4 Delinquent Loans/Debenture Purchases -Quarterly reports required on all loans over 60 days past due. -SBA will follow up on severely past due loans monthly. -No response by CDC – debenture purchase. -> 3 months past due with no plan - debenture purchase. -Debenture purchase and cancellation deadline is the 10 th business day of each month.
5 504 LIQUIDATION TPL 60-Day Foreclosure Notices -CDC to contact SBA/forward notice immediately. -CDC to make recommendation on debenture purchase. -Generally SBA will purchase debenture immediately. -CDC must order BPO or appraisal. New SOP requires independent appraisal. CDC may request a copy of TPL’s appraisal, but can’t rely on it without exception to policy approval from LRSC. -Must be prepared for foreclosure sale (bid/no bid).
6 504 LIQUIDATION Liquidation Process -CDC assistance is critical to effective liquidation. -SBA will authorize debenture purchase, transfer of loan into liquidation status & authorize new appraisal or BPO. -CDC must order BPO or appraisal - SBA will pay or reimburse cost. If delay is justified, contact SBA ASAP. -CDC must prepare and submit liquidation plan and site visit report to SBA within 30 days of debenture purchase. -Immediately following debenture purchase SBA will send an e- mail to CDC requesting updated obligor info (TIN/SSN) within five days and the liquidation plan, site visit report, appraisal and protective bid analysis within 30 days.
7 504 LIQUIDATION Liquidation Process -- continued -Immediately following debenture purchase SBA will send a demand letter to the borrower. -Thirty days after debenture purchase SBA will send a second e- mail to the CDC requesting any liquidation information not received. -Thirty to forty days after debenture purchase SBA will send a demand/acceleration letter to all obligors. -Quarterly liquidation reports are required by CDCs conducting the liquidation. The format is available on the servicing centers’ website and the URL is included in the 30-day sent to the CDC.
8 504 LIQUIDATION Liquidation Process -- continued -All borrowers that are over 120 days past due after debenture purchase will automatically receive a (Treasury Offset Program) TOP Due Process Notice. -If default isn’t cured during the 60-day due process period TOP referral will proceed and receivables from the Federal government will be offset. -If borrower is cooperative and engaged in serious workout or short sale negotiations TOP referral may be “outlawed.” -To “outlaw” a TOP referral the CDC must contact SBA ASAP so codes can be entered to stop TOP referral.
9 504 LIQUIDATION Liquidation Process – continued -To ensure effective TOP referral it is imperative that current and accurate obligor info (names, addresses, SSN/TIN, etc.), be submitted to SBA within five days of debenture purchase. -Recently reorganized SBA Office of General Counsel will pursue obligors through DOJ if: Net collectability of $50,000 or more per individual guarantor is anticipated through enforced collection. -Work with LRSC to determine net collectability IF high net worth is apparent. -Recovery through Treasury Cross Servicing for guarantors with less than $50,000 net collectability.
LIQUIDATION Liquidation Process -- continued -Current liquidation plan format is available on SBA’s website: (Under “Lender Quick Links” at bottom of page go to “Steps in SBA Lending,” click “CDC/504 Loans,” click “Liquidation”) -If litigation/bankruptcy CDC should notify SBA field counsel and LRSC immediately and submit litigation plan to field counsel for approval. -Debenture purchase is usually, but not always, required in the event of bankruptcy. -CDC should determine status of the TPL loan and their intentions regarding workout, foreclosure, etc.
LIQUIDATION Liquidation Process – continued -If there’s workout potential, CDC should work with borrower to submit proposal to LRSC (address in liq plan). -If TPL foreclosure is eminent CDC must order appraisal or BPO immediately. -CDC should timely prepare & submit a protective bid analysis to SBA including bid recommendation. -If “no bid” determination push for short sale, private auction sale or monitor TPL foreclosure action (provide results to SBA). -If “bid” is approved SBA will order Treasury check and request that CDC represent us at the foreclosure sale (district office support may be available if needed).
LIQUIDATION Liquidation Process – continued -If SBA is winning bidder, REO account is established and CDC assistance is requested to secure, maintain and market the property. CDC assistance is critical to a positive outcome on the sale of REO. -CDC should send Wrap Up Report recommending charge off and pursuit of judgment/Treasury referral of obligors at conclusion of liquidation. -Administrative wage garnishment (AWG) is possible and a very effective collection tool for obligors with outside employment. -AWG should be pursued at the outset of liquidation if obligors with outside employment are uncooperative. -SBA will notify CDC when loan charge off is complete.
LIQUIDATION Liquidation Concerns & Issues -Please use the 504 Liquidation box! -Submit liquidation plans within 30 days of purchase. -If possible, send liquidation plans and attachments in separate files. -Include accurate TIN/SSN on all obligors in liquidation plans. -Site visit reports must be provided timely (due within 60 days of payment default/15 days of technical default/30 days of debenture purchase)
LIQUIDATION Liquidation Concerns & Issues -FF&E must be addressed in appraisal/BPO and PBA. -Keep SBA informed as the property is liquidated, e.g., reporting TPL foreclosure results to SBA. -CDC must enforce the TPL agreement which requires 30 days notice of default and 60 days of foreclosure. -Short sale submissions must contain complete supporting information required by SOP Detail any secondary collateral and obtain valuations including residences.
LIQUIDATION Liquidation Concerns & Issues -Original PFS on guarantors must be included in liquidation package if loan was processed under ASM. -CDC must record the bid results and buyers at all foreclosures sales and ensure surplus proceeds for SBA are recovered. SBA notification required. -Quarterly Reports (60-day past due and liquidation). -Must submit wrap up report at the conclusion of collateral liquidation or abandonment. -CDC assistance is critical to effective liquidation.
LIQUIDATION Communicating with 504 Liquidation Division -CDC’s are encouraged to communicate with SBA continually throughout the liquidation process. -We ask that you use the 504 liquidation box for submission of ALL case specific and general questions. -The 504 liquidation box should always be used for: -Quarterly Delinquency Reports -Debenture Purchase Requests -Liquidation & Litigation Plans -Quarterly Liquidation Reports -Protective Bid Analyses -Wrap Up Reports -Our website has a link for secure transmission of large files such as appraisals, environmental surveys, etc. (Send This File)