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Previous Issues
Issue 30: Loan Sale Premiums Hold Steady in November

Issue 29: Proper Risk Management Protection and Credit Worthiness

Issue 28: BoeFly Helps Veterans With Disabilities Connect With Lenders to Obtain Small Business Loans

Issue 27: Loan Sale Premiums Level off in October

Issue 26: SBA Secondary Market changes - Warranty Period and Premiums on New Larger Loans

Issue 25: BoeFly Surpasses the $1 Billion Transaction Mark

Issue 24: Loan Sale Premiums Continue Climb in September

Issue 23: Robert Tannenhauser, CEO of BoeFly, Interviewed by Michael McKee on Bloomberg Radio

Issue 22: Lender Optimism is up While Anxiously Awaiting the Small Business Jobs Bill

Issue 21: Loan Sale Premiums Blast to Record Highs in August

Issue 20: Title Insurance- the Lender's Perspective

Issue 19: Condemnation and Mortgage Lender's Rights

Issue 18: Long-Term Deals Continue Record Climb; Short-Term Deals Fade

Issue 17: Congressman Walt Minnick (D-Idaho) Gets It

Issue 16: Deeds and Forms of Ownership

Issue 15: SBA Loan Sale Premiums Hit Record High in June

Issue 14: What You Need to Know About Property Insurance

Issue 13: SBA Fixed Interest Rate Loans are an Important Product to have at the Ready

Issue 12: 504 Guaranteed Pool Program Summary and Survey Results

Issue 11: Loan Sale Premiums Surge to Record Highs in May

Issue 10: Environmental Risk for Lending Opportunities

Issue 9: How To Take Advantage of the First Lien Position 504 Loan Pool Guarantee Program

Issue 8: Investors Remain for SBA Loans

Issue 7: Retirement Funds for an Equity Injection - Selecting the Right Plan Provider

Issue 6: Why Outsourcing Environmental Risk Management makes Cents for Lenders

Issue 5: Loan Monitoring: Comfort in a Crisis

Issue 4: BoeFly Case Study: The economics of selling SBA guaranteed loans

Issue 3: BoeFly Lender Survey Results Q1 2010

Issue 2: Loan Sale Premiums Rally in Q1

Issue 1: The Importance of Efficiency in Secondary Markets

SBA Secondary Market changes - Warranty Period and Premiums on New Larger Loans


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Market experts gathered in Anaheim, CA this week at the annual National Association of Government Guaranteed Lenders (NAGGL) conference to discuss several issues relevant to lenders selling SBA 7(a) guaranteed loans, here is a brief summary.


Large Loan Size Likely to Achieve Lower Premiums

With the increase in the maximum loan size from $2,000,000 to $5,000,000, lenders can sell a much larger guaranteed portion. In connection with the larger loan size, new rules will soon allow SBA pool assemblers to break the larger loans into $500,000 pieces to help in the pooling process. While the larger loan size may seem like an obvious benefit, there was consensus from SBA pool assemblers that large loans will trade at lower premiums than typical loans. Poolers anticipate lower demand for pools with large loans and are limited by the rule that a loan can only be broken into $500,000 pieces, of which only one piece from each loan can be placed into a given pool. For example, a $3,000,000 guaranteed portion broken into six $500,000 portions, the pooler must create six pools. To do so, the pooler assembler must hold the loan for a longer period resulting in higher costs (in capital and risk). Restricting the size of the portion to $500,000 and one piece per pool is a primary driver for lower premiums. Solutions to increase premium were discussed including increasing the split from $500,000 to $1,500,000 - similar to what exists now on a single loan - or increasing the number of portions that can be included in a pool.


Additional concerns around the technical implementation of this new portioning capability for buyers, Colson Services (SBA's fiscal transfer agent) and the SBA were raised and still need to be worked out. Rules, regulations and programming updates need to be finalized – and an early 2011 rollout of this capability for buyers is a best case scenario.


One alternative suggested to avoid the large loan, lower premium issue is to split the loan into multiple notes. Despite concern over the inconvenience and increased closing costs, some lenders are making plans in this area.


SBA Form 1086 Warranty Period Removal to Remove the Delay in Sale Treatment

As part of the new rule change, SBA is removing the 90- day warranty period from form 1086, the participation form required on SBA 7(a) loan sales. While the warranty is in effect, the seller is prevented from taking sale treatment, in accordance with FAS 166. The changed form is now under review in accordance with federal rules and an update to form 1086 is expected in the next 60-90 days. It seems unlikely that the changes will be implemented in time for sellers to enjoy sale treatment before calendar year end.