January 11, 2022

Delaney Sexton
Contributing Editor

Hot Topic Tuesday – Form 159 Q&A Clarifications

What is to stop 7(a) lending to unregulated non-bank lenders to erode into the same debacle as we saw with the 2008 mortgage lending crisis?

Non-bank lenders are regulated and subjected to frequent reviews and audits from the SBA and other audit teams. There are fourteen trusted non-bank lenders that have skilled and experienced SBA lenders.

Does each “application” mean each service provided? For instance, our 159 fees may include charges for construction oversight and a charge for documentation assistance. Do we have to complete two separate 159s for these two different charges?

Each application in terms of the 159 is if there are fees charged to the borrower and they have more than one loan, each loan needs a separate application. However, if one provider provides packaging and provides another service to the borrower you should be able to report it on a single application, but you can always send separate 159s.

Do we have an idea when Etran will be updated? I checked a few days ago and it has not been updated to the new form.

We are not sure, but we will report on it whenever we receive information.

Can a lender charge a packaging fee and a separate doc prep fee associated with closing for SBA loans if they customarily charge a doc prep fee for closing for non-SBA loans?

You shouldn’t have two separate charges, it should all be included in the packaging fee.

Is it ok to collect a deposit for appraisal, title work, etc. prior to approval and closing to cover fees paid for by the bank that are incurred whether the loan closes or not?

You can collect a good-faith deposit for appraisals, title work, environmentals, and so on. If you don’t approve and close the loan, it is a best practice to refund the remaining balance.

On extraordinary fees for construction can the lender charge a fee if there is a monitoring company?

If you are doing construction monitoring and you collect the extraordinary servicing fee, there is nothing that would prohibit you from paying a monitoring company.

Do you have to provide any documentation for the extraordinary servicing fee when you submit the 159?

The extraordinary servicing fee is reported in Etran, so it is not necessary.

As a best practice, when should the borrower be given the 159 to sign: at application, prior to loan documents, or when they sign loan documents?

There is not an exact requirement, but it is a best practice to present the 159 to the borrower as early as possible. It should be presented before the loan closing.