SBA Lender Unilateral Authority – Servicing Actions

August 2, 2013

By Karen McHugh
SBA Complete

SBA requires lenders to take all necessary actions to service and liquidate the 7(a) loans in their portfolio. The entire debt owed on each loan (not just the lender’s portion) must be serviced by the lender regardless of the guaranteed percentage or whether the guaranty has been purchased. There are certain actions that require SBA approval, some actions that require notification to SBA, and others that require that the lender document their decision under their own authority.

Actions requiring SBA approval
1. Any action that is an exception to SBA policy
2. Any action that would confer a preference by the lender
3. Any action where there is a conflict of interest between the lender, the borrower, and/or the SBA
4. Sale or lease of collateral or OREO to the lender, an associate of the lender, an employee of the lender, or a close relative of an employee of the lender
5. Sale or lease of collateral or OREO to an obligor, a close relative, or associate of an obligor
6. Release of a co-borrower or guarantor
7. Compromise of the principal loan balance
8. Assumption of the loan with release of an obligor
9. Charging of an extraordinary servicing fee
10. Prepayment that requires a subsidy recoupment fee
11. CLP loan – liquidation plans or amendments
12. Litigation plan or amended litigation plan
13. Acquisition of title to any property in SBA’s name
14. Acquisition of title to contaminated property in SBA’s name or the lender’s name
15. Operation or control of a business that handles hazardous substances
16. Operation or control of a business located on contaminated property
17. Increases in the loan amount
18. Increase in SBA’s guaranty percentage
19. Reinstatement of SBA’s guaranty
20. Emergency purchase of the loan from the secondary market
21. Transfer or sale of more than 90% of the loan

The lender must notify SBA of any action that would change the information in their database regarding the loan, such as a decrease in loan or guaranty amount (increases require approval), an extension of maturity dates or final disbursement dates, and any change to the borrower’s information such as name, address, legal structure, or ID numbers.

Any documentation of a servicing or liquidation action should be dated along with the supporting documents such as appraisals, credit reports, environmental investigation reports, and any other document relied upon before taking the action. The lender should also place a copy of SBA’s “7a Servicing and Liquidation Matrix” in the file to document their authority to make such decision.

Think of us as your “go to” team for whatever needs you may have in the SBA lending world. We provide assistance at every SBA touch point from loan structuring to loan liquidation. To learn more about the all-inclusive SBA lending services of SBA Complete, go to www.sbacomplete.com or call us at 800-801-2378.