[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2614 Reported in House (RH)]

                                                 Union Calendar No. 166
106th CONGRESS
  1st Session
                                H. R. 2614

                          [Report No. 106-278]

To amend the Small Business Investment Act to make improvements to the 
     certified development company program, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 27, 1999

   Mr. Talent (for himself, Ms. Velazquez, Mrs. Kelly, Ms. Millender-
 McDonald, Mr. Hill of Montana, Mr. Davis of Illinois, Mrs. Bono, Mrs. 
    Jones of Ohio, Ms. Berkley, Mrs. Napolitano, Mr. Pascrell, Mrs. 
    McCarthy of New York, Mr. Sweeney, Mr. Combest, and Mr. DeMint) 
 introduced the following bill; which was referred to the Committee on 
                             Small Business

                             August 2, 1999

  Additional sponsors: Mr. LoBiondo, Mr. Baird, and Mr. Udall of New 
                                 Mexico

                             August 2, 1999

Committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed

_______________________________________________________________________

                                 A BILL


 
To amend the Small Business Investment Act to make improvements to the 
     certified development company program, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Certified Development Company 
Program Improvements Act of 1999''.

SEC. 2. WOMEN-OWNED BUSINESSES.

    Section 501(d)(3)(C) of the Small Business Investment Act (15 
U.S.C. 695(d)(3)(C)) is amended by inserting before the comma ``or 
women-owned business development''.

SEC. 3. MAXIMUM DEBENTURE SIZE.

    Section 502(2) of the Small Business Investment Act of 1958 (15 
U.S.C. 696(2)) is amended to read as follows:
            ``(2) Loans made by the Administration under this section 
        shall be limited to $1,000,000 for each such identifiable small 
        business concern, except loans meeting the criteria specified 
        in section 501(d)(3), which shall be limited to $1,300,000 for 
        each such identifiable small business concern.''.

SEC. 4. FEES.

    Section 503(f) of the Small Business Investment Act of 1958 (15 
U.S.C. 697(f)) is amended to read as follows:
    ``(f) Effective Date.--The fees authorized by subsections (b) and 
(d) shall apply to financings approved by the Administration on or 
after October 1, 1996, but shall not apply to financings approved by 
the Administration on or after October 1, 2003.''.

SEC. 5. PREMIER CERTIFIED LENDERS PROGRAM.

    Section 217(b) of the Small Business Reauthorization and Amendments 
Act of 1994 (relating to section 508 of the Small Business Investment 
Act) is repealed.

SEC. 6. SALE OF CERTAIN DEFAULTED LOANS.

    Section 508 of the Small Business Investment Act of 1958 (15 U.S.C. 
697e) is amended--
            (1) in subsection (a), by striking ``On a pilot program 
        basis, the'' and inserting ``The'';
            (2) by redesignating subsections (d) though (i) as 
        subsections (e) though (j), respectively;
            (3) in subsection (f) (as redesignated by paragraph (2)), 
        by striking ``subsection (f)'' and inserting ``subsection 
        (g)'';
            (4) in subsection (h) (as redesignated by paragraph (2)), 
        by striking ``subsection (f)'' and inserting ``subsection 
        (g)''; and
            (5) by inserting after subsection (c) the following:
    ``(d) Sale of Certain Defaulted Loans.--
            ``(1) Notice.--If, upon default in repayment, the 
        Administration acquires a loan guaranteed under this section 
        and identifies such loan for inclusion in a bulk asset sale of 
        defaulted or repurchased loans or other financings, it shall 
        give prior notice thereof to any certified development company 
        which has a contingent liability under this section. The notice 
        shall be given to the company as soon as possible after the 
        financing is identified, but not less than 90 days before the 
        date the Administration first makes any records on such 
        financing available for examination by prospective purchasers 
        prior to its offering in a package of loans for bulk sale.
            ``(2) Limitations.--The Administration shall not offer any 
        loan described in paragraph (1) as part of a bulk sale unless 
        it--
                    ``(A) provides prospective purchasers with the 
                opportunity to examine the Administration's records 
                with respect to such loan; and
                    ``(B) provides the notice required by paragraph 
                (1).''.

SEC. 7. LOAN LIQUIDATION.

    (a) Liquidation and Foreclosure.--Title V of the Small Business 
Investment Act of 1958 (15 U.S.C. 695 et seq.) is amended by adding at 
the end the following:

``SEC. 510. FORECLOSURE AND LIQUIDATION OF LOANS.

    ``(a) Delegation of Authority.--In accordance with this section, 
the Administration shall delegate to any qualified State or local 
development company (as defined in section 503(e)) that meets the 
eligibility requirements of subsection (b)(1) the authority to 
foreclose and liquidate, or to otherwise treat in accordance with this 
section, defaulted loans in its portfolio that are funded with the 
proceeds of debentures guaranteed by the Administration under section 
503.
    ``(b) Eligibility for Delegation.--
            ``(1) Requirements.--A qualified State or local development 
        company shall be eligible for a delegation of authority under 
        subsection (a) if--
                    ``(A) the company--
                            ``(i) has participated in the loan 
                        liquidation pilot program established by the 
                        Small Business Programs Improvement Act of 1996 
                        (15 U.S.C. 695 note), as in effect on the day 
                        before promulgation of final regulations by the 
                        Administration implementing this section;
                            ``(ii) is participating in the Premier 
                        Certified Lenders Program under section 508; or
                            ``(iii) during the 3 fiscal years 
                        immediately prior to seeking such a delegation, 
                        has made an average of not less than 10 loans 
                        per year that are funded with the proceeds of 
                        debentures guaranteed under section 503; and
                    ``(B) the company--
                            ``(i) has 1 or more employees--
                                    ``(I) with not less than 2 years of 
                                substantive, decision-making experience 
                                in administering the liquidation and 
                                workout of problem loans secured in a 
                                manner substantially similar to loans 
                                funded with the proceeds of debentures 
                                guaranteed under section 503; and
                                    ``(II) who have completed a 
                                training program on loan liquidation 
                                developed by the Administration in 
                                conjunction with qualified State and 
                                local development companies that meet 
                                the requirements of this paragraph; or
                            ``(ii) submits to the Administration 
                        documentation demonstrating that the company 
                        has contracted with a qualified third-party to 
                        perform any liquidation activities and secures 
                        the approval of the contract by the 
                        Administration with respect to the 
                        qualifications of the contractor and the terms 
                        and conditions of liquidation activities.
            ``(2) Confirmation.--On request the Administration shall 
        examine the qualifications of any company described in 
        subsection (a) to determine if such company is eligible for the 
        delegation of authority under this section. If the 
        Administration determines that a company is not eligible, the 
        Administration shall provide the company with the reasons for 
        such ineligibility.
    ``(c) Scope of Delegated Authority.--
            ``(1) In general.--Each qualified State or local 
        development company to which the Administration delegates 
        authority under section (a) may with respect to any loan 
        described in subsection (a)--
                    ``(A) perform all liquidation and foreclosure 
                functions, including the purchase in accordance with 
                this subsection of any other indebtedness secured by 
                the property securing the loan, in a reasonable and 
                sound manner according to commercially accepted 
                practices, pursuant to a liquidation plan approved in 
                advance by the Administration under paragraph (2)(A);
                    ``(B) litigate any matter relating to the 
                performance of the functions described in subparagraph 
                (A), except that the Administration may--
                            ``(i) defend or bring any claim if--
                                    ``(I) the outcome of the litigation 
                                may adversely affect the 
                                Administration's management of the loan 
                                program established under section 502; 
                                or
                                    ``(II) the Administration is 
                                entitled to legal remedies not 
                                available to a qualified State or local 
                                development company and such remedies 
                                will benefit either the Administration 
                                or the qualified State or local 
                                development company; or
                            ``(ii) oversee the conduct of any such 
                        litigation; and
                    ``(C) take other appropriate actions to mitigate 
                loan losses in lieu of total liquidation or 
                foreclosures, including the restructuring of a loan in 
                accordance with prudent loan servicing practices and 
                pursuant to a workout plan approved in advance by the 
                Administration under paragraph (2)(C).
            ``(2) Administration approval.--
                    ``(A) Liquidation plan.--
                            ``(i) In general.--Before carrying out 
                        functions described in paragraph (1)(A), a 
                        qualified State or local development company 
                        shall submit to the Administration a proposed 
                        liquidation plan.
                            ``(ii) Administration action on plan.--
                                    ``(I) Timing.--Not later than 15 
                                business days after a liquidation plan 
                                is received by the Administration under 
                                clause (i), the Administration shall 
                                approve or reject the plan.
                                    ``(II) Notice of no decision.--With 
                                respect to any plan that cannot be 
                                approved or denied within the 15-day 
                                period required by subclause (I), the 
                                Administration shall within such period 
                                provide in accordance with subparagraph 
                                (E) notice to the company that 
                                submitted the plan.
                            ``(iii) Routine actions.--In carrying out 
                        functions described in paragraph (1)(A), a 
                        qualified State or local development company 
                        may undertake routine actions not addressed in 
                        a liquidation plan without obtaining additional 
                        approval from the Administration.
                    ``(B) Purchase of indebtedness.--
                            ``(i) In general.--In carrying out 
                        functions described in paragraph (1)(A), a 
                        qualified State or local development company 
                        shall submit to the Administration a request 
                        for written approval before committing the 
                        Administration to the purchase of any other 
                        indebtedness secured by the property securing a 
                        defaulted loan.
                            ``(ii) Administration action on request.--
                                    ``(I) Timing.--Not later than 15 
                                business days after receiving a request 
                                under clause (i), the Administration 
                                shall approve or deny the request.
                                    ``(II) Notice of no decision.--With 
                                respect to any request that cannot be 
                                approved or denied within the 15-day 
                                period required by subclause (I), the 
                                Administration shall within such period 
                                provide in accordance with subparagraph 
                                (E) notice to the company that 
                                submitted the request.
                    ``(C) Workout plan.--
                            ``(i) In general.--In carrying out 
                        functions described in paragraph (1)(C), a 
                        qualified State or local development company 
                        shall submit to the Administration a proposed 
                        workout plan.
                            ``(ii) Administration action on plan.--
                                    ``(I) Timing.--Not later than 15 
                                business days after a workout plan is 
                                received by the Administration under 
                                clause (i), the Administration shall 
                                approve or reject the plan.
                                    ``(II) Notice of no decision.--With 
                                respect to any workout plan that cannot 
                                be approved or denied within the 15-day 
                                period required by subclause (I), the 
                                Administration shall within such period 
                                provide in accordance with subparagraph 
                                (E) notice to the company that 
                                submitted the plan.
                    ``(D) Compromise of indebtedness.--In carrying out 
                functions described in paragraph (1)(A), a qualified 
                State or local development company may--
                            ``(i) consider an offer made by an obligor 
                        to compromise the debt for less than the full 
                        amount owing; and
                            ``(ii) pursuant to such an offer, release 
                        any obligor or other party contingently liable, 
                        if the company secures the written approval of 
                        the Administration.
                    ``(E) Contents of notice of no decision.--Any 
                notice provided by the Administration under 
                subparagraphs (A)(ii)(II), (B)(ii)(II), or 
                (C)(ii)(II)--
                            ``(i) shall be in writing;
                            ``(ii) shall state the specific reason for 
                        the Administration's inability to act on a plan 
                        or request;
                            ``(iii) shall include an estimate of the 
                        additional time required by the Administration 
                        to act on the plan or request; and
                            ``(iv) if the Administration cannot act 
                        because insufficient information or 
                        documentation was provided by the company 
                        submitting the plan or request, shall specify 
                        the nature of such additional information or 
                        documentation.
            ``(3) Conflict of interest.--In carrying out functions 
        described in paragraph (1), a qualified State or local 
        development company shall take no action that would result in 
        an actual or apparent conflict of interest between the company 
        (or any employee of the company) and any third party lender, 
        associate of a third party lender, or any other person 
        participating in a liquidation, foreclosure, or loss mitigation 
        action.
    ``(d) Suspension or Revocation of Authority.--The Administration 
may revoke or suspend a delegation of authority under this section to 
any qualified State or local development company, if the Administration 
determines that the company--
            ``(1) does not meet the requirements of subsection (b)(1);
            ``(2) has violated any applicable rule or regulation of the 
        Administration or any other applicable law; or
            ``(3) fails to comply with any reporting requirement that 
        may be established by the Administration relating to carrying 
        out of functions described in paragraph (1).
    ``(e) Report.--
            ``(1) In general.--Based on information provided by 
        qualified State and local development companies and the 
        Administration, the Administration shall annually submit to the 
        Committees on Small Business of the House of Representatives 
        and of the Senate a report on the results of delegation of 
        authority under this section.
            ``(2) Contents.--Each report submitted under paragraph (1) 
        shall include the following information:
                    ``(A) With respect to each loan foreclosed or 
                liquidated by a qualified State or local development 
                company under this section, or for which losses were 
                otherwise mitigated by the company pursuant to a 
                workout plan under this section--
                            ``(i) the total cost of the project 
                        financed with the loan;
                            ``(ii) the total original dollar amount 
                        guaranteed by the Administration;
                            ``(iii) the total dollar amount of the loan 
                        at the time of liquidation, foreclosure, or 
                        mitigation of loss;
                            ``(iv) the total dollar losses resulting 
                        from the liquidation, foreclosure, or 
                        mitigation of loss; and
                            ``(v) the total recoveries resulting from 
                        the liquidation, foreclosure, or mitigation of 
                        loss, both as a percentage of the amount 
                        guaranteed and the total cost of the project 
                        financed.
                    ``(B) With respect to each qualified State or local 
                development company to which authority is delegated 
                under this section, the totals of each of the amounts 
                described in clauses (i) through (v) of subparagraph 
                (A).
                    ``(C) With respect to all loans subject to 
                foreclosure, liquidation, or mitigation under this 
                section, the totals of each of the amounts described in 
                clauses (i) through (v) of subparagraph (A).
                    ``(D) A comparison between--
                            ``(i) the information provided under 
                        subparagraph (C) with respect to the 12-month 
                        period preceding the date on which the report 
                        is submitted; and
                            ``(ii) the same information with respect to 
                        loans foreclosed and liquidated, or otherwise 
                        treated, by the Administration during the same 
                        period.
                    ``(E) The number of times that the Administration 
                has failed to approve or reject a liquidation plan in 
                accordance with subparagraph (A)(i), a workout plan in 
                accordance with subparagraph (C)(i), or to approve or 
                deny a request for purchase of indebtedness under 
                subparagraph (B)(i), including specific information 
                regarding the reasons for the Administration's failure 
                and any delays that resulted.''.
    (b) Regulations.--
            (1) In general.--Not later than 150 days after the date of 
        enactment of this Act, the Administrator shall issue such 
        regulations as may be necessary to carry out section 510 of the 
        Small Business Investment Act of 1958, as added by subsection 
        (a) of this section.
            (2) Termination of pilot program.--Beginning on the date 
        which the final regulations are issued under paragraph (1), 
        section 204 of the Small Business Programs Improvement Act of 
        1996 (15 U.S.C. 695 note) shall cease to have effect.




                                                 Union Calendar No. 166

106th CONGRESS

  1st Session

                               H. R. 2614

                          [Report No. 106-278]

_______________________________________________________________________

                                 A BILL

To amend the Small Business Investment Act to make improvements to the 
     certified development company program, and for other purposes.

_______________________________________________________________________

                             August 2, 1999

Committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed