Regulations

eCFR -

Code of Federal Regulations

Page 1 of 12

ELECTRONIC CODE OF FEDERAL REGULATIONS
e-CFR Data is current as of April 2, 2014
Title 13: Business Credit and Assistance

PART 120-BUSINESS LOANS

Subpart J-Establishment of SBA Secondary Market Guarantee Program
for First Lien Position 504 Loan Pools
Contents
§120.1700
§120.1701
§120.1702
§120.1703
§120.1704
§120.1705
§ 120 .1706
§ 120.1707
§120.1708
§120.1709
§ 120.1710
§120.1711
§120.1712
§120.1713
§ 120 .1714
§ 120.1715
§ 120.1716
§120.1717
§ 120.1718
§120.1719
§120.1720
§120.1721
§120.1722
§120.1723
§120.1724
§120.1725
§120.1726

Definitions used in subpart J.
Program purpose.
Program fee.
Qualifications to be a Pool Originator.
Pool Loans eligible for Pooling.
Pool formation requirements.
Pool Originator's retained interest in Pool.
Seller's retained Loan Interest.
Pool Certificates.
Transfers of Pool Certificates.
Central servicing of the Program.
Suspension or termination of Program participation privileges.
Seller responsibilities with respect to Seller's Pool Loan.
Seller's Pool Loan origination.
Seller's Pool Loan servicing.
Seller's Pool Loan liquidation.
Required SBA approval of servicing actions.
Seller's Pool Loan deferments.
SBA's right to assume Seller's responsibilities.
SBA's right to recover from Seller.
SBA's right to review Pool Loan documents.
SBA's right to investigate.
SBA's offset rights.
Pool Loan receivables received by Seller.
Servicing and liquidation expenses.
No Program Preference by Seller or Pool Originator.
Pool Certificates a Seller cannot purchase.

SOURCE: 74 FR 56093, Oct. 30, 2009, unless otherwise noted.

t

Back to Top

§120.1700 Definitions used In subpart J.
504 financing. The loans made to a small business to fund a Project under the SBA's
development company loan program authorized by Title V of the Small Business Investment Act of
1958.
Affiliate. A person or entity SBA determines to be an affiliate of a Program Participant pursuant to
the application of the principles and guidelines set forth in § 121.103 of this Title.

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320fl4fc65914a6b668115ea942&node= 13:... 4/4/2014

eCFR - Code of Federal Regulations

Page 2 of 12

Central Servicing Agent or CSA. The entity serving as SBA's central servicing agent for the
Program.
Certified Development Company or COG. An entity that meets the definition of a Certified
Development Company as defined in §120.10 of this Part.
Current. That no scheduled payment owed by an Obligor pursuant to a Pool Note is over 29 days
past due.
First Lien Position 504 Loan. The financing provided by the First Lien Position 504 lender that is
part of the 504 project financing.
First Lien Position 504 Loan Pool Guarantee Agreement. The agreement, in the form approved by
SBA, wherein entities agree to participate in the forming of a Pool under the Program, available at
http://www.sba.gov/aboutsbalsbaprograms/elending/index.htmll.
Guide. The First Lien Position 504 Loan Pooling Program Guide published by SBA which provides
information applicable to the Program including, among other things, requirements relating to the
formation of a Pool, available at http://www.sba.gov/aboutsbalsbaprograms/elending/index.htmll.
Liquidation Proceeds. Cash, including insurance proceeds, proceeds of any foreclosed-on
property disposition, revenues received with respect to the conservation and disposition of a
foreclosed-on property or repossessed collateral, including any real property securing the Pool Loan,
consisting of a commercial property or residential property and any improvements thereon, and any
other amounts received in connection with the liquidation of the Pool Loan, whether through Seller's
sale, foreclosure sale, any offset or workout, or otherwise.
Loan Interest. The right to receive the owned portion of the principal balance of the Pool Loan
together with interest thereon at a per annum rate in effect from time to time in accordance with the
First Lien Position 504 Loan Pool Guarantee Agreement.
Maturity. The maturity of the Loan Interest in the Pool that has the longest remaining term of any
Loan Interest in the Pool. The maturity will change from time to time due to prepayment or default on
Loan Interests in the Pool.
Ongoing Guarantee Fee. An annual fee collected monthly and based on the percentage of the
Pool Loan amount, pursuant to section 503(C)(3)(B)(ii) of the Recovery Act, to result in a cost of the
loan guarantee of zero as determined under the Federal Credit Reform Act of 1990. as amended. The
funds generated by the fee serve as a reserve to pay for program losses.
Obligor. The obligor(s) under a Pool l\Iote.
Pool. The aggregate of Loan Interests formed into a single pool by the Pool Originator in
accordance with the Program. The Pool is comprised of an unguaranteed portion and an SBA­
guaranteed portion. The unguaranteed portion of the Pool backs the Pool Originator Receipt, and
cannot be sold to Pool Investors. The SBA-guaranteed portion of the Pool backs the Pool Certificates
sold to Pool Investors. The Seller's Loan Interest is not included in the Pool.
Pool Assembler. An entity that meets the qualifications of a Pool Assembler as set forth in section
120.630 of this Part and has been approved as such by SBA.
Pool Certificate. The document representing a beneficial fractional interest in the SBA-guaranteed
portion of a Pool.
Pooled. When one or more Loan Interests in a Pool Loan has been put into a Pool.
Pooling. The transfer of one or more Loan Interests in a Pool Loan into a Pool.
Pool Investor. An entity which holds a Pool Certificate in accordance with Program Rules and
Regulations.

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/412014

eCFR -

Code of Federal Regulations

Page 3 of 12

Pool Loan. A loan that meets the Program eligibility requirements as set forth in § 120.1704 of this
subpart J and has been pooled.
Pool Loan Receivables. Pool Loan payments, prepayments, or collections made in connection
with the Pool Loan by the Obligor pursuant to Pool Note or any other Pool Loan documents or
agreements, or by another person or entity made on behalf of any such Pool Loan obligor, and
Liquidation Proceeds.
Pool Note. The document evidencing a Pool Loan.
Pool Originator. An entity approved by SBA to pool Loan Interests under the Program.
Pool Originator Receipt. The document evidencing the Pool Originator's retained ownership in a
Pool it has formed under the Program.
Premier Certified Lenders Program. The program defined in §120.845 of this Part.
Program. The program authorized by section 503 of the American Recovery and Reinvestment
Act of 2009.
Program Participant. An entity that executes the First Lien Position 504 Loan Pool Guarantee
Agreement as Seller, Pool Originator, or Pool Investor, and any successors or assignees thereof.
Program Participant Associate. (1) An officer, director, key employee, or holder of 20 percent or
more of the value of a Program Participant's stock or debt instruments, or (2) Any individual in which
one or more individuals referred to in paragraph (1) of this definition, or a spouse, or child, or sibling,
or the spouse of any such individual, owns or controls at least 20 percent.
Program Preference. Any arrangement giving the Seller, Pool Originator, or a Program Associate
or Affiliate of Seller or Pool Originator, a preference or benefit of proportion greater than its Loan
Interest as compared to Pool Originator, Pool Investor, or SBA relating to the making, servicing, or
liquidation of the Loan with respect to such things as repayment, collateral, guarantees, control,
maintenance of a compensating balance, purchase of a certificate of deposit or acceptance of a
separate or companion loan, without SBA's consent. Seller's agreement to grant a Pool Loan's Obligor
a deferment in return for receiving more collateral on a different loan owned by Seller is an example of
a preference.
Program Rules and Regulations. This subpart J, as may be amended from time to time by SBA
(the Program Regulations), the First Lien Position 504 Loan Pool Guarantee Agreement, any other
Program agreements signed by a Program Participant, if applicable, the Guide, the Recovery Act, and
the provisions of subpart H governing Third Party Loans and Third Party Lenders.
Project. A project as defined by §120.802 of the Part.

SBA The United States Small Business Administration, an agency of the United States
Government.
Seller. An entity that has sold a Pool Loan to a Pool Originator to be Pooled and any successor
entity that has executed the First Lien Position 504 Loan Pool Guaranty Agreement pursuant to
§120.1707.
Seller's Pool Loan. The Pool Loan sold to a Pool Originator pursuant to the First Lien Position 504
Loan Pool Guarantee Agreement.
Seller Receipt. The document that evidences a Seller's Loan Interest.
Servicing Retention Amount. The amount of a Pool Loan interest payment retained by Seller for
servicing the Pool Loan that is payable and calculated pursuant to the First Lien Position 504 Loan
Pool Guarantee Agreement.

http://www.ecfr.gov/cgi-binitext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/4/2014

eCFR -

Code of Federal Regulations

Page 4 of 12

Weighted Average Interest Rate. The dollar-weighted average interest rate of a Pool Certificate
calculated by multiplying the interest rate of each Loan Interest in the Pool by the ratio of that Loan
Interest's current outstanding principal in the SBA-guaranteed portion of the Pool (that is, the portion of
the Pool Loan backing the Pool Certificates) to the current aggregate or outstanding principal of each
Loan Interest in the SBA-guaranteed portion of the Pool, and adding the sum of the resulting products.
The Pool Certificate interest rate will fluctuate over the life of the Pool as defaults, prepayments and
normal repayments applicable to Loan Interests in the Pool occur.
Weighted Average Maturity. The weighted average maturity of a Pool Certificate is a dollar
weighted average maturity that is calculated by multiplying the remaining term, in months, of each
Loan Interest in a Pool by the ratio of that Loan Interest's current outstanding pooled principal to the
current aggregate outstanding pooled principal of all Loan Interests in the Pool, and adding the sum of
the resulting products. The weighted average maturity of a Pool Certificate will fluctuate over the life of
the Pool as Loan Interest defaults, prepayments and normal Loan Interest repayments occur.

t.

Back to Top

§120.1701

Program purpose.

As authorized by the American Recovery and Reinvestment Act of 2009 (Recovery Act), SBA
establishes the Program to authorize an entity to apply for SBA's guarantee of Pools comprised of
portions of First Lien Position 504 Loans backing Pool Certificates to be sold to Pool Investors. The
purpose of the Program is to temporarily provide a federal guarantee for Pools of First Lien Position
504 Loans to facilitate the sale of such loans and increase the liquidity of the lenders holding the loans
so that the lenders can use the sale proceeds to fund more such loans. The Program's authorization
expires on September 23,2012 and the Administrator may guarantee not more than $3,000,000,000
of pools under this authority pursuant to section 503(c)(B)(iii) of the Recovery Act, as amended by
section 1119 of the Small Business Jobs Act of 2010.
[61 FR 3235, Jan. 31,1996, as amended at 76 FR 63547, Oct. 12,2011]

t

Back to Top

§120.1702 Program fee.

Ongoing Guarantee Fee. The Ongoing Guarantee Fee is payable to SBA, and it is calculated and
payable monthly from the amounts received in respect of interest on Loan Interests in the SBA­
guaranteed portion of a Pool. This amount is set forth in the First Lien Position 504 Loan Pool
Guarantee Agreement. This fee is used to pay program losses.

t

Back to Top

§120.1703 Qualifications to be a Pool Originator.
(a) Application to become Pool Originator. The application to become a Pool Originator is
available from the SBA and can be found on SBA's website. In order to qualify as a Pool Originator, an
entity must send the application to the SBA and certify that it is a Pool Assembler or it:
(1) Is regulated by the appropriate agency as defined in section 3(a)(34)(G) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(34)(G»;
(2) Meets all financial and other applicable requirements of its regulatory authority and the
Government Securities Act of 1986, as amended (Pub. L. 99-571, 100 Stat. 3208);
(3) Has the financial capability to originate acceptable pools consisting of eligible First Lien
Position 504 Loans in sufficient quantity to support the issuance of Pool Certificates;
(4) Is in good standing with SBA (as the SBA determines), 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

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/4/2014

eCFR -

Code of Federal Regulations

Page 5 of 12

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; and
(5) for any Pool Originator that is an SSA Lender, that the SSA Lender has satisfactory SSA
performance, as determined by SSA in its sole discretion.
(b) Approval by SBA. An entity may not submit applications to form Pools to the CSA until SSA
has approved its application to become a Pool Originator.
(c) Conduct of business by Pool Originator. An entity continues to qualify as a Pool Originator so
long as it:
(1) Meets the eligibility standards in paragraph (a) of this section;
(2) Conducts its business in accordance with SSA regulations and accepted securities or banking
industry practices, ethics, and standards;
(3) Maintains its books and records in accordance with generally accepted accounting principles
or in accordance with the guidelines of the regulatory body governing its activities; and
(4) Has not been suspended or terminated from the Program by SSA.

t

Sack to Top

§120.1704 Pool Loans eligible for Pooling.
(a) General Pool Loan eligibility requirements. For a First Lien Position 504 Loan to be eligible for
Pooling it must:
(1) Se a loan that is:
(i) A Third Party Loan as defined in § 120.801 (c)(3);
(ii) Made by a private sector lender acceptable to SSA in its sole discretion; and
(iii) Secured by a first lien on the Project Property as defined in §120.801 of this chapter;

(2) Se part of a 504 financing that is comprised of only one Third Party Loan and one CDC 504
loan; the CDC 504 loan must be funded by a Debenture that was been sold on or after February 17,
2009;
(3) Se Current and have been Current for the six-month-period immediately prior to the date the
Pool is formed or for the life of the Pool Loan, whichever time period is shorter;
(4) Have been made and closed in a commercially reasonable manner, consistent with prudent
lending standards;
(5) Se part of a completed 504 financing, funded by a 504 debenture, which means that the Pool
Loan must be fully disbursed and the debenture funding the related loan by a CDC must have been
sold on or after February 17,2009; and
(6) Not be:
(i) To a business deriving more than one-third of its gross annual revenue from legal gambling
activities;
(ii) To a casino, gambling establishment, or casino hotel;
(iii) For financing the acquisition, construction or renovation of an aquarium, zoo, golf course, or
swimming pool; or

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/4/2014

eCFR - Code of Federal Regulations

Page 6 of 12

(iv) To a business covered by a six-digit North American Industry Classification System (NAICS)
code for casinos-71321 0 ("Casinos (Except Casino Hotels)"); casino hotels-721120 ("Casino
Hotels"); other gambling institutions-713290 ("Other Gambling Industries"); golf courses-713910
("Golf Courses and Country Clubs"); or aquariums and zoos-712130 ("Zoos and Botanical Gardens").
(b) SBA review of a Pool Loan prior to pool formation. SBA has the right to review any Pool Loan
before a Loan Interest in it is added to a Pool, and SBA may prohibit the Pool's formation as proposed
based on SBA's review in SBA's sole discretion. In the event SBA decides to review Pool Loan
documents related to a Loan Interest prior to the requested Pool formation, that Loan Interest may not
be added to the Pool until SBA reviews and approves the Pool Loan for such purpose. Copies of Pool
Loan documents related to underwriting and origination, and any other Pool Loan-related documents
SBA may, in its sole discretion, request to review in writing, must be sent to SBA's Sacramento Pool
Loan Processing Center. The Pool Originator must identify and SBA must review Pool Loan
documents before a Loan Interest is added to a Pool if:
(1) The Pool Loan is to a business within NAICS code 713940 covering Fitness and Recreational
Sports Centers; (If SBA determines that a Pool Loan has had any of its proceeds used for any of the
restricted purposes listed above, the Pool Loan will be prohibited from being part of a Pool.)
(2) The Pool Loan was part of a 504 financing involving a 504 loan that was processed under
SBA's Premier Certified Lenders Program; or
(3) The Project the Pool Loan financed included the refinancing of existing debt owed to the Seller
or Third Party Lender (not including interim financing associated with the Project).

t

Back to Top

§120.1705 Pool formation requirements.
(a) Initiation of Pool formation. Only an entity approved by SBA to be a Pool Originator under the
Program that continues to qualify to be a Pool Originator pursuant to this subpart may initiate the
formation of a Pool. The Pool Originator creates the Pool subject to Program Rules and Regulations,
including the parameters set forth in the Guide, and SBA approval.
(b) Adjustment of Pool requirements. SBA may adjust the Pool characteristics periodically based
on program experience and market conditions and will publish a revised version of the Guide in the
FEDERAL REGISTER to implement such adjustments. Any such adjustments shall not affect Pools
formed prior to the adjustment.
(c) When the Pool Originator is the Seller. When a Pool Originator proposes to form a Pool
involving a Pool Loan it owns, it must execute the First Lien Position 504 Loan Pool Guarantee
Agreement as Pool Originator and as Seller and, consequently, will be subject to all applicable
Program Rules and Regulations pertaining to both roles.
(d) When the Pool Originator does not own the Pool Loan. When a Pool Originator proposes to
form a Pool involving a Pool Loan it does not own, it must purchase the Loan Interest it proposes to
pool from a Seller that owns the whole Pool Loan and that has the servicing rights. The Pool Originator
must purchase the Loan Interest and take it into inventory or settle the purchase of the Loan Interest
through the CSA concurrently with the formation of the Pool. The entity selling the Loan Interest to the
Pool Originator must execute the First Lien Position 504 Loan Pool Guarantee Agreement as Seller
and, consequently, will be subject to all applicable Program Rules and Regulations pertaining to a
Seller. The Pool Originator must also execute the First Lien Position 504 Loan Pool Guaranty
Agreement.
(e) What GSA must receive prior to Pool formation. Before the CSA may carry out its
responsibilities relating to the formation of a Pool, it must receive:

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/412014

eCFR - Code of Federal Regulations

Page 7 of 12

(1) From the Pool Originator: A properly completed First Lien Position 504 Loan Pool application
form, First Lien Position 504 Loan Guarantee Agreement, and any other documentation which SBA
may require, if applicable; and
(2) All cost reimbursement due and payable to the CSA prior to Pool formation owed by the
Participants participating in the formation of the Pool.

t

Back to Top

§120.1706 Pool Originator's retained interest in Pool.
The Pool Originator must retain an ownership interest in any Pool it has formed that is equal to at
least 5% of the aggregate of the total outstanding principal balance of each Pool Loan with a Loan
Interest in the Pool as calculated at the time of Pool formation. Such interest will decline with Loan
Interest payments, prepayments, defaults and any other early termination. At Pool formation, the CSA
will issue the Pool Originator a Pool Originator Receipt evidencing the Pool Originator's retained
interest in the Pool. The Pool Originator may not sell, pledge, participate, or otherwise transfer its Pool
Originator Receipt or any interest therein for the life of the Pool.

t

Back to Top

§120.1707 Seller's retained Loan Interest.
The Seller must retain a 15% or greater Loan Interest in each of its loans included in a Pool. At
Pool formation, the CSA will issue the Seller a Seller Receipt evidencing the Seller's retained
ownership in the Pool Loan. With SBA's written permission, the Seller may sell the Seller Receipt and
Servicing Retention Amount in whole, but not in part, to a single entity at one time. The Seller may not
sell less than 100% of the Seller Receipt and Servicing Retention Amount, and may not sell a
participation interest in any portion of any of its Pooled loans. In addition, in order to complete such
sale, Seller must have the purchaser of its rights to the Pool Loan execute the First Lien Position 504
Loan Pool Guarantee Agreement as Seller and deliver the executed original to the CSA.

t

Back to Top

§120.1708 Pool Certificates.
(a) SBA Guarantee of Pool Certificates. SBA guarantees to a Pool Investor the timely payment of
principal and interest installments and any prepayment or other recovery of principal to which the Pool
Investor is entitled. If an Obligor misses a scheduled payment pursuant to the terms of the Pool Note
underlying a Loan Interest backing a Pool Certificate, SBA, through the CSA, will make advances to
maintain the schedule of interest and principal payments to the Pool Investor. If SBA makes such
payments, it is subrogated fully to the rights satisfied by such payment.
(b) SBA guarantee backed by full faith and credit. SBA's guarantee of the Pool Certificate is
backed by the full faith and credit of the United States.
(c) SBA purchase of a Loan Interest. SBA will determine whether to purchase a Loan Interest
backing a Pool Certificate with an underlying Pool Note that is 60 days or more in arrears. SBA
reserves the right to purchase a Loan Interest from a Pool at any time.
(d) Self-liquidating. A Pool Certificate represents a fractional beneficial interest in a Pool that is
self-liquidating by Pool Loan Receivables and/or SBA Loan Interest payment or redemption.
(e) Pool Certificate form. The CSA prepares the Pool Certificate. SBA must approve the form and
terms of the Pool Certificate.

(f) Pool Certificate registration. A Pool Certificate must be registered with the CSA.
(g) Face amount of Pool Certificate. The face amount of a Pool Certificate cannot be less than a
minimum amount as specified in the Guide, and the dollar amount of Pool Certificates must be in

http://www.ecfr.gov/cgi-binitext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/412014

eCFR - Code of Federal Regulations

Page 8 of 12

increments which SBA will specify in the Guide (except for one Pool Certificate for each Pool). SBA
may change these requirements based upon an analysis of market conditions and program
experience, and will publish any such change in the FEDERAL REGISTER.
(h) Basis of payment for Pool Certificates. All payments on a Pool Certificate are due pursuant to
terms, conditions, and percentages set forth or referenced therein and are based on the unpaid
principal balance of the Pool represented by the Pool Certificate. Any Pool Loan Receivables
applicable to a Loan Interest in the SBA-guaranteed portion of a Pool will be passed through to the
appropriate Pool Investors with the regularly scheduled payments to such Pool Investors.
(i) Pool Certificate interest rate. A Pool Certificate must have a Weighted Average Interest Rate.

(j) Pool Certificate maturity. A Pool Certificate must have a Maturity and a Weighted Average
Maturity.
(k) Early Pool Certificate redemption. SBA, or the CSA on behalf of SBA, may redeem a Pool
Certificate prior to its Maturity because of Obligor prepayment and/or SBA purchase of all Loan
Interests in the Pool backing the Pool Certificate.

t

Back to Top

§120.1709 Transfers of Pool Certificates.
(a) Transfer of Pool Certificates. A Pool Certificate is transferable. A transfer of a Pool Certificate
must comply with Article 8 of the Uniform Commercial Code of the State of New York. The seller may
use any form of assignment acceptable to SBA and the CSA. The CSA may refuse to issue a Pool
Certificate until it is satisfied that the documents of transfer are complete.
(b) Transfer on CSA records. In order for the transfer of a Pool Certificate to be effective, the CSA
must reflect the transfer on its records.
(c) Contents of letter of transmittal for Pool Certificate. A letter of transmittal must accompany
each Pool Certificate which a Pool Investor submits to the CSA for transfer. The Pool Investor must
supply the following information in the letter:
(1) Pool number;
(2) Pool Certificate number;
(3) Name of purchaser of Pool Certificate;
(4) Address and tax identification number of the purchaser;
(5) Name, e-mail address and telephone number of the person handling or facilitating the transfer;
and
(6) Instructions for the delivery of the new Pool Certificate.
(d) CSA transfer cost recovery. At the same time a Pool Investor submits a letter of transmittal for
a Pool Certificate pursuant to this section, it must send to the CSA sufficient funds to cover its cost for
this service. The CSA will supply the transfer information to the Pool Investor.

t Back to Top
§120.1710 Central servicing of the Program.
(a) Pool Certificates and Receipts issued at Pool formation. As part of its role as Central Servicing
Agent for the Pool, at Pool formation, CSA issues a Seller Receipt to the Seller, a Pool Originator
Receipt to the Pool Originator, and a Pool Certificate to each Pool Investor.

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/412014

eCFR - Code of Federal Regulations

Page 9 of 12

(b) CSA fiscal transfer responsibilities. All Pool Loan Receivables on a Pool Loan received by the
CSA must be forwarded by it to pay the Servicing Retention Amount, Ongoing Guarantee Fee, Seller
Receipt, Pool Originator Receipt, Pool Certificates, any SBA-purchased Loan Interest, and any other
payment applicable to the Pooling of such Pooled Loan, in accordance with Program Rules and
Regulations.
(c) Administration of the Pool Certificates. CSA must administer each Pool Certificate. It shall
maintain a registry of Pool Investors and other information as SBA requires. CSA registers all Pool
Certificates. This means it issues, transfers title to, and redeems them. It shall maintain a registry of
Pool Investors and other information as SBA requires. In fulfilling its obligation to keep the central
registry current, the CSA may, with SBA's approval, obtain any necessary information from the parties
involved in the Program.
(d) CSA Monthly Report. CSA must provide SBA with a list, by Pool, of each Loan Interest with an
underlying Pool Note that is 60 days or more in arrears on a monthly basis.

t

Back to Top

§120.1711 Suspension or termination of Program participation privileges.
(a) Participant suspension or termination. The SBA may suspend or terminate the privilege of a
Participant, and/or any Associate or Affiliate of the Participant, to sell, purchase, broker, or deal in Pool
Loans, Loan Interests, or Pool Certificates under the Program if any such Participant or its Associate
or Affiliate has:
(1) Failed to comply materially with any requirement imposed by the Program Rules and
Regulations or other SBA rules and regulations; or
(2) Made a material false statement or failed to disclose a material fact to SBA.
(b) Additional rules for suspension or termination of Pool Originator. In addition to the conditions
set forth in paragraph (a) above, SBA may also suspend or terminate the Program participation
privileges of a Pool Originator if the Pool Originator (and/or its Associates):
(1) Does not comply with any of the requirements in 120.1703(a) or (c);
(2) Has been revoked or suspended it from engaging in the securities business by its supervisory
agency, or is under investigation for a practice which SBA considers, in its sole discretion, to be
relevant to its fitness to participate in the Program;
(3) Has been indicted or otherwise formally charged with, or convicted of, a felony, or a
misdemeanor which, in SBA's sole discretion, bears on its fitness to participate in the Program;
(4) Has received an adverse civil judgment that it has committed a breach of trust or a violation of
a law or regulation protecting the integrity of business transactions or relationships; or
(5) Has been suspended or terminated as a Pool Assembler under 120.631.
(c) Suspension procedures. SBA may undertake suspension or enforcement actions under this
section using the procedures set forth in §120.1600(a).

t

Back to Top

§120.1712 Seller responsibilities with respect to Seller's Pool Loan.
Seller shall remain obligated for servicing and liquidating Seller's Pool Loan until the Pool Loan is
repaid in full unless SBA provides written approval or notice to the contrary.

t

Back to Top

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/4/2014

eCFR - Code of Federal Regulations

Page 10 of 12

§120.1713 Seller's Pool Loan origination.
SBA is entitled to recover from the Seller losses incurred by SBA on its guarantee of a Pool if
such losses resulted because Seller's Pool Loan was not made and closed in a commercially
reasonable manner, consistent with prudent lending standards, and in accordance with any applicable
Program Rules and Regulations.

t Back to Top
§120.1714 Seller's Pool Loan servicing.
Subject to §120.1718 of this subpart J, the Seller must service Seller's Pool Loan in a
commercially reasonable manner, consistent with prudent lending standards, and in accordance with
applicable Program Rules and Regulations. The Seller receives the Servicing Retention Amount for
servicing the Seller's Pool Loan.

t

Back to Top

§120.1715 Seller's Pool Loan liquidation.
Subject to §120.1718 of this subpart J, the Seller must liquidate and conduct debt collection
litigation for Seller's Pool Loan in a prompt, cost-effective and commercially reasonable manner,
consistent with prudent lending standards, in accordance with applicable Program Rules and
Regulations, and with SBA approval of a liquidation plan and any litigation plan, and any amendment
of either such a plan, if applicable.

t Back to Top
§120.1716 Required SBA approval of servicing actions.
Seller shall not, without prior written consent of SBA, take the following actions with respect to
Seller's Pool Loan:
(a) Make or consent to any substantial alteration in the terms ("substantial" includes, but is not
limited to, any changes to the principal amount or interest rate);
(b) Accelerate the maturity;
(c) Sue; or
(d) Waive or release any claim. Guidance on other servicing actions, some of which may need
prior SBA approval, is provided in the Guide.

t

Back to Top

§120.1717 Seller's Pool Loan deferments.
Without the prior written consent of SBA, Seller, at the request of Obligor, may grant one
deferment of Obligor's scheduled payments for a continuous period not to exceed three months of past
or future installments. Seller shall immediately notify CSA of any payment deferment and that
notification shall include:
(a) The SBA Pool Loan number;
(b) The Obligor's name;
(c) The terms of such deferment;
(d) The date Obligor is to resume payment; and

http://www.ecfr.gov!cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/4/2014

eCFR - Code of Federal Regulations

Page 11 of 12

(e) Reconfirmation of the basis of interest calculation (e.g. 30/360 or Actual Days/365).

t.

Sack to Top

§120.1718 SBA's right to assume Seller's responsibilities.
SSA may, in its sole discretion, undertake the servicing, liquidation and/or litigation of Seller's Pool
Loan at any time and, in such event, Seller must take any steps necessary to facilitate the assumption
by SSA of such responsibilities, which can be transferred by SSA at its discretion to a contractor,
agent or other entity, and such steps shall include, among other things, providing or assigning to SSA
any documents requested by SSA within 15 calendar days of Seller's receipt of such request. SSA will
notify the Obligor of the change in servicing.

t

Sack to Top

§120.1719 SBA's right to recover from Seller.
SSA is entitled to recover from Seller any monies paid on SSA's guarantee of a Pool Certificate
backed in part by Seller's Pool Loan, plus interest, if SSA in its sole discretion determines that any of
the following events has occurred:
(a) Seller's improper action or inaction has put SSA at risk;
(b) Seller has failed to disclose a material fact to SSA regarding a Seller's Pool Loan in a timely
manner;

(c) Seller has misrepresented a material fact to SSA regarding Seller's Pool Loan;
(d) Seller has failed to comply materially with §120.1720 of this subpart;
(e) SSA has received a written request from Seller to terminate the SSA's guarantee on the Loan
Interest in Seller's Pool Loan;
(f) SeUer has failed to comply materially with Program Rules and Regulations; or
(g) Seller has failed to make, close, service or liquidate Seller's Pool Loan in a prudent manner.

t Sack to Top
§120.1720 SBA's right to review Pool Loan documents.
In the event that SSA purchases a Loan Interest in Seller's Pool Loan, Seller must provide to SSA
copies of the Pool Loan collateral documents, Pool Loan underwriting documents, and any other
documents SSA may require in writing within 15 calendar days of a written request from SSA (which
SSA will review in connection with its efforts to determine if Seller is obligated to reimburse SSA
pursuant to this subpart). A Seller's failure to provide the requested documentation may constitute a
material failure to comply with the Program Rules and Regulations and may lead to an action for
recovery under §120.1719. SSA will also evaluate a Seller's continued participation in the Program
and may restrict further sales under the Program until SSA determines that the Seller has provided
sufficient documentation.

t Sack to Top
§120.1721 SBA's right to investigate.
SSA may undertake such investigation as it deems necessary to determine whether it is entitled
to seek recovery from the Seller and Seller agrees to take whatever actions are necessary to facilitate
such investigation.

t

Sack to Top

http://www.ecfr.gov/cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/412014

eCFR -

Code of Federal Regulations

Page 12 of 12

§120.1722 SSA's offset rights.
SBA shall have the right to offset any amount owed by Lender to SBA, including, without
limitation, an offset against CSA's obligation to pay Lender pursuant to any Section 504 First Mortgage
Loan Pool Guarantee Agreement.

t

Back to Top

§120.1723 Pool Loan receivables received by Seller.
Any Pool Loan Receivables received by Seller in connection with obligations under Seller's Pool
Loan must be forwarded by Seller to CSA within two business days of receipt of collected funds.

t Sack to Top
§120.1724 Servicing and liquidation expenses.
All ordinary and reasonable expenses of servicing and liquidating Seller's Pool Loan shall be paid
by, or be recoverable from, Obligor, and all such ordinary and reasonable expenses incurred by Seller
or SBA which are not recoverable from Obligor shall be shared ratably by Seller, SSA, and the Pool
Originator pursuant to the applicable percentages set forth in the First Lien Position 504 Loan Pool
Guarantee Agreement.

t

Back to Top

§120.1725 No Program Preference by Seller or Pool Originator.
The Seller and the Pool Originator must not establish a Program Preference, which is defined in
13 CFR 120.10.

t Back to Top
§120.1726 Pool Certificates a Seller cannot purchase.
Neither a Seller, nor any of its Program Associates or Affiliates, may purchase a Pool Certificate
that is backed by a Loan Interest in a Pool Loan that the Seller, or any of its Program Associates or
Affiliates, originated or owned, and, in the event such purchase occurs, SBA's guarantee shall not be
in effect with respect to any such Pool Certificate.

t

Back to Top

For questions or comments regarding e-CFR editorial content, features. or design. email ecfr@nara.gov.
For questions concerning e-CFR programming and delivery issues, email webteam@gpo.gov.

http://www.ecfr.gov!cgi-binltext-idx?SID=ece00320f14fc65914a6b668115ea942&node=13: ... 4/412014