Download:
pdf |
pdfehiers on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
other security-sensitive information that
could be detrimental to homeland security.
(c) From subsection (e)(1) (Relevancy and
Necessity of Information) because in the
course of investigations into potential
violations of federal law, the accuracy of
information obtained or introduced
occasionally may be unclear, or the
information may not be strictly relevant or
necessary to a specific investigation. In the
interests of effective law enforcement, it is
appropriate to retain all information that may
aid in establishing patterns of unlawful
activity.
(d) From subsection (e)(2) (Collection of
Information from Individuals) because
requiring that information be collected from
the subject of an investigation would alert the
subject to the nature or existence of the
investigation, thereby interfering with that
investigation and related law enforcement
activities.
(e) From subsection (e)(3) (Notice to
Subjects) because providing such detailed
information could impede law enforcement
by compromising the existence of a
confidential investigation or reveal the
identity of witnesses or confidential
informants.
(f) From subsections (e)(4)(G), (e)(4)(H),
and (e)(4)(I) (Agency Requirements) and (f)
(Agency Rules), because portions of this
system are exempt from the individual access
provisions of subsection (d) for the reasons
noted above, and therefore DHS is not
required to establish requirements, rules, or
procedures with respect to such access.
Providing notice to individuals with respect
to existence of records pertaining to them in
the system of records or otherwise setting up
procedures pursuant to which individuals
may access and view records pertaining to
themselves in the system would undermine
investigative efforts and reveal the identities
of witnesses, and potential witnesses, and
confidential informants.
(g) From subsection (e)(5) (Collection of
Information) because with the collection of
information for law enforcement purposes, it
is impossible to determine in advance what
information is accurate, relevant, timely, and
complete. Compliance with subsection (e)(5)
would preclude DHS agents from using their
investigative training and exercise of good
judgment to both conduct and report on
investigations.
(h) From subsection (e)(8) (Notice on
Individuals) because compliance would
interfere with DHS’s ability to obtain, serve,
and issue subpoenas, warrants, and other law
enforcement mechanisms that may be filed
under seal and could result in disclosure of
investigative techniques, procedures, and
evidence.
(i) From subsection (g)(1) (Civil Remedies)
to the extent that the system is exempt from
other specific subsections of the Privacy Act.
Dated: August 3, 2016.
Jonathan R. Cantor,
Acting Chief Privacy Officer, Department of
Homeland Security.
[FR Doc. 2016–18812 Filed 8–8–16; 8:45 am]
BILLING CODE 9111–28–P
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 115 and 120
RIN 3245–AF85
Miscellaneous Amendments to
Business Loan Programs and Surety
Bond Guarantee Program
U.S. Small Business
Administration.
ACTION: Proposed rule.
AGENCY:
The U.S. Small Business
Administration (SBA) continues to
review the regulations governing the
delivery and oversight of its business
lending programs. SBA is proposing
changes to some of these regulations for
clarity and to increase participation in:
The Surety Bond Guarantee (SBG)
Program, the 7(a) Loan Program, the
Microloan Program, and the
Development Company Loan Program
(504 Loan Program). In addition, the
proposed changes will streamline the
regulations by removing or revising any
outdated regulations.
DATES: SBA must receive comments to
the proposed rule on or before October
11, 2016.
ADDRESSES: You may submit comments,
identified by RIN 3245–AF85, by any of
the following methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Mary Frias, Office of
Financial Assistance, Office of Capital
Access, Small Business Administration,
409 Third Street SW., Washington, DC
20416.
• Hand Delivery/Courier: Mary Frias,
Office of Financial Assistance, Office of
Capital Access, Small Business
Administration, 409 Third Street SW.,
Washington, DC 20416.
SBA will post all comments on
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at www.regulations.gov, please
submit the information to Office of
Financial Assistance, Office of Capital
Access, 409 Third Street SW.,
Washington, DC 20416. Highlight the
information that you consider to be CBI
and explain why you believe SBA
should hold this information as
confidential. SBA will review the
information and make the final
determination whether it will publish
the information.
FOR FURTHER INFORMATION CONTACT:
Robert Carpenter, Financial Analyst,
Office of Financial Assistance, Office of
Capital Access, Small Business
Administration, 409 Third Street SW.,
SUMMARY:
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
52595
Washington, DC 20416; telephone: (202)
205–7654; email: robert.carpenter@
sba.gov.
SUPPLEMENTARY INFORMATION:
I. Background Information
Executive Order 13563, Improving
Regulation and Regulatory Review, 76
FR 3821 (January 21, 2011), directs
agencies to ensure that regulations are
accessible, consistent, written in plain
language, and easy to understand in
order to foster economic growth and job
creation. Executive Order 13563
provides that our regulatory system
‘‘must identify and use the best, most
innovative and least burdensome tools
for achieving regulatory ends.’’
Executive Order 13563 further provides
that ‘‘[t]o facilitate the periodic review
of existing significant regulations,
agencies shall consider how best to
promote retrospective analysis of rules
that may be outmoded, ineffective,
insufficient, or excessively burdensome,
and to modify, streamline, expand, or
repeal them in accordance with what
has been learned.’’ SBA has reviewed its
regulations with regard to the Business
Loan Programs, as defined below, and is
proposing a number of amendments and
revisions to accomplish this goal.
The SBA programs affected by this
proposed rule are the 7(a) Loan Program
authorized pursuant to section 7(a) of
the Small Business Act (the Act) (15
U.S.C. 636(a)), the Microloan Program
authorized pursuant to section 7(m) of
the Act (15 U.S.C. 636(m)), the Surety
Bond Guarantee Program authorized
pursuant to part B of title IV of the
Small Business Investment Act of 1958
(15 U.S.C. 694b et seq.), and the
Development Company Program (the
504 Loan Program) authorized pursuant
to title V of the Small Business
Investment Act of 1958 (15 U.S.C. 695
et seq.) (collectively referred to as the
Business Loan Programs).
The Agency requests comments on all
aspects of the regulatory revisions in
this proposed rule and on any related
issues affecting the Business Loan
Programs.
II. Summary of Proposed Business Loan
Program Changes
SBA’s proposed changes are described
in this section, with additional details
on each located in the section-bysection analysis that follows:
A. Surety Bond Guarantee Program
1. Threshold Change. SBA proposes
to change the threshold amounts set
forth in §§ 115.19, 115.32, and 115.67
under which Sureties are required to
notify SBA, or obtain SBA’s prior
written approval, of changes in the
E:\FR\FM\09AUP1.SGM
09AUP1
52596
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
ehiers on DSK5VPTVN1PROD with PROPOSALS
contract or bond amounts for which an
SBA bond guarantee has been issued.
This change would remove the $100,000
threshold and rely solely on the 25%
threshold.
2. Quarterly Contract Completion
Notification. SBA proposes to add a
requirement that all participating
sureties must notify SBA of all contracts
successfully completed on a quarterly
basis through the submission of a
quarterly contract completion report
identifying all contracts successfully
completed and any changes in the
contract amount and related fees during
the preceding fiscal quarter. This new
requirement will be addressed in a new
section at § 115.22, Quarterly Contract
Completion Report.
3. Quick Bond Guarantee Application
and Agreement (SBA Form 990A)
Increased Contract Limit. SBA proposes
to allow Sureties participating in the
Prior Approval Program to use the
Quick Bond Guarantee Application and
Agreement (SBA Form 990A),
authorized by 13 CFR 115.30(d)(2), for
contracts that do not exceed $400,000.
The current contract limit for use of this
form is $250,000.
4. Preferred Surety Bond Guarantee
Program. SBA was recently authorized
to increase its guarantee percentage for
bonds issued in the Preferred Surety
Bond (PSB) Guarantee Program from
‘‘not to exceed 70 per centum’’ to ‘‘not
to exceed 90 per centum’’ by section 874
of title VIII of Division A of the National
Defense Authorization Act (NDAA),
2016, Public Law 114–92, 129 Stat. 726.
This increase will become effective on
November 25, 2016. Accordingly, SBA
is proposing to amend its regulations to
implement this change, including
increasing the guarantee percentages in
the PSB Program and requiring that, for
a period of at least nine months
following the admission of new Sureties
into the PSB Program, Sureties obtain
SBA’s prior written approval before
executing a bond greater than $2
million.
B. 7(a) and 504 Loan Programs and
Microloan Program
1. Consumer and Marketing
Cooperatives. SBA proposes to remove
consumer and marketing cooperatives
from the ineligible types of businesses
identified in § 120.110.
2. Change of Ownership Among
Existing Owners in Eligible Passive
Companies (EPC) and Operating
Companies (OC). SBA proposes to
revise the regulation at § 120.111 to
permit loans to finance a change of
ownership when an existing owner of
the Eligible Passive Company (EPC) is
purchasing a departing co-owner’s
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
interest in the EPC for the benefit of an
eligible OC. SBA also proposes to revise
§ 120.111(a)(3) to clarify that rent or
lease payments cannot exceed the
amount necessary to make the loan
payment to the lender, and an
additional amount to cover the EPC’s
direct expenses of holding the property,
such as maintenance, insurance and
property taxes.
3. Personal Guarantee Conditions for
Eligible Passive Companies (EPCs) and
Operating Companies (OCs). For
consistency with § 120.160(a), SBA
proposes to add language in
§ 120.111(a)(6) to state that SBA may
require the personal guarantee of those
owning less than 20 percent of the EPC
or the OC. Additionally, SBA proposes
to add language to provide that SBA
may require the personal guarantee of
those owning less than 5 percent
ownership when circumstances warrant.
Finally, SBA proposes to clarify that the
personal guarantee requirements apply
when an individual has an ownership
interest in either the EPC or the OC.
4. Restrictions on uses of proceeds.
SBA proposes to revise § 120.130 to add
a new paragraph (e) and redesignate
paragraphs (e) and (f) as paragraphs (f)
and (g), respectively. The new
paragraph (e) will include the text
currently found in § 120.160(d), Taxes,
which prohibits the use of loan
proceeds to pay past-due Federal or
state payroll taxes. SBA also proposes to
revise paragraph (g) to remove the
reference to ‘‘§ 120.203’’ and replace it
with ‘‘§ 120.202’’.
5. Personal Guarantees (for loans
other than to EPCs/OCs). SBA proposes
to modify the language in § 120.160(a) to
clarify that SBA may require the
personal guarantee of those owning less
than 5 percent ownership when
circumstances warrant.
6. Use of Computer Forms. SBA
proposes to remove § 120.194 as it is
outdated and no longer necessary.
7. Variable Interest Rates on 7(a)
Loans. SBA proposes to revise the
language in § 120.214 with respect to
when the allowable base rate is
determined and when adjustments in
the variable interest rate will be
permitted.
8. Fees that Lender pays SBA. SBA
proposes to add a new § 120.220(a)(3) to
incorporate the provision under Public
Law 114–38, section 2 (Veterans
Entrepreneurship Act of 2015), which
waives the up-front guaranty fee for
SBA Express loans provided to
businesses owned and controlled by
veterans or spouses of veterans under
certain circumstances. In order to
incorporate advances in technology,
SBA also proposes to update the
PO 00000
Frm 00004
Fmt 4702
Sfmt 4702
regulation at § 120.220(b) to provide for
the electronic payment of the up-front
guaranty fee on all loans and to modify
the timing of that payment on certain
loans. Finally, SBA proposes
corresponding changes to § 120.220(c)
governing when SBA will refund the
guaranty fee on certain loans.
9. Fees which a Lender May Collect
from an Applicant. SBA proposes to add
clarifying language to this section in an
introductory paragraph explaining that
the fees listed in § 120.221 are the only
fees a Lender is permitted to collect
from an applicant in connection with
the loan application. SBA also proposes
to remove the current language in
§ 120.221(e), which prohibits a Lender
from charging a Borrower a pre-payment
fee, and replace that language with the
current language found in § 120.222(e),
which permits a Lender to charge an
Applicant for certain legal fees.
10. Fees which the Lender or
Associate May Not Collect from the
Borrower or Share with Third Parties.
SBA proposes to revise § 120.222 to
remove all of the text except the
prohibition on sharing premiums for
secondary market sales. In conjunction
with the proposed changes to § 120.221,
SBA proposes to include the fees a
Lender may charge an Applicant or
Borrower in one regulation; unless
otherwise permitted by SBA Loan
Program Requirements, any fees not
included in § 120.221 will be
prohibited.
11. Use of Proceeds in the Builders
Loan Program. In § 120.394, SBA
proposes to increase the limit on loan
proceeds being used to acquire land
under a line of credit under the
Builder’s Loan Program.
12. On-Site/Off-Site Reviews for 7(a)
Lenders, CDCs and Microloan
Intermediaries (Intermediaries). Due to
SBA’s improved electronic methods,
virtual reviews, such as Analytical and
Targeted Reviews, may cover much of
what was previously performed in the
scope of ‘‘on-site’’ reviews, diminishing
the distinction between ‘‘off-site’’ and
‘‘on-site’’ reviews. Accordingly, SBA
proposes to remove all references to
‘‘on-site’’ reviews in §§ 120.410(a)(2),
120.424(b), 120.433(b), 120.434(c),
120.630(a)(5), 120.710(e)(1), 120.812(c),
120.816(c), 120.839, 120.841(c),
120.1050, 120.1051, 120.1070 and
120.1400(c)(4). SBA will, however,
retain the term ‘‘review/examination
assessments’’ in these regulations. SBA
is also proposing to replace references to
‘‘off-site’’ reviews and monitoring with
‘‘monitoring’’ in §§ 120.1025 and
120.1051(a).
13. ‘‘Good Standing’’ now referred to
as being ‘‘Satisfactory.’’ SBA proposes
E:\FR\FM\09AUP1.SGM
09AUP1
ehiers on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
to replace the term ‘‘Good Standing’’ as
it relates to a Lender’s status with its
Federal Financial Institution Regulator
(FFIR) with ‘‘Satisfactory’’ in
§§ 120.410(e), 120.630(a)(4), and
120.1703(a)(4).
14. The Certified Lenders Program.
SBA proposes to remove regulations
pertaining to SBA’s Certified Lenders
Program (CLP). Section 120.440 will be
replaced with a new regulation (see
discussion immediately below), and
§ 120.441 will be reserved for future use.
15. Delegated Authority Criteria. SBA
proposes to add a new title and text in
place of § 120.440 to include in the
regulations the criteria for delegated
authority in the 7(a) Loan Program. With
the addition of this regulation on
delegated authority in general, the
specific regulation at § 120.451, How
does a Lender become a PLP Lender, is
no longer necessary and will be
removed and reserved for future use.
16. When is SBA Released from
Liability on its Guarantee? SBA
proposes to revise § 120.524(b) to allow
SBA to utilize all legal means available
when recovering any moneys paid on
the guarantee plus interest, including
administrative offset and judicial
remedies.
17. Suspension or Revocation from
SBA’s Secondary Market. SBA proposes
to revise § 120.660 to require that any
action taken under this section be
approved by both the Director, Office of
Financial Assistance (D/FA) and the
Director, Office of Credit Risk
Management (D/OCRM). Authority is
also proposed for suspension or
revocation of a Lender participating in
SBA’s Secondary Market based upon
specific regulatory action issued by a
Lender’s primary regulator or a going
concern opinion issued by the Lender’s
auditor. Finally, SBA proposes to
remove the reference to an obsolete
form.
18. Removal of Board Overlap
Restriction. SBA proposes to remove
language from § 120.823(c)(5) that
prohibits a CDC from having more than
one of its Directors employed by, or
serving on, the Board of Directors of any
other non-CDC entity.
19. Removal of Reference to Members
for CDC Boards of Directors. SBA
proposes to replace the term ‘‘members’’
with the term ‘‘individuals’’ in
§ 120.823(d)(4)(ii), Loan Committee.
20. Case-by-Case Application to Make
a 504 Loan Outside of a CDC’s Area of
Operations. SBA proposes to replace the
term ‘‘District Office’’ in § 120.839 with
the term ‘‘504 loan processing center.’’
SBA also proposes to streamline the text
in the introductory paragraph of this
section.
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
21. Ineligible Costs for 504 Loans.
SBA proposes to replace the term
‘‘meeting the IRS definition of capital
equipment’’ in § 120.884(e)(3) with
‘‘having a remaining useful life of at
least 10 years.’’
22. Confidentiality of Reports, Risk
Ratings and related Confidential
Information Disclosure Prohibitions.
SBA proposes a limited expansion of
parties identified in § 120.1060 as
‘‘permitted parties’’ who should be
afforded access to, a lender’s Review/
Exam Report information, Risk Rating,
and Confidential Information. Access to
these permitted parties is granted only
for the purpose of assisting a lender in
improving the SBA Lender’s,
Intermediary’s or Non-lending
Technical Assistance Provider’s
(NTAP’s) SBA program operation in
conjunction with SBA’s Lender
Oversight Program and SBA’s portfolio
management.
23. Lender Oversight Fees. Due to the
SBA’s improved electronic methods for
oversight that allows for virtual Reviews
and other oversight activities to be
conducted without an ‘‘on-site’’ visit,
SBA proposes to eliminate the
distinction between ‘‘on-site’’ and ‘‘offsite’’ in the fee components set forth in
§ 120.1070. Consistent with eliminating
this distinction, the proposed rule
would also provide flexibility in how
SBA allocates its costs for Reviews,
Examinations, Monitoring, or Other
Lender Oversight Activities (e.g.,
allocating actual costs assessed to each
Lender versus apportioning costs by
portfolio size).
24. Grounds for Enforcement
Actions—SBA Lenders. SBA proposes to
revise language to provide for consent to
the appointment of a Receiver and/or
other relief by SBA Supervised Lenders
(except Other Regulated SBLCs) and by
CDCs in § 120.1400(a).
25. Types of Enforcement Actions—
SBA Lenders. SBA proposes to revise
the language permitting SBA to initiate
a request for appointment of a Receiver
of an SBA Supervised Lender in
§ 120.1500(c)(3) and add language
permitting SBA to initiate a request for
appointment of a Receiver of a CDC in
§ 120.1500(e)(3).
26. General Procedures for
Enforcement Actions Against SBA
Lenders, SBA Supervised Lenders, Other
Regulated SBLCs, Management
Officials, Other Persons, Intermediaries,
and NTAPs. SBA proposes to add
language regarding the procedures for
appointment of a Receiver over a CDC
or an SBA Supervised Lender in
§§ 120.1600(a), 120.1600(a)(6), and
120.1600(b)(4).
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
52597
27. First Lien Position 504 Loan
(‘‘FMLP’’) Program. SBA proposes to
add language to § 120.1707 to ensure
that an allonge to the First Lien Position
504 Loan Pool Guarantee Agreement, in
form acceptable to SBA, is executed
with a transfer of a Seller’s retained
interest in an FMLP Pool Loan.
28. Systemically Important Secondary
Market Broker-Dealers (SISMBD) Loan
Program. SBA proposes to remove
§§ 120.1800–1900, Subpart K, in its
entirety to remove all references to the
SISMBD Loan Program. The program
was established under the American
Recovery and Reinvestment Act (ARRA)
in 2009 and the program authority
expired on February 16, 2013.
III. Section by Section Analysis
1. Section 115.19 Denial of liability.
Under the current regulation, the dollar
threshold for determining when an
increase in the Contract or bond
amounts may result in denial of liability
as the result of a material breach or a
substantial regulatory violation is 25%
or $100,000, whichever is less. Based on
feedback from the surety industry and
other stakeholders, SBA has determined
that the existing threshold is outdated,
and no longer reflects current industry
practices and this change is being made
to align SBA requirements with the
prevailing industry practice, while
managing the increased bond liability to
the Government. Currently, under
§ 115.32(d), the surety is required to
notify SBA if any contract or bond
increases in the aggregate by 25% or
$100,000, whichever is less. Further, if
the bond increases as a result of a single
change order by 25% or $100,000,
whichever is less, the surety is required
to obtain SBA’s prior written approval
of the increase. Prevailing industry
practice allows increases to the contract
and bond without prior notification to
the surety. To better align SBA
requirements with that of the industry,
while managing the increased bond
liability to the Government, this change
would eliminate the dollar threshold of
$100,000, while retaining the 25%
threshold for purposes of denying
liability under paragraphs (c)(1), (d),
and (e)(2) of § 115.19.
2. Section 115.22 Quarterly Contract
Completion Report. At present, SBA
does not receive a final accounting of
fees due and paid by the surety and
principal on contracts that are
successfully completed. Consequently,
SBA is unable to ensure that fees due
the Government as a result of an
increase in the contract amount are paid
in a timely manner on contracts that do
not default. To better track fee payments
and complement periodic on-site audits
E:\FR\FM\09AUP1.SGM
09AUP1
ehiers on DSK5VPTVN1PROD with PROPOSALS
52598
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
at surety company locations, sureties
participating in the SBA Surety Bond
Guarantee Program would be required
under this provision to submit a
quarterly contract completion report
within 45 days of the close of each
quarter, identifying completed
contracts, any changes in contract
amount, and any related fees.
3. Section 115.30 Submission of
Surety’s guarantee application. Section
115.30(d)(2) provides a streamlined
Quick Bond Guarantee Application and
Agreement (SBA Form 990A) (Quick
Bond) that is used in the Prior Approval
Program for smaller contract amounts. It
complements the surety industry
practice of providing a shorter
application for smaller contract
amounts, and has helped to address
sureties’ perceptions about excessive
paperwork in SBA’s bond guarantee
application process. The Quick Bond
has been widely accepted by
participating sureties.
The proposed rule would increase the
Quick Bond eligible contract limit from
$250,000 to $400,000. Implementation
of the higher contract limit would
increase the use of the Quick Bond and
would provide access to bonding for
more small contractors. It would more
closely conform to the contract limits
allowed in the abbreviated applications
offered in the surety industry, and
would respond to sureties’ requests to
raise the current limit.
Experience with the Quick Bond has
been favorable at the $250,000 limit.
Since its implementation in August of
2012, SBA has guaranteed more than
1,500 bonds and only 27 defaults have
occurred. If the contract amount is
increased, SBA would continue to
closely monitor its experience with the
Quick Bond.
4. Section 115.32(d)(1) Notification
and Approval. Under the current
regulation, a Prior Approval Surety
must notify SBA of any increases or
decreases in the Contract or bond
amount that aggregate 25% of $100,000,
whichever is less, as soon as the Surety
acquires knowledge of the change, and
also must obtain SBA’s prior written
approval of an increase in the original
bond amount as a result of a single
change order of at least 25% or
$100,000, whichever is less. As
discussed above under § 115.19,
prevailing industry practice allows
increases to the contract and bond
without prior notification to the surety.
To better align SBA requirements with
that of the industry, while managing the
increased bond liability to the
Government, this change would
eliminate the dollar threshold of
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
$100,000 while retaining the 25%
threshold.
5. Section 115.60 Selection and
admission of PSB Sureties. SBA is
proposing to amend this provision to
provide that, for a period of nine
months following admission into the
PSB Program, the Surety must obtain
SBA’s prior written approval before
executing a bond greater than $2
million. With the increase in the
guarantee percentage to up to 90% (as
discussed below), SBA wants the
opportunity to evaluate the Surety’s
underwriting and claims and recovery
processes to be assured that the PSB
Surety has demonstrated a successful
period of operations. At its discretion,
SBA may extend this period to further
evaluate the Surety.
6. Section 115.67(a) Increases.
Under the current regulation, a
Preferred Surety Bond Surety must pay
the additional fees due from the
Principal and the Surety on increases
aggregating 25% of the contract or bond
amount or $100,000, whichever is less.
For consistency with the changes
proposed to §§ 115.19 and 115.32, the
proposed rule would eliminate the
dollar threshold while retaining the
25% threshold.
7. Section 115.68 Guarantee
Percentage. There are two SBA surety
bond guarantee programs: The Prior
Approval Program and the Preferred
Surety Bond (PSB) Program. Under the
Prior Approval Program, SBA approves
each bond guarantee individually, and
guarantees between 80% and 90% of a
bond issued, depending on the status of
the contractor or the amount of the
Contract at the time the bond was
executed. Under the PSB Program,
sureties are authorized to issue, monitor
and service bonds without prior SBA
approval, but the SBA currently
guarantees only up to 70% of the bond.
Over the past several years, SBA has
experienced a sharp decline in the PSB
Program activity due to the lower
guarantee rate. To increase participation
in the PSB Program, and thereby assist
more small businesses, Congress
amended section 411(c)(1) of the Small
Business Investment Act of 1958 (15
U.S.C. 694b(c)(1)), to authorize SBA to
guarantee up to 90% in the PSB
Program. The effective date of this
increase was delayed until November
25, 2016, to allow time for the necessary
rulemaking.
Accordingly, SBA is proposing to
amend § 115.68 to adopt the same
guarantee percentages for the PSB
Program that are provided in the Prior
Approval Program under § 115.31:
(1) SBA would reimburse a PSB
Surety for 90% of the Loss incurred and
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
paid if: (i) The total amount of the
Contract at the time of Execution of the
bond is $100,000 or less. Like the Prior
Approval Program, when the Contract
amount increases to more than $100,000
after bond Execution, the guarantee
percentage would decrease by one
percentage point for each $5,000 of
increase or part thereof, but would not
decrease below 80%. If the Contract
decreases to $100,000, or less, after
bond Execution, the guarantee
percentage would increase to 90% if the
Surety provides SBA with evidence
supporting the decrease and any other
information or documents requested; or
(ii) the bond was issued on behalf of a
small business owned and controlled by
socially and economically
disadvantaged individuals, on behalf of
a qualified HUBZone small business
concern, or on behalf of a small business
owned and controlled by Veterans or a
small business owned and controlled by
Service-Disabled Veterans;
(2) SBA would reimburse a PSB
Surety in an amount not to exceed 80%
of the Loss incurred and paid on bond
for Contracts in excess of $100,000
which are executed on behalf of nondisadvantaged concerns; and
(3) If the Contract or Order amount is
increased above the Applicable
Statutory Limit (as defined in § 115.10)
after bond Execution, SBA’s share of the
Loss is limited to that percentage of the
increased Contract or Order amount that
the Applicable Statutory Limit
represents multiplied by the guarantee
percentage approved by SBA. For
example, if a contract amount increases
to $6,800,000, SBA’s share of the loss
under an 80% guarantee is limited to
76.5% (6,500,000/6,800,000 = 95.6% ×
80% = 76.5%.)
8. Section 120.110 What businesses
are ineligible for SBA business loans?
SBA proposes to remove the existing
§ 120.110(l) that identifies consumer
and marketing cooperatives as ineligible
types of businesses for SBA financial
assistance. Cooperatives are a form of
organization and there is no reason why
cooperatives should be excluded from
eligibility. As such, all cooperatives may
be eligible for SBA financing, provided
they comply with all other Loan
Program Requirements.
9. Section 120.111 What conditions
must an Eligible Passive Company
satisfy? SBA proposes to amend two
paragraphs in § 120.111:
(1) Introductory paragraph. Presently,
the Eligible Passive Company (EPC) may
only use loan proceeds ‘‘to acquire or
lease, and/or improve or renovate, real
or personal property (including eligible
refinancing), that it leases to one or
more Operating Companies for
E:\FR\FM\09AUP1.SGM
09AUP1
ehiers on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
conducting the Operating Company’s
business.’’ SBA proposes to include
language to permit SBA loan proceeds
to be used to finance a change of
ownership between existing owners of
the Eligible Passive Company (EPC),
provided the transaction meets all
conditions described in § 120.111.
(2) Paragraph (a)(3). The lease
between the EPC and the OC. SBA
proposes to clarify that rent or lease
payments made by the OC to the EPC
cannot exceed the amount necessary to
make the loan payment to the lender,
and an additional amount to cover the
EPC’s direct expenses of holding the
property, such as maintenance,
insurance and property taxes.
(3) Paragraph (a)(6). Who must
guarantee the loan. SBA proposes to
clarify that owners of 20 percent or
more of either the EPC or the OC are
required to personally guarantee the
loan. Also, for consistency with
§ 120.160(a), SBA proposes to add
language to § 120.111(a)(6) to provide
that SBA may, in its discretion and in
consultation with the Lender, require
the personal guarantee of owners with
less than 20% ownership of the EPC or
the OC. Additionally, SBA proposes to
add language to provide that SBA may
require the personal guarantee of those
owning less than 5% ownership when
circumstances warrant.
10. Section 120.130 Restrictions on
uses of proceeds. SBA proposes to
revise § 120.130 to add a new paragraph
(e) and redesignate paragraphs (e) and
(f) as paragraphs (f) and (g), respectively.
The new paragraph (e) will include the
text currently found in § 120.160(d),
Taxes. The current text in § 120.160(d)
prohibit the use of proceeds for payment
of past-due Federal or state withholding
taxes, which is more applicable to
§ 120.130. SBA also proposes some
minor modifications to the language to
clarify the restriction. SBA also
proposes to revise newly designated
paragraph (g) to remove the reference
‘‘§ 120.203’’ and replace it with
‘‘§ 120.202’’. The regulation § 120.203
cited in this section was removed in
1996. The correction to remove the
reference to § 120.203 and replace it
with the reference to § 120.202 in
§ 120.130(f) was not made at the time
and this oversight is being corrected
here. The redesignation of paragraphs
(e) and (f) to (f) and (g) in the section
improves the flow with the inclusion of
the new § 120.130(e).
11. Section 120.160(a) Loan
conditions. SBA proposes to add the
word ‘‘generally’’ to the last sentence of
§ 120.160(a) to clarify that SBA may
require a personal guarantee of an
owner who holds less than 5% when
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
the circumstances warrant, such as
Cooperatives where no one member may
have an ownership interest of at least
5%.
12. Section 120.194 Use of computer
forms. SBA proposes to remove the
regulation at § 120.194 in its entirety as
it is outdated. The regulation will be
reserved for future use.
13. Section 120.214 What conditions
apply for variable interest rates? The
current regulation governing variable
interest rates in § 120.214 provides that,
when a Lender uses the prime or
London Interbank Offered Rate (LIBOR)
rate as the base rate in a variable interest
rate loan, the base rate will be ‘‘that
which is in effect on the first business
day of the month, as printed in a
national financial newspaper published
each business day.’’ (§ 120.214(c))
Further, the current regulation also
provides that the ‘‘first change in the
variable rate may occur on the first
calendar day of the month following
initial disbursement using the base rate
(see paragraph (c) of this section) in
effect on the first business day of the
month.’’ (§ 120.214(a)) SBA proposes to
revise the language in §§ 120.214(a) and
(c) to change when the base rate is
determined and to permit adjustments
in the variable interest rate other than
just on the first business day of the
month, provided the changes occur no
more frequently than monthly.
14. Section 120.220 Fees that Lender
pays SBA. SBA proposes to add a new
paragraph § 120.220(a)(3) to incorporate
into the regulations the statutory waiver
of the up-front guaranty fee for SBA
Express loans made to businesses
owned and controlled by veterans and/
or spouses of veterans in fiscal years
when the subsidy rate for the 7(a)
program is zero, as set forth in section
7(a)(31) of the Small Business Act (15
U.S.C. 636(a)(31)). The conditions a
business must meet to qualify for this
fee waiver will be explained in SBA
Loan Program Requirements.
In § 120.220(b), in an effort to
incorporate advances in technology,
SBA proposes to update the regulation
to advise Lenders to pay the guaranty
fee electronically and to revise the
timeframe within which a Lender must
pay the guaranty fee to SBA for loans
with a maturity of 12 months or less
(‘‘short-term loans’’). SBA proposes to
revise the timing of payment of the fee
on a short-term loan from the time of
application to within ten business days
of SBA’s approval of the loan. The
current requirement was implemented
when Lenders paid fees using checks.
Currently, fees are paid electronically
through Pay.gov. Requiring payment of
the fee with the application for guaranty
PO 00000
Frm 00007
Fmt 4702
Sfmt 4702
52599
on short-term loans creates a bottleneck
that delays the processing center’s turnaround time for these loans.
Given the longer timeframe for the
Lender to pay the fee, SBA also
proposes to remove the first two
sentences of § 120.220(c), which state
when SBA will refund the guaranty fee
paid on a short-term loan. With the
additional time provided for payment of
the fee, there will be no need for
refunds.
15. Section 120.221 Fees which the
Lender may collect from a loan
applicant. SBA proposes to add
clarifying language to this section in an
introductory paragraph explaining that,
unless otherwise permitted by SBA
Loan Program Requirements (e.g., the
guaranty fee under § 120.220), the fees
listed in § 120.221 are the only fees a
lender is permitted to charge and collect
from an Applicant or Borrower. SBA
also proposes to remove the current
language in § 120.221(e) because it
incorrectly refers to a prohibited fee
(‘‘pre-payment fees’’). SBA proposes to
move the language that permits Lenders
to collect fees for legal services
presently found in § 120.222(e) to
§ 120.221(e). By making these changes,
the guidance on permissible fees a
Lender may charge and collect from an
Applicant or Borrower will be contained
in one regulation in an effort to reduce
confusion.
16. Section 120.222 Fees which the
Lender or Associate may not collect
from the Borrower or share with third
parties. SBA proposes to retitle
§ 120.222 to read ‘‘Prohibition on
sharing premiums for secondary market
sales.’’ SBA also proposes to remove
paragraphs (a), (b), (c), and (e), and
revise the text of paragraph (d). The
removal of the fees currently included
in § 120.222(a), (b), and (c) does not
mean that Lenders will now be
permitted to charge these fees. On the
contrary, the proposal to remove the
fees from § 120.222 in conjunction with
the proposed changes to § 120.221 are
intended to place the guidance on
allowable fees in a single regulation.
Unless otherwise permitted by SBA
Loan Program Requirements, any fee not
identified in § 120.221 is prohibited.
SBA proposes to retain the prohibition
on the sharing of secondary market fees
in § 120.222 for consistency with 13
CFR 103.5(c), which prohibits a lender
from sharing any secondary market
premium with a lender service provider.
17. Section 120.394 What are the
eligible uses of proceeds? SBA proposes
to increase the regulatory limitation on
how much of the proceeds of a line of
credit under the Builder’s Loan Program
can be used for land acquisition from
E:\FR\FM\09AUP1.SGM
09AUP1
ehiers on DSK5VPTVN1PROD with PROPOSALS
52600
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
20% to 33%. SBA recognizes that the
current limitation is reflective of limits
imposed in 1977, and has not allowed
for increases due to the passage of time
and increases in land and development
costs.
18. Section 120.410 Requirements
for all participating Lenders. SBA
proposes to replace the term ‘‘Good
Standing,’’ as it relates to a Lender’s
status with its Federal Financial
Institution Regulator, with ‘‘considered
Satisfactory by its Federal Financial
Institution Regulator’’ (FFIR) in
paragraph (e) to better align with
terminology used by the FFIRs. Finally,
given the diminished distinction
between ‘‘on-site’’ and ‘‘off-site’’
reviews due to incorporation of virtual
methods for oversight in SBA’s Revised
Risk-Based Review Protocol, SBA
proposes to remove the references to
‘‘on-site’’ reviews/examinations in
§ 120.410(a)(2) (and in all other
regulations) while retaining the term
‘‘review/examination assessments.’’
19. Section 120.424 What are basic
conditions a Lender must meet to
securitize? In paragraph (b), SBA
proposes to remove the term ‘‘on-site’’
while retaining the term ‘‘review/
examination assessments’’ in this
section.
20. Section 120.433 What are SBA’s
other requirements for sales and sales of
participating interests? In paragraph (b),
SBA proposes to remove the term ‘‘onsite’’ while retaining the term ‘‘review/
examination assessments’’ in this
section.
21. Section 120.434 What are SBA’s
requirements for loan pledges? In
paragraph (c), SBA proposes to remove
the term ‘‘on-site’’ while retaining the
term ‘‘review/examination assessments’’
in this section.
22. Sections 120.440 and 120.441
The Certified Lenders Program (‘‘CLP’’);
replaced with new Delegated Authority
section. SBA proposes to remove the
title and all language in §§ 120.440 and
120.441, The Certified Lenders Program,
as implementation of newer, more
efficient methods of processing, closing,
servicing, and liquidating have made
this program unnecessary and obsolete.
Beginning on the effective date of the
final rule, the CLP would be terminated.
SBA also proposes to add a new
heading before § 120.440 that reads
‘‘Delegated Authority Criteria’’ and to
add new language in § 120.440 that sets
forth the criteria for Lenders when
applying for initial approval or renewal
of delegated authority in the 7(a) Loan
Program. These criteria are essentially
identical to the criteria currently
included in SBA’s Standard Operating
Procedure (SOP) 50 10 5(H), subpart A
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
for the PLP, SBA Express and Export
Express Programs. Under this new
provision, SBA, in its discretion, would
consider whether the Lender:
(a) Has the continuing ability to
evaluate, process, close, disburse,
service, liquidate and litigate SBA loans.
This includes the ability to develop and
analyze complete loan packages. SBA
may consider the experience and
capability of Lender’s management and
staff.
(b) Has satisfactory SBA performance
(as defined in § 120.410(a)(2));
(c) Is in compliance with SBA Loan
Program Requirements (e.g., Form 1502
reporting, timely payment of all fees to
SBA);
(d) Has completed to SBA’s
satisfaction all required corrective
actions;
(e) Is subject to any enforcement
action, order or agreement with other
regulators or the presence of other
regulatory concerns as determined by
SBA; and
(f) Whether Lender exhibits other risk
factors (e.g., has rapid growth; low SBA
activity; SBA loan volume; Lender, an
officer or director is under investigation
or indictment).
With respect to ‘‘low SBA activity,’’
SBA considers making 5 SBAguaranteed loans or less in a 2 year
period to be low activity. Additionally,
with respect to SBA loan volume, SBA
would look at the Lender’s proportion of
SBA lending relative to the Lender’s
total loan portfolio.
Section 120.441 will be reserved for
future use.
23. Section 120.451 How does a
Lender become a PLP Lender? As a
result of replacing § 120.440 with a new
regulation setting out the criteria for
delegated authority, the existing
regulation at § 120.451 would no longer
be necessary and would be removed and
reserved for future use.
24. Section 120.524 When is SBA
released from liability on its guarantee?
SBA proposes to clarify that its rights to
collect monies paid on a guarantee from
which SBA determines it has been
released of liability include judicial
remedies and the right to offset funds
due the Lender for the guaranty
purchase of another loan. SBA’s right to
seek these remedies arises under
contract law as interpreted by the
courts.
25. Section 120.630 Qualifications
to be a Pool Assembler. In paragraph
(a)(4) SBA proposes to replace the term
‘‘good standing’’ with ‘‘satisfactory’’
when it relates to other federal
regulators and SBA proposes to update
the reference to the National
Association of Securities Dealers
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
(NASD) and replace it with the
Financial Industry Regulatory Authority
(FINRA), as NASD no longer exists. SBA
also proposes to remove the term ‘‘onsite’’ while retaining the term ‘‘review/
examination assessments’’ in
subparagraph (a)(5).
26. Section 120.660 Suspension or
revocation. SBA proposes to revise
§ 120.660 to require that any action
taken under this section be approved by
both the D/FA and the D/OCRM. SBA
proposes to add a 120-day limit to the
proposed suspension period to give
participants sufficient time to resolve
any correctable issues. Additionally,
SBA proposes to reduce the timeframe
for a revocation under this section to no
more than two (2) years. SBA also
proposes to identify regulatory orders or
supervisory actions brought by a
Lender’s primary regulator or by SBA or
a going concern opinion by the Lender’s
auditor as additional reasons for which
SBA may suspend or revoke a Lender’s
privilege to participate in SBA’s
Secondary Market. The issuance of any
regulatory order or supervisory action
by the Lender’s primary regulator will
require notice to SBA within 5 business
days (or as soon as practicable
thereafter) to the D/OCRM and D/FA. In
addition, SBA proposes to add a new
paragraph (d) to this regulation to
provide for early termination of a
suspension or revocation under this
section, in the D/FA and the D/OCRM’s
discretion, if termination is warranted.
SBA also proposes to eliminate the
reference to SBA Form 1085 within this
section as SBA Form 1085 is obsolete.
27. Section 120.710(e)(1) What Must
an Intermediary Demonstrate to Get a
Reduction in the Loan Loss Reserve
Fund? SBA proposes to remove the
reference to ‘‘on-site’’ reviews or
examinations, while retaining the term
‘‘review/examination assessments.’’ As
SBA increases its use and application of
electronic technology in lender
oversight and reviews and
examinations, the ‘‘on-site’’ review
language is no longer generally
applicable. The proposed language
reflects a more current representation of
reviews and examinations.
28. Section 120.812 Probationary
period for newly certified CDCs. In
paragraph (c), SBA proposes to remove
the term ‘‘on-site’’ while retaining the
term ‘‘review/examination
assessments.’’
29. Section 120.816 CDC non-profit
status and good standing. SBA proposes
to remove the term ‘‘on-site’’ while
retaining the term ‘‘review/examination
assessments’’ in paragraph (c).
30. Section 120.823 CDC Board of
Directors. SBA proposes to revise
E:\FR\FM\09AUP1.SGM
09AUP1
ehiers on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
§ 120.823(c)(5) to eliminate the language
in this rule that currently prevents more
than one Board member of a CDC from
being employed by, or serving as a
Director on the Board of, other entities,
except for civic or charitable
organizations not involved in financial
services or economic development
activities. This provision was intended
to apply to associations not covered by
13 CFR 120.820, under which a CDC
may be affiliated, including through
common board members, with the
entities described in that section.
However, § 120.823(c)(5) has created
confusion among the CDCs with respect
to what other entities a CDC Director
may be employed by or associated with
as a Director. SBA has reconsidered this
provision and determined that the
affiliation restrictions set forth in
§ 120.820 sufficiently limit the ability of
another entity to control the CDC. SBA
will retain the sentence in this provision
that references § 120.851(b) to reinforce
the prohibition against a CDC Board
member from serving on the Board of
another CDC.
SBA also proposes to insert the word
‘‘individuals’’ in place of ‘‘members’’ to
clarify in § 120.823(d)(4)(ii)(C) that
individuals serving on the loan
committee of a CDC do not have to be
Members of the CDC or the CDC’s
Board. SBA no longer requires a CDC to
have a membership and some CDC’s
were confused by the use of the term
‘‘member’’ in this section. Therefore,
SBA intends to change the word
‘‘member’’ to ‘‘individual’’.
31. Section 120.839 Case-by-case
application to make a 504 loan outside
of a CDC’s Area of Operations. SBA
proposes to replace the term ‘‘District
Offices’’ in this Section with ‘‘504 loan
processing center’’ to reflect the SBA
office that processes 504 loan
applications. A revision to the
regulation is needed in order to reflect
the current protocol that the 504 loan
processing center, not the District
Office, submits its recommendation to
the D/FA or designee, along with the
application and supporting materials for
the final decision if the applicant CDC
meets the specific criteria to be
authorized to make a loan outside of its
stated Area of Operations. SBA also
proposes to remove the term ‘‘on-site’’
while retaining ‘‘review/examination
assessments’’ in this section.
32. Section 120.841(c) CDC Reviews.
SBA proposes to remove the term ‘‘onsite’’ while retaining the term ‘‘review/
examination assessments’’ in
§ 120.841(c).
33. Section 120.884 Ineligible costs
for 504 loans. SBA proposes to define
heavy duty construction equipment in
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
§ 120.884(e)(3) without reference to the
IRS definition and to add the
requirement that the equipment have a
remaining useful life of at least 10 years.
SBA currently requires that heavy duty
construction equipment must be integral
to the business’ operations and meet the
IRS definition of capital equipment. IRS
no longer publishes a definition for
‘‘capital equipment.’’
34. Section 120.1025 Off-site reviews
and monitoring. SBA proposes to
remove specific reference to ‘‘off-site’’
regarding reviews and monitoring in
§ 120.1025, including in the title, and
replace it with ‘‘monitoring’’.
35. Section 120.1050 On-site reviews
and examinations. SBA proposes to
remove specific reference to ‘‘on-site’’
regarding reviews and examinations in
§ 120.1050, including in the title.
36. Section 120.1051 Frequency of
on-site reviews and examinations. SBA
proposes to remove specific reference to
‘‘on-site’’ regarding reviews and
examinations in § 120.1051, including
in the title. SBA proposes to remove
specific reference to ‘‘off-site review/
monitoring’’ in paragraph (a) and
replace it with ‘‘results of monitoring’’.
37. Section 120.1060 Confidentiality
of Reports, Risk Ratings and related
Confidential Information. SBA proposes
a limited expansion of its definition in
§ 120.1060 of ‘‘permitted parties’’ who
demonstrate a legitimate need to know
a lender’s Review/Exam Report
information, Risk Rating, and
Confidential Information for the
purpose of assisting a lender in
improving the SBA Lender’s,
Intermediary’s or NTAP’s SBA program
operations in conjunction with SBA’s
Lender Oversight Program and SBA’s
portfolio management. This limited
expansion of permitted parties may
include the lender’s parent entity,
directors, auditors and those lender
consultants under written contract
specifically to assist the Lender in
addressing SBA Findings and Corrective
Actions Required to SBA’s satisfaction.
Consultants do not include Lender
Service Providers. The consultant
contract must provide for both (1) the
consultant’s agreement to abide by the
disclosure prohibition in § 120.1060(b);
and (2) agreement not to use the Report,
Risk Rating, and Confidential
Information for any other purpose than
to assist Lender in addressing SBA
Findings and Corrective Actions. This
expansion may improve an SBA
Lender’s, Intermediary’s or NTAP’s
ability to address SBA Findings and
Corrective Actions or make other
necessary improvements within their
SBA operations. The change codifies
SBA practice of approving disclosure of
PO 00000
Frm 00009
Fmt 4702
Sfmt 4702
52601
a lender’s Report, Risk Rating, and
Confidential Information for this group,
obviating the need for case-by-case
approval for these parties going forward.
38. Section 120.1070 Lender
oversight fees. With the advent of new
technologies, generally less costly and
less burdensome virtual reviews such as
Analytical and Targeted Reviews may
cover much of what was previously
performed within the scope of on-site
reviews, diminishing the distinction
between ‘‘off-site’’ and ‘‘on-site’’
reviews. Therefore, SBA is proposing to
refine § 120.1070 to delete the
distinctions based on ‘‘on-site’’ and ‘‘offsite,’’ and to categorize the fee
components only as Examinations,
Reviews, Monitoring, and Other Lender
Oversight Activities.
With respect to Reviews, under
current regulations, SBA charges
Lenders a fee for the following types of
Reviews, including but not limited to,
PARRiS Full Reviews, PARRiS
Analytical Reviews, Targeted Reviews,
and Delegated Authority Reviews. This
fee is assessed based on the cost that
SBA incurs under its contract for these
Reviews. Under the proposed rule, SBA
is specifying that SBA can charge a
Lender the actual cost for Lender Loan
Reviews (e.g., Secondary Market Loan
Reviews) and corrective action
assessments, which is consistent with
SBA’s policy that Lenders that represent
increased risk and warrant additional
oversight should bear the expense of
that oversight rather than that expense
being apportioned to all Lenders.
The proposed section would also
provide that SBA has discretion in how
it allocates the costs to Lenders to allow
contracting flexibility in how SBA pays
for this cost. It would specify, consistent
with SBA’s current practice and current
contracts, that in general, where the
costs that SBA incurs for the oversight
activity are specific to a Lender, SBA
will charge that Lender for the actual
costs and, where the costs that SBA
incurs for the oversight activity are not
sufficiently specific to a particular
Lender but may be a flat fee paid to a
vendor, SBA will charge a Lender based
on that Lender’s portion of SBA
guarantees in the portfolio or segment of
the portfolio the activity covers. For
example, under its current review
contract, SBA pays its contractor for
each specific Lender’s Full Review and
SBA passes that cost along to the Lender
for which the Review was conducted.
Under the L/LMS contract, SBA pays its
contractor a flat fee for providing L/LMS
services that cover all Lenders and this
amount is apportioned among all
Lenders based on portfolio size.
E:\FR\FM\09AUP1.SGM
09AUP1
ehiers on DSK5VPTVN1PROD with PROPOSALS
52602
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
39. Section 120.1400(a) Grounds for
enforcement actions—SBA Lenders.
SBA proposes to amend § 120.1400(a) to
provide that by making SBA 7(a)
guaranteed loans or SBA 504 loans after
a certain date, SBA Supervised Lenders
(except Other Regulated SBLCs) or
CDCs, as applicable, consent to the
appointment of a Receiver and such
injunctive or other equitable relief as
appropriate, and waive in advance any
defenses to such relief as sought by
SBA, in connection with an
enforcement action. SBA is conditioning
its guarantee of 7(a) loans made by SBA
Supervised Lenders (except Other
Regulated SBLCs) and 504 debentures
after a certain date on consent to this
relief in an enforcement action because
the injury to SBA and its supervision
and regulatory oversight of the SBA
Supervised Lender or CDC due to the
SBA Supervised Lender’s or CDC’s
default under its agreement(s) with SBA
would be irreparable and the amount of
damage would be difficult to ascertain,
making this relief necessary and
required. A consent to receivership is
not without precedent in other federal
agency practice and has been upheld by
the courts as valid and legally
enforceable. See, e.g., U.S. v. Mountain
Village Company, 424 F. Supp. 822 (D.
Mass. 1976).
40. Section 120.1500 Types of
enforcement actions—SBA Lenders.
SBA proposes to revise § 120.1500(c)(3)
and to add § 120.1500(e)(3) to clarify
when SBA may initiate a request for
appointment of a Receiver to administer
and operate an SBA Supervised Lender
and to permit SBA to initiate a request
for appointment of a Receiver of a CDC.
41. Section 120.1600 General
procedures for enforcement actions
against SBA Lenders, SBA Supervised
Lenders, Other Regulated Small
Business Lending Companies (SBLCs),
Management Officials, Other Persons,
Intermediaries, and Non-Lending
Technical Assistance Providers
(NTAPs). SBA proposes to add language
into §§ 120.1600(a), 120.1600(a)(6) and
120.1600(b)(4) providing that if SBA
undertakes the appointment of a
Receiver for a CDC or an SBA
Supervised Lender, SBA will follow the
applicable procedures under federal law
to obtain such remedies and to enforce
the CDC’s or SBA Supervised Lender’s
consent and waiver in advance to those
remedies.
42. Section 120.1703 Qualifications
to be a Pool Originator. In paragraph
(a)(4) SBA proposes to replace the term
‘‘good standing’’ with ‘‘Satisfactory’’
when it relates to other federal
regulators.
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
43. Section 120.1707 Seller’s
retained Loan Interest. SBA is currently
using an allonge to the First Lien
Position 504 Loan Pool Guarantee
Agreement, as opposed to requiring the
execution of a new First Lien Position
504 Loan Pool Guarantee Agreement, to
substantiate the transfer of a Seller’s
interest in an FMLP Pool Loan. The use
of an allonge will require the purchaser
of a Seller’s retained interest to assume
the original responsibilities of the Seller
with regard to the FMLP Pool Loan. The
allonge must be in form acceptable to
SBA and the purchaser must
acknowledge, assume and accept all of
the original obligations and
responsibilities of the Seller under the
initial or subsequent First Lien Position
504 Loan Pool Guarantee Agreement.
The proposed change will conform the
rule to the current practice.
44. Subpart K—Establishment of an
SBA Direct Loan Program for
Systemically Important Secondary
Market Broker-Dealers (SISMBD Loan
Program). Since the SISMBD Loan
Program expired on February 16, 2013,
and was not extended by statute, SBA
proposes to remove this subpart in its
entirety.
Compliance With Executive Orders
13563, 12866, 12988, and 13132, the
Paperwork Reduction Act (44 U.S.C.,
Ch. 35), and the Regulatory Flexibility
Act (5 U.S.C. 601–612)
Executive Order 12866
The Office of Management and Budget
(OMB) has determined that this
proposed rule is not a ‘‘significant’’
regulatory action for the purposes of
Executive Order 12866. In the interest of
transparency, however, SBA has drafted
a Regulatory Impact Analysis for the
public’s information in the next section.
This is not a major rule under the
Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
1. Is there a need for this regulatory
action?
The Agency believes it needs to
streamline and reduce regulatory
burdens to facilitate robust participation
in the business loan and surety bond
programs that assist small and
underserved U.S. businesses.
2. What are the potential benefits and
costs of this regulatory action?
As stated above, the potential benefits
of this proposed rule are based on its
elimination of unnecessary participation
burdens. Participants will benefit from
clear and simpler regulatory directions
that enable them to provide small
business loans and bonds in a more
efficient and cost effective manner.
PO 00000
Frm 00010
Fmt 4702
Sfmt 4702
3. What alternatives have been
considered?
One ‘‘alternative’’ would be to
eliminate even more regulatory burdens.
The Agency will consider public
comment and suggestions on how that
can be done responsibly without
substantially increasing the risk of
waste, fraud, or abuse of the programs.
Executive Order 13563
A description of the need for this
regulatory action and benefits and costs
associated with this action, including
possible distributional impacts that
relate to Executive Order 13563, are
included above in the Regulatory Impact
Analysis under Executive Order 12866.
SBA’s Business Loan Programs
operate through the Agency’s lending
partners, which are Surety Bond
Companies for the Surety Bond
Guarantee Program, 7(a) Lenders for the
7(a) Loan Program, third party lenders,
CDCs for the 504 Loan Program, and
Microloan Intermediaries for the
Microloan Program. The Agency has
participated in public forums and
meetings which have included outreach
to hundreds of its lending partners to
seek valuable insight, guidance, and
suggestions for program reform.
Executive Order 12988
This action meets applicable
standards set forth in sections 3(a) and
3(b)(2) of Executive Order 12988, Civil
Justice Reform, to minimize litigation,
eliminates ambiguity, and reduce
burden. The action does not have
retroactive or preemptive effect.
Executive Order 13132
SBA has determined that this
proposed rule will not have substantial,
direct effects on the States, on the
relationship between the national
government and the States, or on the
distribution of power and
responsibilities among the various
levels of government. Therefore, for the
purposes of Executive Order 13132,
SBA has determined that this proposed
rule has no federalism implications
warranting preparation of a federalism
assessment.
Paperwork Reduction Act, 44 U.S.C.,
Ch. 35
SBA has determined that this
proposed rule imposes additional
reporting requirements under the
Paperwork Reduction Act (PRA). As
described above, SBA proposes to
require all participating sureties to
notify SBA of all contracts that were
successfully completed on a quarterly
basis. The public is invited to comment
on this proposed new report and to
E:\FR\FM\09AUP1.SGM
09AUP1
ehiers on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
submit any comments by the deadline
stated in the DATES section of this
document to: SBA Desk Officer, Office
of Information and Regulatory Affairs,
Office of Management and Budget,
Room 10202, 725 17th Street NW.,
Washington, DC 20503.
SBA invites comments on: (1)
Whether the proposed collection of
information is necessary for the proper
performance of SBA’s functions,
including whether the information will
have a practical utility; (2) the accuracy
of SBA’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used; (3)
ways to enhance the quality, utility, and
clarity of the information to be
collected; and (4) ways to minimize the
burden of the collection of information
on respondents, including through the
use of automated collection techniques,
when appropriate, and other forms of
information technology. SBA will
submit the proposed form and other
documents required under the
Paperwork Reduction Act to OMB for
review and approval.
A summary description of this
information collection, the respondents,
and the estimate of the annual hour
burden resulting from this new process
is provided below. Included in the
estimate is the time for reviewing
instructions, searching existing data
sources, gathering information needed,
and completing and reviewing the
responses.
Title: Quarterly Contract Completion
Report.
Description: The Quarterly Contract
Completion Report would be submitted
by all participating surety companies to
provide SBA with information about
successfully completed contracts. The
information reported would include the
Surety Bond Guarantee number, the
name of the Principal, the original
Contract dollar amount, the revised
Contract dollar amount (if applicable),
the date of Contract completion, and a
fee recap. Reports would be due to SBA
within 45 days of each fiscal quarter.
OMB Control Number: New
Collection.
Description of and Estimated Number
of Respondents: The proposed new
collection would be submitted by the
surety companies that participate in the
SBG Program. The burden estimate for
this requirement is based on the 23
current participants.
Estimated Number of Responses: Each
of the estimated 23 sureties would be
required to submit the report to SBA 4
times per year, for a total of 92
responses.
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
Estimated Response Time: It is
estimated that each surety would need
approximately 1 hour to complete the
proposed report.
Total Estimated Annual Hour Burden:
92 hours.
Estimated Annual Cost Burden:
$4,604.
Regulatory Flexibility Act, 5 U.S.C. 601–
612
When an agency issues a rulemaking
proposal, the Regulatory Flexibility Act
(RFA), 5 U.S.C. 601–612, requires the
agency to ‘‘prepare and make available
for public comment an initial regulatory
analysis’’ which will ‘‘describe the
impact of the proposed rule on small
entities.’’ Section 605 of the RFA allows
an agency to certify a rule, in lieu of
preparing an analysis, if the proposed
rulemaking is not expected to have a
significant economic impact on a
substantial number of small entities.
There are 23 sureties (none of them
small entities) that participate in the
SBG Program, and no part of this rule
would impose any significant cost or
burden on them. Although the
rulemaking will impact all of the
approximately 5,000 7(a) Lenders (some
of which are small), all of the
approximately 250 CDCs (all of which
are small), and 145 Microloan
Intermediaries (most of which are small)
SBA does not believe the impact will be
significant. The proposed rule will
reduce the burden of the Agency’s
lending partners because they choose
their own level of program participation
(i.e., 7(a) Lenders and CDCs are not
required to process more loan
applications simply because there is a
reduced burden for small businesses to
apply for a business loan). Therefore the
proposed modernization of certain
program participation requirements
would not have a substantial economic
impact or cost on the small business
borrower, lender, or CDC, and in fact,
may reduce costs to lender participants.
SBA believes that this proposed rule
encompasses best practice guidance that
aligns with the Agency’s mission to
increase access to capital for small
businesses and facilitate American job
preservation and creation with the
removal of unnecessary regulatory
requirements. A review of the summary
and preamble above will provide more
detailed explanations discussing the
specific improvements that will reduce
regulatory burdens and encourage
increased program participation. For
these reasons, SBA has determined that
there is no negative impact on a
substantial number of small entities.
SBA invites comment from members of
the public who believe there will be a
PO 00000
Frm 00011
Fmt 4702
Sfmt 4702
52603
significant impact on sureties,
microloan intermediaries, participant
lenders, CDCs, or small businesses.
List of Subjects
13 CFR Part 115
Claims, Reporting and recordkeeping
requirements, Small businesses, Surety
bonds.
13 CFR Part 120
Community development, Equal
employment opportunity, Loan
programs—business, Reporting and
recordkeeping requirements, Small
businesses.
For the reasons stated in the
preamble, SBA proposes to amend 13
CFR parts 115 and 120 as follows:
PART 115—SURETY BOND
GUARANTEE
1. The authority citation for part 115
continues to read as follows:
■
Authority: 5 U.S.C. app 3; 15 U.S.C. 687b,
687c, 694a, 694b note; and Pub. L. 110–246,
Sec. 12079, 122 Stat. 1651.
§ 115.19
[Amended]
2. Amend § 115.19 by removing the
phrase ‘‘or $100,000, whichever is less’’
in paragraph (c)(1), the second sentence
of paragraph (d), and paragraph (e)(2).
■ 3. Add § 115.22 to subpart A to read
as follows:
■
§ 115.22
Report.
Quarterly Contract Completion
The Surety must submit a Quarterly
Contract Completion Report within 45
days after the close of each fiscal year
quarter ending December 31, March 31,
June 30, and September 30, that
identifies each contract successfully
completed during the quarter.
The report shall include:
(a) The SBA Surety Bond Guarantee
Number,
(b) Name of the Principal,
(c) The original Contract Dollar
Amount,
(d) The revised Contract Dollar
Amount (if applicable),
(e) The date of Contract completion,
and
(f) A summary specifying the fee
amounts paid to SBA by the Surety and
Principal, the fee amounts due to SBA
as a result of any increases in the
Contract amount, and the fee amounts to
be refunded to the Principal or rebated
to the Surety as a result of any decreases
in the Contract amount.
§ 115.30
[Amended]
4. Amend § 115.30 by removing
‘‘$250,000’’ from the second sentence of
paragraph (d)(2)(i) and adding in its
place ‘‘$400,000’’.
■
E:\FR\FM\09AUP1.SGM
09AUP1
52604
§ 115.32
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
[Amended]
5. Amend § 115.32 by removing ‘‘or
$100,000, whichever is less’’ from the
first and second sentences of paragraph
(d)(1).
■ 6. Amend § 115.60 by adding third
and fourth sentences at the end of
paragraph (b) to read as follows:
■
§ 115.60 Selection and admission of PSB
Sureties.
*
*
*
*
*
(b) * * * For a period of nine months
following admission to the PSB
program, the Surety must obtain SBA’s
prior written approval before executing
a bond greater than $2 million so that
SBA may evaluate the Surety’s
performance in its underwriting and
claims and recovery functions. At the
end of this nine month period, SBA may
in its discretion extend this period to
allow SBA to further evaluate the
Surety’s performance.
§ 115.67
[Amended]
7. Amend § 115.67 by removing the
phrase ‘‘or $100,000, whichever is less’’
from the second sentence of paragraph
(a).
■ 8. Revise § 115.68 to read as follows:
■
§ 115.68
Guarantee percentage.
SBA reimburses a PSB Surety in the
same percentages and under the same
terms as set forth in § 115.31.
PART 120—BUSINESS LOANS
9. The authority citation for part 120
is revised to read as follows:
■
Authority: 15 U.S.C. 634(b)(6), (b)(7),
(b)(14), (h) and note, 636(a), (h) and (m), 650,
687(f), 696(3) and 697(a) and (e); Pub. L. 111–
5, 123 Stat. 115; Pub. L. 111–240, 124 Stat.
2504; Pub. L. 114–38, 129 Stat. 437.
§ 120.110
[Amended]
10. Remove and reserve § 120.110(l).
11. Amend § 120.111 by revising the
introductory text and paragraphs (a)(3)
and (6) to read as follows:
■
■
ehiers on DSK5VPTVN1PROD with PROPOSALS
§ 120.111 What conditions must an
Eligible Passive Company satisfy?
An Eligible Passive Company must
use loan proceeds to either acquire or
lease, and/or improve or renovate, real
or personal property (including eligible
refinancing), that it leases to one or
more Operating Companies for
conducting the Operating Company’s
business (references to Operating
Company in paragraphs (a) and (b) of
this section mean each Operating
Company) or to finance a change of
ownership between the existing owners
of the Eligible Passive Company. Any
ownership structure or legal form may
qualify as an Eligible Passive Company.
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
(a) * * *
(3) The lease between the Eligible
Passive Company and the Operating
Company must be in writing and must
be subordinated to SBA’s mortgage,
trust deed lien, or security interest on
the property. Also, the Eligible Passive
Company (as landlord) must furnish as
collateral for the loan an assignment of
all rents paid under the lease. The rent
or lease payments cannot exceed the
amount necessary to make the loan
payment to the lender, and an
additional amount to cover the EPC’s
direct expenses of holding the property,
such as maintenance, insurance and
property taxes;
*
*
*
*
*
(6) Each holder of an ownership
interest constituting at least 20 percent
of either the Eligible Passive Company
or the Operating Company must
guarantee the loan (the trustee shall
execute the guaranty on behalf of any
trust). SBA, in its discretion, consulting
with the Participating Lender, may
require other appropriate individuals to
guarantee the loan as well, except SBA
generally will not require personal
guarantees from those owning less than
5 percent ownership.
*
*
*
*
*
■ 12. Amend § 120.130 by redesignating
paragraphs (e) and (f) as paragraphs (f)
and (g) respectively, adding new
paragraph (e), and revising newly
redesignated paragraph (g).
The addition and revisions read as
follows:
■
§ 120.130 Restrictions on uses of
proceeds.
*
*
*
*
*
*
(e) The applicant may not use any of
the proceeds to pay past-due Federal or
state payroll taxes;
*
*
*
*
*
(g) Any use restricted by §§ 120.201,
120.202, and 120.884 (specific to 7(a)
loans and 504 loans respectively).
■ 13. Amend § 120.160 by revising the
second sentence of paragraph (a) and by
removing paragraph (d).
The revision reads as follows:
§ 120.160
Loan conditions.
*
*
*
*
*
(a) * * * SBA, in its discretion,
consulting with the Participating
Lender, may require other appropriate
individuals to guarantee the loan as
well, except SBA generally will not
require personal guarantees from those
owning less than 5 percent ownership.
*
*
*
*
*
§ 120.194
■
[Removed and reserved]
14. Remove and reserve § 120.194.
PO 00000
Frm 00012
Fmt 4702
Sfmt 4702
15. Amend § 120.214 by revising the
second sentence in paragraph (a) and
revising paragraph (c) to read as follows:
§ 120.214 What conditions apply for
variable interest rates?
*
*
*
*
*
(a) * * * Subsequent changes may
occur 2 business days (or more) after a
change in the identified base rate;
however, such changes may not occur
more often than monthly.
*
*
*
*
*
(c) Base rate. (1) The base rate will be
one of the following:
(i) The prime rate;
(ii) The thirty-day (1-month) London
Interbank Offered Rate (LIBOR) plus 3
percentage points; or
(iii) The Optional Peg Rate.
(2) The prime or LIBOR rate will be
that which is in effect on the date SBA
receives a complete loan application.
The initial prime or LIBOR base rate and
subsequent changes to the prime or
LIBOR base rate must follow the rates as
printed in a national financial
newspaper or Web site published each
business day.
*
*
*
*
*
■ 16. Amend § 120.220 by adding
paragraph (a)(3), revising the first and
third sentences of paragraph (b), and
removing the first two sentences of
paragraph (c).
The additions and revisions read as
follows:
§ 120.220
Fees that Lender pays SBA.
*
*
*
*
(a) * * *
(3) For loans approved under section
7(a)(31) of the Small Business Act to
veterans and/or the spouse of a veteran.
In fiscal years when the 7(a) program is
at zero subsidy, SBA will not collect a
guarantee fee in connection with a loan
made under section 7(a)(31) of the Small
Business Act to a business owned and
controlled by a veteran or the spouse of
a veteran.
(b) * * * For a loan with a maturity
of twelve (12) months or less, the
Lender must pay the guaranty fee to
SBA electronically within 10 business
days after SBA gives its loan approval.
* * * For a loan with a maturity in
excess of twelve (12) months, the
Lender must pay the guaranty fee to
SBA electronically within 90 days after
SBA gives its loan approval. * * *
*
*
*
*
*
■ 17. Amend § 120.221 by revising the
section heading, adding introductory
text, and revising paragraph (e) to read
as follows:
E:\FR\FM\09AUP1.SGM
09AUP1
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
§ 120.221 Fees and expenses which the
Lender may collect from a loan applicant or
Borrower.
Unless otherwise allowed by SBA
Loan Program Requirements, the Lender
may charge and collect from the
applicant or Borrower only the
following fees and expenses:
*
*
*
*
*
(e) Legal services. Lender may charge
the Borrower for legal services, but only
for hourly charges for requested services
actually rendered.
■ 18. Revise § 120.222 to read as
follows:
§ 120.222 Prohibition on sharing
premiums for secondary market sales.
The Lender or its Associates may not
share in any premium received from the
sale of an SBA guaranteed loan in the
secondary market with a Service
Provider, packager, or other loan-referral
source.
§ 120.394
[Amended]
19. Amend § 120.394 in the third
sentence by removing the term ‘‘20’’ and
adding in its place the term ‘‘33’’.
■ 20. Amend § 120.410 in paragraph
(a)(2) by removing the term ‘‘on-site’’
from the third sentence and by revising
paragraph (e) to read as follows:
■
§ 120.410 Requirements for all
participating Lenders.
*
*
*
*
*
(e) Be in good standing with SBA, as
defined in § 120.420(f) (and determined
by SBA in its discretion), and, as
applicable, with its state regulator and
be considered satisfactory by its Federal
Financial Institution Regulator (as
determined by SBA and based on, for
example, information in published
orders/agreements and call reports); and
*
*
*
*
*
§ 120.424
[Amended]
21. Amend § 120.424(b) by removing
the term ‘‘on-site’’ from the third
sentence.
[Amended]
22. Amend § 120.433(b) by removing
the term ‘‘on-site’’ from the third
sentence.
■
ehiers on DSK5VPTVN1PROD with PROPOSALS
§ 120.434
[Amended]
23. Amend § 120.434(c) by removing
the term ‘‘on-site’’ from the third
sentence.
■ 24. Revise the undesignated center
heading following § 120.435 to read
‘‘Delegated Authority Criteria’’.
■ 25. Revise § 120.440 to read as
follows:
■
VerDate Sep<11>2014
15:05 Aug 08, 2016
(a) In making its decision to grant or
renew a delegated authority, SBA
considers whether the Lender, as
determined by SBA in its discretion:
(1) Has the continuing ability to
evaluate, process, close, disburse,
service, liquidate and litigate SBA loans.
This includes the ability to develop and
analyze complete loan packages. SBA
may consider the experience and
capability of Lender’s management and
staff.
(2) Has satisfactory SBA performance
(as defined in § 120.410(a)(2));
(3) Is in compliance with SBA Loan
Program Requirements (e.g., Form 1502
reporting, timely payment of all fees to
SBA);
(4) Has completed to SBA’s
satisfaction all required corrective
actions;
(5) Is subject to any enforcement
action, order or agreement with a
regulator or the presence of other
regulatory concerns as determined by
SBA; and
(6) Whether Lender exhibits other risk
factors (e.g., has rapid growth; low SBA
activity; SBA loan volume; Lender, an
officer or director is under investigation
or indictment).
(b) Delegated authority decisions are
made by the appropriate SBA official in
accordance with Delegations of
Authority, and are final.
(c) If delegated authority is approved
or renewed, Lender must execute a
Supplemental Guarantee Agreement,
which will specify a term not to exceed
two years. SBA may grant shortened
renewals based on risk or any of the
other delegated authority criteria.
Lenders with less than 3 years of SBA
lending experience will be limited to a
term of 1 year or less.
§ 120.441
■
■
§ 120.433
§ 120.440 How does a Lender obtain
delegated authority?
Jkt 238001
[Removed and reserved]
26. Remove and reserve § 120.441.
§ 120.451
[Removed and reserved]
27. Remove and reserve § 120.451.
28. Amend § 120.524 by revising
paragraph (b) to read as follows:
■
■
§ 120.524 When is SBA released from
liability on its guarantee?
*
*
*
*
*
(b) If SBA determines, at any time,
that any of the events set forth in
paragraph (a) of this section occurred in
connection with that loan, SBA is
entitled to recover any moneys paid on
the guarantee plus interest from the
Lender. In the exercise of its rights, SBA
may utilize all legal means available,
including offset and judicial remedies.
*
*
*
*
*
PO 00000
Frm 00013
Fmt 4702
Sfmt 4702
52605
29. Amend § 120.630 by revising
paragraph (a)(4) to read as follows and
paragraph (a)(5) by removing the term
‘‘on-site’’ from the third sentence:
■
§ 120.630 Qualifications to be a Pool
Assembler.
(a) * * *
(4) Is in good standing with SBA (as
the D/FA determines in his or her
discretion), and is Satisfactory with the
Office of the Comptroller of the
Currency (‘‘OCC’’) if it is a national
bank, the Federal Deposit Insurance
Corporation if it is a bank not regulated
by the OCC, or the Financial Industry
Regulatory Authority (‘‘FINRA’’) if it is
a member as determined by SBA.
*
*
*
*
*
■ 30. Amend § 120.660 by:
■ a. Revising paragraph (a) introductory
text and paragraphs (a)(1)(ii) and (a)(2);
■ b. Adding paragraph (a)(3);
■ c. Revising paragraph (c); and
■ d. Adding paragraph (d) to read as
follows:
§ 120.660
Suspension or revocation.
(a) Temporary suspension or
revocation of Lender, broker, dealer, or
Registered Holder for violation of
Secondary Market rules and regulations.
The D/FA together with the Director,
Office of Credit Risk Management (D/
OCRM) may suspend for a period of no
more than 120 calendar days or revoke
for a period of no more than two (2)
years, the privilege of a Lender, broker,
dealer, or Registered Holder to sell,
purchase, broker, or deal in loans or
Certificates for:
(1) * * *
(ii) Any provisions in the contracts
entered into by the parties, including
SBA Forms 1086, 1088 and 1454;
(2) Knowingly submitting false or
fraudulent information to the SBA or
FTA; or
(3) A Lender’s receipt, from its
primary regulator, of a cease and desist
order, a consent agreement affecting
capital or commercial lending issues, a
supervisory action citing unsafe or
unsound banking practices or other
items of concern to SBA and its
potential risk to SBA through loan sales;
or a going concern opinion issued by the
Lender’s auditor. A Lender subject to
such action or opinion must notify the
D/FA and the D/OCRM within five
business days (or as soon as practicable
thereafter) of the issuance of any such
action or opinion, including providing
copies of the relevant documents for
review.
*
*
*
*
*
(c) Notice to suspend or revoke. The
D/FA and the D/OCRM shall notify the
affected party in writing, providing the
E:\FR\FM\09AUP1.SGM
09AUP1
52606
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
reasons therefore, at least 10 business
days prior to the effective date of the
suspension or revocation. The affected
party may appeal the suspension or
revocation made under this section
pursuant to the procedures set forth in
part 134 of this chapter. The action
taken by the D/FA and the D/OCRM will
remain in effect pending resolution of
the appeal.
(d) Early termination of suspension or
revocation. SBA may, by written notice,
terminate a secondary market
suspension or revocation under this
section, if the D/FA and the D/OCRM,
in their sole discretion, determine that
such termination is warranted for good
cause.
§ 120.710
[Amended]
31. Amend § 120.710 by removing the
term ‘‘on-site’’ from the third sentence
of paragraph (e)(1).
■ 32. Amend § 120.812 by revising the
last sentence of paragraph (c) to read as
follows:
■
§ 120.812 Probationary period for newly
certified CDCs.
*
*
*
*
*
(c) * * * Other factors may include,
but are not limited to review/
examination assessments, historical
performance measures, loan volume to
the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission).
*
*
*
*
*
■ 33. Amend § 120.816 by revising the
last sentence of paragraph (c) to read as
follows:
§ 120.816 CDC non-profit status and good
standing.
*
*
*
*
(c) * * * Other factors may include,
but are not limited to, review/
examination assessments, historical
performance measures, loan volume to
the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission).
*
*
*
*
*
■ 34. Amend § 120.823 by revising
paragraphs (c)(5) and (d)(4)(ii)(C) to read
as follows:
ehiers on DSK5VPTVN1PROD with PROPOSALS
*
§ 120.823
CDC Board of Directors.
*
*
*
*
*
(c) * * *
(5) No CDC Board member may serve
on the Board of another CDC in
accordance with § 120.851(b).
(d) * * *
(4) * * *
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
(ii) * * *
(C) Have at least two individuals with
commercial lending experience
satisfactory to SBA; and
*
*
*
*
*
■ 35. Amend § 120.839 by revising the
introductory text to read as follows:
§ 120.839 Case-by-case application to
make a 504 loan outside of a CDC’s Area
of Operations.
A CDC may apply to make a 504 loan
for a Project outside its Area of
Operations by submitting a request to
the 504 loan processing center. The
applicant CDC must demonstrate that it
can adequately fulfill its 504 program
responsibilities for the 504 loan,
including proper servicing. In addition,
the CDC must have satisfactory SBA
performance, as determined by SBA in
its discretion. The CDC’s Risk Rating,
among other factors, will be considered
in determining satisfactory SBA
performance. Other factors may include,
but are not limited to, review/
examination assessments, historical
performance measures, loan volume to
the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission). The 504 loan processing
center may approve the application if:
*
*
*
*
*
■ 36. Amend § 120.841 by revising the
last sentence of paragraph (c) to read as
follows:
§ 120.841
Qualifications for the ALP.
*
*
*
*
*
(c) * * * Other factors may include,
but are not limited to review/
examination assessments, historical
performance measures, loan volume to
the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission);
*
*
*
*
*
■ 37. Amend § 120.884 by revising
paragraph (e)(3) to read as follows:
§ 120.884
Ineligible costs for 504 loans.
*
*
*
*
*
(e) * * *
(3) Construction equipment (except
for heavy duty construction equipment
integral to the business’ operations with
a remaining useful life of a minimum of
10 years).
■ 38. Amend § 120.1025 by revising the
section heading and removing ‘‘off-site
reviews and monitoring’’ and adding in
its place ‘‘monitoring’’.
The revision reads as follows:
§ 120.1025
Monitoring.
*
*
PO 00000
*
Frm 00014
*
Fmt 4702
*
Sfmt 4702
39. Amend § 120.1050 by revising the
section heading and removing the
phrase ‘‘on-site’’ wherever it occurs.
The revision reads as follows:
■
§ 120.1050
Reviews and examinations.
*
*
*
*
*
■ 40. Amend § 120.1051 by revising the
section heading and paragraph (a) and
removing the phrase ‘‘on-site’’ wherever
it occurs.
The revisions read as follows:
§ 120.1051 Frequency of reviews and
examinations.
*
*
*
*
*
(a) Results of monitoring, including
an SBA Lender’s, Intermediary’s or
NTAP’s Risk Rating;
*
*
*
*
*
■ 41. Revise § 120.1060(b) to read as
follows:
§ 120.1060 Confidentiality of Reports, Risk
Ratings and related Confidential
Information.
*
*
*
*
*
(b) Disclosure prohibition. Each SBA
Lender, Intermediary, and NTAP is
prohibited from disclosing its Report,
Risk Rating, and Confidential
Information, in full or in part, in any
manner, without SBA’s prior written
permission. An SBA Lender,
Intermediary, and NTAP may use the
Report, Risk Rating, and Confidential
Information for confidential use within
its own immediate corporate
organization. SBA Lenders,
Intermediaries, and NTAPs must restrict
access to their Report, Risk Rating and
Confidential Information to their
respective parent entities, officers,
directors, employees, auditors and
consultants, in each case who
demonstrate a legitimate need to know
such information for the purpose of
assisting in improving the SBA
Lender’s, Intermediary’s, or NTAP’s
SBA program operations in conjunction
with SBA’s Program and SBA’s portfolio
management (for purposes of this
regulation, each referred to as a
‘‘permitted party’’), and to those for
whom SBA has approved access by
prior written consent, and those for
whom access is required by applicable
law or legal process. If such law or
process requires SBA Lender,
Intermediary, or NTAP to disclose the
Report, Risk Rating, or Confidential
Information to any person other than a
permitted party, SBA Lender,
Intermediary, or NTAP will promptly
notify SBA and SBA’s Information
Provider in writing and in advance of
such disclosure so that SBA and the
Information Provider have, within their
discretion, the opportunity to seek
E:\FR\FM\09AUP1.SGM
09AUP1
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
appropriate relief such as an injunction
or protective order prior to disclosure.
For purposes of this regulation,
‘‘consultants’’ means only those
consultants that are under written
contract with an SBA Lender,
Intermediary or NTAP specifically to
assist with addressing its Report
Findings and Corrective Actions to
SBA’s satisfaction. The consultant
contract must provide for both the
consultant’s agreement to abide by the
disclosure prohibition in this paragraph
and the consultant’s agreement not to
use the Report, Risk Rating, and
Confidential Information for any
purpose other than to assist with
addressing the Report Findings and
Corrective Actions. ‘‘Information
Provider’’ means any contractor that
provides SBA with the Risk Rating.
Each SBA Lender, Intermediary, and
NTAP must ensure that each permitted
party is aware of and agrees to these
regulatory requirements and must
ensure that each such permitted party
abides by them. Any disclosure of the
Report, Risk Rating, or Confidential
Information other than as permitted by
this regulation may result in appropriate
action as authorized by law. An SBA
Lender, Intermediary, and NTAP will
indemnify and hold harmless SBA from
and against any and all claims,
demands, suits, actions, and liabilities
to any degree based upon or resulting
from any unauthorized use or disclosure
of the Report, Risk Rating, or
Confidential Information. Information
Provider contact information is
available from the Office of Capital
Access.
■ 42. Amend § 120.1070 by:
■ a. Revising paragraphs (a)(1) through
(4);
■ b. Redesignating paragraphs (b) and
(c) as paragraphs (c) and (d),
respectively;
■ c. Adding a new paragraph (b);
■ d. Revising the first and second
sentences of newly redesignated
paragraph (c); and
■ e. Revising the final sentence of newly
redesignated paragraph (d).
The additions and revisions read as
follows:
§ 120.1070
Lender oversight fees.
ehiers on DSK5VPTVN1PROD with PROPOSALS
*
*
*
*
*
(a) * * *
(1) Examinations. The costs of
conducting a safety and soundness
examination and related activities of an
SBA-Supervised Lender, including any
expenses that are incurred in relation to
the examination and such activities.
(2) Reviews. The costs of conducting
a review of a Lender or a Lender’s loans,
and related review activities (e.g.,
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
corrective action assessments, delegated
loan reviews), including any expenses
that are incurred in relation to the
review and such activities.
(3) Monitoring. The costs of
conducting monitoring reviews of a
Lender, including any expenses that are
incurred in relation to the monitoring
review activities.
(4) Other lender oversight activities.
The costs of additional expenses that
SBA incurs in carrying out other lender
oversight activities (for example, the
salaries and travel expenses of SBA
employees and equipment expenses that
are directly related to carrying out
lender oversight activities, technical
assistance and analytics to support the
monitoring and review program, and
supervision and enforcement activity
costs).
(b) Allocation. SBA will assess to
Lender(s) the costs associated with the
review, examination, monitoring, or
other lender oversight activity, as
determined by SBA in its discretion.
(1) In general:
(i) Where the costs that SBA incurs for
a review, exam, or other lender
oversight activity are specific to a
particular Lender, SBA will charge that
Lender a fee for the actual costs of
conducting the review, exam, or other
lender oversight activity; and
(ii) Where the costs that SBA incurs
for the lender oversight activity are not
sufficiently specific to a particular
Lender, SBA will assess a fee based on
each Lender’s portion of the total dollar
amount of SBA guarantees in SBA’s
total portfolio or in the relevant
portfolio segment being reviewed or
examined, to cover the costs of such
activity.
(2) SBA may waive the assessment of
this fee for all Lenders owing less than
a threshold amount below which SBA
determines that it is not cost effective to
collect the fee.
(c) * * * For the examinations or
reviews conducted under paragraphs
(a)(1) and (2) of this section, SBA will
bill each Lender for the amount owed
following completion of the
examination, review or related activity.
For monitoring conducted under
paragraph (a)(3) of this section and the
other lender oversight activity expenses
incurred under paragraph (a)(4) of this
section, SBA will bill each Lender for
the amount owed on an annual basis.
* * *
(d) * * * In addition, a Lender’s
failure to pay any of the fee components
described in this section, or to pay
interest, charges and penalties that have
been charged, may result in a decision
to suspend or revoke a participant’s
eligibility, limit a participant’s
PO 00000
Frm 00015
Fmt 4702
Sfmt 4702
52607
delegated authority, or other remedy
available under law.
■ 43. Amend § 120.1400 by revising
paragraph (a) to read as follows:
§ 120.1400 Grounds for enforcement
actions—SBA Lenders.
(a) Agreements. By making SBA 7(a)
guaranteed loans or 504 loans, SBA
Lenders automatically agree to the
terms, conditions, and remedies in Loan
Program Requirements, as promulgated
or issued from time to time and as if
fully set forth in the SBA Form 750
(Loan Guaranty Agreement),
Development Company 504 Debenture,
CDC Certification, Servicing Agent
Agreement, or other applicable
participation, guaranty, or supplemental
agreement. SBA Lenders further agree
that a violation of Loan Program
Requirements constitutes default under
their respective agreements with SBA.
(1) Additional agreements by CDCs.
By obtaining approval for 504 loans
after [date 60 days from publication of
final rule in the Federal Register], a
CDC consents to the remedies in
§ 120.1500(e)(3) and waives in advance
any defenses to such relief as sought by
SBA. The CDC agrees that its consent to
SBA’s application to a federal court of
competent jurisdiction for appointment
of a receiver of SBA’s choosing, an
injunction or other equitable relief, and
the CDC’s consent in advance to the
court’s granting of SBA’s application,
includes a waiver of objection to a
receiver or other such relief and may be
enforced upon any basis in law or
equity recognized by the court.
(2) Additional agreements by SBA
Supervised Lenders (except Other
Regulated SBLCs). By making SBA 7(a)
guaranteed loans after [date 60 days
from publication of final rule in the
Federal Register], an SBA Supervised
Lender (except an Other Regulated
SBLC) consents to the remedies in
§ 120.1500(c)(3) and waives in advance
any defenses to such relief as sought by
SBA. The SBA Supervised Lender
agrees that its consent to SBA’s
application to a federal court of
competent jurisdiction for appointment
of a receiver of SBA’s choosing, an
injunction or other equitable relief, and
the SBA Supervised Lender’s consent in
advance to the court’s granting of SBA’s
application, includes a waiver of
objection to a receiver or other such
relief and may be enforced upon any
basis in law or equity recognized by the
court.
*
*
*
*
*
■ 44. Amend § 120.1500 by revising
paragraph (c)(3) and adding paragraph
(e)(3) to read as follows:
E:\FR\FM\09AUP1.SGM
09AUP1
52608
Federal Register / Vol. 81, No. 153 / Tuesday, August 9, 2016 / Proposed Rules
§ 120.1500 Types of enforcement
actions—SBA Lenders.
*
*
*
*
*
(c) * * *
(3) Initiate request for appointment of
receiver and/or other relief. The SBA
may make application to any federal
court of competent jurisdiction for the
court to take exclusive jurisdiction,
without notice, of an SBA Supervised
Lender, and SBA shall be entitled to the
appointment of a receiver of SBA’s
choosing to hold, administer, operate,
and/or liquidate the SBA Supervised
Lender; and to such injunctive or other
equitable relief as may be appropriate.
Without limiting the foregoing and with
SBA’s written consent, the receiver may
take possession of the portfolio of 7(a)
loans and sell such loans to a third
party, and/or take possession of
servicing activities of 7(a) loans and sell
such servicing rights to a third party.
*
*
*
*
*
(e) * * *
(3) Apply to any federal court of
competent jurisdiction for the court to
take exclusive jurisdiction, without
notice, of the CDC, and SBA shall be
entitled to the appointment of a receiver
of SBA’s choosing to hold, administer,
operate and/or liquidate the CDC; and to
such injunctive or other equitable relief
as may be appropriate. Without limiting
the foregoing and with SBA’s consent,
the receiver may take possession of the
portfolio of 504 loans and/or pending
504 loan applications, including for the
purpose of carrying out an enforcement
order under paragraph (e)(1) of this
section.
■ 45. Amend § 120.1600 by:
■ a. Revising paragraph (a) introductory
text;
■ b. Adding paragraph (a)(6); and
■ c. Revising paragraph (b)(4).
The revisions and additions read as
follows:
ehiers on DSK5VPTVN1PROD with PROPOSALS
§ 120.1600 General procedures for
enforcement actions against SBA Lenders,
SBA Supervised Lenders, Other Regulated
Small Business Lending Companies
(SBLCs), Management Officials, Other
Persons, Intermediaries, and Non-Lending
Technical Assistance Providers (NTAPs).
(a) In general. Except as otherwise set
forth for the enforcement actions listed
in paragraphs (a)(6), (b) and (c) of this
section, SBA will follow the procedures
listed below.* * *
*
*
*
*
*
(6) Receiverships of Certified
Development Companies and/or other
relief. If SBA undertakes the
appointment of a receiver for a Certified
Development Company and/or
injunctive or other equitable relief,
paragraphs (a)(1) through (5) of this
VerDate Sep<11>2014
15:05 Aug 08, 2016
Jkt 238001
section will not apply and SBA will
follow the applicable procedures under
federal law to obtain such remedies and
to enforce the Certified Development
Company’s consent and waiver in
advance to those remedies.
(b) * * *
(4) Receiverships, transfer of assets
and servicing activities. If SBA
undertakes the appointment of a
receiver for, or the transfer of assets or
servicing rights of an SBA Supervised
Lender and/or injunctive or other
equitable relief, SBA will follow the
applicable procedures under federal law
to obtain such remedies and to enforce
the SBA Supervised Lender’s consent
and waiver in advance to those
remedies.
*
*
*
*
*
■ 46. Amend § 120.1703 by revising
paragraph (a)(4) to read as follows:
§ 120.1703 Qualifications to be a Pool
Originator.
(a) * * *
(4) Is in good standing with SBA (as
the SBA determines), and is Satisfactory
with the Office of the Comptroller of the
Currency (OCC) if it is a national bank,
the Federal Deposit Insurance
Corporation if it is a bank not regulated
by the OCC, the Financial Institutions
Regulatory Authority, if it is a member,
the National Credit Union
Administration if it is a credit union, as
determined by SBA; and
*
*
*
*
*
■ 47. Revise § 120.1707 by revising the
fifth sentence and adding a sixth
sentence to read as follows:
§ 120.1707
Seller’s retained Loan Interest.
* * * In addition, in order to
complete such sale, Seller must have the
purchaser of its rights to the Pool Loan
execute an allonge to the Seller’s First
Lien Position 504 Loan Pool Guarantee
Agreement in form acceptable to SBA,
acknowledging and accepting all terms
of the Seller’s First Lien Position 504
Loan Pool Guarantee Agreement, and
deliver the executed original allonge
and a copy of the corresponding First
Lien Position 504 Loan Pool Guarantee
Agreement to the CSA. All Pool Loan
payments related to a Seller Receipt and
Servicing Retention Amount proposed
for sale will be withheld by the CSA
pending SBA acknowledgement of
receipt of all executed documents
required to complete the transfer.
Subpart K—[Removed and Reserved]
48. Remove and reserve subpart K,
consisting of §§ 120.1800 through
120.1900.
■
PO 00000
Frm 00016
Fmt 4702
Sfmt 4702
Dated: July 21, 2016.
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016–18044 Filed 8–8–16; 8:45 am]
BILLING CODE 8025–01–P
DEPARTMENT OF TRANSPORTATION
Federal Motor Carrier Safety
Administration
49 CFR Part 391
[Docket No. FMCSA–2008–0362 and
FMCSA–2015–0419]
Medical Review Board (MRB) Meeting:
Public Meeting
Federal Motor Carrier Safety
Administration (FMCSA), DOT.
ACTION: Advance notice of proposed
rulemaking; announcement of a public
MRB advisory committee meeting.
AGENCY:
FMCSA announces a meeting
of its Medical Review Board (MRB) on
Monday and Tuesday, August 22–23,
2016. The MRB will make
recommendations to the Agency on the
disposition of comments from medical
professionals and associations, as well
as safety advocacy, labor, and industry
groups, to the Agency’s and the Federal
Railroad Administration’s (FRA)
Advance Notice of Proposed
Rulemaking (ANPRM) of March 10,
2016, on safety-sensitive rail and
commercial motor vehicle (CMV)
drivers with moderate to severe
Obstructive Sleep Apnea (OSA).
Additionally, the MRB will review its
previously issued report on OSA from
2012 to determine whether the report
should be updated based on any
changes to medical standards and
practice or the comments received at the
listening sessions and to the docket.
Meetings are open to the public for their
entirety, and the public will be allowed
to comment during the proceedings.
TIMES AND DATES: The meeting will be
held on Monday and Tuesday, August
22–23, 2016, from 9 a.m. to 4:30 p.m.,
Eastern Daylight Time (E.T.), at the
FMCSA National Training Center, 1310
N. Courthouse Road, Arlington, VA, 6th
floor. Copies of the task statement and
an agenda for the entire meeting will be
made available in advance of the
meeting at www.fmcsa.dot.gov/mrb.
FOR FURTHER INFORMATION CONTACT: Ms.
Shannon L. Watson, Senior Advisor to
the Associate Administrator for Policy,
Federal Motor Carrier Safety
Administration, U.S. Department of
Transportation, 1200 New Jersey
SUMMARY:
E:\FR\FM\09AUP1.SGM
09AUP1
| File Type | application/pdf |
| File Modified | 2016-08-09 |
| File Created | 2016-08-09 |