[Federal Register Volume 79, Number 31 (Friday, February 14, 2014)]
[Notices]
[Pages 9028-9029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03323]


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SMALL BUSINESS ADMINISTRATION


Standard 7(a) Loan Guaranty Processing Center (LGPC) Emergency 
Catch-up Pilot

AGENCY: Small Business Administration.

ACTION: Notice of Regulatory Waiver for Standard 7(a) Loan Guaranty 
Processing Center (LGPC) Emergency Catch-up Pilot.

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SUMMARY: During the first quarter of Fiscal Year 2014, SBA waived an 
Agency regulation applicable to the 7(a) Business Loan Program for the 
Standard 7(a) Loan Guaranty Processing Center (LGPC) Emergency Catch-up 
Pilot (Pilot). Specifically, SBA waived the regulation setting forth 
SBA's criteria for establishing borrower creditworthiness and assuring 
repayment through the consideration of nine elements. The Pilot 
consisted of a streamlined review process for qualified 7(a) loan 
applications to address the backlog of unprocessed applications at the 
LGPC created by the government shutdown in October 2013. This Notice 
explains the actions SBA undertook and the reasons for the Pilot.

DATES: The waiver was effective for qualified applications submitted to 
the

[[Page 9029]]

LGPC from October 1, 2013 through December 3, 2013.

FOR FURTHER INFORMATION CONTACT: John A. Miller, Director, Office of 
Financial Program Operations, U.S. Small Business Administration, 409 
Third Street SW., Washington, DC 20416; (202) 619-0647.

SUPPLEMENTARY INFORMATION: SBA implemented a temporary pilot called the 
LGPC Emergency Catch-up Pilot that consisted of a streamlined review 
process to address the backlog of unprocessed 7(a) loan applications at 
the LGPC created by the government shutdown in a manner that expedited 
delivery of capital to small businesses.

1. Background

    Due to the lapse in appropriations beginning on October 1, 2013, 
the LGPC accumulated a backlog of unprocessed 7(a) loan applications 
that would have taken an estimated 6 to 8 weeks to review under the 
normal review process. SBA estimated that implementation of the 
streamlined review process would make it possible for the LGPC to 
review the unprocessed inventory in 3 to 4 weeks in a manner that did 
not further delay the delivery of capital to small businesses and did 
not increase SBA's risk. SBA determined the streamlined review 
performed under the Pilot would have a negligible effect on potential 
improper payments and defaults, as it allowed the LGPC to match 
resources to risk by focusing on higher-risk, high-dollar applications. 
Any potential increased risk to SBA was mitigated through a robust 
quality control review process whereby loans chosen by statistically 
valid, random sampling underwent full quality control reviews.

2. Standard 7(a) Loan Guaranty Processing Center (LGPC) Emergency 
Catch-up Pilot

Overview

    The streamlined review consisted of (1) a review to verify the 
completeness of the application package to ensure the LGPC had all 
required forms signed and completed, the lender's credit memorandum, 
and all other applicable supporting documentation; (2) a full 
eligibility review; and (3) a minimum threshold credit score. For 
purposes of the LGPC Emergency Catch-up Pilot, the credit score was 
used as a decision tool to assess borrower repayment ability in lieu of 
analyzing each of the required elements set forth in 13 CFR 120.150. 
The credit score utilized was FICO's LiquidCredit, which is calculated 
based on a combination of consumer credit bureau data, business bureau 
data, borrower financial data, and application data, and is used 
industry-wide in the small business lending industry. The LiquidCredit 
Score has been in use at the LGPC since 2007 and is the credit scoring 
model used for SBA's Small Loan Advantage (SLA) Program. The minimum 
credit score required for an application to qualify for streamlined 
review was based on the lower end of SBA's current risk profile and was 
the minimum score currently used for SLA applications.
    Standard 7(a), SLA, and Certified Lender Program (CLP) loan 
applications of $350,000 or less with LiquidCredit scores equal to or 
greater than 140 received in the LGPC from October 1, 2013 through 
December 3, 2013 qualified for the streamlined review process. The 
following applications did not qualify for the Pilot and underwent the 
standard review currently followed in the LGPC: (1) CAPLine 
applications; (2) Community Advantage applications; (3) applications 
that had credit scores below the minimum threshold score of 140; and 
(4) applications from lenders with unsatisfactory performance, as 
determined by the Office of Credit Risk Management (OCRM).
    SBA will track and monitor the quality control review results for 
use in future analysis to measure the effectiveness of the Pilot. SBA 
also will track and monitor the loans approved under the Pilot for 
future analysis in comparing default rates of loans approved under the 
Pilot to similarly sized loans approved under normal review procedures 
in the same timeframe to determine the effectiveness of the Pilot.

Regulatory Waivers

    Pursuant to the authority provided to SBA under 13 CFR 120.3 to 
suspend, modify or waive certain regulations in establishing and 
testing pilot loan initiatives for a limited period of time, SBA has 
waived 13 CFR 120.150, which defines SBA's lending criteria for 
establishing borrower creditworthiness and assuring repayment through 
the consideration of nine elements. The waiver of this regulation for 
loans processed under the Pilot allowed for streamlined reviews of 
qualifying applications utilizing FICO's LiquidCredit Score as a 
decision tool to assess borrower repayment ability.
    All provisions of the Small Business Act applicable to the 7(a) 
loan program apply to loans made under this Pilot. Unless waived or 
modified by this Notice, all regulations applicable to the 7(a) loan 
program apply to loans made under this Pilot. All standard operating 
procedures applicable to the 7(a) loan program that are not superseded 
by any provision of this Notice apply to loans made under this Pilot.

    Authority:  15 U.S.C. 636(a)(25) and 13 CFR 120.3.

    Dated: February 10, 2014.
Jeanne A. Hulit,
Acting Administrator.
[FR Doc. 2014-03323 Filed 2-13-14; 8:45 am]
BILLING CODE 8025-01-P