Small Business Administration § 120.975 the outstanding principal balance of AUTHORITY OF CDCS TO PERFORM LIQ- the loan being assumed. UIDATION AND DEBT COLLECTION LITI- (b) CSA fees. The CSA may charge an GATION initiation fee on each loan and a monthly servicing fee under the terms § 120.975 CDC Liquidation of loans and of the Master Servicing Agreement. debt collection litigation. (c) Other agent fees. Agent fees and (a) PCLP CDCs. If a CDC is designated charges necessary to market and serv- as a PCLP CDC under § 120.845, the CDC ice Debentures and Certificates may be must liquidate and handle debt collec- assessed to the Borrower or the inves- tion litigation with respect to all tor. The fees must be approved by SBA PCLP Loans in its portfolio on behalf and published periodically in the FED- of SBA as required by § 120.848(f), in ac- ERAL REGISTER. cordance with subpart E of this part. (d) SBA fees. (1) SBA charges a 0.5 With respect to all other 504 loans that percent guarantee fee on the Deben- a PCLP CDC makes, the PCLP CDC is ture. an Authorized CDC Liquidator and (2) For loans approved by SBA after must exercise its delegated authority September 30, 1996, SBA charges a fee to liquidate and handle debt-collection of not more than 0.9375 percent annu- litigation in accordance with subpart E ally on the unpaid principal balance of of this part for such loans, if the PCLP the loan as determined at five-year an- CDC is notified by SBA that it meets niversary intervals. either of the following requirements to (e) Miscellaneous fees. A funding fee be an Authorized CDC Liquidator, as not to exceed 0.25 percent of the Deben- determined by SBA: ture may be charged to cover costs in- (1) The PCLP CDC has one or more curred by the trustee, fiscal agent, employees who have not less than two transfer agent. years of substantive, decision-making experience in administering the liq- [61 FR 3235, Jan. 31, 1996, as amended at 64 uidation and workout of defaulted or FR 2119, Jan. 13, 1999; 68 FR 57988, Oct. 7, problem loans secured in a manner sub- 2003] stantially similar to loans funded with 504 loan program debentures, and who § 120.972 Third Party Lender partici- pation fee and CDC fee. have completed a training program on loan liquidation developed by the (a) Participation fee. For loans ap- Agency in conjunction with qualified proved by SBA after September 30, CDCs that meet the requirements of 1996, SBA must collect a one-time fee this section; or equal to 50 basis points on the Third (2) The PCLP CDC has entered into a Party Lender’s participation in a contract with a qualified third party Project when the Third Party Lender for the performance of its liquidation occupies a senior credit position to responsibilities and obtains the ap- SBA in the Project. proval of SBA with respect to the (b) CDC fee. For loans approved by qualifications of the contractor and the SBA after September 30, 1996, SBA terms and conditions of the contract. must collect an annual fee from the (b) All other CDCs. A CDC that is not CDC equal to 0.125 percent of the out- authorized under paragraph (a) of this standing principal balance of the De- section may apply to become an Au- benture. The fee must be paid from the thorized CDC Liquidator with author- servicing fees collected by the CDC and ity to liquidate and handle debt collec- cannot be paid from any additional fees tion litigation with respect to 504 loans imposed on the Borrower. on behalf of SBA, in accordance with subpart E of this part, if the CDC [68 FR 57988, Oct. 7, 2003] meets the following requirements: (1) The CDC meets either of the fol- lowing criteria: (i) The CDC participated in the loan liquidation pilot program established 311 VerDate Mar<15>2010 14:16 Mar 01, 2011 Jkt 223042 PO 00000 Frm 00321 Fmt 8010 Sfmt 8010 Y:\SGML\223042.XXX 223042 erowe on DSK5CLS3C1PROD with CFR § 120.990 13 CFR Ch. I (1–1–11 Edition) by the Small Business Programs Im- and/or debt collection litigation under provement Act of 1996 prior to October this section. 1, 2006; or [72 FR 18365, Apr. 12, 2007] (ii) During the three fiscal years im- mediately prior to seeking such au- ENFORCEABILITY OF 501, 502 AND 503 thority, the CDC made an average of LOANS AND OTHER LAWS not less than ten 504 loans per year; and § 120.990 501, 502 and 503 loans. (2) The CDC meets either of the fol- SBA has discontinued loan programs lowing requirements: for 501, 502, and 503 loans. Outstanding (i) The CDC has one or more employ- loans remain under these programs, ees who have not less than two years of and Borrowers, CDCs, and SBA must substantive, decision-making experi- comply with the terms and conditions ence in administering the liquidation of the corresponding notes and Deben- and workout of defaulted or problem tures, and the regulations in this part loans secured in a manner substan- in effect when the obligations were un- tially similar to loans funded with 504 dertaken or last in effect, if applicable. loan program debentures, and who have completed a training program on loan § 120.991 Effect of other laws. liquidation developed by the Agency in No State or local law may preclude conjunction with qualified CDCs that or limit SBA’s exercise of its rights meet the requirements of this section; with respect to notes, guarantees, De- or bentures and Debenture Pools, or of its (ii) The CDC has entered into a con- enforcement rights to foreclose on col- tract with a qualified third party for lateral. the performance of its liquidation re- sponsibilities and obtains the approval Subpart I—Risk-Based Lender of SBA with respect to the qualifica- tions of the contractor and the terms Oversight and conditions of the contract. (c) CDC counsel. To perform debt col- SOURCE: 72 FR 25194, May 4, 2007, unless lection litigation under paragraphs (a) otherwise noted. or (b) of this section, a CDC must also SUPERVISION have either in-house counsel with ade- quate experience as approved by SBA § 120.1000 Risk-Based Lender Over- or entered into a contract for the per- sight. formance of debt collection litigation (a) Risk-Based Lender Oversight. SBA with an experienced attorney or law supervises, examines, and regulates, firm as approved by SBA. and enforces laws against, SBA Super- (d) Application for authority to liq- vised Lenders and the SBA operations uidate and litigate. To seek authority to of SBA Lenders, Intermediaries, and perform liquidation and debt collection NTAPs. litigation under paragraphs (b) and (c) (b) Scope. Most rules and standards of this section, a CDC other than a set forth in this subpart apply to SBA PCLP CDC must submit a written ap- Lenders as well as Intermediaries and plication to SBA and include docu- NTAPs, However, SBA has separate mentation demonstrating that the CDC regulations for enforcement grounds meets the requirements of paragraph and enforcement actions for Inter- (b) and (c) of this section. If a CDC in- mediaries and NTAPs at § 120.1425 and tends to use a contractor to perform § 120.1540. liquidation, it must obtain approval from SBA of both the qualifications of [73 FR 75519, Dec. 11, 2008] the contractor and the terms and con- ditions in the contract covering the § 120.1005 Bureau of PCLP Oversight. CDC’s retention of the contractor. SBA SBA’s Bureau of PCLP Oversight will notify a CDC in writing when the within OCRM, monitors the capitaliza- CDC can begin to perform liquidation tion of PCLP CDC pilot participants’ 312 VerDate Mar<15>2010 14:16 Mar 01, 2011 Jkt 223042 PO 00000 Frm 00322 Fmt 8010 Sfmt 8010 Y:\SGML\223042.XXX 223042 erowe on DSK5CLS3C1PROD with CFR.