Implications of Financial Accounting System (FAS) 166 on SBA Guaranteed Loan Programs, 13329-13330 [2010-6101]
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Federal Register / Vol. 75, No. 53 / Friday, March 19, 2010 / Notices
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Accordingly, the Commission has
determined that pursuant to 10 CFR
73.5, the exemption from the March 31,
2010, compliance date is authorized by
law and will not endanger life or
property or the common defense and
security, and is otherwise in the public
interest. Therefore, the Commission
hereby grants the requested exemption.
The NRC staff has determined that the
long-term benefits that will be realized
when the security system upgrades are
complete justify exceeding the full
compliance date and the proposed
implementation schedule is consistent
with the scope of the modifications in
the case of this particular licensee. The
security measures that TVA needs
additional time to implement at BFN are
new requirements imposed by March
27, 2009, amendments to 10 CFR 73.55,
and are in addition to those required by
the security orders issued in response to
the events of September 11, 2001.
Therefore, the NRC staff concludes that
the licensee’s actions are in the best
interest of protecting the public health
and safety through the security changes
that will result from granting this
exemption.
As per the licensee’s request and the
NRC’s regulatory authority to grant an
exemption from the March 31, 2010,
implementation deadline for the three
items specified in Enclosure 1 of the
TVA letter dated November 6, 2009
(publicly available version dated
January 11, 2010), the licensee is
required to be in full compliance by
December 20, 2012. In achieving
compliance, the licensee is reminded
that it is responsible for determining the
appropriate licensing mechanism (i.e.,
10 CFR 50.54(p) or 10 CFR 50.90) for
incorporation of all necessary changes
to its security plans.
Pursuant to 10 CFR 51.32, ‘‘Finding of
no significant impact,’’ the Commission
has previously determined that the
granting of this exemption will not have
a significant effect on the quality of the
human environment (75 FR 5354, dated
February 2, 2010).
This exemption is effective upon
issuance.
Dated at Rockville, Maryland this 11th day
of March 2010.
For the Nuclear Regulatory Commission.
Joseph G. Giitter,
Director, Division of Operating Reactor
Licensing, Office of Nuclear Reactor
Regulation.
[FR Doc. 2010–6064 Filed 3–18–10; 8:45 am]
BILLING CODE 7590–01–P
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14:14 Mar 18, 2010
Jkt 220001
SMALL BUSINESS ADMINISTRATION
[Docket No. SBA–2010–0005]
Implications of Financial Accounting
System (FAS) 166 on SBA Guaranteed
Loan Programs
Small Business Administration.
Notice; request for comments.
AGENCY:
ACTION:
SUMMARY: The Small Business
Administration (SBA) is soliciting
information and views from the public
on: (1) The effect that the accounting
changes mandated by the Financial
Accounting Standards Board (FASB) in
Financial Accounting Standard (FAS)
166 have on SBA Lender and investor
participation in the SBA 7(a) loan
program and the SBA Secondary Market
Program; and (2) the need to modify the
structure of the 7(a) loan program and/
or the SBA Secondary Market program
as well as related guidelines and
governing documents as a result of FAS
166.
DATES: Comments must be received on
or before April 19, 2010.
ADDRESSES: You may submit comments,
identified by docket number SBA–
2010–0005 by any of the following
methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail, Hand Delivery/Courier: James
W. Hammersley, Acting Assistant
Administrator for Policy and Strategic
Planning, Office of the Administrator,
Small Business Administration, 409
Third Street, SW., Washington, DC
20416.
SBA will post all comments on
https://www.regulations.gov. If you wish
to submit confidential business
information (CBI) as defined in the User
Notice at https://www.regulations.gov,
please submit the information to James
W. Hammersley, Acting Assistant
Administrator for Policy and Strategic
Planning, Office of the Administrator,
Small Business Administration, 409
Third Street, SW., Washington, DC
20416 or send an e-mail to
james.hammersley@sba.gov. Highlight
the information that you consider to be
CBI and explain why you believe SBA
should hold this information as
confidential. SBA will review the
information and make the final
determination as to whether the
information will be published.
FOR FURTHER INFORMATION CONTACT:
James W. Hammersley, Acting Assistant
Administrator for Policy and Strategic
Planning, Office of the Administrator,
(202) 205–7505;
james.hammersley@sba.gov.
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
13329
Under
SBA’s 7(a) business loan program,
private sector lenders (SBA Lenders)
make loans to small businesses (7(a)
loans) that do not qualify for
conventional credit. The SBA guaranty
provides the credit enhancement
necessary for the SBA Lender to make
the 7(a) loan. Through the SBA
Secondary Market described in 13 CFR
120.601, SBA Lenders sell the
guaranteed portion of 7(a) loans
(guaranteed portions) to investors and
use the funds to make additional loans.
The Secondary Market is a major source
of liquidity for many SBA Lenders. SBA
estimates that SBA Lenders sell the
guaranteed portion of almost 50% of the
7(a) loans they make.
The Secondary Market for 7(a) loans
developed in the early 1970s when SBA
Lenders began to sell guaranteed
portions to other lenders. SBA realized
the importance of a stable and reliable
liquidity option and took steps to
formalize and expand the market for the
sale of guaranteed portions, including
providing a full faith and credit
guaranty for the investors in the mid
1970s. Throughout the 1970s and early
1980s the market continued to grow as
more lenders used the funds from
Secondary Market sales to make
additional loans. In 1984, in recognition
of the value of the Secondary Market,
Congress added a pooling option that
included a timely payment guaranty by
SBA. The pooling option allowed small
business loans to be purchased by an
even greater number of investors. The
Secondary Market was clearly one of the
drivers in the growth of the 7(a) loan
program from $2 billion per year of loan
originations in the early 1980s to almost
$15 billion of loan originations per year
prior to the recent economic crisis.
Historically, there has been strong
demand for Secondary Market
certificates backed by the guaranteed
portion of 7(a) loans. Due to this strong
demand, SBA Lenders are able to sell
the guaranteed portion at a premium
and/or retain an income stream in
excess of the servicing fee that must be
retained. Many lenders prefer to retain
a significant ongoing cash flow rather
than to receive a premium at the time
of sale. This ongoing cash flow provides
a steady flow of income that is not based
on current loan production.
On May 17, 1994, SBA modified the
agreement signed by the lender,
investor, and SBA at the time of sale
(SBA Form 1086, Secondary
Participation Guaranty Agreement—
referred to below as the Form 1086
available at https://www.sba.gov/tools/
forms/) to include a
requirement that the selling lender
SUPPLEMENTARY INFORMATION:
E:\FR\FM\19MRN1.SGM
19MRN1
erowe on DSK5CLS3C1PROD with NOTICES
13330
Federal Register / Vol. 75, No. 53 / Friday, March 19, 2010 / Notices
would have to return any premium
received under certain conditions.
These conditions are: (1) If the borrower
prepays the loan for any reason during
the first 90 days after the settlement of
the Secondary Market sale; or (2) if the
borrower fails to make when due, the
first three monthly payments within the
month after the Secondary Market sale
and the borrower enters uncured default
within 275 days after the settlement
date of the Secondary Market sale. This
warranty provision, added to the Form
1086, helped to encourage investor
participation in the Secondary Market
by extending investment protection
beyond the principal amount of the
guaranteed portion to the premium paid
by the investor.
It is SBA’s understanding that under
new FASB guidelines for the accounting
treatment of a Secondary Market sale, as
detailed in FAS 166, a lender may not
treat any premium received as income
until the expiration of the warranty
period. In addition, if the lender sells
the loan and retains cash flow in excess
of the minimum servicing fee, the
transaction is considered a borrowing
and the lender must continue to retain
capital to support it. As a result, the
lender would have to hold more capital
because the original loan would still be
on the books along with the new
borrowing.
In light of the foregoing, SBA is
soliciting views from the public on the
effect of FAS 166 on SBA Lender and
investor participation in the SBA 7(a)
loan program and the SBA Secondary
Market Program. In addition, SBA is
soliciting views from the public on the
need to modify the structure of the 7(a)
loan program and/or the SBA Secondary
Market program. Commenters are
encouraged to submit suggestions that
could minimize any adverse impact of
FAS 166 on the 7(a) loan program and/
or SBA Secondary Market participants.
SBA has received several unsolicited
suggestions on how to address this
issue. Some of the suggestions may
require regulatory changes; others may
require form or contractual changes.
SBA has not taken a position on any of
these proposals. SBA is seeking
additional suggestions and ideas on how
to address the ramifications of FAS 166
on the 7(a) loan program and the SBA
Secondary Market Program, as well as
comments on the specific proposals
received to date, which are as follows:
1. Eliminate the warranty period from
the Form 1086 and the SBA Secondary
Market Program. Under this proposal,
SBA would modify the Form 1086 to
remove the warranty language. The
warranty provision afforded investors
some protection against early
VerDate Nov<24>2008
14:14 Mar 18, 2010
Jkt 220001
prepayment and may have discouraged
lenders from selling guaranteed portions
of loans they knew were susceptible to
early default. However, after the
warranty language was implemented,
Congress added a subsidy recoupment
fee (prepayment penalty) for borrowers,
which may have reduced the need for
the warranty provision. The subsidy
recoupment fee is charged to the
borrower if it prepays a loan in the first
three years of the life of the loan.
Secondary Market sales tend to occur in
the first year of the life of the loan.
Thus, borrowers have a financial
incentive not to prepay early in the life
of the loan that did not exist when the
warranty language was originally added
to the Form 1086. It is also possible that
SBA’s establishment of the Office of
Credit Risk Management (OCRM) has
reduced the need for the warranty
provision as OCRM monitors lender
activity and has the ability to scrutinize
prepayment activity, including a pattern
of early prepayments.
2. Permit or Require SBA Secondary
Market Broker Dealers to provide the
warranty to their customers. If SBA
were to permit or require broker dealers
to provide the warranty protection, the
selling lender would no longer be in the
position of having to return any funds
received from a secondary market sale.
SBA understands that many broker
dealers are currently holding many
loans in excess of ninety (90) days while
they create pools, so many loans may
actually be in the broker dealer’s
inventory during the warranty period.
While this change would result in a
liability for the broker dealers, the
broker dealer may be in a good position
to know which lender’s loans tend to
prepay or default during the warranty
period. This option would require
modification of the Form 1086 by SBA.
3. Permit a private sector insurance
fund to repay investors when a premium
is lost during the 90 day warranty
period. Under this proposal, lenders
would pay a portion of the premium
received into an insurance fund that
would be run by an entity not related to
SBA or to SBA participating lenders. If
a borrower prepays or defaults, the
investor would file a claim with the
insurance fund. SBA’s role in the
implementation of such an option
would consist only of removing the
warranty language from the Form 1086;
the fund would be established and run
by a private sector entity.
4. Make the warranty period optional.
Under this proposal, SBA would modify
the Form 1086 and related documents to
allow the buyers and sellers to decide
whether they wanted a warranty
included in the terms of the agreement
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
for a particular sale. Commenters are
requested to provide suggestions on
how warranty information for a
particular sale could be communicated
to potential purchasers under this
proposal as such purchasers would need
to know in advance whether a particular
certificate included a warranty.
Implementing this change would
require modifications to both the Form
1086 and SBA’s contract with its Fiscal
and Transfer Agent.
Commenters are encouraged to submit
other suggestions or actions that could
minimize any adverse impact of FAS
166 on the 7(a) loan program and/or
SBA Secondary Market participants.
SBA is also seeking comments on
whether the existing warranty should be
left in place as it is currently structured.
Authority: 15 U.S.C. 634(b)(7)
Dated: March 5, 2010.
Eric R. Zarnikow,
Associate Administrator of Capital Access.
[FR Doc. 2010–6101 Filed 3–18–10; 8:45 am]
BILLING CODE 8025–01–P
DEPARTMENT OF STATE
[Public Notice 6924]
Bureau of Political-Military Affairs;
Statutory Debarment Under the Arms
Export Control Act and the
International Traffic in Arms
Regulations
ACTION:
Notice.
SUMMARY: Notice is hereby given that
the Department of State has imposed
statutory debarment pursuant to
§ 127.7(c) of the International Traffic in
Arms Regulations (‘‘ITAR’’) (22 CFR
parts 120 to 130) on persons convicted
of violating, attempting to violate or
conspiring to violate Section 38 of the
Arms Export Control Act, as amended,
(‘‘AECA’’) (22 U.S.C. 2778).
DATES: Effective Date: Date of conviction
as specified for each person.
FOR FURTHER INFORMATION CONTACT: Lisa
Studtmann, Director, Office of Defense
Trade Controls Compliance, Bureau of
Political-Military Affairs, Department of
State, (202) 663–2980.
SUPPLEMENTARY INFORMATION: Section
38(g)(4) of the AECA, 22 U.S.C.
2778(g)(4), prohibits the Department of
State from issuing licenses or other
approvals for the export of defense
articles or defense services where the
applicant, or any party to the export, has
been convicted of violating certain
statutes, including the AECA. In
implementing this provision, Section
127.7 of the ITAR provides for ‘‘statutory
E:\FR\FM\19MRN1.SGM
19MRN1
Agencies
[Federal Register Volume 75, Number 53 (Friday, March 19, 2010)]
[Notices]
[Pages 13329-13330]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-6101]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
[Docket No. SBA-2010-0005]
Implications of Financial Accounting System (FAS) 166 on SBA
Guaranteed Loan Programs
AGENCY: Small Business Administration.
ACTION: Notice; request for comments.
-----------------------------------------------------------------------
SUMMARY: The Small Business Administration (SBA) is soliciting
information and views from the public on: (1) The effect that the
accounting changes mandated by the Financial Accounting Standards Board
(FASB) in Financial Accounting Standard (FAS) 166 have on SBA Lender
and investor participation in the SBA 7(a) loan program and the SBA
Secondary Market Program; and (2) the need to modify the structure of
the 7(a) loan program and/or the SBA Secondary Market program as well
as related guidelines and governing documents as a result of FAS 166.
DATES: Comments must be received on or before April 19, 2010.
ADDRESSES: You may submit comments, identified by docket number SBA-
2010-0005 by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Mail, Hand Delivery/Courier: James W. Hammersley, Acting
Assistant Administrator for Policy and Strategic Planning, Office of
the Administrator, Small Business Administration, 409 Third Street,
SW., Washington, DC 20416.
SBA will post all comments on https://www.regulations.gov. If you
wish to submit confidential business information (CBI) as defined in
the User Notice at https://www.regulations.gov, please submit the
information to James W. Hammersley, Acting Assistant Administrator for
Policy and Strategic Planning, Office of the Administrator, Small
Business Administration, 409 Third Street, SW., Washington, DC 20416 or
send an e-mail to james.hammersley@sba.gov. Highlight the information
that you consider to be CBI and explain why you believe SBA should hold
this information as confidential. SBA will review the information and
make the final determination as to whether the information will be
published.
FOR FURTHER INFORMATION CONTACT: James W. Hammersley, Acting Assistant
Administrator for Policy and Strategic Planning, Office of the
Administrator, (202) 205-7505; james.hammersley@sba.gov.
SUPPLEMENTARY INFORMATION: Under SBA's 7(a) business loan program,
private sector lenders (SBA Lenders) make loans to small businesses
(7(a) loans) that do not qualify for conventional credit. The SBA
guaranty provides the credit enhancement necessary for the SBA Lender
to make the 7(a) loan. Through the SBA Secondary Market described in 13
CFR 120.601, SBA Lenders sell the guaranteed portion of 7(a) loans
(guaranteed portions) to investors and use the funds to make additional
loans. The Secondary Market is a major source of liquidity for many SBA
Lenders. SBA estimates that SBA Lenders sell the guaranteed portion of
almost 50% of the 7(a) loans they make.
The Secondary Market for 7(a) loans developed in the early 1970s
when SBA Lenders began to sell guaranteed portions to other lenders.
SBA realized the importance of a stable and reliable liquidity option
and took steps to formalize and expand the market for the sale of
guaranteed portions, including providing a full faith and credit
guaranty for the investors in the mid 1970s. Throughout the 1970s and
early 1980s the market continued to grow as more lenders used the funds
from Secondary Market sales to make additional loans. In 1984, in
recognition of the value of the Secondary Market, Congress added a
pooling option that included a timely payment guaranty by SBA. The
pooling option allowed small business loans to be purchased by an even
greater number of investors. The Secondary Market was clearly one of
the drivers in the growth of the 7(a) loan program from $2 billion per
year of loan originations in the early 1980s to almost $15 billion of
loan originations per year prior to the recent economic crisis.
Historically, there has been strong demand for Secondary Market
certificates backed by the guaranteed portion of 7(a) loans. Due to
this strong demand, SBA Lenders are able to sell the guaranteed portion
at a premium and/or retain an income stream in excess of the servicing
fee that must be retained. Many lenders prefer to retain a significant
ongoing cash flow rather than to receive a premium at the time of sale.
This ongoing cash flow provides a steady flow of income that is not
based on current loan production.
On May 17, 1994, SBA modified the agreement signed by the lender,
investor, and SBA at the time of sale (SBA Form 1086, Secondary
Participation Guaranty Agreement--referred to below as the Form 1086
available at https://www.sba.gov/tools/forms/) to include a
requirement that the selling lender
[[Page 13330]]
would have to return any premium received under certain conditions.
These conditions are: (1) If the borrower prepays the loan for any
reason during the first 90 days after the settlement of the Secondary
Market sale; or (2) if the borrower fails to make when due, the first
three monthly payments within the month after the Secondary Market sale
and the borrower enters uncured default within 275 days after the
settlement date of the Secondary Market sale. This warranty provision,
added to the Form 1086, helped to encourage investor participation in
the Secondary Market by extending investment protection beyond the
principal amount of the guaranteed portion to the premium paid by the
investor.
It is SBA's understanding that under new FASB guidelines for the
accounting treatment of a Secondary Market sale, as detailed in FAS
166, a lender may not treat any premium received as income until the
expiration of the warranty period. In addition, if the lender sells the
loan and retains cash flow in excess of the minimum servicing fee, the
transaction is considered a borrowing and the lender must continue to
retain capital to support it. As a result, the lender would have to
hold more capital because the original loan would still be on the books
along with the new borrowing.
In light of the foregoing, SBA is soliciting views from the public
on the effect of FAS 166 on SBA Lender and investor participation in
the SBA 7(a) loan program and the SBA Secondary Market Program. In
addition, SBA is soliciting views from the public on the need to modify
the structure of the 7(a) loan program and/or the SBA Secondary Market
program. Commenters are encouraged to submit suggestions that could
minimize any adverse impact of FAS 166 on the 7(a) loan program and/or
SBA Secondary Market participants.
SBA has received several unsolicited suggestions on how to address
this issue. Some of the suggestions may require regulatory changes;
others may require form or contractual changes. SBA has not taken a
position on any of these proposals. SBA is seeking additional
suggestions and ideas on how to address the ramifications of FAS 166 on
the 7(a) loan program and the SBA Secondary Market Program, as well as
comments on the specific proposals received to date, which are as
follows:
1. Eliminate the warranty period from the Form 1086 and the SBA
Secondary Market Program. Under this proposal, SBA would modify the
Form 1086 to remove the warranty language. The warranty provision
afforded investors some protection against early prepayment and may
have discouraged lenders from selling guaranteed portions of loans they
knew were susceptible to early default. However, after the warranty
language was implemented, Congress added a subsidy recoupment fee
(prepayment penalty) for borrowers, which may have reduced the need for
the warranty provision. The subsidy recoupment fee is charged to the
borrower if it prepays a loan in the first three years of the life of
the loan. Secondary Market sales tend to occur in the first year of the
life of the loan. Thus, borrowers have a financial incentive not to
prepay early in the life of the loan that did not exist when the
warranty language was originally added to the Form 1086. It is also
possible that SBA's establishment of the Office of Credit Risk
Management (OCRM) has reduced the need for the warranty provision as
OCRM monitors lender activity and has the ability to scrutinize
prepayment activity, including a pattern of early prepayments.
2. Permit or Require SBA Secondary Market Broker Dealers to provide
the warranty to their customers. If SBA were to permit or require
broker dealers to provide the warranty protection, the selling lender
would no longer be in the position of having to return any funds
received from a secondary market sale. SBA understands that many broker
dealers are currently holding many loans in excess of ninety (90) days
while they create pools, so many loans may actually be in the broker
dealer's inventory during the warranty period. While this change would
result in a liability for the broker dealers, the broker dealer may be
in a good position to know which lender's loans tend to prepay or
default during the warranty period. This option would require
modification of the Form 1086 by SBA.
3. Permit a private sector insurance fund to repay investors when a
premium is lost during the 90 day warranty period. Under this proposal,
lenders would pay a portion of the premium received into an insurance
fund that would be run by an entity not related to SBA or to SBA
participating lenders. If a borrower prepays or defaults, the investor
would file a claim with the insurance fund. SBA's role in the
implementation of such an option would consist only of removing the
warranty language from the Form 1086; the fund would be established and
run by a private sector entity.
4. Make the warranty period optional. Under this proposal, SBA
would modify the Form 1086 and related documents to allow the buyers
and sellers to decide whether they wanted a warranty included in the
terms of the agreement for a particular sale. Commenters are requested
to provide suggestions on how warranty information for a particular
sale could be communicated to potential purchasers under this proposal
as such purchasers would need to know in advance whether a particular
certificate included a warranty. Implementing this change would require
modifications to both the Form 1086 and SBA's contract with its Fiscal
and Transfer Agent.
Commenters are encouraged to submit other suggestions or actions
that could minimize any adverse impact of FAS 166 on the 7(a) loan
program and/or SBA Secondary Market participants. SBA is also seeking
comments on whether the existing warranty should be left in place as it
is currently structured.
Authority: 15 U.S.C. 634(b)(7)
Dated: March 5, 2010.
Eric R. Zarnikow,
Associate Administrator of Capital Access.
[FR Doc. 2010-6101 Filed 3-18-10; 8:45 am]
BILLING CODE 8025-01-P