Post-servicing actions

Post-servicing actions consist primarily of Offers in Compromise and Charge Off actions for 7(a), Express and 504 loans. Actions taken on loans after Charge Off would also come to this group.

Requests should be sent to the appropriate Commercial Loan Service Center (CLSC).

An SBA Form 1150 - Offer in Compromise (OIC) and either SBA Form 770 (Financial Statement of Debtor) or a business financial statement are required for every person or entity wishing to be compromised.

Use of OIC Tabs is a requirement which allows for quicker processing of requests and helps to ensure that all necessary information is included.

7(a) Lenders must resolve SBA-purchased loans as outlined below and provide sufficient evidence of resolution as determined by SBA to the appropriate CLSC within either 24 months of purchase by SBA or 24 months after the effective date of SOP 50 57 2 for loans where lenders are actively liquidating, whichever is longer, unless an extension is approved in writing by SBA prior to the expiration of the applicable 24-month period.

Sufficient evidence of resolution includes the following:

• Returned to regular servicing 
  Lenders must provide SBA with the relevant terms of the agreement under which the borrower has agreed to the resumption of regular payments as appropriate evidence of resolution. The lender must provide this information in writing.
• Paid in full 
  Lenders must remit SBA’s pro-rata share of the net proceeds sufficient to satisfy the debt owed on the SBA-purchased loan and verify that the loan is classified as “paid in full” in E-Tran as appropriate evidence of resolution.
• Wrap-up
  Lenders must submit a wrap-up report acceptable to SBA and demonstrating completion of all prudent liquidation as sufficient evidence of resolution. Refer to SOP 50 57 2 Chapter 26, Paragraph B for more information on the contents of the wrap-up report.

Extension of the 24-month prudent liquidation deadline relating to SBA-purchased loans may be granted by SBA on a case-by-case basis if an extenuating circumstance, such as a judicial foreclosure or a bankruptcy proceeding, prevents compliance with that deadline by the lender. Extensions must be granted in writing.

The lender must submit a written request for an extension to the 24-month prudent liquidation deadline to the appropriate CLSC as soon as it becomes apparent that an extenuating circumstance will prevent compliance with the deadline, but any such request should be submitted no later than 30 calendar days prior to the expiration of any deadline. At a minimum, the request must include:

• A detailed description of the extenuating circumstance preventing timely liquidation
• Supporting documentation evidencing the extenuating circumstances
• A reasonable estimate of when the prudent liquidation will be complete on the SBA purchased loan
• A status report must be submitted with the request for extension (refer to SOP 50 57 2, Chapter 3, Paragraph F)

SBA will review the request and provide a written response granting or denying the extension and, if granted, will provide a new deadline for prudent liquidation. Once an extension has been granted, lenders must continue to submit a report to SBA every 6 months. Refer to SOP 50 57 2, Chapter 3, Paragraph F.

If the extenuating circumstance provided for in the extension request ceases to exist, the Lender must promptly notify SBA and provide a wrap-up report within 30 calendar days

A Lender must comply with the new prudent liquidation deadline unless a further extension is granted in writing by SBA prior to the expiration of the existing deadline

Prudent liquidation email:

• Fresno: FRSC.2YearExceptions@sba.gov
• Little Rock: LRSC.2YearExceptions@sba.gov

For loans which SBA has purchased from the secondary market, lenders must provide the CLSC with a written status report within 15 business days after receiving notice that SBA purchased its guaranty from the secondary market. (13 C.F.R. § 120.520)

In addition, for all loans SBA has purchased, either from the secondary market or directly from the lender, lenders must provide the CLSC with a written status report every 6 months, starting within 6 months from the date of guaranty purchase, until the lender has provided evidence sufficient to SBA that the loan is resolved (i.e. returned to regular servicing, paid in full, charged-off). Refer to SOP 50 57 2, Chapter 23, paragraph I, for the deadline for lender resolution of an SBA-Purchased Loan.

The status report on each loan must include, at a minimum, the following:

• Borrower status
• Obligors
• Collateral
• REO and acquired personal property collateral
• Workout or restructuring negotiations
• Recoveries and expenses incurred
• Liquidation activities and litigation proceedings
• Reasons preventing the resolution of the SBA loan
• Timelines as to when the lender’s resolution activities are expected to be completed

Lenders must prepare and submit a wrap-up report in electronic format to the appropriate CLSC for review and approval within 30 calendar days after prudent liquidation is complete or upon receipt of a request from SBA, whichever occurs first. Once approved by SBA, the remaining loan balance, if any, will be charged-off by SBA and all eligible parties of the loans will be referred to U.S. Department of the Treasury for further collection efforts after assignment of the appropriate loan documents by lender to SBA; further collection efforts may include administrative wage garnishment by Treasury.

A wrap-up report template is available at SBA Charge Off Tabs/Wrap-Up Report.

• SBA Form 1150 — Offer in Compromise 
• SBA Form 770 — Financial Statement of Debtor
• Offer in Compromise (OIC) 8-Tab Kit
• SBA Charge Off Tabs/Wrap-up Report
• CDC-CPC Reimbursement Request

Please refer to SOP 50 57 or email the appropriate post-servicing inbox.