[Federal Register Volume 60, Number 159 (Thursday, August 17, 1995)]
[Rules and Regulations]
[Pages 42779-42781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20434]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 120 and 122
Business Loan Policy and Business Loans; Facsimiles of SBA Forms
AGENCY: Small Business Administration (SBA).
ACTION: Final rule.
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SUMMARY: This final rule authorizes SBA participating lenders to use
computer generated facsimile exact copies of SBA application and
closing forms in making SBA guaranteed loans. SBA lenders, under this
final rule, agree to accept liability for a substantial SBA loss
attributable to deficiencies in such forms. Under the final rule, SBA
could deny liability to a lender which fails to use SBA provided forms
or computerized facsimile exact copies of the SBA forms if this failure
would contribute to a substantial loss by the SBA on the guaranteed
loan.
EFFECTIVE DATE: This rule is effective August 17, 1995.
FOR FURTHER INFORMATION CONTACT: John R. Cox, 202/205-6490.
SUPPLEMENTARY INFORMATION: On March 3, 1995, SBA published in the
Federal Register (42 FR 11941) a proposed rule which would authorize
SBA participating lenders to use computerized exact replicas of SBA
application and closing forms in making SBA guaranteed loans under
section 7(a) of the Small Business Act (15 U.S.C. 636(a)). There were
46 public comments received in response to the publication and all
favored the proposal. SBA will discuss the comments made in detail
herein.
For many years, the SBA has required that its participating lenders
use SBA provided application and closing forms in the SBA guaranteed
business loan program. With advances in technology, SBA recognizes that
these forms may be reproduced as mirror image facsimiles by computer
and that permitting such reproductions to be used by participating
lenders may be in the best interest of the SBA guaranteed loan program.
Therefore, SBA proposed to permit SBA participating lenders to use
computer generated facsimile exact copies of SBA application and
closing forms in making SBA guaranteed loans. In this context, several
commenters suggested that the SBA clarify what is meant by the term
``exact computerized facsimile copies'', as used in the proposed
regulation. The Agency does not intend by this language that the type,
font, line and spacing be exactly duplicated in an exact computer
generated facsimile since variations in those aspects of a form do not
affect the substantive nature of the documentation. The Agency is
concerned with exact duplication of the language in the forms. In that
regard, the regulation intends that the language represented on a
permissible computer generated facsimile be exactly the same as that in
the SBA form it is intended to portray. In order to avoid confusion as
to which edition of a form is being reproduced, under the rule,
[[Page 42780]]
computerized copies must show the SBA form number, the Office of
Management and Budget (OMB) number, and expiration date.
Several commenters suggested the possibility that SBA certify or
otherwise qualify the preparers of computer generated facsimile forms
or software which would be used to prepare such forms. SBA has no plans
to furnish participating lenders with approved third party vendors
which provide forms or software used to generate forms which are
acceptable under the regulation. The Agency is in no position to
evaluate, analyze and qualify vendors. Neither does SBA plan to provide
such third party vendors with CD-Roms, diskettes or preprinted forms.
Any participating lender or third party vendor interested in the
implications of this regulation may obtain SBA preprinted forms from
SBA's district offices which are located in every state.
One of the commenters suggested that if the Agency reviews a loan
package prior to issuing its guaranty, a lender should not be held
liable for a subsequent loss directly attributable to an error or
omission in the computer generated forms it used to make or close the
loan. It has been the Agency position for many years that it may deny
liability to a lender for failure to prudently make or close an SBA
guaranteed loan. Such a failure includes the utilization of incomplete
or inaccurate documentation supporting the making and closing of the
loan, regardless of SBA's review of a loan package.
In this regard, SBA's guaranty to a participating lender with
respect to an SBA guaranteed business loan is conditionally based upon
the lender's actions in prudently making and closing loans consistent
with SBA's regulatory requirements. Accordingly, SBA's rules release
the Agency from its obligation to a lender to purchase the guaranteed
portion of a business loan under conditions prescribed in those
regulations. Such conditions will now include compliance with this
final regulation. SBA is confident that this approach is legally
supportable based on its past experience, and it will administer the
implementation of this regulation in a fashion consistent with that
experience.
Therefore, SBA is amending section 120.202-5 of its regulations so
that it is released from an obligation to a participating lender to
purchase the guaranteed portion of a loan if the lender fails to
utilize SBA provided forms or computerized exact facsimile copies
thereof, and this failure contributes or may contribute to a
substantial loss on the loan guaranty by the SBA. This means that if
the computer generated forms used by a lender are not exact facsimile
copies of SBA's forms, and such lack of conformity contributes or may
contribute to a substantial loss by SBA on its guaranty of the loan,
SBA could refuse to honor its guaranty.
In this regard, a commenter suggested that the SBA define what is
meant by ``substantial'' loss as used in the regulation. It is the
Agency's position that the term is not susceptible to precise
definition. It is a standard which has evolved out of decided decisions
on a case by case basis. Note that section 120.202-5 of the SBA
regulations also requires that the participating lender
``substantially'' comply with all the provisions of the regulations,
guaranty agreement, and the loan authorization, with no specificity
possible in that case either.
Finally, under this final rule, lenders participating in the SBA
guaranteed business loan program are authorized to use SBA application
and closing forms which are computer generated by the lenders
themselves or generated from software prepared by third parties with
whom they have contracted. Because SBA in the past has withheld
permission to computerize some identified SBA forms, new section 122.5-
6 of the regulations specifically lists the forms which may be computer
generated, although the rule is intended to permit computer generation
of exact facsimiles of all SBA application and closing forms used in
the guaranteed loan program.
In light of the foregoing, SBA is promulgating this final rule as
proposed.
Compliance With Executive Orders 12612, 12778 and 12866, the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. and the Paperwork Reduction Act,
44 U.S.C. Ch. 35.
For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et
seq., SBA certifies that this final rule will not have a significant
economic impact on a substantial number of small entities.
The SBA certifies that this final rule will not constitute a
significant regulatory action for the purposes of Executive Order
12866, since the change is not likely to result in an annual effect on
the economy of $100 million or more.
The SBA certifies that this final rule would not impose additional
reporting or recordkeeping requirements which would be subject to the
Paperwork Reduction Act, 44 U.S.C. Chapter 35.
The SBA certifies that this final rule would not have federalism
implications warranting the preparation of a Federalism Assessment in
accordance with Executive Order 12612.
Further, for purposes of Executive Order 12778, SBA certifies that
this final rule is drafted, to the extent practicable, in accordance
with the standards set forth in section 2 of that Order.
(Catalog of Federal Domestic Assistance Programs, No. 59.012)
List of Subjects
13 CFR Part 120
Loan programs--business, Small businesses.
13 CFR Part 122
Loan programs--business, Small businesses.
Accordingly, pursuant to the authority contained in section 5(b)(6)
of the Small Business Act (15 U.S.C. 634(b)(6)), SBA hereby amends
parts 120 and 122, chapter I, title 13, Code of Federal Regulations, as
follows:
PART 120--BUSINESS LOAN POLICY
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. The introductory text of Sec. 120.202-5 is revised to read as
follows:
Sec. 120.202-5 When SBA does not purchase.
SBA shall be released from its obligation to purchase its share of
the guaranteed loan if the Lender has not substantially complied with
all of the provisions of these regulations, the Guaranty Agreement and
the Loan Authorization; has failed to disclose material facts; has made
material misrepresentations to SBA with respect to the loan; or has
failed to utilize SBA provided forms or exact computerized facsimile
copies thereof; provided that any of these failures contributes or may
contribute to a substantial loss on the loan by SBA; or upon the
happening of any one or more the following events:
* * * * *
PART 122--BUSINESS LOANS
1. The authority citation for part 122 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 636(a), 636(m).
2. Section 122.5-6 is added to read as follows:
[[Page 42781]]
Sec. 122.5-6 Facsimile Copies of SBA Application Forms.
For guaranteed loans, a Participating Lender may use computer
generated SBA application or closing forms which are exact facsimile
reproductions of SBA's forms. Lenders which use computer generated
application or closing forms agree to accept liability for a
substantial SBA loss due to deficiencies in the use of these forms.
(See Sec. 120.202-5 of this chapter). All SBA business loan forms,
including the following, may be computer generated: 147 (Note), 148
(Guaranty), 155 (Standby Agreement), 601 (Applicant's Agreement of
Compliance), 928 (Mortgage), 1050 (Settlement Sheet), 1059 (Security
Agreement).
Dated: June 29, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-20434 Filed 8-16-95; 8:45 am]
BILLING CODE 8025-01-P
