[Federal Register Volume 60, Number 174 (Friday, September 8, 1995)]
[Proposed Rules]
[Pages 46789-46790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22064]



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SMALL BUSINESS ADMINISTRATION

13 CFR Part 108


Loans to State and Local Development Companies Section 504 Loan 
Program Amendments

AGENCY: Small Business Administration.

ACTION: Notice of proposed rulemaking.

SUMMARY: This proposed rule revises the regulations governing the 
collection of fees and the utilization of interest accruing in accounts 
established to administer the 504 loan program in order to permit the 
flexibility required in negotiating with private sector entities for 
the delivery of the 504 program.

DATES: Comments must be received on or before October 10, 1995.

ADDRESSES: Comments should be sent to LeAnn M. Oliver, Acting Director, 
Office of Rural Affairs and Economic Development, Small Business 
Administration, 409 3rd Street SW., suite 8300, Washington DC 20416.

FOR FURTHER INFORMATION CONTACT: LeAnn M. Oliver, Acting Director, 
Office of Rural Affairs and Economic Development, Small Business 
Administration, Telephone (202) 205-6485.

SUPPLEMENTARY INFORMATION: The proposed rule would amend the rule 
governing the Central Servicing Agent (CSA) functions. The existing 504 
program regulations were promulgated based upon the Agency's experience 
with a predecessor program. Sufficient experience has accumulated to 
allow the codification of approaches that have arisen in the 
administration of the program. This rule clarifies that: (1) Fees can 
be collected from the borrower of the proceeds of a debenture 
guaranteed under the program as a one-time initiation fee or a monthly 
servicing fee, (2) fees can be paid to the CSA from either a specific 
borrower's payment or from aggregated funds collected pursuant to a 
master service agreement, and (3) clarifies that 503 companies are to 
receive periodic pro rata disbursements of interest accruing on loan 
payments in the Master Reserve Account pending the debenture payment 
date.

Compliance with Executive Orders 12612, 12778, and 12866, the 
Regulatory Flexibility Act and the Paperwork Reduction Act.

Executive Order 12866 and Regulatory Flexibility Act

    SBA certifies that this proposed rule, if adopted, would not be a 
significant regulatory action for purposes of Executive Order 12866 
and, for purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., would not have a significant economic impact on a substantial 
number of small entities, for the following reasons:
    1. It would not result in an annual economic effect of $100 million 
or more or adversely affect in a material way the economy, a sector or 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities.
    2. It would not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency.
    3. It would not materially alter the budgetary impact of 
entitlements, grants, user fees, or loan programs or the rights and 
obligations of recipients thereof.
    4. It would not raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in E.O. 12866

Executive Order 12612

    SBA certifies that this rule, if adopted, would have no Federalism 
implications warranting the preparation of a Federalism Assessment in 
accordance with Executive Order 12612.

Paperwork Reduction Act

    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA 
hereby certifies that this proposed rule, if adopted, would impose no 
new reporting or recordkeeping requirements.

Executive Order 12778

    SBA certifies that this proposed rule is drafted, the extent 
practicable, in accordance with the standards set forth in section 2 of 
E.O. 12778.

List of Subjects in 13 CFR Part 108

    Loan programs/business, Small businesses.

    For the reasons set forth above, part 108 of the Code of Federal 
Regulations is amended 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.

Assistance Under Sections 504 and 505


Sec. 108.504  [Amended]

    2. Section 108.504(e) is revised to read as follows:
* * * * *
    (e) Central Servicing Agent. This subsection supersedes 
Sec. 108.503-11 for loans funded under Section 504 and is applicable to 
all such loans whenever funded.
    (1) SBA, in a master servicing agreement, shall designate a Central 
Servicing Agent (CSA) to act for all 503 companies participating in the 
sale of 504 Debentures, to ensure uniformity 

[[Page 46790]]
and the orderly flow of funds among 504 loan recipients, 503 companies, 
and the Trustee or Transfer Agent (see Sec. 108.505(f)(3) of this 
part). Pursuant to such master servicing agreement, in consideration of 
SBA's guaranty of the 503 company's debenture(s), the 503 Company, with 
the borrower's consent shall enter into a servicing agent agreement 
(504 program), SBA Form 1506, with the CSA. Execution of such form 
shall constitute acceptance by the 503 company and the borrower of the 
terms of the master servicing agreement. Amendments may be made in the 
terms and conditions of the master servicing agreement as necessary to 
adapt to changing program needs.
    (2) The borrower may be charged an initiation fee and/or a monthly 
servicing fee as prescribed by Form 1506, which shall be in addition to 
the fees and charges permitted by Sec. 108.503-6 of this part.
    (3) The CSA may be compensated through an initiation fee and/or a 
monthly service fee. Pursuant to instructions in the master servicing 
agreement, the CSA's compensation may be paid from initiation fees on 
specific loans or from aggregated service fees.
    (4) SBA Form 1506 shall prescribe the deposits into and the 
disbursements from a master reserve account, set up by the CSA pursuant 
to said master servicing agreement. The master reserve account shall be 
funded by a reserve deposit, and a funding fee to be published from 
time to time in the Federal Register, and by principal and interest 
payments of 504 loans. SBA shall add funds pursuant to its guaranty to 
insure the full and timely payment of the debentures in the event a 
borrower fails to make full and timely payment on its 504 loan. Funds 
in the master reserve account shall be used to defray expenses of the 
program described under paragraph (b) of this section. Interest 
accruing on loan payments between the date of monthly payment and the 
debenture payment date shall be paid to the 503 company servicing the 
loan and shall be disbursed to 503 companies periodically on a pro rata 
basis. Funds in the master reserve escrow account representing interest 
earned prior to October 1991 and not distributed to a specific 503 
company may be expended by SBA for the purposes of program 
administration.
* * * * *
(Catalog of Federal Domestic Assistance 59.036 Certified Development 
Company Loans (503 Loans); 59.041 Certified Development Company 
Loans (504 Loans)).

    Dated: June 29, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-22064 Filed 9-7-95; 8:45 am]
BILLING CODE 8025-01-P