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B-193134 1 (1979-07-27)

handle is hein.gao/gaobadhle0001 and id is 1 raw text is: THE COMPTROLLER GENERAL DECISION <7 . OF THE UNITED STATES WASHINGTON, O.C. 20549 FILE: B-193134 DATE: July 27, 1979 MATTER OF: Herget National Bank of Pekin, Illinois - Small Business Administration Guaranteed Loan DIGEST: Bank's alleged modification of terms of loan guaranteed by Small Business Administration (SBA), whereby bank agreed to grant borrower additional time to begin re- paying principal and interest on loan, was not legally effective with respect to SBA, since bank neither re- quested nor received SBA's prior written approval of such modification as required by Authorization and Guaranty Agreement between SBA and bank. Therefore, in accordance with B-181432, March 13, 1975 and sub- sequent opinions upholding that decision, SBA's refusal to purchase the loan was correct, since SBA has no authority to accept payment of guarantee fee after default by borrower. This is in response to a request from the counsel for the Herget National Bank (HNB) of Pekin, Illinois, for our Office to review the decision of the Small Business Administration (SBA) not to purchase an SBA-guaranteed loan made by HNB. In denying any liability under the terms of the Guaranty Agreement, SBA relied on our decision, B-181432, March 13, 1975, in which we held that SBA could not purchase a guaranteed loan if the required guaranty fee had not been paid by the lender before the loan went into default or if the lender had reason to believe a default was imminent. For the reasons set forth hereafter, we agree with SBA's determination. As recognized in the.request, HNB is not entitled as a matter of law to a formal decision from our Office. See 31 U.S.C. § 74, 82d, (1976); B-181432, November 12, 1975; B-181432, April 5, 1979. How- ever since SBA's refusal to purchase this loan was based on our decision of March 13, 1975, we will consider the arguments set forth on behalf of HNB. Based on the information contained in the letter from HNB's counsel, as well as the information we were provided by SBA, the facts concerning this matter appear to be as follows. On July 5, 1973, SBA issued an Authorization approving HNB's request for an SBA guarantee of a proposed loan in the amount of $53,000 to Mr. and Mrs. John Vagen to open the Pekin Electronic Store.

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