[Federal Register Volume 60, Number 80 (Wednesday, April 26, 1995)]
[Rules and Regulations]
[Pages 20392-20394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10178]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 108
Loans to State and Local Development Companies; Premier Certified
Lenders Program for Certified Development Companies
AGENCY: Small Business Administration (SBA).
ACTION: Interim final rule.
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SUMMARY: On October 22, 1994, the President signed Public Law 103-403,
the Small Business Administration Reauthorization and Amendments Act of
1994. Section 217 of that Act added a new section 508 to the Small
Business Investment Act, 15 U.S.C. 695 et seq. This new section
authorizes the Small Business Administration (SBA) to establish a
Premier Certified Lenders Program. This rule, published in accordance
with Public Law 103-403, is intended to implement this new program.
DATES: This rule is effective on April 26, 1995; however, SBA will
accept comments submitted by May 26, 1995.
ADDRESSES: Comments should be sent to LeAnn M. Oliver, Acting Director,
Office of Rural Affairs & Economic Development, Small Business
Administration, 409 Third Street SW., suite 8300, Washington, DC 20416.
[[Page 20393]] FOR FURTHER INFORMATION CONTACT:
LeAnn Oliver, (202) 205-6485.
SUPPLEMENTARY INFORMATION: Public Law 103-403, enacted October 22,
1994, established a Premier Certified Lenders Program (PCLP) for
Certified Development Companies (CDCs). The law provides that, on a
three-year pilot program basis, SBA may establish the PCLP for not more
than 15 CDCs. The PCLP is intended to emulate the successful Preferred
Lender Program for the SBA's General Business Loan Program and to
transfer that experience to the development company loan program. This
recognizes the maturity of individual local certified development
companies and the favorable track record of the overall development
company loan program. In this way, it will enable SBA to increase
responsiveness to small business borrowers by taking the partnership
role it normally maintains with the certified development companies to
a higher level with CDCs that are designated as PCLP/CDCs.
The concept of a PCLP/CDC is based on the PLP designation for
lenders participating with the SBA 7(a) General Business Loan Program.
In consideration for a PCLP/CDC agreeing to share in the risk of loan
making, the SBA will delegate authority to the PCLP/CDC for the purpose
of authorizing, closing and servicing development company loans.
Similar to the work of the preferred participating lender in the
General Business Loan Program, a PCLP/CDC will be required to obtain
SBA's final approval of the eligibility of a debenture for guaranty,
but will not be required to obtain SBA's approval for underlying
decisions regarding creditworthiness of the borrower, loan closing, or
legal requirements imposed by law or regulation. Both PCLP and PLP
loans will be processed through the same centralized SBA processing
center.
The Premier Certified Lender Program responds to the significant
increase in development company loan program activity and recognizes
the growing strength and capability of CDCs. A PCLP/CDC will be
designated based on a high level of 504 loan activity, a history of
submitting adequately analyzed debenture guarantee application packages
to SBA, and a favorable recommendation from the SBA field office with
which the CDC works. Also as a condition of designation, a PCLP/CDC
will commit to establish and maintain a loss reserve equal to the
greater of the company's historic loss rate on guaranteed debentures or
1% of the outstanding amount of debentures issued by the company and
guaranteed by SBA under the PLCP Program.
Compliance With Executive Orders 12612, 12778, and 12866, the
Regulatory Flexibility Act and the Paperwork Reduction Act
For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et
seq., SBA certifies that this rule will not have a significant economic
impact on a substantial number of small entities.
SBA certifies that this rule will not constitute a significant
regulatory action for purposes of Executive Order 12866, since the
change is not likely to result in an annual effect on the economy of
$100 million or more.
SBA certifies this rule will not impose additional reporting or
recordkeeping requirements which would be subject to the Paperwork
Reduction Act, 44 U.S.C. Ch. 35.
SBA certifies that this rule will not have Federalism implications
warranting the preparation of a Federalism Assessment in accordance
with Executive Order 12612.
SBA certifies that this rule is drafted, to the extent practicable,
in accordance with the standards set forth in Section 2 of Executive
Order 12778.
List of Subjects in 13 CFR Part 108
Loan programs--business, Small businesses.
For the reasons set forth above, SBA amends part 108 of title 13 of
the Code of Federal Regulations as follows:
PART 108--[AMENDED]
1. The authority citation for part 108 continues to read as
follows:
Authority: 15 U.S.C. 687(c), 695, 696, 697a, 697b, 697c.
2. Section 108.2 is amended by adding definitions of the following
terms in the appropriate alphabetical order: ``Premier Certified
Lender'' and ``PCLP'' to read as follows:
Sec. 108.2 Definitions.
* * * * *
PCLP means the Premier Certified Lenders Program as provided for in
Sec. 108-509.
Premier Certified Lender means a 503 Company which has met the
eligibility requirements of Sec. 108.509-3 and which has executed with
SBA the PCLP Agreement.
* * * * *
3. A new undesignated center heading and Secs. 108.509-1 through
108.509-5 are added to read as follows:
Premier Certified Lenders Program
Sec. 108.509-1 Objectives and characteristics of premier certified
lenders program.
(a) Purpose. The purpose of this subpart is to implement section
217 of Public Law 103-403 which authorizes SBA to delegate authority to
designated 503 companies, hereinafter called Premier Certified Lenders,
to undertake processing, approval, closing and servicing of loans made
with the proceeds of SBA guaranteed debentures.
(b) Characteristics. SBA will solicit and approve qualified 503
companies to serve as Premier Certified Lenders. Each Premier Certified
Lender will be delegated authority to approve loans that are funded
with the proceeds of debentures issued by such company. SBA will retain
the responsibility to guarantee any such debenture. All rules in this
part 108 relating to the operations of participating 503 companies
shall apply to Premier Certified Lenders.
(c) Approval. The approval of a loan by a Premier Certified Lender
shall be subject to final approval by SBA as to eligibility of the
guarantee of a debenture, the proceeds of which will fund the loan.
Such final approval shall not include a detailed review of decisions by
the Lender relative to the loan involving creditworthiness, loan
closing, or compliance with legal requirements imposed by law or
regulation, provided that SBA will satisfy itself that its guarantee of
any debenture issued by a Premier Certified Lender is fully supportable
under applicable laws and regulations as to the eligibility of the
guaranty of a debenture before it approves any such guarantee.
(d) Pilot Program Period. On a pilot program basis, SBA may
designate not more than fifteen Premier Certified Lenders. Effective on
October 1, 1997, the pilot program ends and sections 108-509-1 thru
108-509-5 of part 108 are repealed.
Sec. 108.509-2 Application procedure.
Upon the request of a 503 company to participate in the Premier
Certified Lender program, the SBA branch or district office with which
the 503 Company has had its most significant activity shall review the
503 company's application and prepare its recommendation. The District
Director or Branch Manager of that district or branch office shall
transmit all requests, accompanied by the district or branch office
recommendation, to SBA Central Office where the Director of the Office
of Rural Affairs and Economic Development shall make the final decision
on all such requests. After a [[Page 20394]] favorable decision, the
district director will designate the lender by executing with the 503
Company the PCLP Agreement. Before it can operate as a Premier
Certified Lender, the 503 company must execute such PCLP Agreement.
Sec. 108.509-3 Eligibility.
In making the determination of whether a 503 company may become a
Premier Certified Lender, SBA shall consider, but is not limited to,
the following factors:
(a) Whether the 503 company has been an active participant in the
Accredited Lenders Program under Sec. 108.508 for not less than the
preceding 12 months, and whether the 503 company has demonstrated
ability to work with the local SBA office in a cooperative and
constructive manner. Prior to January 1, 1996, SBA may waive the
requirement for prior activity in the Accredited Lenders Program if
such company is otherwise qualified to participate in that program;
(b) Whether the 503 company has a history of submitting to SBA
complete, accurate and adequately analyzed debenture guaranty
application packages;
(c) Whether the 503 company agrees to assume and to reimburse SBA
for 10 percent of any loss sustained by the SBA as a result of a
default by the company in the payment of principal or interest on a
debenture issued by such company and guaranteed by SBA under the PCLP
Program; and
Whether the 503 company has a historical loss rate acceptable to
SBA.
Sec. 108.509-4 Loss reserve.
Each Premier Certified Lender shall establish a loss reserve for
financings approved pursuant to the PCL Program.
(a) Amount. The amount of the loss reserve shall be the greater of:
(1) The historic loss rate on all debentures issued by such
company; or
(2) 10 percent of the amount of the company's exposure on
debentures issued under the PCL Program.
(b) Assets. The loss reserve shall be comprised of segregated
assets of the company which shall be securitized in favor of the SBA.
(c) Contributions. For each debenture issued by a Premier Certified
Lender, the company shall make a contribution proportionate to the
total amount of loss reserve required in the following amounts and at
the following intervals:
(1) 50 percent when the debenture is funded,
(2) 25 percent not later than one year after the debenture is
funded, and
(3) 25 percent not later than two years after the debenture is
funded.
Sec. 108.509-5 Suspension or revocation.
(a) Cause. The designation of a 503 Company as a Premier Certified
Lender may be suspended or revoked if the SBA determines that:
(1) The 503 company has not continued to meet the criteria for
eligibility under Sec. 108.509-3; or
(2) The 503 company has not established or maintained the loss
reserve required under Sec. 108.509-4; or
(3) The 503 company has failed to adhere to the SBA's rules and
regulations or has violated any other applicable provision of law.
(b) Review. At intervals not greater than 12 months, SBA shall
review the financings made by each Premier Certified Lender. The review
shall include the lender's credit decisions and general compliance with
the eligibility requirements for each financing approved under the
program authorized by this section.
(c) Procedure. SBA reserves the unilateral right to suspend or
revoke the designation of any Premier Certified Lender as a result of
any violation of SBA regulations, any breach of any agreement with SBA,
or any change of circumstance resulting in the Lender's inability to
meet the operational requirements set forth herein: Provided, however,
that such suspension or revocation shall not invalidate any guaranty
previously entered into by SBA. Proceedings for such purposes will be
initiated by a determination to suspend or revoke issued by the
Director of the Office of Rural Affairs and Economic Development. Such
determination may be appealed to the Associate Deputy Administrator for
Economic Development whose decision on any appeal shall be the final
decision of SBA.
Catalog of Federal Domestic Assistance 59.036 Certified
Development Company Loans (503 Loans); 59.041 Certified Development
Company Loans (504 Loans).
Dated: March 17, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-10178 Filed 4-25-95; 8:45 am]
BILLING CODE 8025-01-M