July 11, 2018
Best Practices: Changes to the SBA Servicing and Liquidation Matrix: Version 14
by Timothy D'Lauro
The SBA recently issued version 14 of its revised servicing and liquidation matrix which became effective on May 1, 2018. There are a few changes that all lenders need to be aware of in order to properly service and liquidate their SBA loans. The matrix continues to be a great guide for lenders to consult before taking certain servicing actions on their loans.
While each lender should thoroughly review and familiarize themselves with the changes, noted below are some of the servicing actions that lenders must now process through E-Tran:
- Changing the monthly payment amount (amortized at least annually);
- Changing the adjustment period;
- Changing from the date of the Note to date of initial disbursement;
- Changing the Borrower’s name or address;
- Adding a guarantor to the loan.
The SBA is focusing on using E-Tran as a more centralized database system for lenders to process all information through, and to help improve the efficiency of the loan programs.
The revised matrix also includes an interesting footnote dealing with transferring loans to liquidation status and terminating the SBA guaranty. It states that “Lenders must use E-Tran to transfer loans to liquidation status and to cancel the SBA Guaranty prior to submission of Guaranty Purchase request. Lenders are obligated to pay the SBA Annual Service Fee for every approved loan until the lender cancels the guaranty in E-Tran or submits a demand for guaranty purchase with a complete guaranty purchase package acceptable to SBA per SOP 50 57 2 Ch. 23. Par C.” While many lenders are aware of these requirements, they may not be aware of the requirement to cancel the guaranty in E-Tran.
The new version also includes a change in the liquidation action section. Now, if a lender wishes to continue the liquidation process for more than 24 months past the date of guaranty purchase, it must first obtain the SBA’s approval prior to extending past the 24 months. The footnote for this revision goes on to state that “SBA reviews all extension requests on a case by case basis to evaluate the existence of extenuating circumstances that could warrant an extension, including judicial foreclosure and protracted bankruptcy proceedings.” While it is possible to obtain an extension to this period, the lender should be prepared to present evidence of an extenuating circumstance that necessitates the extension in order to not run afoul of SBA’s prudent liquidation requirements.
Lenders should all review the new revised matrix in order to comply with all current SBA servicing and liquidation requirements and to avoid jeopardizing their loan guaranty. For more information concerning changes to SBA’s servicing and liquidation matrix, please contact Tim at 267.470.1223 or at email@example.com.