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B-181432 1 (1978-08-11)

handle is hein.gao/gaobadgge0001 and id is 1 raw text is: /. THE COMIlTILIJ' k GENERAL<J, DECISION OFa THE usesTRO SATE=a WASMINGTON. OC. U054B 020110 ~ CF TE UNT~CbTATE DATE: Auctat 11, 1C'T MATTER OF: Small Business Administration Fiscal Agent Small Business Administration (SA) does not have authority under existing lagislation to guarantee unconditionally each new holder of SBA-guaranteed loans against errors in certification of outstanding loan balance performed by private entity acting as SBA's fiscal agent in secondary market for such loans. Implementation of proposal would substan- tially enlarge SBA's existing guarantee responsi- bility and would subject SBA to new risks it does not presently have. However, SBA can appoint private entity to serve as its fiscal agent, provided it merely guarantees holder against fiscal agent's failure to properly forward loan payments from borrower. L I The Administrator of the Small Business Administration (S3A) has requested our concurrence with SBA's position that it has authority to enter into a relationship with a private entity which would serve as the centralized fiscal and transfer agent in the secondary market for the SBA-guaranteed portions of loans to small business borrowers. Based on the explanation provided by the Administrator, the market in guaranteed portions (GPs) of SBA guaranteed loans presently operates in the following manner. Participating lend- ing institutions make loans to small business concerns and SBA may guarantee up to £'3 percent of the outstanding balance of the loan.- After the loan has been disbursed by the lender and the required guarantee fee has been paid to SBA, the lender is free to sell the GP. The sale of the GP is evidenced by the execution of a tripartite agreement between the lender, the holder, and SBA. SBA and the lender warrant to the holder that, as of the date of the agreement, a certain specified sum of money is owed by the borrower to the lender with a specified percentage of the principal being guaranteed by SBA with interest. The lender promises the holder that it will promptly remit to the holder the full amount, including any prepayments, of all payments ~1 I DIGEST: FILE: B-181432

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