[Federal Register Volume 61, Number 33 (Friday, February 16, 1996)]
[Notices]
[Pages 6281-6282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3538]



=======================================================================
-----------------------------------------------------------------------

SMALL BUSINESS ADMINISTRATION


Request for Ideas, Recommendations and Information on the Most 
Cost Efficient Method of Servicing Disaster Home Loans

AGENCY: Small Business Administration.

ACTION: Request for comments.

-----------------------------------------------------------------------

SUMMARY: The Small Business Administration requests ideas, suggestions 
and information as to the most efficient method of handling the 
servicing and collection functions of its Disaster Home Loan Program at 
a cost consistent with or below existing levels. This includes but is 
not limited to contracting with the private sector to perform all or 
part of this service. SBA also solicits comments on the public policy 
issue of how best to work with disaster loan borrowers to cure defaults 
in ways other than foreclosure and under what, if any, circumstances 
should disaster victims be permitted to remain in their home even if 
they cannot pay on the loan.

DATES: It is requested that comments be received by the SBA no later 
than April 16, 1996.

ADDRESSES: Comments should be addressed to Allan S. Mandel, Director, 
Office of Policy, Office of Borrower and Lender Servicing, SBA, Suite 
8300, 409 Third Street SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Allan S. Mandel, Director, Office of 
Policy, Office of Borrower and Lender Servicing, SBA, 409 Third Street 
SW., Washington, DC 20416 (202/205-6488).

SUPPLEMENTARY INFORMATION: The U.S. Small Business Administration 
operates a Disaster Loan Program, under which direct government loans 
are made in Federally-declared disaster areas to eligible home and 
business owners to assist them in replacing, rebuilding and repairing 
their property damaged in the disaster. The Agency currently (10/31/95) 
has a portfolio of 198,000 Disaster Home Loans valued at $3.2 billion. 
Ninety-three percent of the loans are current on their payments. Most 
of this portfolio, 182,000 loans valued at $2.9 billion, are serviced 
by the SBA in four Disaster Home Loan Centers located in Birmingham, 
Alabama; New York City; El Paso, Texas; and Santa Ana, California. Most 
of the loans are in a second or lower lien position. Servicing 
functions may include approval of subordination of the SBA loan, 
approval of assumption of the SBA loan, approval of substitution of 
collateral, approval of partial release of collateral, making parcel 
map revisions due to boundary 

[[Page 6282]]
changes, authorizing the issuance of insurance checks, responding to 
demands for payoff, approval of release of collateral documents and 
notes, responding to Freedom of Information Act requests, handling 
consumer disputes of credit bureau reports, and handling Congressional 
inquiries. Soon the servicing function will also include monitoring 
payment of flood insurance and flood plain maps to insure that any 
borrower required to purchase flood insurance or any borrower whose 
property becomes located in a flood plain actually purchases insurance. 
If they do not, the servicer will purchase it and add the cost to the 
loan balance. Collection functions include dealing with delinquent 
loans, deferral, reduction in payments or other loan restructuring, 
bankruptcy and probate, issuance of foreclosure and tax sale notices 
and other liquidation processes.
    The SBA is hereby requesting ideas, suggestions and information as 
to the most efficient method of handling the servicing and collection 
functions at a cost consistent with or below existing levels. This 
includes but is not limited to contracting with the private sector to 
perform all or part of this service. (Such actions would require a 
change in law, as Section 5 (b) (7) of the Small Business Act currently 
prohibits SBA from contracting or delegating its responsibility for 
servicing direct loans to anyone other than SBA personnel.) SBA also 
solicits comments on the public policy issue of how best to work with 
disaster loan borrowers to cure defaults in ways other than foreclosure 
and under what, if any, circumstances should disaster victims be 
permitted to remain in their home even if they cannot pay on the loan.
Arnold S. Rosenthal,
Assistant Administrator for Borrower and Lender Servicing.
[FR Doc. 96-3538 Filed 2-15-96; 8:45 am]
BILLING CODE 8025-01-P