best practices for liquidation & servicing procedures

Best Practices for Liquidation & Servicing Procedures

Salon A

Monday, October 20, 2014

9:15 am – 10:45 am

T RAI N I N G & E D U C AT I O N

Thank you to our Alliance Partners

T RAI N I N G & E D U C AT I O N

Speakers Sarah Hawkins, Deputy Center Director U.S. Small Business Administration Shirley Walls, Supervisory Loan Specialist for Servicing U.S. Small Business Administration Karen Musick, Loan Specialist – 504 U.S. Small Business Administration John D. Evans, Executive Vice President, Credit Administrator Mountain West Small Business Finance Sandy Mortan, First Vice President New Jersey Business Finance Corporation

Moderator: Rhonda Pointon, VP Regulatory Affairs, Training & Support National Association of Development Companies

SBA Servicing Best Practices

Joel Tittel Johnnie Green

Dustin Allen

Velma Hardin

Beverly Newborn

• SOP 50 55 - CH 6 and CH 8 – Servicing Requests. Know

these chapter’s and you can’t go wrong

Best Practices will save you Time and

Money

• A clear and concise request can reap SBA turn time

rewards (five days or less) this will save you money and time

• When you submit a servicing request, please attach

your documents for review

• Your request should be clear and concise

• 1) Provide your credit memo – do your analysis

• 2) Copy of the TPL loan - balances (cash out and no cash

out subordinations)

• 3) Address the collateral value – (appraisals)

• 4) Your credit analysis should cover all financial

statements, so no need to submit.

• 5) Your request should address clearly the condition of

the business and other factors important to your request.

• 6) Don’t forget to include a word copy of your

document(s) that needs SBA legal review

How to submit a Servicing Request

• Use the lrsc.servicing@sba.gov e-mail address to submit

servicing actions. Large emails should be sent through

sendthisfile.com

• You can also fax your request to 202-292-3878 or by mail to

2120 Riverfront Drive, Suite 100, Little Rock, AR 72202-1794

• Visit our website for sample loan servicing templates

• CDC Matrix (13 CFR 120.535 and 120.536)-

• When utilizing delegated, unilateral authority, the CDC

must internally document their credit decision

(reasonable and prudent)

How to submit a Servicing Request Continued

►Timeline:

► SBA strives to process loan servicing requests in a five to

seven day turnaround (from the date of receipt to the date

the SBA decision is faxed back, mailed out, or overnighted

back to the CDC)

► A rare servicing action may require the approval of SBA

headquarters – OFPO (exception to policy)

► CDC must perform an analysis independent of any Third

Party Lender that has a senior position on the project

collateral

SBA Approval Process

• The Recommendation should include the following:

• The reason for the request

• Use of proceeds (e.g., improvements to the project property,

etc.)

• Is the loan seasoned – 18 months after the initial

disbursement or 18 months after the final disbursement if it

occurred more than six months after the initial disbursement,

or if there was a default, the borrower cured it and for 12

consecutive months following the 18 month post-

disbursement period, the borrower made all scheduled

payments.

SBA Approval Process Continued

• How will the request benefit the Agency and the SBC

• Status of both SBA and TPL loan (Payoff if subordinating)

• Demonstrate repayment ability – analysis of financial

statements

• If request affects collateral – SBA’s collateral position both

“before” and “after” the approval of the recommended

action. Collateral value must be based on a recent

appraisal (120 days old or no older than 1 year)

• Any recommendation that is declined by the CDC should

not be submitted to the SBA

SBA Approval Process Continued

• Written request that is clear and concise

• Your credit memo that supports the request

• Documents prepared and submitted with request

• Do these things and you will have the key to SBA approval

by following the SOP guidance

A complete request equals - approval

Putting it all Together

• When submitting a request,

make sure you receive a email response that we have

your action!!!

• Electronic Loan Files: We store

all files and emails

• Useful Links:

• http://www.sba.gov/Little RockCLSC (General Directory)

• Emails: Want to know more about SBA's Center in Little Rock? Come see us at...

• http://www.sba.gov/aboutsba/sbaprograms/elending/clc/index.html

• Please direct ALL servicing inquiries and actions to LRSC.Servicing@sba.gov

General Information-Links

NADCO Regional Workshop – Liquidation and Servicing

Little Rock, AR October 20-21, 2014

Karen Musick

504 Loan Servicing Specialist

LRSC – Debenture Purchase Trends

FY 2006 -- 126 (11/mo.)

FY 2007 -- 179 (15/mo.)

FY 2008 -- 323 (27/mo.)

FY 2009 -- 712 (59/mo.)

FY 2010 -- 1,081 (90/mo.)

FY 2011 -- 920 (77/mo.)

FY 2012 -- 680 (57/mo.)

FY 2013 -- 495 (41/mo.)

FY 2014 -- 365 (30/mo.)

LRSC – Debenture Purchase Trends

126 179

323

712

1081

920

680

495

365

0

200

400

600

800

1000

1200

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

504 Liquidation LRSC Debenture Purchase Trends

504 Liquidation Best Practices

• Complete information for each request – Personal Financial Statements (PFS) for all obligors and guarantors? Are they signed and

complete? Loan Origination PFS?

– Appraisal?

– Credit Analysis?

– Current Tax Returns and business Financial Statements?

• Each request sent in an individual email to the 504 Liquidation Box lrsc.504liquidation@sba.gov

• Ensure SBA has current TIN/SSN numbers on all Obligors and Guarantors

• Appraisal vs. BPO vs. LVPR

504 Liquidation Best Practices

• Workout Plans – An approved workout will need to pay the loan in full

by maturity. Changes that are possible: • Interest Rate

• Monthly payments including graduated payments

• Maturity extensions up to 10 years

• Seasonal Payments

– Is the workout plan feasible?

– Note Modification Agreement is encouraged

– Short term workout plans can be arranged to help the burrower “buy time” prior to sale of business or property with the purpose of preventing TOP referral.

504 Liquidation Best Practices

• Short Sale

– A current PBA is required with detailed TPL payoff and verified property taxes

– Preliminary settlement statement

To Be Covered in Breakout Sess ions – Protective Bids

– REO Management

– Offer in Compromise

– TOP’s

504 Liquidation Division Contact Info

E-mail: lrsc.504Liquidation@sba.gov

Main Phone Number: (501) 324-5871

Fax: (202) 741-6930

Website: http://www.sba.gov/aboutsba/sbaprograms/elending/clc/index.html

Sarah Hawkins, Interim Supervisory Loan Officer & Deputy Center Director (x242)

Steve Clark, Loan Officer (x298)

Kenneth McKay, Loan Officer (x291)

Karen Musick, Loan Officer (x313)

Steve Park, Loan Officer (x314)

Gail Schulte, Loan Officer (x228)

Veronica Kirtley, Loan Servicing Assistant (x232)

Sharreka Reed, Loan Servicing Assistant (x236)

Anna Sadler, Loan Servicing Assistant (x224)

T RAI N I N G & E D U C AT I O N

What’s Up Next 11:00 am: Central Servicing Agent Forum Salon A

1:15 pm: Liquidation & Servicing: Post Debenture Servicing & SOP Highlights Salon A

2:30 pm: Liquidation: Protective Bids, REO Management & Offers in Compromise Salon A

2:30 pm: Servicing Update: SOP 50 55, Chapter 6 & Chapter 8 Overview Salon B