February 11, 2015
Best Practices: New E-Tran Requirements in the 7(a) Servicing and Liquidation Matrix
by Starfield & Smith
The SBA recently published Information Notice 5000-1329 which became effective on February 1, 2015. In the Information Notice, the SBA updates the current Servicing and Liquidation Actions 7(a) Lender Matrix (the “Matrix”) to include additional circumstances when all 7(a) Lenders will be required to notify the SBA of certain unilateral servicing and liquidation actions through E-Tran.
The Matrix is a tool created by the SBA to help guide SBA 7(a) Lenders in servicing and liquidating their loans, and provides Lender with a summary of requirements that are defined in the SOP. The Matrix describes actions that Lenders need to take after the loan has been approved but before final disbursement, and loans that have been completely disbursed from closing.
In previous additions of the Matrix, the Lender was required to notify the Loan Guaranty Processing Center or the proper Commercial Loan Servicing Center when taking certain unilateral actions. The new Matrix (Version 10) requires Lenders to use E-Tran to notify the SBA in situations where they previously notified the appropriate Center.
The Procedure Notice states that beginning February 1, 2015, Lenders will be required to notify the SBA via E-Tran for the following unilateral actions that were previously not sent via E-Tran:
- Cancel the SBA Guaranty
- Extend the Maturity Date (prior to stated maturity expiring)
- Note: If the loan was sold on the secondary market, prior written consent from investor and/or Fiscal Transfer Agent is required for any action that alters the original loan repayment terms before Lender approves the action and notifies the SBA via E-Tran
- Assumption of the loan without release on an Obligor (adding a borrower)
- Adding a Guarantor to the loan
Another significant change to the new Matrix is contained in the Footnotes. Footnote 2 of the Matrix states “on a fixed rate loan the lender may change the rate, and the lender may also change the Note from a fixed rate into a variable rate or from a variable rate to a fixed rate, provided the new interest rate does not exceed the maximum allowable interest rate at the time of the loan application.” This Footnote provides added authority to the lender to modify the interest rate, but they must still comply with the SOP allowable interest rates that were in place at the time of the application.
Lenders should be aware of these new E-Tran requirements in order to make sure they comply with all new requirements.
For more information regarding the new E-Tran requirements, please contact Tim at 267-470-1182 or at email@example.com.