sop 50 51 2 loan liquidation & acquired property

313 Pages·2013·1.42 MB·English

by  Nita J. Congress

SBA
SOP 50 51 2

LOAN LIQUIDATION &
ACQUIRED PROPERTY

Office of Financial Assistance
Borrower and Lender Servicing

U.S. Small Business
Administration

SMALL BUSINESS ADMINISTRATION
STANDARD OPERATING PROCEDURE
National

SUBJECT: S.O.P. REV
Loan Liquidation and Acquired Property SECTION NO.
50 51 2A

INTRODUCTION

1. Purpose. To update policy and procedural guidance concerning loan liquidation and acquired property.

2. Personnel Concerned. Headquarters and field office personnel engaged in loan liquidation and acquired
property activities.

3. Page Changes.

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4. Originator. Office of Borrower and Lender Servicing, Office of Financial Assistance.

AUTHORIZED BY: EFFECTIVE DATE
11-2-98
Jane Palsgrove Butler PAGE
Acting Associate Administrator 1
for Financial Assistance
SBA Form 989 (5-90) Ref: SOP 00 23
Federal Recycling Program Printed on Recycled Paper

This form was electronically produced by Elite Federal Forms, Inc.

SOP 50 51 2

SUMMARY
TABLE OF CONTENTS

CHAPTER 1 PURPOSE AND ORGANIZATION ............................................................. 1-1

CHAPTER 2 REGULATIONS AND OTHER AUTHORITIES ...................................... 2-1

CHAPTER 3 CORRESPONDENCE, REPORTS, AND CONTROL SYSTEMS ........... 3-1

CHAPTER 4 GENERAL GUIDELINES FOR LIQUIDATION ACTIVITIES ............. 4-1

CHAPTER 5 PROBLEM LOANS AND WORKOUT SITUATIONS ............................. 5-1

CHAPTER 6 SBA-SERVICED LIQUIDATIONS ............................................................. 6-1

CHAPTER 7 SBA’S METHODS OF RECOVERY FROM COLLATERAL ................. 7-1

CHAPTER 8 LENDER-SERVICED LIQUIDATIONS .................................................... 8-1

CHAPTER 9 MISCELLANEOUS ISSUES REGARDING PARTICIPATION
LOANS ............................................................................................................ 9-1

CHAPTER 10 SPECIAL PROGRAMS .............................................................................. 10-1

CHAPTER 11 COLLATERAL PURCHASED (COLPUR) BY SBA AND LENDER ... 11-1

CHAPTER 12 GUIDELINES FOR PERSONAL GUARANTIES ................................... 12-1

CHAPTER 13 DENIAL OF LIABILITY -- SUIT AGAINST PARTICIPANT .............. 13-1

CHAPTER 14 BANKRUPTCY PROCEEDINGS .............................................................. 14-1

CHAPTER 15 CONTRACTING WITH AUCTION FIRMS ............................................ 15-1

CHAPTER 16 APPRAISALS ............................................................................................... 16-1

CHAPTER 17 COMPROMISE ACTIONS ........................................................................ 17-1

CHAPTER 18 CHARGE OFF PROCEDURES ................................................................. 18-1

CHAPTER 19 ADMINISTRATIVE COSTS, ADVANCES,EXPENSES,
AND RECOVERIES .................................................................................... 19-1

EFFECTIVE DATE: DECEMBER 1, 1997
SOP 50 51 2

CHAPTER 20 EFFECTS OF COMPETING TAX LIENS (STATE, COUNTY,
AND LOCAL) ON LOAN COLLATERAL AND COLPURED
PROPERTY .................................................................................................. 20-1

CHAPTER 21 EFFECTS OF SENIOR COMPETING LIENS (NON-TAX LIENS)
ON LOAN COLLATERAL AND COLPURED PROPERTY ................ 21-1

CHAPTER 22 INSURANCE: PROPERTY, LIFE, AND PUBLIC LIABILITY ........... 22-1

CHAPTER 23 DISCLOSURE OF LOAN INFORMATION ............................................ 23-1

CHAPTER 24 REFERRALS TO THE OFFICE OF THE INSPECTOR GENERAL .. 24-1

APPENDIX

INDEX

EFFECTIVE DATE: DECEMBER 1, 1997
SOP 50 51 2A

TABLE OF CONTENTS

CHAPTER 1 PURPOSE AND ORGANIZATION .................................................................... 1-1
1. What is the Purpose of this Standard Operating Procedure (SOP)? ............ 1-1
2. What is the Scope of Liquidation Activities? .............................................. 1-1
3. How is this SOP Organized? ....................................................................... 1-1
4. What are the Sources of Authority and Guidance for Liquidation
Activity? ...................................................................................................... 1-2
5. What will this SOP Provide? ....................................................................... 1-3
6. When Should You Refer to the Loan Servicing SOP? ................................ 1-3
CHAPTER 2 REGULATIONS AND OTHER AUTHORITIES ............................................. 2-1
1. 13 CFR § 120.512. Who services the loan after SBA honors its
guarantee? .................................................................................................... 2-1
2. 13 CFR § 120.431. Suspension or revocation of eligibility to
participate. ................................................................................................... 2-1
3. 13 CFR § 120.540. What are SBA’s policies concerning
liquidation of collateral? .............................................................................. 2-1
4. 13 CFR § 120.10. Definitions. ..................................................................... 2-3
5. 13 CFR § 120.140. What ethical requirements apply to
participants? ................................................................................................. 2-4
6. 13 CFR § 120.410. Requirements for all participating lenders. ................ 2-6
7. 13 CFR § 120.411. Preferences. ................................................................ 2-6
8. 13 CFR § 120.412. Other services Lenders may provide
Borrowers. ................................................................................................... 2-6
9. 13 CFR § 120.440. What is the Certified Lenders Program? ..................... 2-7
10. 13 CFR § 120.450. What is the Preferred Lenders Program? .................... 2-7
11. 13 CFR § 120.453. What are the requirements of a PLP Lender in
servicing and liquidating SBA guaranteed loans? ....................................... 2-7
EFFECTIVE DATE: NOVEMBER 2, 1998 i
SOP 50 51 2A

12. 13 CFR § 120.520. When does SBA honor its guarantee? ........................ 2-7
13. 13 CFR § 120.521. What interest rate applies after SBA purchases
Its guaranteed portion? ................................................................................ 2-8
14. 13 CFR § 120.522. How much accrued interest does SBA pay to
the Lender or Registered Holder when SBA purchases the
guaranteed portion? ..................................................................................... 2-8
15. 13 CFR § 120.523. What is the “earliest uncured payment default”? ......... 2-9
16. 13 CFR § 120.524. When is SBA released from liability on Its
guarantee? .................................................................................................... 2-9
17. 13 CFR § 120.550. What is homestead protection for farmers? .............. 2-10
18. 13 CFR § 120.551. Who is eligible for homestead protection? ............... 2-10
19. 13 CFR § 120.552. Lease. ........................................................................ 2-11
20. 13 CFR § 120.553. Appeal. ...................................................................... 2-11
21. 13 CFR § 120.554. Conflict of laws. ........................................................ 2-11
22. 13 CFR § 120.938. Default. ...................................................................... 2-11
23. 13 CFR § 120.940. Prepayment of the 504 loan or debenture. ................ 2-12
CHAPTER 3 CORRESPONDENCE, REPORTS, AND CONTROL SYSTEMS .................. 3-1
1. Correspondence. .......................................................................................... 3-1
2. What is SBA Form 327, Modification or Administrative Action? ............. 3-1
3. Transferring Loans Between Field Offices. ................................................ 3-4
4. Liquidation Litigation Tracking System (LLTS). ....................................... 3-4
5. What are the Requirements of the Liquidation Plan? .................................. 3-4
6. How is a Liquidation Plan Approved? ........................................................ 3-5
7. Who is Responsible for Maintaining/Updating LLTS? ............................... 3-5
8. Who is Responsible for Oversight of the LLTS? ........................................ 3-5
ii EFFECTIVE DATE: NOVEMBER 2, 1998
SOP 50 51 2A

9. What are the Supervisor’s Objectives When Conducting the LLTS
Portfolio Review? The supervisor objectives are to: .................................. 3-6
10. What Should the Supervisor Determine at the LLTS Portfolio
Review? The supervisor should determine that: ........................................ 3-6
11. Where Can You Find More Information About LLTS? .............................. 3-6
12. What Loan Accounting Data is Available, and Where is it Found? ........... 3-6
13. How Do You Use the PMQD System? ....................................................... 3-6
14. What Accounting Information is Available from the Office of
Financial Operations (OFO)? ...................................................................... 3-7
15. What is the Procedure for 503/504 Payoff? ................................................ 3-7
16. Special Computer Inputs/Controls When a Loan is Charged Off. .............. 3-7
17. Safekeeping and Control of the Collateral Records? .................................. 3-8
18. What Must Be Done When Approved Actions Affect Collateral
Records? ...................................................................................................... 3-8
19. Computer Input, Support and Control Systems. .......................................... 3-8
CHAPTER 4 GENERAL GUIDELINES FOR LIQUIDATION ACTIVITIES .................... 4-1
1. Definitions. .................................................................................................. 4-1
2. What are the SBA’s Delegations of Authority? .......................................... 4-3
3. What Do You Do When You Receive a Written Proposal by an
Obligor or Debtor? ...................................................................................... 4-5
4. What are the Field Offices’ Performance Goals for Loans in
Liquidation, Litigation, and Colpur Status? ................................................ 4-6
5. Management Reviews. ................................................................................ 4-6
6. Placing a Loan “In Liquidation” or “In Litigation” Status. ......................... 4-7
7. Placing/Removing a Loan In or Out of Liquidation/Litigation
Status. .......................................................................................................... 4-9
8. Risk Management Database, Loan Underwriting Characteristics. ............ 4-10
EFFECTIVE DATE: NOVEMBER 2, 1998 iii
SOP 50 51 2A

9. Which 327 Actions Must SBA Counsel Review? ..................................... 4-13
10. What Other 327 Actions Does SBA Counsel Typically Review? ............ 4-14
11. Who has Authority to Liquidate SBA Loans? ........................................... 4-15
12. What is the Federal Statute of Limitations Act? ....................................... 4-15
13. How Do You Handle Conflicts of Interest? .............................................. 4-15
14. What is SBA’s Policy on the Sale of a Loan? ........................................... 4-17
15. What is SBA’s Policy on Certain Litigation Matters? .............................. 4-17
CHAPTER 5 PROBLEM LOANS AND WORKOUT SITUATIONS .................................... 5-1
1. What is SBA’s Policy Regarding Workouts of Loans Classified “In
Liquidation?” ............................................................................................... 5-1
2. How Do You Determine if a Workout Should Be Considered? ................. 5-1
3. Is it Necessary to View the Collateral Before Considering a
Workout on a Problem Loan? ...................................................................... 5-1
4. What Types of Relief are Available to the Borrower? ................................ 5-1
5. What Type of Legal Review and Formal Documentation is
Required? ..................................................................................................... 5-2
6. What Interest Rate Adjustments May Be Made in a Workout
Situation? ..................................................................................................... 5-3
7. Special Interest Rate Rules. ......................................................................... 5-3
8. What Determines the “Cost of Money to the Government?” ...................... 5-3
9. Information for Workout on the Disaster Loan Program. ........................... 5-4
10. Special Handling of Loans Where Borrower is Willing but Unable
to Pay (Hardship Case). ............................................................................... 5-4
11. Assistance Provided to Existing Borrowers who Suffer Losses in a
Declared Disaster? ....................................................................................... 5-5
CHAPTER 6 SBA-SERVICED LIQUIDATIONS .................................................................... 6-1
1. What is SBA’s Policy for SBA-Serviced Liquidations? ............................. 6-1
iv EFFECTIVE DATE: NOVEMBER 2, 1998