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SBA releases new Form 1086, Form 1502
Through Information Notice 5000-1194 SBA announces the availability of revised SBA Form 1086, Secondary Market Participation Agreement, and Form 1502, Guaranty Loan Status and Lender Remittance Form. SBA notes that the revision to Form 1502 was minor -- simply a date and logo update -- no material changes were made to the current form. However, please note: This updated Form 1502 must be used beginning in March 2011 to report loan payment activity through February 28, 2011. The more significant--and long-awaited--revision is to SBA Form 1086 [ OMB NO.: 3245-0185 expiration date: 12/31/2013] that includes clarifications to "prevailing progarm rules along with additional lender certifications." And, as expected, the new Form 1086 removes "all reference" to the warranty period for loans sold at a premium in the secondary market, thus addressing the delay in sales recognition that resulted when the new accounting rule FAS 166 became effective 1/1/2010, and now known as FASB Accounting Standards Codification (ASC) Topic 860 (formerly FAS 140 and FAS 166) that modified the accounting rules for transfers and servicing of financial assets. [Therefore, old Form 1086, page 7, 3. paragraphs 2-7 removed.]
HOWEVER, the new SBA Form 1086 has no effect on the accounting rule that states if a lender receives more than 100 basis points in servicing, the transaction WILL NOT qualify as a sale.
The new SBA Form 1086 is effective for all loans submitted for secondary market sales on or after February 15, 2011. Notice 5000-1194 recognizes that "a number of loan sale commitments using the older version of the form have already been arranged. Therefore, sales settlement packages received by Colson will be accepted using either version of the form." But note that, "All sales settlement packages received at Colson after February 14, 2011, must use the February 2011 version of form with older verisons returned to the sender for proper re-submisison."
A review of the new SBA Form 1086 shows the addition of the following Lender Certifications in the initial section of the Form:
(A.) ...
(1) Lender certifies to the best of its knowledge that it has underwritten, closed and serviced the loan in a prudent manner and in accordance with all SBA Loan program requirements as that term is defined in 13 C.F.R. §120.10,
...
(3) The Lender will not share any premium received from this sale with a Service Provider, packager, or other loan referral source,
...
(4) The loan is not a revolving loan or line of credit facility,
In section G. Program Fees, the specification of an actual ongoing fee amount has been removed and replaced by the general statement: "There is an ongoing fee collected from all payments received from the Lender, which is transmitted to SBA to defray program expenses, and subject to change from time to time."
Other changes:
page 3: OLD: "SBA shall retain a program fee equal to 1/2 of one percent per year of the guaranteed principal amount outstanding." Has been updated (top of pg. 4 New form): "SBA shall retain a program fee equal to _______ (to be completed by the Lender) of one percent per year of the guaranteed principal amount outstanding."
NEW form: page 4 (changes bolded): The minimum servicing fee as of the date of publication of this form is 0.4% per annum for all loans. There shall also be a minimum premium protection fee for any Guaranteed Interest sold at a price greater than Par Value. This fee shall be published from time to time in the Federal Register. The minimum premium protection fee for those Loans sold on the secondary market at a premium as of the date of publication of this form is 0.6% per annum. For any Guaranteed Interest sold at a price greater than Par Value, the total minimum lender fees, as of the date of publication of this form, are 1.0% per annum.
NEW form: page 7, 3. -- paragraph added:
Lender also acknowledges that SBA reserves the right to recover any outstanding Lender obligations to SBA by setting off any and all funds due to Lender related to Secondary Market transactions or from SBA including but not limited to SBA guaranty payments and applying such funds to Lender's outstanding obligations to SBA.
NEW form: page 11, 7. a (iv): Removes the requirement for 'prior written consent of SBA' to ... now reads: "FTA may offset from payments due to Registered Holder any prior overpayments made to Registered Holder." NEW Form: Removes statement that FTA will provide report of execution of the Form 1086 during the previous month to district offices. NEW Form: page 13, 7. k.: Adds long paragraph regarding FTA processing, reporting and submission of data to SBA on a daily basis... and specifies that "The FTA shall be responsible for contacting lenders to correct loan data submitted for the prior reporting period, and to reconcile missing or incorrect loan information. Lender shall respond to FTA request for information within 5 business days of receipt of such request. Lender's response to FTA request for loan information shall be substantive enough so FTA can reconcile loan. Reconciliation will be performed on a daily basis during the course of the month following the last reporting period. The FTA shall collect and track the known loan data errors that were corrected during the month following a reporting period. FTA shall verify SBA Form 1502 data reported by lenders against edit criteria provided by SBA. FTA shall report information to SBA on loan accounts that remain uncorrected. Uncorrected loan account information shall include GP number, name of lender and description of loan error. From time to time, FTA shall provide additional reports derived from the SBA Form 1502 reporting process described above, as prescribed by SBA." NEW Form: Purchase by SBA: page 16, 11.b.: Adds limit of 120 days for payment of interest: "This payment of accrued interest will be limited to accrued interest no more than 120 days from the interest paid to date used to compute the guarantee purchase amount." ........................................................................................... SBA News Patriot Express Loan Pilot extended SBA announced in December that the Patriot Express Loan Pilot has been extended wtih no changes for an additional threeyears and will now expire on December 31, 2013, unless further extended or made permanent by that date. www.sba.gov/content/popular-sba-patriot-express-loan-initiative-renewed-three-more-years Patricia Brown-Dixon appointed administrator for SBA Region VII Patricia Brown-Dixon was named Regional Administrator for Region VII, which encompasses Iowa, Kansas, Missouri, and Nebraska. Brown-Dixon has worked for the U.S. General Services Administration (GSA) for more than 25 years. Currently, she serves as Director of the Heartland Office of Small Business Utilization. In that role, she is responsible for managing the agency's efforts to support small businesses in the region.
www.sba.gov/content/patricia-brown-dixon-appointed-administrator-sba-region-vii
Record loan volume follows passage of Jobs Act
SBA Administrator Karen Mills announced that as of Dec. 31 the agency had approved more than $10.3 billion in loan guarantees which supported more than $12 billion in lending to small businesses since President Obama signed the Small Business Jobs Act of 2010 on Sept. 27. [7(a) volume was $9.1 billion in the first quarter of FY 2011.] The Jobs Act included an extension of reduced fees and higher guarantee loan enhancements in the agency's two largest loan programs.
www.sba.gov/content/jobs-act-supported-more-12-billion-sba-lending-small-businesses-just-three-months
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NAGGL News
President & CEO Tony Wilkinson presents a legislative and industry update during a General Session at the Southeastern Small Business Lenders Conference on the morning of February 1. Presentation >
EVP Jane Butler is a major speaker at the March 16-18 Western Pennsylvania SBA Government Guaranteed Lenders (WPASGL) Quality Circle in Seven Springs, PA.
www.wpasgl.org/QC2011RegistrationPackage.pdf
Jane is an always requested speaker, and she'll again headline the Michigan SBA Lenders Conference in East Lansing on March 31. Watch for details. | 
