Best Practices: Changes to Lender Responsibilities in SOP 50 57 3.1
On August 1, 2023, the SOP 50 57 3, 7(a) Loan Servicing and Liquidation became effective. SBA has published an update, SOP 50 57 3.1, which has been amended to clarify and update certain sections based upon questions and comments from lenders and other third parties. Along with the new SOP, SBA also released Information Notice # 5000-856113 (“Notice”) which summarizes the changes. The SOP 50 57 3.1 will go into effect December 1, 2024.
Here, we highlight only those changes that are related to lender responsibilities and authority.
Chapter 3. Lender Responsibility and Authority- Page 35, Paragraph C.3: This section addresses the release of obligors following a loan assumption. SBA has added language that, from a practical standpoint, will require lenders to get written permission from the SBA to release an obligor in a loan assumption if the loan is in payment default or liquidation.
Chapter 3. Lender Responsibility and Authority- Page 37, Note Box: SBA revised the language to state “Note: The appropriate SBA District Counsel or Center Counsel will make a determination on all Lender Servicing Requests that involve Lender Litigation Plans, Debt Collection Litigation Expenses and other legal expenses. SBA Loan Centers will decide all other Lender Servicing Requests. SBA Loan Centers, Center Counsel or SBA District Counsel should respond to Lender Servicing requests within 15 business days from the date SBA receives the Servicing Request. (See 13 C.F.R. §120.541 for additional guidance.)” This change allows SBA Loan Centers to review Lender Servicing Requests that do not require SBA District Counsel review. This Note addition helps clarify who will be reviewing the different requests, and it also sets the Lender’s expectations for how long it should take for a response- within 15 days.
Chapter 3. Lender Responsibility and Authority- Page 38, Paragraph C.6.b: This section adds guidance on where a lender should appeal certain sections such as Litigation Plans, Debt Collection Litigation Expenses and other legal expenses. It further clarifies the mechanics of how a lender may appeal these decisions.
Chapter 3. Lender Responsibility and Authority- Page 44, Paragraph F.4.a.(1): This section deleted the requirement for Lenders to submit Litigation Plan status updates. Instead, a Lender must submit an amendment to the Litigation Plan to the SBA should the approved Litigation Plan change. It is important to note that lenders must still include updates on liquidation activities and proceedings in its periodic loan status report, which are submitted to the SBA Loan Services Center every six months (beginning six months from date of guaranty purchase).
While there are other changes that the Lenders should be aware of, these actions that are listed under Chapter 3: Lender Responsibility and Authority in the new Loan Servicing SOP are actions that are critical to a Lender’s workout and Guaranty Purchase Groups. Lenders must be sure to keep apprised of changes to processes and authority in order to protect their guaranty.