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CONGRATULATIONS!!
| Katie O'Brien, Esq. |
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We take great
pleasure in
announcing that
Katie O'Brien
has been admitted as
a Partner in the firm!
Katie concentrates her practice in the areas of commercial lending, real estate and commercial contracts. She represents financial institutions nationwide, including national banks, community banks, credit unions and non-bank lenders, who extend commercial credit facilities to small and mid size businesses. Katie has extensive experience in the areas of government guaranteed lending and acquisition financing and has closed hundreds of commercial finance transactions, from start-up business transactions to complex real estate and business acquisitions.
Katie advises lenders on eligibility matters and documenting and closing loans under the SBA 7(a) and 504 loan programs and assists lenders in preserving and protecting their government guaranty. As a closing attorney, Katie reviews loan files, drafts and negotiates loan documents, advises on due diligence documentation and coordinates the closing and funding of transactions. She also assists lenders with respect to their closed SBA-guaranteed loan files by reviewing and preparing SBA guaranty repurchase packages, responding to SBA recommendations, and performing loan portfolio audits.
ADMISSIONS:
To read more about Katie, click here.
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FEATURED ARTICLE
Best Practices: Prompt Liquidation of SBA Loans Can Avoid Unanticipated Costs
By: Ethan W. Smith, Esquire
| Ethan W. Smith, Esquire |
When an SBA loan goes into liquidation status, SBA Lenders sometimes lose their sense of urgency to get the loan into liquidation status and charged off. However, unlike conventional small business loans, a lack of diligence in liquidating SBA loans can result in the unwary lender incurring unexpected expenses. Two such expenses are the ongoing SBA guaranty fee and, for loans sold on SBA's secondary market, interest owed to the secondary market investor.
The on-going SBA guaranty fee (also sometimes referred to as the "yearly fee") is an annual fee paid by lenders (and which cannot be passed through to borrowers), which is currently 52 basis points of the guaranteed portion of the outstanding balance of the loan. In FY 2015, this fee will drop to 51.9 basis points, signaling continued strengthening of the SBA portfolio. SBA Information Notice 5000-1318. Per SOP 50 10 5 (F), the on-going guaranty fee must be paid by lenders whether or not the borrower makes its loan payment, and in the case where a borrower has stopped making payments, lenders must "...compute the fee based on the product of a monthly on-going fee factor times the last reported Guaranteed Portion Closing Balance." SOP 50 10 5 (F), Subpart B, Chapter 8, Subparagraph IV., F., 2., i), iii, p.230. Accordingly, a lender's obligation to pay the on-going guaranty fee continues, irrespective of whether or not a borrower is making loan payments, until the SBA purchases the guaranteed portion from the lender (in the case of loans that are not sold on the secondary market) or from the secondary market investor (for loans that are sold). Lenders should therefore try to proceed as expeditiously as possible in liquidating their collateral and submitting their guaranty purchase packages so as to minimize the expense of the ongoing guaranty fee for non-performing loans.
For loans sold on SBA's secondary market, lenders that delay their guaranty repurchase requests will often create a liability to the SBA for interest that SBA pays to the secondary market investor. When a sold loan defaults, the SBA continues to make interest payments to the secondary market holder under the terms of the Secondary Participation Guaranty Agreement (SBA Form 1086). However, pursuant SOP 50 57, "if SBA is required to pay a secondary market holder more than 120 calendar days of accrued interest because of Lender delay, SBA may demand that the Lender reimburse SBA for the difference between the amount paid by SBA and 120 calendar days of accrued interest." SOP 50 57, Chapter 23, Subparagraph B.3., p.147. Accordingly, delays in submitting a guaranty purchase package will make a lender liable for any interest in excess of 120 days from the date of default through the date of repurchase. Since it is the lender's obligation to demand purchase by the SBA, unwary lenders that delay purchase requests for months (or even years) after default, can rack up thousands of dollars in interest payment reimbursements to the SBA for loans which were sold on the secondary market.
Protecting the guaranty is only the beginning for SBA lenders. Savvy SBA lenders will manage their workout, liquidation and guaranty purchase processes and procedures so as to avoid unanticipated and otherwise unnecessary costs is connection with their defaulted SBA 7(a) loans.
For more information on how lenders can minimize liquidation costs in connection with their SBA 7(a) loan portfolio, contact Ethan at [email protected] or at 267-470-1186.
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EVENTS & SEMINARS
Date: Friday, October 10, 2014 Location: Cranberry Highlands, Cranberry, PA
For more information about this event and/or to register, click here.
Date: October 19 - 21, 2014
For more information about this event and/or to register, click here. NAGGL 2014 Annual Conference
Date: October 28 - 30, 2014
For more information about this event and/or to register, click here.
Date: August 12-14, 2015 Location: Hyatt Regency, Baltimore, Maryland
For more information about this event, click here.
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Donald Tyson / Senior Vice President / The Bancorp Bank
When The Bancorp Bank made the strategic decision in 2009 to become a national SBA lender, our first call was to Ethan Smith at Starfield & Smith. I had worked with Ethan in deals where he represented the SBA lender and was impressed by the firm's capacity to handle a particularly complicated management buy-out with multiple layers of financing provided by multiple firms. This deal involved a credit line, an SBA term loan, a mezzanine loan, and private equity from multiple investors, not to mention an obstinate seller. The legal side of the deal could not have gone more smoothly. Bancorp's SBA team has been very successful and we have relied on the guidance of Starfield & Smith every step of the way. They work to earn our trust every day and we could not be more pleased with our relationship with them. They have a well earned national reputation for expertise in SBA lending that is unmatched.
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