[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