[Federal Register Volume 85, Number 192 (Friday, October 2, 2020)]
[Notices]
[Page 62363]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21832]


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SMALL BUSINESS ADMINISTRATION


Change to SBA Secondary Market Program

AGENCY: Small Business Administration.

ACTION: Notice of change to secondary market program.

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SUMMARY: The purpose of this Notice is to inform the public that the 
Small Business Administration (SBA) is making a change to its Secondary 
Market Loan Pooling Program. SBA is decreasing the minimum maturity 
ratio for both SBA Standard Pools and Weighted-Average Coupon (WAC) 
Pools by 500 basis points, to 89.0%. The change described in this 
Notice is being made to cover the estimated cost of the timely payment 
guaranty for newly formed SBA 7(a) loan pools. This change will be 
incorporated, as needed, into the SBA Secondary Market Program Guide 
and all other appropriate SBA Secondary Market documents.

DATES: This change will apply to SBA 7(a) loan pools with an issue date 
on or after October 1, 2020.

ADDRESSES: Address comments concerning this Notice to John M. Wade, 
Chief Secondary Market Division, U.S. Small Business Administration, 
409 3rd Street SW, Washington, DC 20416; or, [email protected].

FOR FURTHER INFORMATION CONTACT: John M. Wade, Chief, Secondary Market 
Division at 202-205-3647 or [email protected].

SUPPLEMENTARY INFORMATION: The Secondary Market Improvements Act of 
1984, 15 U.S.C. 634(f) through (h), authorized SBA to guarantee the 
timely payment of principal and interest on Pool Certificates. A Pool 
Certificate represents a fractional undivided interest in a ``Pool,'' 
which is an aggregation of SBA guaranteed portions of loans made by SBA 
Lenders under section 7(a) of the Small Business Act, 15 U.S.C. 636(a). 
In order to support the timely payment guaranty requirement, SBA 
established the Master Reserve Fund (MRF), which serves as a mechanism 
to cover the cost of SBA's timely payment guaranty. Borrower payments 
on the guaranteed portions of pooled loans, as well as SBA guaranty 
payments on defaulted pooled loans, are deposited into the MRF. Funds 
are held in the MRF until distributions are made to investors 
(Registered Holders) of Pool Certificates. The interest earned on the 
borrower payments and the SBA guaranty payments deposited into the MRF 
supports the timely payments made to Registered Holders.
    From time to time, SBA provides guidance to SBA Pool Assemblers on 
the required loan and pool characteristics necessary to form a Pool. 
These characteristics include, among other things, the minimum number 
of guaranteed portions of loans required to form a Pool, the allowable 
difference between the highest and lowest gross and net note rates of 
the guaranteed portions of loans in a Pool, and the minimum maturity 
ratio of the guaranteed portions of loans in a Pool. The minimum 
maturity ratio is equal to the ratio of the shortest and the longest 
remaining term to maturity of the guaranteed portions of loans in a 
Pool.
    Based on SBA's expectations as to the performance of future Pools, 
SBA has determined that for pools formed on or after October 1, 2020, 
SBA Pool Assemblers may increase the difference between the shortest 
and the longest remaining term of the guaranteed portions of loans in a 
Pool by 5 percentage points (i.e., decreasing the minimum maturity 
ratio by 500 basis points). SBA does not expect a 5 percentage point 
reduction in the minimum maturity ratio to have an adverse impact on 
either the program or the participants in the program. Therefore, 
effective October 1, 2020, all guaranteed portions of loans in Standard 
Pools and WAC Pools presented for settlement with SBA's Fiscal Transfer 
Agent will be required to have a minimum maturity ratio of at least 
89.0%. SBA is making this change pursuant to Section 5(g)(2) of the 
Small Business Act, 15 U.S.C. 634(g)(2).
    SBA will continue to monitor loan and pool characteristics and will 
provide notification of additional changes as necessary. It is 
important to note that there is no change to SBA's obligation to honor 
its guaranty of the amounts owed to Registered Holders of Pool 
Certificates and that such guaranty continues to be backed by the full 
faith and credit of the United States.
    This program change will be incorporated as necessary into SBA's 
Secondary Market Guide and all other appropriate SBA Secondary Market 
documents. As indicated above, this change will be effective for 
Standard Pools and WAC Pools with an issue date on or after October 1, 
2020.

    Dated: September 29, 2020.
William M. Manger,
Associate Administrator, Office of Capital Access.
[FR Doc. 2020-21832 Filed 10-1-20; 8:45 am]
BILLING CODE P