[Federal Register Volume 77, Number 26 (Wednesday, February 8, 2012)]
[Notices]
[Pages 6619-6620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-2798]
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SMALL BUSINESS ADMINISTRATION
Community Advantage Pilot Program
AGENCY: U.S. Small Business Administration.
ACTION: Notice of changes to Community Advantage Pilot Program.
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SUMMARY: On February 18, 2011, SBA published a notice introducing the
Community Advantage Pilot Program. In that notice, SBA provided an
overview of the Community Advantage Pilot Program requirements,
including the application process to participate, and SBA modified or
waived as appropriate certain regulations, which otherwise apply to the
7(a) loan program, for the Community Advantage Pilot Program. SBA
continues to refine and improve the design of the Community Advantage
Pilot Program. To support SBA's commitment to expanding access to
capital for small businesses and entrepreneurs in underserved markets,
SBA is issuing this Notice to revise certain program requirements,
including certain of the regulatory waivers.
DATES: Effective Date: This Notice is effective February 8, 2012.
Applicability Date: This Notice applies to Community Advantage
Pilot Program loan applications (or requests for loan numbers submitted
under a lender's delegated authority) approved by SBA on or after
February 8, 2012.
FOR FURTHER INFORMATION CONTACT: Grady B. Hedgespeth, Director, Office
of Financial Assistance, U.S. Small Business Administration, 409 Third
Street SW., Washington DC 20416; (202) 205-7562;
[email protected].
SUPPLEMENTARY INFORMATION: On February 18, 2011, SBA issued a notice
and request for comments introducing the Community Advantage Pilot
Program (``CA Pilot Program'') (76 FR 9626). The CA Pilot Program was
introduced to increase SBA-guaranteed loans to small businesses in
underserved markets. The February 18, 2011 notice provided an overview
of the CA Pilot Program requirements and, 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, SBA
modified or waived as appropriate certain regulations which otherwise
apply to 7(a) loans for the CA Pilot Program. SBA continues to refine
and improve the design of the CA Pilot Program and, on September 12,
2011, SBA issued a notice modifying certain of those regulatory waivers
in order to permit Community Advantage Lenders (``CA Lenders'') to
pledge loans made under the CA Pilot Program (``CA loans'') as
collateral for certain lender financings that are approved by SBA. (76
FR 56262) In response to comments received on the CA Pilot Program and
to further support SBA's commitment to expanding access to capital for
small businesses and entrepreneurs in underserved markets, SBA is
issuing this Notice to revise several of the original program
requirements, including certain regulatory waivers, as described more
fully below.
In the February 18, 2011 notice, SBA waived the regulations at 13
CFR 120.213, 120.214 and 120.215 and set the maximum allowable interest
rate that CA Lenders may charge for CA loans at prime + 4%. SBA is now
increasing the maximum allowable rate that a CA Lender may charge a
borrower to prime + 6%. Therefore, SBA is continuing to waive the
regulations at 13 CFR 120.213, 120.214 and 120.215 to allow CA Lenders
to charge prime + 6% on CA Loans.
Additionally, in response to comments received on the initial
notice announcing the CA Pilot Program, SBA is modifying the program
requirements to allow participating CA Lenders to contract with Lender
Service Providers (LSPs) as defined at 13 CFR 103.1(d). In accordance
with Agency regulations at 13 CFR 120.410, a CA Lender must have a
continuing ability to evaluate, process, close, disburse, service,
liquidate and litigate small business loans. A CA Lender may contract
with a third party (an LSP) to assist with one or more of these
functions. However, the CA Lender itself, not the LSP, has ultimate
responsibility for evaluating, processing, closing, and liquidating its
SBA loan portfolio.
SBA is also removing ``Tier Two--Conditional Delegation'' from the
levels of delegated authority that a CA Lender may receive. Thus, there
will only be two distinct categories: delegated authority and non-
delegated authority. The remaining pilot program requirements
pertaining to delegated authority, including how to request delegated
authority and when a CA Lender can begin processing CA loans using
delegated authority, remain unchanged.
SBA is further modifying the requirements for CA Lenders to sell
loans in the secondary market by allowing CA Lenders to request
authority either at the time of application or after one year of
participation. CA Lenders granted permission for secondary market sales
must have additional reserves and must complete additional training
related to secondary market activities and requirements before they are
allowed to initiate secondary market sales.
Finally, in response to comments received on the initial notice
announcing the CA Pilot Program, SBA is revising the original lender
oversight strategy to better clarify the expected costs and schedule of
oversight. The February 18, 2011 notice provided that all participating
lenders will receive an examination or review after the first year of
operation. The revised strategy removes this requirement and explains
that SBA will monitor CA Lenders using various oversight tools,
including but not limited to Off-Site Reviews, Desk Reviews, Agreed
Upon Procedures On-site Reviews, On-site Risk Based Reviews and On-Site
Examinations. SBA's Office of Credit Risk Management (OCRM) will
evaluate the CA Lender's level of activity, performance metrics, risk
rating, effectiveness in reaching SBA targeted underserved market
segments and other relevant information to determine the appropriate
oversight tool(s) to employ. Lender risk evaluations will also include
a review of information from SBA's processing, servicing and
liquidation/guaranty purchase centers. SBA anticipates that the cost
for off-site monitoring through desk reviews conducted by OCRM will be
approximately $150 per $1 million in loans outstanding. Additional
costs for more extensive reviews and examinations will vary based on
the CA Lender's portfolio size and performance, as well as OCRM's
assessment of the CA Lender.
[[Page 6620]]
All other SBA guidelines and regulatory waivers related to the CA
Pilot Program remain unchanged.
In connection with the CA Pilot Program, SBA also issued a
Community Advantage Participant Guide to provide more detailed guidance
on the CA Pilot Program requirements. This guide was posted on SBA's
Web site at http://www.sba.gov. SBA has issued a revised Community
Advantage Participant Guide that incorporates all of these changes. The
revised Community Advantage Participant Guide is available on SBA's Web
site at http://www.sba.gov/sites/default/files/files/CA%20-%20Participants%20Guide.pdf. In addition to issuing this Notice and the
revised CA Participant Guide, SBA will modify SBA Forms 2301, Parts A,
B, C and D to reflect these changes. Finally, SBA will modify the
Community Advantage Lender Participation Application (SBA Form 2301,
Part E). The application form also may be found on SBA's Web site at
http://www.sba.gov/sites/default/files/tools_sbf_forms_2301e.pdf.
SBA may provide additional guidance, through SBA notices, which may
also be published on SBA's Web site at http://www.sba.gov/category/lender-navigation/forms-notices-sops/notices. Questions regarding the
CA Pilot Program may be directed to the Lender Relations Specialist in
the local SBA district office. The local SBA district office may be
found at http://www.sba.gov/about-offices-list/2.
Authority: 15 U.S.C. 636(a)(25) and 13 CFR 120.3.
Karen G. Mills,
Administrator.
[FR Doc. 2012-2798 Filed 2-7-12; 8:45 am]
BILLING CODE 8025-01-P