Liquidating sba loans dating sober alcoholic

Liquidating sba loans

Lenders should therefore try to proceed as expeditiously as possible in liquidating their collateral and submitting their guaranty purchase packages so as to minimize the expense of the ongoing guaranty fee for non-performing loans.For loans sold on SBA’s secondary market, lenders that delay their guaranty repurchase requests will often create a liability to the SBA for interest that SBA pays to the secondary market investor.For more information on how lenders can minimize liquidation costs in connection with their SBA 7(a) loan portfolio, contact Ethan at [email protected] at 267-470-1186.Accordingly, delays in submitting a guaranty purchase package will make a lender liable for any interest in excess of 120 days from the date of default through the date of repurchase.Since it is the lender’s obligation to demand purchase by the SBA, unwary lenders that delay purchase requests for months (or even years) after default, can rack up thousands of dollars in interest payment reimbursements to the SBA for loans which were sold on the secondary market.When a sold loan defaults, the SBA continues to make interest payments to the secondary market holder under the terms of the Secondary Participation Guaranty Agreement (SBA Form 1086).However, pursuant SOP 50 57, “if SBA is required to pay a secondary market holder more than 120 calendar days of accrued interest because of Lender delay, SBA may demand that the Lender reimburse SBA for the difference between the amount paid by SBA and 120 calendar days of accrued interest.” SOP 50 57, Chapter 23, Subparagraph B.3., p.147.September 24, 2014 When an SBA loan goes into liquidation status, SBA Lenders sometimes lose their sense of urgency to get the loan into liquidation status and charged off.

Protecting the guaranty is only the beginning for SBA lenders.Savvy SBA lenders will manage their workout, liquidation and guaranty purchase processes and procedures so as to avoid unanticipated and otherwise unnecessary costs is connection with their defaulted SBA 7(a) loans.Two such expenses are the ongoing SBA guaranty fee and, for loans sold on SBA’s secondary market, interest owed to the secondary market investor.The on-going SBA guaranty fee (also sometimes referred to as the “yearly fee”) is an annual fee paid by lenders (and which cannot be passed through to borrowers), which is currently 52 basis points of the guaranteed portion of the outstanding balance of the loan.In FY 2015, this fee will drop to 51.9 basis points, signaling continued strengthening of the SBA portfolio. Per SOP 50 10 5 (F), the on-going guaranty fee must be paid by lenders whether or not the borrower makes its loan payment, and in the case where a borrower has stopped making payments, lenders must “…compute the fee based on the product of a monthly on-going fee factor times the last reported Guaranteed Portion Closing Balance.” SOP 50 10 5 (F), Subpart B, Chapter 8, Subparagraph IV., F., 2., i), iii, p.230.

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Accordingly, a lender’s obligation to pay the on-going guaranty fee continues, irrespective of whether or not a borrower is making loan payments, until the SBA purchases the guaranteed portion from the lender (in the case of loans that are not sold on the secondary market) or from the secondary market investor (for loans that are sold).

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