SBA Information Notice: Servicing and Liquidation Authority
Summary
This SBA Information Notice, Control No. 5000-1110, effective 6-25-2009, is addressed to all SBA employees and 7(a) lenders. It recalls that SBA published regulations on liquidation and debt collection on April 12, 2007, effective May 14, 2007, and that Section 120.536 standardized which servicing and liquidation actions require prior SBA approval. The purpose of the notice is to remind 7(a) lenders that they have the same authority PLP lenders had before to service and liquidate their loan portfolios. The notice says this unilateral authority includes deferments and loan restructuring where needed to keep a small business open and operational. Lenders must keep supporting documentation in their loan files, which SBA uses to judge whether a lender's actions were prudent and commercially reasonable.
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Full text
SBA Information Notice
TO: All SBA Employees CONTROL NO.: 5000-1110
SUBJECT: Servicing and Liquidation Authority EFFECTIVE: 6-25-2009
of 7(a) Lenders
On April 12, 2007, SBA published regulations on liquidation and debt collection activities that
amended 13 CFR Part 120 governing business loans. The new regulations became effective on May 14,
2007. Section 120.536 standardized across the various 7(a) loan programs the servicing and
liquidation actions that require prior SBA approval, and reminded lenders to maintain in their loan
files supporting documentation for actions taken in connection with a loan not requiring prior SBA
approval. This documentation is essential for SBA’s review of the lender’s handling of a loan if it
is submitted for guaranty purchase and for SBA’s determination as to whether the lender’s actions
were prudent, commercially reasonable (consistent with generally accepted commercial lending
practices) and in accordance with loan program requirements.
The purpose of this notice is to remind all SBA 7(a) lenders that they are given the same authority
previously held by PLP lenders to service and liquidate their loan portfolios. Therefore, lenders
may use their unilateral authority in order to expeditiously address the needs of small business
concerns in these difficult economic times. This unilateral authority includes, among other things,
deferments and loan restructuring where needed to keep a small business open and operational.
SBA’s regulations at 13 CFR § 120.535 set forth the following general standards for loan servicing,
liquidation and debt collection litigation actions:
(a) Service using prudent lending standards. Lenders … must service 7(a) … loans
in their portfolio no less diligently than their non-SBA portfolio, and in a
commercially reasonable manner, consistent with prudent lending standards, and in
accordance with Loan Program Requirements. Those Lenders … that do not
maintain a non-SBA loan portfolio must adhere to the same prudent lending
standards for loan servicing followed by commercial lenders on loans without a
government guarantee. 1
With the exception of the actions specifically identified in 13 CFR § 120.536, SBA has now
delegated to all 7(a) lenders identical unilateral servicing authority as indicated above. SBA’s
Commercial Loan Servicing Centers (CLSCs) in Fresno and Little Rock and the Herndon National
Guaranty Purchase Center (NGPC) are unable to approve actions within a lender’s unilateral
servicing authority because of the high volume of such actions.
As a helpful guide for lenders to determine which actions they may take unilaterally, SBA has
developed a matrix for both servicing and liquidation actions that replaces previous matrices that
addressed servicing and liquidation actions separately. The new combined matrix is available on
1
Loan Program Requirements are defined in 13 CFR §120.10 as “requirements imposed upon lenders … by statute, SBA
regulations, any agreement the lender … has executed with SBA, SBA SOPs, official SBA notices and forms applicable to the 7(a)
… loan programs, and loan authorizations, as such requirements are issued and revised by SBA from time to time.”
EXPIRES: 6-01-2010 PAGE 1 of 1
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recyling Program Printed on Recycled Paper
SBA's websites for the Fresno, Little Rock and Herndon centers accessible through
www.sba.gov/banking.
As indicated above, for all loan servicing actions lenders must continue to document the
justifications for their decisions and retain these and supporting documents in their loan files for
future SBA review if the loan is submitted for guaranty purchase, as well as for lender oversight
purposes. A lender’s actions will be evaluated in the purchase process to determine whether they
constituted a reasonable business decision made in connection with good faith efforts to keep a
borrower’s business open.
It is important that lenders notify SBA with respect to the unilateral actions identified in the
combined matrix that are identified as requiring SBA notification. Such notice is necessary to
update SBA’s loan database and to maintain accurate records for loans that will be sold in the
secondary market.
SBA encourages all lenders to become familiar with and use E-tran, which permits lenders to make
many changes to their SBA loan record using a direct connection via the internet. SBA is offering
special training and assistance in relation to servicing, the use of E-tran, as well as the servicing and
liquidation matrix. This training is being offered through local SBA district offices in cooperation
with SBA’s loan servicing centers. Lenders are encouraged to contact brand managers or other
officials at their local SBA district office for more information regarding training
For questions, please contact the Little Rock CLSC Director, Nique Carrington (501-324-5871, Ext.
281), the Fresno CLSC Director, Joel Stiner (559-487-5136, Ext. 215), the Herndon NGPC
Director, Vanessa Piccioni (703-487-9293), or Walter Intlekofer at SBA Headquarters (202-205-
7543).
_________________________________
Grady Hedgespeth
Director
Office of Financial Assistance
PAGE 2 of 2 EXPIRES: 6-01-2010
Employees
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recyling Program Printed on Recycled Paper
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