies to non-Recovery Act loans approved on or after 10/01/09. All other loanswill require an exception to policy for an increase over 20% of loan amount or morethan 18 months after the original approval date.

Increases –Term Loans (continued)

Increase must be requested within 48 months from the approval date.*

If sold on the secondary market, SBA cannot approve increase without investor approval.

Additional guaranty fee due within 30 days from Date of SBA approval of increase.

*Applies to non-Recovery Act loans approved on or after 10/01/09. All other loanswill require an exception to policy for an increase over 20% of loan amount or morethan 18 months after the original approval date.

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Analysis and review of request should follow requirements found in SOP 50-57-2 Chapters 6 and 7.

May be extended for up to 10 years beyond its original maturity date if:

The extension is requested before the SBA loan guaranty expires, less than 180 calendar days after the maturity date.

Will aid in orderly repayment of the loan.

If applicable, additional guaranty fee will have to be paid within 30 days of approval or entire loan will cancel.

Analysis and review of request should follow requirements found in SOP 50-57-2 Chapters 6 and 8.

General Requirements:

It will help the long or short term needs of the Borrower without unduly impairing the ability to recover on the SBA loan.

Satisfactory credit history. Be to a specific amount and should not extend to future

advances. Sufficient equity to secure the SBA loan after the prosed request. Terms should be set out in document signed by all parties.

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Subordination (continued)

Subordination (continued)

Analysis and review of request should follow requirements found in SOP 50-57-2 Chapters 6, 8 and 11 (Assumption).

Substitution of Guarantor:

Financial strength of proposed substitute guarantor should be equal or greater than the financial strength of the existing Obligor; and

Neither the release of the existing Guarantor nor the substitution for the proposed Guarantor should adversely impact the operation of the business. Substitution of the proposed Guarantor may be conditioned on retention of the original Guarantor for a transitional period during which time no material adverse change in the financial condition of the business.

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Release of obligors:

Loan must be seasoned. Release must not conflict with the SBA Loan Program Requirements

in 13 CFR and SOP 50-10 that was in effect when loan was approved that require Guaranties from specific Persons as a condition for SBA’s guaranty of the loan.

Must not jeopardize the ability to maximize recover on the loan; shift the risk of loss to SBA, or otherwise harm the integrity of the SBA loan program; and

If request is in conjunction with sale or reorganization, parties should be encouraged to pay off the 7(a). If loan will not be paid off or substantially paid down, instead of the release of obligors, they should be required to guaranty the loan, but their guaranty may be limited to the amount of any funds they are to receive as part of the change of ownership/reorganization.

Analysis and review of request should also follow requirements found in SOP 50-57-2 Chapters 6, 7 and 12.

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SOP 50-57-2, Chapter 11. A Lender may assign an individual 7(a) loan to

another 7(a) lender pursuant to Transfer of Participation Agreement.

Request completed/submitted to CLCS by new lender and agreement signed by both lenders.

SBA does not charge a fee, nor does it require or prohibit the assignor Lender from negotiating assignment fee to be paid by the assignee Lender.

Transfer of Participation Request/Agreement found on SBA’s website.

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Close loan according to Loan Authorization. Be familiar with SOP 50-10 5 (H), 13 CFR, SOP 50-57, and Policy

Notices, which can be found on Servicing website. Document, document, document all credit decisions, which should

be reasonable and prudent. Service and Liquidate SBA Loan in the same manner as lender’s non-

SBA loans. Include 7a Lender Matrix as part of lender’s documentation when

approving requests under lender’s delegated, unilateral authority. Always check Servicing Website weekly for most recent version.

File internal bank loan according to SBA’s Ten Tab Purchase Demand Kit. This is to ensure lender has all appropriate documents at the time lender demands SBA honor its guaranty.

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Guaranty Purchase –Roles and Responsibilities

Both FCLSC and LRCLSC are responsible for:

Liquidation and Purchase of Small Loan Advantage, Express and Pilot Loan Program 7(a) Loans, including GO Loans, Community Advantage Loans.

ARC loans classified in liquidation status (including purchase). Note: Responsibility of Fresno CLSC

For loans approved on/after January 1, 2014, liquidation and purchase of 7a loans under $350,000 INCLUDING the 7a Small Loans made on/after July 1, 2014.

Chapter 23

Guaranty PurchaseRequirements:

Uncured Loan Default The Borrower must be in default on a payment due on the Note for more than 60 calendar days unless SBA agreed otherwise in writing. (13 C.F.R. § 120.520)

Loan Classified in Liquidation The Lender must report the loan as in “liquidation” status on the Lender’s monthly Form 1502 report.

Collateral Liquidated Prior to requesting guaranty purchase, Lenders should liquidate all of the collateral for the loan, but must, must at a minimum, liquidate the following:

(a) Loans Approved on or after May 14, 2007 a.For loans approved on or after May 14, 2007, unless the Borrower filed for bankruptcy, the Lender must liquidate the business personal property collateral with an aggregate Recoverable Value of $5,000 or more (13 C.F.R. § 120.520(a)); (b) Loans Approved Prior to May 14, 2007 For loans approved prior to May 14, 2007, the Lender must liquidate the collateral according to the requirements of the program under which the loan was made. For example, the following collateral must be liquidated: …………..Express and Pilot Loan Programs—All collateral; in addition, all cost-effective means of recovery must be exhausted unless: (a) The loan was made under the Export Express Program; (b) The remaining principal balance of the loan is $50,000 or less; or (c) The loan involves prolonged litigation or other circumstances that will extend the liquidation process more than 90 calendar days past the earliest date that the Lender could request guaranty purchase.

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Chapter 23

Guaranty Purchase

Special requirement for loans SBA has purchased from the secondary market:

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If SBA purchased the guaranteed portion of the loan from the secondary market investor, the Lender must submit a complete Purchase Package to the appropriate SBA Loan Center within 45 calendar days of the purchase.

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Chapter 23

Guaranty Purchase

Complete Purchase Package Submitted to SBA

To request guaranty purchase, Lenders must submit a complete Purchase Package to the appropriate SBA Loan Center within 180 days of maturity or within 180 days of the completion of liquidation/debt collection activities. Refer to 13 CFR Ch. I 120.524

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Chapter 24

Denial of Liability Top reasons for repair/denial on Express loans:

Bankruptcy deficiency- Failure to file a timely proof of claim on asset bankruptcies SBA Forms 1919 or 912 deficiency without satisfactory alternate documentation Ineligible use of loan proceeds Failure to obtain required collateral lien position Failure to obtain required guarantor Lack of meaningful collateral evaluation resulting in loss to Agency Release of collateral without justification Guarantors released/compromised without SBA Approval Untimely or lack of site visit resulting in loss of collateral Collateral abandoned without justification Purchase not requested within 180 days of maturity or within 180 days of the completion of

liquidation/debt collection activities. Refer to 13 CFR Ch. I 120.524 Negligent lender credit analysis (Early Payment Default Loans) Lack of Special loan program documentation (Community Express, GO, Export, Star, ARC, Patriot) SBA Loan eligibility: e.g. Ineligible franchise, Ineligible loan purpose, ineligible business Recovery Act loans----lender did not obtain special borrower Immigration Law/use of loan proceeds

certification.

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Chapter 24

Denial of Liability (continued)

Special note about early defaults

The early default loans are the ones most likely to be audited! Purchases deemed an “early default” must undertake the highest degree of scrutiny!

Improper Payments Elimination and Recovery Act (IPERA) PlanOn July 22, 2010, the President signed into law the Improper Payments Elimination and Recovery Act (IPERA). IPERA amended the Improper Payments Information Act of 2002 and generally repealed the Recovery Auditing Act.

The law requires that agencies examine the risk of, and feasibility of recapturing, improper payments in all programs and activities. It also outlines the method to determine improper payment rates, the reporting requirements in the Agency Financial Report and the payment recapture audit process. It also requires that the Office of the Inspector General determine if the Agency is in compliance with IPERA.

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Express Purchase Demand KitNew PDK

First page = SummaryIt lists the Tabs and what goes within each TabIt also provides the Contact information for both Fresno and Little Rock

Complete each section Completely….

Why?...

Tabs will Magically appear…

Tab 1- General Information

Loan Authorization

Companion Loans

Wire Instructions

Tab 2 – Loan Summary

Purchase Type

Purchase with Charge Off

Purchase without Charge off

Detailed Summary:Nature of Business, Cause of Default, Servicing Actions, Liquidation Effort, Action taken to pursue obligor/guarantors

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Tab 3 – Transcript of Account

Terms and any modifications:Must also submit copies of any Note Modifications, Amendments, Deferments, and Workout Agreements (include all revised repayment terms including dates, interest rate adjustments, and payment revisions)For Secondary Market loans, lender must provide evidence of investor's approval of modifications, as applicable

Transcript Summary -Attach Certified Copy of Transcripts - form 1149 preferred

CPC Expenses CPC Tabs to be attached behind Tab 10

Tab 4 – Early Default Determination

Type of loan

Term = Final Disbursement date

or

Revolving = Initial Disbursement date

Date of Default

Determines Early Default or not

Tab 5 – Early Default Documentation

Delegated or Non-Delegated

As you check boxes applicable boxes will magically appear –Complete each section Completely

Equity Injection?

Standby Agreement?

IRS Income Tax Verification?

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Tab 5 – Early Payment Default (continued)

Provide a copy of Bank credit memorandum All supporting documentation used by lender in credit

analysis IRS Income Tax Verification (Form 4506) - Transcript

Verification Evidence of Equity/Asset Injection - invoices, receipts,

cancelled checks, HUD-1 Standby Agreement (Form 155) - Copy of stand-by note Complete copy of borrower application SBA 912 (if borrower answered yes on 1919 questions

1,2,&3) SBA will review to determine if deficiency by lender in

making or closing of loan contributed to business failure.

Tab 5 – Early Payment Default (Continued)

Early Default means any of the following events of default that occurred either within 18 months of the initial disbursement of the loan or within 18 months of the final disbursement of the loan if the final disbursement occurred more than six months after the initial disbursement, unless the Borrower cured the default and made the scheduled loan payments for 12 months following the 18 month period:

a. Failure to make a scheduled loan payment; b. Funding a scheduled loan payment from the sale of collateral rather than from business operations; c. Deferment of more than three consecutivescheduled full payments; or d. Any other event of default that required the loan tobe classified in liquidation status, e.g., bankruptcy.

Tab 6 – Business Eligibility

SBA Express, Patriot Express, Community Express, Export Express:SBA form 1920 or 2238 with applicable attachments

Star, Gulf Opportunity:SBA form 22276 B & C

Franchise? Approved on the Franchise Registry?

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Franchise Registry

Yes - Copy of:

Franchise agreement signed by the borrower and showing

the date/ version of the agreement and state the date SBA approved that

version of the franchise agreement. –

Addendum to the Franchise Agreement as reflected on the registry's SBA approval

page.

Documentation that evidences compliance/non-compliance with all SBA conditions

required by eligibility notes shown on the registry’s SBA approval page.

Signed “Certificate of Franchise Documents”.

Franchise Registry

No – Copy of

All documents evidencing the lender’s review and analysis of the Franchise/

Dealer/Jobber/License or similar agreement in compliance with SOP 50 10 5.

Franchise/Dealer/Jobber/License or similar agreement signed by the borrower.

Specific Agreement was approved by the SBA Franchise Committee, attach the specific approval you received from the SBA

Business Eligibility

Star – Provide eligibility on application Patriot Express - Copy of DD 214 or equivalent - Long

Form! Community Express

identify eligibility criteria - Low, Middle Income, Veteran, Woman or Minority owned

copy of initial management assessment , Technical Assistance Providers Action Plan and if required, a Business Plan.

If Borrower declined post disbursement Technical Assistance, copies of lender correspondence to borrower encouraging completion of the plan.

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Tab 7 –Obligors/Guarantors/Associates

All Obligors and Guarantors associated with the loan

Add a Tab for each Obligor and GuarantorIs Obligor/Guarantor:

Guaranty?

Bankruptcy?

Remain Liable?

Referred to Treasury?

Tab 8 – Special Program Eligibility

Drop down and chose loan type

Express – Skip this tab

All others follow the trail

Documents needed will magically be revealed

Tab 9 – Use of Proceeds

Check Boxes for each Use of Proceeds identified in the Loan Authorization or most recent modification

Applicable pages will magically appear

Complete each section completely

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Tab 10 – Collateral Liquidation

Unsecured – Include a copy of this Tab with the demand

Secured – Check applicable boxes and once again applicable pages will magically appear.

Complete each section completely