Liquidation of Collateral

SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

Liquidation of Collateral

AGENCY: Small Business Administration (SBA).

ACTION: Proposed rule.

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SUMMARY: SBA proposes to amend its regulation regarding the liquidation

and sale of loans. As part of a government-wide initiative, federal

credit agencies are being directed by the Office of Management and

Budget (OMB) to sell their loan portfolios. Previously, SBA amended its

regulations to permit the sale of direct and purchased loans made under

the authorities of the 7(a) and 501, 502, 503, and 504 programs (64 FR

44109). SBA now proposes to sell its physical disaster home loans,

physical disaster business loans and economic injury disaster loans

(collectively referred to as Disaster Assistance Loans). This will

include sales of both secured and unsecured Disaster Assistance Loans

in performing and non-performing status. The Disaster Assistance Loans

will be sold to qualified bidders by means of competitive procedures at

publicly advertised sales. Bidder qualifications will be set for each

sale in accordance with the terms and conditions of each sale.

DATES: Submit comments on or before February 9, 2000.

ADDRESSES: Comments should be mailed to Arnold S. Rosenthal, Assistant

Administrator for Portfolio Management, Small Business Administration,

409 Third Street, SW, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Richard Blewett, 202-205-4202.

SUPPLEMENTARY INFORMATION: 13 CFR 120.540 sets forth SBA's policy for

the liquidation of collateral and the sale of commercial loans. SBA now

proposes to amend and expand this rule to include the sale of Disaster

Assistance Loans in asset sales.

Public Law 104-134, the ``Debt Collection Improvement Act of

1996,'' enacted on April 26, 1996, provides that, ``the head of an

executive * * * agency may sell, subject to section 504(b) of the

Federal Credit Reform Act of 1990 and using competitive procedures, any

non-tax debt owed to the United States that is delinquent for more than

90 days.'' 31 U.S.C. 3711(i)(1).

The Small Business Act, 15 U.S.C. 634(b)(2), provides that ``(The

Administrator) may sell at public or private sale . . . in (her)

discretion * * * any evidence of debt * * * personal property, or

security. * * *'' It further provides in 15 U.S.C. 634(b)(7) that the

Administrator may ``take any and all actions * * * when (she)

determines such actions are necessary or desirable in * * * liquidating

or otherwise dealing with or realizing on loans. * * *'' Pursuant to

this statutory authority, SBA is establishing an Asset Sales Program to

sell portions of its direct and participation loan portfolios.

Compliance With Executive Orders 13132, 12988, and 12866, the

Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork

Reduction Act (44 U.S.C. Ch. 35).

This proposed rule is not a significant rule within the meaning of

Executive

Order 12866, since it is not likely to have an annual economic effect

of $100 million or more, result in a major increase in costs or prices,

or have a significant adverse effect on competition or the U.S.

economy.

SBA certifies that this proposed rule will not have a significant

economic impact on a substantial number of small entities within the

meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612.

This regulation concerns the ability of SBA to sell disaster loans

as part of SBA's Asset Sales Programs. There will be no economic impact

upon the small businesses that received those loans because the loans

that will be sold are merely changing ownership, so no new funding is

involved. The purchaser of the loans will be bound by the terms of the

loan documents in the same manner as SBA. The Agency does not

anticipate that any additional costs will placed upon small entities.

Therefore, SBA believes that there will be no economic impact on small

businesses.

Nevertheless, even if it is assumed that there is an economic

impact, this rule would still only have a minimal effect on an

insubstantial number of small businesses. This is because SBA's total

disaster business loan portfolio at the end of FY 1999 was 64,832

loans, as contrasted with an estimated total of 24 million small

businesses in the United States (as estimated by SBA's Office of

Advocacy).

SBA certifies that this proposed rule does not impose any

additional reporting or recordkeeping requirements under the Paperwork

Reduction Act, 44 U.S.C., chapter 35.

For purposes of Executive Order 13132, SBA certifies that this

proposed rule has no federalism implications warranting preparation of

a Federalism Assessment.

For purposes of Executive Order 12988, SBA certifies that this

proposed rule is drafted, to the extent practicable, to accord with the

standards set forth in paragraph 3 of that Order.

List of Subjects in 13 CFR Part 120

Loan programs--business.

For the reasons stated in the preamble, SBA proposes to amend 13

CFR part 120 as follows:

PART 120-BUSINESS LOANS

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. Revise the section heading in Sec. 120.540 and amend the first

sentence of paragraph (b)(4) as follows:

Sec. 120.540 What are SBA's policies concerning the liquidation of

collateral and the sale of business loans and physical disaster

assistance loans, physical disaster business loans and economic injury

disaster loans?

* * * * *

(b) * * *

(4) Sell direct and purchased 7(a) and 501, 502, 503 and 504 loans

and physical disaster home loans, physical disaster business loans and

economic injury disaster loans in asset sales. * * *

* * * * *

Dated: December 23, 1999.

Aida Alvarez,

Administrator.

[FR Doc. 00-426 Filed 1-7-00; 8:45 am]

BILLING CODE 8025-01-P