Liquidation of Collateral, Sale of Loans

AGENCY:

Small Business Administration (SBA).

ACTION:

Final rule.

SUMMARY:

With this rule, SBA amends its regulation regarding the liquidation and sale of loans. As part of a government-wide initiative, federal credit agencies are being directed by the Office of Management and Budget (OMB) to sell their loan portfolios. Previously, SBA amended its regulations to permit the sale of direct and purchased loans made under the authorities of the 7(a) and 501, 502, 503, and 504 programs (64 FR 44109). This final rule will permit SBA to sell its physical disaster home loans, physical disaster business loans and economic injury disaster loans (collectively referred to as Disaster Assistance Loans) in addition to direct and purchased commercial loans. This will include sales of both secured and unsecured Disaster Assistance Loans in performing and non-performing status. The Disaster Assistance Loans will be sold to qualified bidders by means of competitive procedures at publicly advertised sales. Bidder qualifications will be set for each sale in accordance with the terms and conditions of each sale.

DATES:

This rule is effective May 1, 2000.

FOR FURTHER INFORMATION CONTACT:

Richard Blewett, 202-205-4202.

SUPPLEMENTARY INFORMATION:

SBA promulgates without change, a rule which it proposed on January 10, 2000 (65 FR 1349). SBA received no comments on the proposed rule and thus, is publishing the final rule as proposed.

13 CFR 120.540 sets forth SBA's policy for the liquidation of collateral and the sale of commercial loans. SBA amends and expands this rule to include the sale of Disaster Assistance Loans in asset sales. Public Law 104-134, the “Debt Collection Improvement Act of 1996,” enacted on April 26, 1996, provides that, “the head of an executive * * * agency may sell, subject to section 504(b) of the Federal Credit Reform Act of 1990 and using competitive procedures, any non-tax debt owed to the United States that is delinquent for more than 90 days.” 31 U.S.C. 3711(i)(1).

The Small Business Act, 15 U.S.C. 634(b)(2), provides that “[The Administrator] may sell at public or private sale * * * in [her] discretion . . . any evidence of debt * * * personal property, or security * * *.” It further provides in 15 U.S.C. 634(b)(7) that the Administrator may “take any and all actions * * * when [she] determines such actions are necessary or desirable in * * * liquidating or otherwise dealing with or realizing on loans * * *.” Pursuant to this statutory authority, SBA is establishing an Asset Sales Program to sell portions of its direct and participation loan portfolios.

Compliance With Executive Orders 13132, 12988, and 12866, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork Reduction Act (44 U.S.C. Ch. 35)

SBA has determined that this final rule is not a significant rule within the meaning of Executive Order 12866, since it is not likely to have an annual economic effect of $100 million or more, result in a major increase in costs or prices, or have a significant adverse effect on competition or the U.S. economy.

SBA has determined that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612. This regulation concerns the ability of SBA to sell disaster loans as part of SBA's Asset Sales Program. There will be no economic impact upon the small businesses that received those loans because the loans that will be sold are merely changing ownership, so no new funding is involved. The purchaser of the loans will be bound by the terms of the loan documents in the same manner as SBA. The Agency does not anticipate that any additional costs will be placed upon small entities. Therefore, SBA believes that there will be no economic impact on small businesses.

Nevertheless, even if it is assumed that there is an economic impact, this rule would still only have a minimal effect on an insubstantial number of small businesses. This is because SBA's total disaster business loan portfolio at the end of FY 1999 was 64,832 loans, as contrasted with an estimated total of 24 million small businesses in the United States (as estimated by SBA's Office of Advocacy).

SBA has determined that this final rule does not impose any additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C., chapter 35.

For purposes of Executive Order 13132, SBA has determined that this final rule has no federalism implications.

For purposes of Executive Order 12988, SBA has determined that this final rule is drafted, to the extent practicable, to accord with the standards set forth in section 3 of that Order.

List of Subjects in 13 CFR Part 120

• Loan programs—business

For the reasons stated in the preamble, SBA amends 13 CFR part 120 as follows:

PART 120—BUSINESS LOANS

1. The authority citation for part 120 continues to read as follows:

Authority: 15 U.S.C. 634 (b)(6) and 636(a) and (h).

2. In § 120.540, revise the section heading and amend the first sentence of paragraph (b)(4) as follows: