April 29, 2020
By: Caity Witucki
Contributing Editor, C-Suite Wednesday
C-Suite Wednesday – Guidance on Participation Sales for Paycheck Protection Program Loans
On Monday, the SBA issued a procedural notice to all SBA employees and Paycheck Protection Program (PPP) lenders providing guidance on participation sales for PPP loans.
According to the guidance in Procedural Notice 5000-20021, lenders participating in PPP may sell up to 100% of the principal balance of a PPP loan to another participating lender. However, the originating lender must continue to hold the note, the loan documents, and all servicing rights. Therefore, the originating lender will be the party responsible to the SBA with respect to all servicing actions, including requests for advance purchases and loan forgiveness. Additionally, the originating lender will remain the party eligible for the guarantee purchase of the PPP loan.
The guidance further clarifies that participating interests in PPP loans may only be sold to participating lenders who possess signed copies of SBA forms 750, 3506, and 3507.
Although the SBA’s prior written consent is not required, the originating lender must provide SBA’s Office of Credit Risk Management (OCRM) with prior written notice of participating interest sales pursuant to meeting the good standing and satisfactory performance requirements in 13 CFR § 120.433. Prior written notice of participating interest sales must be sent to the following email address: PPPLoanParticipation@sba.gov.
The SBA will continue to provide lenders with guidance regarding PPP. If a lender has any questions pertaining to the sale or purchase of participating interest in PPP loans, they are advised to contact John Wade, Chief of Secondary Markets at email@example.com.