[Federal Register Volume 62, Number 2 (Friday, January 3, 1997)]
[Rules and Regulations]
[Pages 301-302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-103]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Rules
and Regulations
[[Page 301]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
Business Loans
AGENCY: Small Business Administration (SBA).
ACTION: Interim final rule with request for comments.
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SUMMARY: Section 103(c) of the Small Business Programs Improvement Act
of 1996 (1996 legislation), enacted on September 30, 1996, authorizes
SBA to continue its Low Documentation (LowDoc) loan program through
lenders with significant experience in making small business loans. The
Act requires SBA to promulgate regulations by December 31, 1996. This
interim final rule implements this requirement. SBA is soliciting and
will consider any comments it receives with respect to this interim
final rule in making future adjustments.
DATES: This rule is effective January 3, 1997. Comments may be made by
February 3, 1997.
ADDRESSES: Comments should be sent to Jane Palsgrove Butler, Acting
Associate Administrator for Financial Assistance, Small Business
Administration, 409 Third Street, N.W., Washington, D.C. 20416.
FOR FURTHER INFORMATION CONTACT: Michael J. Dowd, Director, Office of
Loan Programs, (202) 205-6570.
SUPPLEMENTARY INFORMATION: Section 103(c) of the 1996 legislation (Pub.
L. 104-208) amends section 7(a) of the Small Business Act (15 U.S.C.
636(a)) and authorizes SBA to continue its LowDoc loan program through
lenders with significant experience in making small business loans.
Under the LowDoc program, SBA may guaranty repayment of up to 80% of a
loan of $100,000 or less made to a small business by a participating
SBA lender. In the LowDoc program the SBA requires a lender to submit
less documentation to support its guaranty request than SBA requires
for other loans guaranteed under section 7(a) of the Small Business
Act. The 1996 legislation requires SBA to promulgate regulations
defining the experience necessary for a lender to be designated as
experienced.
SBA believes that an experienced lender should be an SBA qualified
lender with significant current activity in making small loans to small
businesses. SBA presently qualifies all of its participating lenders
pursuant to section 410 of its regulations (13 CFR Sec. 120.410). Once
qualified, lenders enter into a guarantee agreement (SBA Form 750) with
SBA. A lender's qualification can be revoked for failure to maintain
regulatory compliance. SBA is satisfied that this qualification process
is satisfactory to assure that only experienced and capable lenders
participate in its programs.
SBA presently monitors the activity of lenders which participate in
its programs and retains information regarding their SBA activity. In
addition, while banking regulators do not require banks and thrift
institutions to track or report lending activity with small businesses,
they do require banks to report the number of small loans outstanding
as of each ``call report'' date. SBA uses this data on commercial/
industrial loans and for commercial real estate loans made by banks and
thrifts to supplement the information it retains regarding qualified
lenders.
SBA has reviewed the activity of its own portfolio of active
lenders and that of the lending community at large to determine what
constitutes a sufficient number of small loans for purposes of
qualification as a LowDoc lender. It also reviewed its own requirements
for the origination, servicing and liquidation capabilities of SBA
guaranteed lenders. On the basis of that review, SBA is satisfied that
a lender should qualify as having significant experience lending to
small business concerns if it is: (1) a bank or thrift institution
which has executed an SBA Form 750, Loan Guaranty Agreement, and which
has at least 20 qualified loans outstanding as of the call report date
closest to the date of its fiscal year end, or (2) an institution other
than a bank or thrift institution which has executed a SBA Form 750,
Loan Guaranty Agreement, and which has at least 20 qualified loans
outstanding as of its latest fiscal year end. A qualified loan is one
which was initially approved in the amount of $100,000 or less and is
classified as a commercial, industrial, or commercial real estate loan
for purposes of call reporting.
SBA will consider good cause exceptions to this definition on a
case by case basis. Lenders seeking an exception should make their
requests directly to the Associate Administrator for Financial
Assistance.
Compliance With Regulatory Flexibility Act, Executive Orders 12866,
12612, and 12778, the Unfunded Mandates Act and the Paperwork
Reduction Act
SBA certifies that this interim final rule will not have a
significant impact on a substantial number of small entities for
purposes of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) This
rule only affects those banks that make fewer than 20 qualified loans
to small business and want to participate in the SBA's LowDoc Loan
Program. A qualified loan is one which was initially approved in the
amount of $100,000 or less and is classified as a commercial,
industrial or commercial real estate loan for purposes of call
reporting. Approximately 500 banks out of 10,000 will be affected by
this rule.
SBA certifies that this interim final rule is not a ``significant
regulatory action'' under Executive Order 12866. It does not have an
annual effect on the economy of $100 million or more and does not
adversely affect in a material way the economy or any sector of the
economy.
SBA certifies that this interim final rule will not have federalism
implications warranting a Federalism Assessment under Executive Order
12612. SBA further certifies that this interim final rule will not add
any new reporting or recordkeeping requirements under the Paperwork
Reduction Act of 1980, 44 U.S.C., chapter 35. For purposes of Executive
Order 12778, SBA certifies that this interim final rule is drafted, to
the extent practicable, in accordance with the standards set forth in
section 2 of that order.
Because this final rule is required to be promulgated by December
31, 1996, SBA is publishing it without opportunity for prior public
comment pursuant to 5 U.S.C. 553(b)(A). However, SBA will consider any
comments it receives with respect to
[[Page 302]]
this final rule in making future adjustments.
(Catalog of Federal Domestic Assistance Program No. 59.012)
List of Subjects in 13 CFR Part 120
Loan programs--business, Small businesses.
Accordingly, pursuant to the authority contained in section 5(b)(6)
of the Small Business Act (15 U.S.C. 634(b)(6)), SBA amends part 120,
chapter I, title 13, Code of Federal Regulations, as follows:
PART 120--BUSINESS LOANS
1. The authority citation for Part 120 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6) and 636(a) and (h).
2. Section 120.410 is amended by removing ``; and'' at the end of
paragraph (c), removing the period at the end of paragraph (d) and
adding ``; and'' in its place, and adding a new paragraph (e) to read
as follows:
Sec. 120.410 Requirements for all participating Lenders.
* * * * *
(e) In order to make Low Documentation loans, be:
(1) A bank or thrift institution which has executed an SBA Form
750, Loan Guaranty Agreement, and which has at least 20 qualified loans
outstanding as of the call report date closest to the date of its
fiscal year end, or
(2) An institution other than a bank or thrift institution which
has executed an SBA Form 750, Loan Guaranty Agreement, and which has at
least 20 qualified loans outstanding as of its latest fiscal year end.
For purposes of this paragraph (e), a qualified loan is one which was
initially approved in the amount of $100,000 or less and is classified
as a commercial, industrial or commercial real estate loan for purposes
of call reporting. A lender may request an exception to the
requirements of this paragraph (e) from the SBA Associate Administrator
for Financial Assistance.
Dated: December 30, 1996.
Philip Lader,
Administrator.
[FR Doc. 97-103 Filed 1-2-97; 8:45 am]
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