Change to SBA Secondary Market Program

Published date01 September 2021
Record Number2021-18858
SectionNotices
CourtSmall Business Administration
Federal Register, Volume 86 Issue 167 (Wednesday, September 1, 2021)
[Federal Register Volume 86, Number 167 (Wednesday, September 1, 2021)]
                [Notices]
                [Page 49087]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-18858]
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                SMALL BUSINESS ADMINISTRATION
                Change to SBA Secondary Market Program
                AGENCY: U.S. Small Business Administration.
                ACTION: Notice of change to secondary market program.
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                SUMMARY: The purpose of this Notice is to inform the public that the
                Small Business Administration (SBA) is making a change to its Secondary
                Market Loan Pooling Program. SBA is increasing the minimum maturity
                ratio for both SBA Standard Pools and Weighted-Average Coupon (WAC)
                Pools by 400 basis points, to 93.0%. The change described in this
                Notice is being made to cover the estimated cost of the timely payment
                guaranty for newly formed SBA 7(a) loan pools. This change will be
                incorporated, as needed, into the SBA Secondary Market Program Guide
                and all other appropriate SBA Secondary Market documents.
                DATES: This change will apply to SBA 7(a) loan pools with an issue date
                on or after October 1, 2021.
                ADDRESSES: Address comments concerning this Notice to John M. Wade,
                Chief Secondary Market Division, U.S. Small Business Administration,
                409 3rd Street SW, Washington, DC 20416; or [email protected].
                FOR FURTHER INFORMATION CONTACT: John M. Wade, Chief, Secondary Market
                Division at 202-205-3647; or [email protected].
                SUPPLEMENTARY INFORMATION: The Secondary Market Improvements Act of
                1984, 15 U.S.C. 634(f) through (h), authorized SBA to guarantee the
                timely payment of principal and interest on Pool Certificates. A Pool
                Certificate represents a fractional undivided interest in a ``Pool,''
                which is an aggregation of SBA guaranteed portions of loans made by SBA
                Lenders under section 7(a) of the Small Business Act, 15 U.S.C. 636(a).
                In order to support the timely payment guaranty requirement, SBA
                established the Master Reserve Fund (MRF), which serves as a mechanism
                to cover the cost of SBA's timely payment guaranty. Borrower payments
                on the guaranteed portions of pooled loans, as well as SBA guaranty
                payments on defaulted pooled loans, are deposited into the MRF. Funds
                are held in the MRF until distributions are made to investors
                (Registered Holders) of Pool Certificates. The interest earned on the
                borrower payments and the SBA guaranty payments deposited into the MRF
                supports the timely payments made to Registered Holders.
                 From time to time, SBA provides guidance to SBA Pool Assemblers on
                the required loan and pool characteristics necessary to form a Pool.
                These characteristics include, among other things, the minimum number
                of guaranteed portions of loans required to form a Pool, the allowable
                difference between the highest and lowest gross and net note rates of
                the guaranteed portions of loans in a Pool, and the minimum maturity
                ratio of the guaranteed portions of loans in a Pool. The minimum
                maturity ratio is equal to the ratio of the shortest and the longest
                remaining term to maturity of the guaranteed portions of loans in a
                Pool.
                 Based on SBA's expectations as to the performance of future Pools,
                SBA has determined that for pools formed on or after October 1, 2021,
                SBA Pool Assemblers may decrease the difference between the shortest
                and the longest remaining term of the guaranteed portions of loans in a
                Pool by 4 percentage points (i.e., increasing the minimum maturity
                ratio by 400 basis points). SBA does not expect a 4 percentage point
                increase in the minimum maturity ratio to have an adverse impact on
                either the program or the participants in the program. Therefore,
                effective October 1, 2021, all guaranteed portions of loans in Standard
                Pools and WAC Pools presented for settlement with SBA's Fiscal Transfer
                Agent will be required to have a minimum maturity ratio of at least
                93.0%. SBA is making this change pursuant to Section 5(g)(2) of the
                Small Business Act, 15 U.S.C. 634(g)(2).
                 SBA will continue to monitor loan and pool characteristics and will
                provide notification of additional changes as necessary. It is
                important to note that there is no change to SBA's obligation to honor
                its guaranty of the amounts owed to Registered Holders of Pool
                Certificates and that such guaranty continues to be backed by the full
                faith and credit of the United States.
                 This program change will be incorporated as necessary into SBA's
                Secondary Market Guide and all other appropriate SBA Secondary Market
                documents. As indicated above, this change will be effective for
                Standard Pools and WAC Pools with an issue date on or after October 1,
                2021.
                John M. Wade,
                Chief, Secondary Market Division, Office of Capital Access.
                [FR Doc. 2021-18858 Filed 8-31-21; 8:45 am]
                BILLING CODE P
                

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