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SBA Loan Foreclosure – Process Overview

If you would like to know more about issues that pertain to SBA problems, contact the lawyers in our office. You will be helped with topics like the tax offset programs, SBA loan foreclosure, and SBA demand letters.

The attorneys in our office want to help you figure out your SBA situation. No matter how difficult your circumstances may seem, the right lawyer can assist you. We understand that you probably have questions regarding a wide range of issues, including how to respond to an SBA demand letter, what SBA loan foreclosure actually entails, and what a tax offset program is. One of our specialists can tell you about all of these topics and more. We urge you to read our blog to learn more about subjects that are confusing to you and to contact us right away if you have specific questions. We look forward to working with you during this period of your life.

While a loan is classified in regular servicing status, it is housed in one of the SBA's two Commercial Loan Service Centers (CLSC) – either Fresno or Little Rock. The process begins when the SBA is notified by the appropriate CLSC that workout is not feasible and liquidation is necessary, the loan is then shipped to the National Guaranty Purchase Center (NGPC) logged in, and classified as in liquidation and then housed awaiting reports and status updates as to action taken commensurate to the loan. The loans are not assigned to any staff member and this Center handles most necessary actions by specialized teams. The NGPC will acknowledge the notification and the Lender will be expected to continue to service this account and completely liquidate or sue upon any loan instrument. The Lender is required to pursue the entire indebtedness regardless of the guaranteed percentage or any purchase thereof. Also note that SBA requires all lenders to make timely site visits to assess the value and take an inventory of loan collateral in order to assess workout possibilities and to develop a meaningful liquidation plan.

2. SBA Loan Management: Primary oversight will be centered around the guaranty purchase review process, timely quarterly updates, and through the thorough review of liquidation wrap-up reports which Lenders must submit to SBA at the completion of liquidation. Secondarily, SBA will monitor debt collection litigation, such as judicial foreclosures, bankruptcy proceedings and other state and federal insolvency proceedings, through the review of litigation plans when applicable and required by circumstances.

Key actions:
1. Guaranty purchase. This includes a detailed review of all origination, servicing, and liquidation actions to ensure that the loan was handled properly; this is done using the Guaranty Purchase 10 Tabs.
2. CPC Expenses. After the loan has been purchased, if there are liquidation expenses that are incurred the lender would be able to submit for reimbursement using  CPC tabs.
3. Offer in Compromise. Typically at the culmination of the liquidation of all business and other worthwhile assets, and OIC is the process used to evaluate a monetary offer in exchange for the release of a personal guaranty on the loan. An Offer in Compromise is an action that requires SBA’s expressed written consent and may be submitted to SBA using the OIC Tabs.
4. Quarterly Updates. Once a loan has been purchased, SBA requires a simple update on a quarterly basis for every loan in liquidation status. This report should include the current actions being taken on the loan.
5. Charge off. Once all liquidation is complete and no further recoveries are expected the loan can then be charged off. This is done by the lender submitting a final wrap up report to SBA.
6. Referral to the US Treasury Offset Program Once the loan has been charged off by SBA, if there are any parties that are eligible (provided they have not been discharged from bankruptcy and/or they were not released as part of an Offer in Compromise) they will be referred to the U.S. Treasury Offset Program for further collection. Once this takes place the servicing of the loan shifts from the lender to Treasury or their fee agents. If any recoveries are received they will be shared with the lender, based on the guaranty rate, and the lender’s share will be forwarded to them (less any expenses incurred by Treasury).

If you'd like to learn more about the options you have for your SBA loan, call for a FREE case evaluation at 1-888-756-9969.

We are here to help you with your SBA loan problems.

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