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7(a)/Express Servicing

Unilateral Actions

SBA values the diligence of its 7(a) lenders in diligently servicing and maximizing recoveries on defaulted loans while addressing borrower needs. SBA has substantially shortened the list of actions requiring prior SBA approval and standardized them across lending programs where possible in order to assist lenders in taking prompt and responsible servicing and recovery actions.  Please refer to the Servicing and Liquidation Actions 7(a) Lender Matrix for additional information.

Lenders must document the business reason and justification for their decisions and retain these and supporting documents in the loan file for future SBA review to determine if the actions taken were prudent, commercially reasonable (consistent with generally accepted commercial lending practices) and complied with applicable loan program requirements. When taking action that falls within a lender's unilateral authority, the lender is encouraged to notate the loan file with a statement such as, "This action was taken under unilateral authority."  (It is recommended that the CDC retain a copy of the matrix in effect at the time of the request attached to the action in their file.) It is important to note that if the lender notifies SBA of a change by E-Tran, then a separate notification to the Center is unnecessary.

Please e-mail notification of unilateral servicing actions to the appropriate Commercial Loan Service Center at: lrsc.servicing@sba.gov (Little Rock) or fsc.servicing@sba.gov (Fresno).  When submitting an action to SBA, always make sure to reference the ten digit SBA loan number; you will receive an acknowledgment from the servicing center that your action was received. This will be the only communication you will receive under the streamlined process for handling unilateral actions. Acknowledgments for unilateral actions are no longer issued by the servicing centers or district offices. It is very important that lenders notify SBA of all unilateral actions where SBA notification is required so SBA's loan database can be updated. This is critical for secondary market sales.


E-Tran Servicing

SBA Information Notice 5000-1110 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. E-Tran enables lenders to process the following actions without any sort of paper submission to the SBA:

•    Cancel undisbursed loan.
•    Terminate guaranty on disbursed loan.
•    Decrease loan amount or guaranty percentage on an undisbursed loan.
•    Change the use of proceeds, which does not involve an increase to loan.
•    Changes to maturity date or months on loans which have not matured.
•    Change loans from revolver to term.
•    Change legal/trade name or address.
•    Change project from rural to urban or vice versa.  
•    Change principal(s) gender, race, veteran status, citizenship.
•    Add borrower(s) /guarantor(s)
 

Each month, the commercial loan service center receives hundreds of loan servicing actions which can be processed under the lender’s delegated unilateral servicing authority.  Many common unilateral servicing actions do not require any sort of submission to SBA. This is based upon the SBA loan servicing regulations (13 CFR §120.535 and §120.536) which went into effect May 10, 2007 (SBA notice 5000-1017).  Please refer to the Servicing and Liquidation Actions 7(a) Lender Matrix for additional information.


ARC Servicing

While ARC loans are in regular servicing status, all unilateral servicing action notices and approval requests should be directed to the Standard 7(a)Loan Guaranty Processing Center (LGPC) by email to ARCloanmod@sba.gov or by fax to (202) 481-0003. Always make sure to reference the ten digit SBA loan number in your correspondence.  Lenders may call their toll free number at (877) 475-2435 for additional information on the regular servicing of an ARC loan.


For ARC loans that have been downgraded to liquidation status, please contact the appropriate Commercial Loan Service Center at: lrsc.servicing@sba.gov (Little Rock) or fsc.servicing@sba.gov (Fresno).


How should I notify SBA that a 7a loan should be placed into liquidation?

Please email notification to place a 7a loan in liquidation to the appropriate Commercial Loan Service Center at:lrsc.servicing@sba.gov (Little Rock) or fsc.servicing@sba.gov (Fresno).  Make sure you refer to the SBA loan number and state that this is a liquidation request in the subject line.


Actions Requiring Prior SBA Approval

As set forth in 13 CFR 120.536, the following servicing actions require SBA’s prior written consent:

•    Increases to the SBA loan amount or guaranty percentage.
•    Reinstatement of SBA Guaranty.
•    Compromises on the principal balance of a loan.
•    Taking title to any property in the name of SBA.
•    Taking title to environmentally contaminated property, or taking over operating and control of a business that handles hazardous substances.
•    Transfers, sells or pledges more than 90% of a loan.
•    Release of an obligor.
•    Any action for which prior written consent is required by a Loan Program Requirement.
•    Any action that confers a preferenceon the lender or engages in an activity that creates a conflict of interest.  As defined in 13 CFR § 120.10, preference is any arrangement giving a Lender a preferred position compared to SBA relating to the making, servicing, or liquidation of a business loan with respect to such things as repayment, collateral, guarantees, control, maintenance of a compensating balance, purchase of a Certificate of deposit or acceptance of a separate or companion loan.


How to request a Servicing Action

A clear and concise cover letter drawn from information in the lender internal credit memorandum generally suffices as the servicing request to us. If the cover letter addresses the request and describes the supporting analysis, you do not need to submit additional information. The SBA reserves the right to request additional information as individual circumstances require.

Please submit servicing requests to the appropriate Commercial Loan Service Center via e-mail at:

Fresno: fsc.servicing@sba.gov (for larger submissions use Send This File )

Little Rock: lrsc.servicing@sba.gov (for larger submissions use Send This File )

Actions that involve complex credit or collateral issues, it would be beneficial to include the lender internal credit memorandum with the servicing request. If the credit memo includes your analysis of the borrower’s financial statements, please do not submit to us a copy of the financial statements. Similarly, if your credit memo describes the collateral analysis and basis for collateral valuation, please do not submit to us copies of appraisals or other documents related to collateral.  Instead, the Servicing Action Supporting Schedule  may be submitted in order to facilitate review.

In general, servicing requests must address a common set of elements. These elements allow the lender and SBA to quickly understand the request, the status of the SBA loan(s), the condition of the borrower’s business and other factors important to the decision.


Your Servicing Request may require all or a portion of the following items:

•    A statement of the proposed action and a brief description of what makes the request necessary.
•    Status of the SBA loan (date and amount funded, current balance and status).
•    Identification of guarantors/co-makers and a statement as to whether their consent has been or will be obtained for the action.
•    A summary and analysis of the business, including analysis of financial statements.
•    Before and after collateral analysis, for actions that affect the collateral.
•    A Servicing Action Supporting Schedule may be submitted in order to facilitate review.
•    Summary of prior servicing experience with the borrower, e.g., loan modifications and/or problems pertinent to the request.
•    A summary of the impact/benefit of the action on the business.
•    Will the proposed action address the needs or solve the problems of the business?
•    Will the action protect the interest of the lender and SBA?
 

Further guidance on submitting servicing requests can be found in our Common 7(a) Servicing Requests Booklet.


Your Servicing Request may also require one of the following forms:

•    Reinstatements
•    Loans that have been erroneously reported as Paid in Full
•    Loans that have been cancelled due to non-payment of SBA guaranty fee
•    Transfer of Participation Request form and Agreement
•    A Servicing Checklist for servicing requests may be submitted in order to facilitate review.
•    A Servicing Action Supporting Schedule may be submitted in order to facilitate review.


What if I have questions concerning the servicing of my SBA guaranteed loan?

If you have any questions, please feel free to contact the appropriate Commercial Loan Service Center:


Commercial Loan Service Center – Little Rock
US Small Business Administration
2120 Riverfront Drive, Suite 100
Little Rock, AR 72202-1794
LRSC.Servicing@sba.gov
(202) 292-3878  Fax
(800) 644-8564  Toll Free Phone
For larger submissions use Send This File


Commercial Loan Service Center - Fresno
US Small Business Administration
801 “R” Street, Suite 101
Fresno, CA 93721
FSC.Servicing@sba.gov
(202) 481-0483 Fax
(800) 387-0922 Toll Free Phone
For larger submissions use Send This File
 

Still have questions?

Check out our FAQs (Frequently Asked Questions) regarding Payment Modifications and 7(a) Servicing.

 

CDC/504 Loan Servicing


Unilateral Actions

Each month, the commercial loan service center receives hundreds of loan servicing actions which can be processed under the CDC’s delegated unilateral servicing authority.  All unilateral servicing actions require submission to SBA. This is based upon the SBA loan servicing regulations (13 CFR §120.535 and §120.536), which went into effect May 10, 2007 (SBA notice 5000-1017). Please refer to the Servicing and Liquidations CDC Matrix for further details.


Please submit notification of unilateral servicing actions to the appropriate Commercial Loan Service Center via e-mail at: lrsc.servicing@sba.gov (Little Rock) or fsc.servicing@sba.gov (Fresno).  The PCLP/CDC Unilateral Action Notification  or the ALP/CDC Unilateral Action Notification may be submitted in order to help facilitate review.  For all servicing actions, CDC must document the justification for their decision and retain these and supporting documents in their file for future SBA review to determine if the actions taken by the CDC were prudent, commercially reasonable, and complied with all Loan Program Requirements. It is recommended that the CDC retain a copy of the matrix in effect at the time of the request attached to the action in their file.


CDCs are reminded any action taken by the CDC that confers a preference or engages them in an activity that creates a conflict of interest requires prior written consent from the SBA.  As defined in 13 CFR § 120.10, preference is any arrangement giving a CDC a preferred position compared to SBA relating to the making, servicing, or liquidation of a business loan with respect to such things as repayment, collateral, guarantees, control, maintenance of a compensating balance, purchase of a Certificate of deposit or acceptance of a separate or companion loan.


How to Request a Servicing Action

A clear and concise cover letter drawn from information in the CDCs internal credit memorandum generally suffices as the servicing request to us.  The CDC should also provide status of the participating third party loan. If the cover letter addresses the request and describes the supporting analysis, you do not need to submit additional information. The SBA reserves the right to request additional information as individual circumstances require.


Please submit servicing requests to the appropriate Commercial Loan Service Center via e-mail at: lrsc.servicing@sba.gov (Little Rock) or fsc.servicing@sba.gov (Fresno).  Actions that involve complex credit or collateral issues, it would be beneficial to include the internal credit memorandum with the servicing request. If the credit memo includes your analysis of the borrower’s financial statements, please do not submit to us a copy of the financial statements. Similarly, if your credit memo describes the collateral analysis and basis for collateral valuation, please do not submit to us copies of appraisals or other documents related to collateral.


In general, servicing requests must address a common set of elements. These elements allow the CDC and SBA to quickly understand the request, the status of the SBA loan(s), the condition of the borrower’s business and other factors important to the decision.


Your Servicing Request may require all or a portion of the following items:

•    A statement of the proposed action and a brief description of what makes the request necessary.
•    Status of the SBA loan (date and amount funded, current balance and status).
•    Identification of guarantors/co-makers and a statement as to whether their consent has been or will be obtained for the action.
•    A summary and analysis of the business, including analysis of financial statements.
•    Before and after collateral analysis, for action that affect the collateral.
•    Common Loan Servicing Request Templates may be submitted in order to facilitate review.
•    Summary of prior servicing experience with the borrower, e.g., loan modifications and/or problems pertinent to the request.
•    A summary of the impact/benefit of the action on the business.
•    Will the proposed action address the needs or solve the problems of the business?
•    Will the action protect the interest of the CDC and SBA?
•    SBA requires all CDCs to prepare legal documents for SBA signature, which SBA counsel reviews for legal sufficiency
•    PCLP/CDC may use Power of Attorney for all Assumption and Subordination Agreements


Additional guidance can be found in applicable SOPs and Policy Notice 5000-863.  For those CDC actions requiring SBA approval, Common Loan Servicing Request Templates may be submitted in order to facilitate review.

 

Your Servicing Request may also require one of the following documents:


What if I have questions concerning the servicing of my SBA guaranteed loan?

If you have any questions, please feel free to contact the appropriate Commercial Loan Service Center:

Commercial Loan Service Center – Little Rock
US Small Business Administration
2120 Riverfront Drive, Suite 100
Little Rock, AR 72202-1794
LRSC.Servicing@sba.gov
(202) 292-3878  Fax
(800) 644-8564  Toll Free Phone
For larger submissions use Send This File


Commercial Loan Service Center - Fresno
US Small Business Administration
801 “R” Street, Suite 101
Fresno, CA 93721
FSC.Servicing@sba.gov
(202) 481-0483 Fax
(800) 387-0922 Toll Free Phone
For larger submissions use Send This File
 

Still have questions?

Check out our FAQs (Frequently Asked Questions) regarding Loan Servicing.
 

Express Purchase

How should I notify SBA that anSBAExpress loan should be placed in to liquidation?

Please email your request to place the SBAExpress loan in liquidation to the appropriate Commercial Loan Service Center at: lrsc.servicing@sba.gov (Little Rock) or fsc.servicing@sba.gov (Fresno). Make sure you refer to the SBA loan number and state that this is a liquidation request in the subject line. (sample: 1236504004 liquidation request) or you may fax your request to (202) 292-3877 for Little Rock or (202) 481-0663 for Fresno. Please DO NOT use this email address or fax number for regular servicing requests.

Generally speaking, when may a lender request an SBA Express loan (or loans made under the Express umbrella---Community Express, Patriot Express, etc) be purchased?

Please refer to SBA’s liquidation SOP 50-51-3 for general guidance.  Generally, unless SBA agrees in writing, the borrower must be in default of a payment due on the Note for more than 60 calendar days.  Additionally, for loans approved on or after May 14, 2007, unless the borrower has filed for bankruptcy, the Lender must complete all prudent and commercially reasonable efforts to liquidation the business personal property collateral with an aggregate Recoverable Value of $2,500 or more.

When Liquidation is completed, where do I submit my demand for SBA to honor its guaranty?

If your loans are regularly serviced by the Little Rock Commercial Loan Servicing Center or the Fresno Commercial Loan Servicing Center then you may mail, fax or email (if your Purchase Demand Kit (PDK) is less than 10 MB) your PDK to appropriate location listed below.
To electronically submit your PDK, use our third party secure transmission service SendThisFile which offers 128-bit encryption:
 

Send PDKs to Little Rock using Send This File
Commercial Loan Servicing Center - Little Rock
US Small Business Administration
2120 Riverfront Drive, Suite 100
Little Rock, AR 72202-1794
Attn: Express Purchase Unit
LRSC.expresspurchase@sba.gov
(202) 292-3877 Fax

Send PDKs to Fresno using Send This File
Commercial Loan Servicing Center - Fresno
US Small Business Administration
801 R Street, Suite 101
Fresno, CA 93721
Attn: Express Purchase Unit
FSC.purchasing@sba.gov
(202) 481-0663 Fax


How should I submit my Demand?

SBA has a 10 Tab Purchase Demand Kit for lenders to use to facilitate the purchase process.
 

Still have questions?

Check out our FAQs (Frequently Asked Questions) regarding the Express Purchase Process.

504 Liquidations

The Commercial Loan Service Centers are responsible for the oversight on 504 liquidation cases. If the loan was made under the PCLP authority of the CDC, or if the CDC is a designated Authorized Liquidator (ACL), the CDC is primarily responsible for the liquidation of the loan. For all other loans, the SBA Servicing Centers are primarily responsible for the liquidation of the loan. However, CDC is to provide information as requested by SBA to assist the Agency in the liquidation process.   
 

1)  Debenture Purchase.

CDC should request the debenture purchase and classification of the loan into liquidation status when:
a)   The loan is 60 or more days past due with no prospect of a deferment or a work out.  Based on a review of current financial statements, determine if a deferment/work out that falls within regular 504 loan servicing guidelines will assist the business. This type of action will be referred to the Center Servicing Department for review and processing.
For a work that requires extension of the maturity date, or other changes that do not fall within regular 504 loan servicing guidelines, SBA must be notified to purchase the debenture and classify the loan in liquidation status.
b)   The Third Party Lender or other senior lien holder has initiated foreclosure proceedings.
c)   A bankruptcy, or other legal action, which will adversely affect repayment of the 504 loan, has been initiated.
 

2)  CDC Status Update Reports

SBA has devised a single form- CDC SBA-serviced Loans QuarterlyStatusReport to report on two CDC requirements: delinquencies over 60 days (pre-purchase) and liquidation updates (post-purchase).
a) Pre Debenture Purchase.
All CDC’s must submit a written update (using the link above) relative to collection activity by CDC on each loan in its portfolio that is 60 days or more past due until the debenture is purchased.    
b) Post Debenture Purchase.
For loans made under the PCLP authority of the CDC, or if the CDC is a designated ACL, a status report must be submitted within 15 days after debenture purchase, and every 90 days thereafter (using the link above) wherein CDC must provide a written update relative to liquidation activity by CDC to SBA.

3.  Site Visit.

A site visit must be completed with a Site Visit Report being submitted to SBA within 15 days of the loan being placed in liquidation status.

4.  Third Party Lender.

CDC to provide information relative to the status of the Third Party Lender’s loan:
a)  The loan balance, including principal, interest, default interest, late fees, and prepayment penalty,
b)  Indication if the loan is in default; and,
c)  If a foreclosure action is imminent.  

5.  Notices.

CDC to forward copies of all default and foreclosure notices filed by Third Party Lender to SBA.CDC to forward copies of all bankruptcy notices to SBA.

6.  Liquidation Plan.

A 504 Liquidation Plan should be prepared after a site visit has been conducted and before any significant action is taken to liquidate the loan.
Liquidation Plans should be completed and submitted to SBA within 30 days after the purchase of the debenture.

7.  Actions.

Release of collateral to facilitate a short sale; release of redemption rights; and other requests by the CDC for an action to be taken must be submitted via e-mail, and include all appropriate supporting documentation.
Please consult the current Servicing and Liquidation Actions CDC Matrix for actions that may be taken under the unilateral authority of the CDC.

8.  Appraisal.

Protective Bid Analysis (Exhibit A) must be prepared based on an appraised value current to within 120 days prior to the action for which the data will be used.  
a)  Calculate the net equity.
b)  Determine if there are any additional mitigating circumstances as indicated by the appraiser, or noted in the site visit.
c)  Based on the above factors, determine if it’s in the Agency’s best interest to enter a bid at the foreclosure sale.

9.  Environmental Investigation.

In the event the protective bid analysis indicates sufficient net equity in the collateral to consider entering protective bid at the Third Party Lender foreclosure sale, the NAICS code must be determined.
If the NAICS Code for the loan is on the list of Environmentally Sensitive Industries, a Phase I, and Reliance Letter must be submitted for SBA review.
For all other loans, at a minimum, an Environmental Questionnaire must be completed.

10.  Expenses.

SBA will reimburse the CDC for recoverable expenses relating to the liquidation of the loan subject to:
•    Requests must be submitted electronically.
•    A separate request must be submitted for each individual loan.
•    Requests may be submitted only quarterly unless the total amount of the expenses is $5,000 or greater.
•    Copies of invoices and other supporting documentation must be included.
•    Requests may be submitted with the Wrap Up Report, regardless of dollar amount.  
 

11.  Litigation.

For loans made under the PCLP authority of the CDC, or if the CDC is a designated ACL, CDC Counsel is responsible to monitor and take appropriate action in litigation matters. 504 Litigation Plan to be submitted to SBA for review and approval.
For all other loans, SBA District Counsel is responsible to monitor and take appropriate action in litigation matters.

12.  Administrative Wage Garnishment.

Review employment status of guarantors and determine potential candidates for an Administrative Wage Garnishment (AWG) referral. Eligible guarantors must have had outside employment for 12 months not earning minimum wage. If it appears an AWG referral is appropriate, provide employer name and address to SBA.

13.  Offer in Compromise.

If a deficiency exists after all of the collateral has been liquidated, obligors who are unable to pay the remaining deficiency in full, may be able to settle their liability on the SBA loan for less that the full amount due. This type of action will be referred to the Center Post-Servicing Department for review and processing.

14.  Wrap Up Report.

504 Liquidation Wrap Up Report is to be submitted to SBA by the CDC within 90 days of completing all reasonable and cost-effective recovery efforts.  
 

Still have questions?

Check out our FAQs (Frequently Asked Questions) regarding the 504 Loan Program.
 

Forms/Documents

Protective Bid Analysis

504 Litigation Plan

504 Liquidation Plan

504 Liquidation Wrap Up Report

Site Visit Report

CDC SBA-serviced Loans Quarterly Status Report

CDC-CPC and Lit Reimbursement

Draft Legal Fee Review
 

Post-Servicing Actions

 

What is a Post Servicing Action?

Post-servicing actions consist primarily of Offers In Compromise and Charge Off actions for both Express and 504 loans. Actions taken on loans after Charge Off would also come to this group.  
 

Where do I send a request?

Requests for Fresno should be sent to fsc.postservicing@sba.gov.

Requests for Little Rock should be sent to lrsc.postservicing@sba.gov

How do I submit an Offer in Compromise?

Use the 8 Tab Offer In Compromise Kit. While it is not a requirement to use this format, it will allow for quicker processing of requests and will help insure that all needed information is included. A SBA Form 1150 (Offer In Compromise) and either SBA Form 770 (Financial Statement of Debtor) or a business financial statement are required for every person or entity wishing to be compromised.

Who needs to submit a Wrap up Report?

Wrap Reports are nice for all 504 loans ready for Charge Off. They are required for all PCLP loans and for all loans liquidated by a CDC included in the Authorized Liquidator Program. A format is available at 504 Liquidation Wrap Up Report
 

Still have questions?

Check out our FAQs (Frequently Asked Questions) regarding Post Servicing.
 

Forms/Documents

1)    SBA Form 1150 — Offer in Compromise 
2)    SBA Form 770 — Financial Statement of Debtor
3)    OIC (Offer in Compromise) 8-Tab Kit
4)    Wrap-up Report