[Federal Register Volume 72, Number 94 (Wednesday, May 16, 2007)]
[Notices]
[Pages 27611-27620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-9442]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
SBA Lender Risk Rating System
AGENCY: Small Business Administration.
ACTION: Final notice.
-----------------------------------------------------------------------
SUMMARY: This final notice implements the Small Business
Administration's (SBA's) risk rating system (Risk Rating System) as an
internal tool to assist SBA in assessing the risk of each active 7(a)
Lender's and Certified Development Company's (CDC's) SBA loan
operations and loan portfolio. The Risk Rating System will enable SBA
to monitor 7(a) Lenders and CDCs (collectively, ``SBA Lenders'') on a
uniform basis and identify those institutions whose SBA loan operations
and portfolio require additional SBA monitoring or other action. It is
also a vehicle for assessing the aggregate strength of SBA's 7(a) and
504 portfolios. Under the Risk Rating System, SBA will assign each SBA
Lender a composite rating based on certain portfolio performance
factors, which may be overridden in some cases due to SBA Lender
specific factors that may be indicative of a higher or lower level of
risk. SBA Lenders will have access to their own ratings through SBA's
Lender Portal (Portal).
DATES: This notice is effective June 15, 2007.
FOR FURTHER INFORMATION CONTACT: Bryan Hooper, Director, Office of
Lender Oversight, U.S. Small Business Administration, 409 Third Street,
SW., Washington, DC 20416, (202) 205-3049.
SUPPLEMENTARY INFORMATION:
Background Information
On May 1, 2006, SBA published a notice and request for comment in
the Federal Register seeking comments on a proposed SBA internal Risk
Rating System for assessing an SBA Lender's SBA loan portfolio (i.e.,
loan portfolio performance). 71 FR 25624 Notice. SBA published a
subsequent notice extending the comment period for the proposed Risk
Rating System to July 15, 2006. 71 FR 34674. The Risk Rating System is
an internal tool that uses data in SBA's Loan and Lender Monitoring
System (L/LMS) to assist SBA in assessing the risk of an SBA Lender's
SBA loan performance on a uniform basis and identify those SBA Lenders
whose portfolio performance demonstrate the need for additional SBA
monitoring or other action. The Risk Rating System will also serve as a
vehicle to measure the aggregate strength of SBA's overall 7(a) and 504
loan portfolios and to assist SBA in managing the related risk. In
addition, SBA will use risk ratings to make more
[[Page 27612]]
effective use of its on-site and off-site lender review and assessment
resources.
As discussed in greater detail in the Notice under the Risk Rating
System, SBA will assign each SBA Lender a composite rating. The
composite rating reflects SBA's assessment of the potential risk to the
government of that SBA Lender's SBA portfolio performance. A rating of
1 will indicate strong portfolio performance, least risk, and that the
least degree of SBA management oversight is needed (relative to other
SBA Lenders in the peer group), while a 5 rating will indicate weak
portfolio performance, highest risk and therefore, the highest degree
of SBA management oversight.
For 7(a) Lenders, SBA will base the composite rating on four common
components or factors. The common factors for 7(a) Lenders will be as
follows: (i) 12 month actual purchase rate; (ii) problem loan rate;
(iii) three month change in the small business predictive score (SBPS),
which is a small business credit score on loans in the 7(a) Lender's
portfolio; and (iv) projected purchase rate derived from the SBPS. On a
lender-specific basis, the existence of additional factors may cause
SBA to override the composite rating and either increase or decrease
the composite rating.
For CDCs, SBA will base the composite rating on three common
components or factors. The common factors for CDCs will be as follows:
(i) 12 month actual purchase rate; (ii) problem loan rate; and (iii)
average SBPS on loans in the CDC's portfolio. The third factor replaces
the third and fourth factors used for 7(a) Lenders because it was
found, during the testing process, to be more predictive of SBA
purchases for CDCs. On a CDC-specific basis, the existence of
additional factors may cause SBA to override the composite rating and
either increase or decrease the composite rating.
In general, the factors described above reflect both historical SBA
Lender performance and projected future performance. SBA will perform
quarterly calculations on the common factors for each SBA Lender, so
that SBA Lenders' composite risk ratings will be updated on a quarterly
basis.
The composite risk rating is a measure of how each SBA Lender's
portfolio performance compares to the portfolio performance of its
peers. Thus, an individual SBA Lender's overall portfolio performance
(using all common factors) will be compared to its peers to derive that
SBA Lender's composite risk rating. SBA Lenders whose overall portfolio
performance (using all of the common factors) is worse than their peers
will receive a worse, or higher score, while SBA Lenders whose overall
portfolio performance is better than their peers will receive a better,
or lower, score. In order to prevent the inequitable comparison of
differently-sized SBA Lenders, which may be affected differently by
similar changes in their portfolio performance, SBA has separated both
7(a) Lenders and CDCs into different peer groups based upon their SBA
loan portfolio size.
All SBA Lenders will be given access to their composite risk rating
and component results through SBA's Lender Portal, which is available
on line. The proposed notice described the Portal information that SBA
will provide and how SBA lenders can access this information.
Comments Received and Changes Made
SBA received 51 comments on the proposed Risk Rating System.
Twenty-three of the comments were from CDCs. Thirteen of the comments
were from 7(a) Lenders other than Small Business Lending Companies
(SBLCs). Six comments were from trade organizations. Five of the
comments were from SBLCs. Finally, four comments were from individuals.
Twenty-three of the commenters were generally supportive of an SBA
Lender rating system. Comments generally covered the following areas:
(i) The Portal; (ii) the rating components; (iii) use of the override;
(iv) peer groupings; (v) the comparative nature of the system; (vi)
static pool analysis; and (vii) other comments.
Portal
The purpose of the Portal is to communicate SBA Lender performance
to SBA Lenders. The Portal will allow SBA Lenders to view their own
quarterly performance data, including their most current composite risk
rating. The Portal will also allow SBA Lenders to access data on peer
group and portfolio averages. Consequently, an SBA Lender will be able
to gauge its performance relative to its peer group and the portfolio
norm, although SBA Lenders will not be able to view the individual
ratings and performance indicators of other SBA Lenders. The quarterly
performance data is updated approximately six to eight weeks after a
calendar quarter ends.
Several commenters requested that SBA provide additional detail to
facilitate reconciliation of the Portal performance results with
performance results from other SBA and SBA Lender accounting systems.
They also requested that SBA provide a process for correcting errors
uncovered in the reconciliation process. SBA has provided that
information on its Web site at http://www.sba.gov/olo/outstanding.pdf.
As indicated on the website, L/LMS incorporates data from many
different sources in order to calculate the common factors that are
used to develop each SBA Lender's composite rating. As a result, some
portfolio performance data in the Portal may not appear to be the same
as that provided to SBA Lenders from other official sources (e.g. 504
LAMP and its Management Reports; Sacramento Loan Processing Center's
ratios, Risk database reports.). An explanation of the potential
differences between data in the Portal and data provided by other
sources may also be found on SBA's Web site at http://www.sba.gov/idc/groups/public/documents/sba_program_office/olo_portal_data.pdf.
A few commenters requested that SBA Lenders be able to access
previous quarters' data. The commenters explained that access to
previous data would facilitate trend analysis. SBA has considered this
comment and has added all previous quarters' data to the portal.
A few commenters suggested that SBA provide more than one user
account per SBA Lender. Multi-bank holding companies, and SBA Lenders
with centralized SBA loan processing or servicing, stated that it would
be helpful to have additional user accounts for managers with various
SBA lending responsibilities. SBA is working with its contractor on the
possibility of allowing SBA Lenders more than one user account.
A few commenters suggested that it would be helpful if users had
access to peer group performance statistics for all peer groups in the
user's lending program [7(a) or 504], rather than the performance of
only the user's peer group. SBA believes that providing portfolio
performance information on all peer groups may be informative for SBA
Lenders, and is therefore making that information available through the
Portal.
Components
Several commenters discussed SBA's proposed component factors and
suggested that SBA consider other components for the Risk Rating
System. Commenters suggested that SBA consider the following as
additional or alternative components: (i) Historical loss rate; (ii) a
longer term purchase rate; (iii) value of pledged collateral; (iv)
credit scores for all principals and guarantors; (v) consideration of
SBA's
[[Page 27613]]
social mission; and (vi) removal of the problem loan rate.
(i) Historical Loss Rate
Several commenters suggested that incorporation of actual
historical losses as a component would increase model accuracy. Ten
commenters suggested substituting actual historical loss rate for the
12-month purchase rate component. In developing the risk rating model,
SBA considered the use of historical loss rate as a component. It was
found that while historical loss rates are somewhat predictive of
future purchases, their use in combination with the other component
factors provided little additional predictiveness. In addition, loss is
a lagging indicator. Actual losses are not recorded until all
collateral has been liquidated and normal collection efforts have been
exhausted, sometimes years after the default and purchase. This may
have negative implications for the calculation of losses and the SBA
Lender's historical loss rate. Specifically, negative events such as
loan origination fraud or poor underwriting decision-making under
previous management may adversely impact an SBA Lender's risk rating
for several years; conversely, improved origination or underwriting
practices will only slowly be reflected in that SBA Lender's risk
rating. On the other hand, the 12-month purchase component factor,
where both positive and negative events will be reflected in the SBA
Lender's risk rating more quickly than they would with a historical
loss rate factor. In addition, the time lag inherent in a historical
loss rate factor may result in the rate not reflecting the SBA Lender's
current portfolio. For example, if a 7(a) Lender had originated most of
its loans under the former Low-Doc program, its historical loss rates
would continue to reflect losses from that program for several years,
even if the 7(a) Lender's current portfolio were predominantly
comprised of EXPRESS loans. Finally, SBA believes that use of
historical loss rates may not reflect some of the costs borne by SBA
and the Federal Government, such as the cost of funds used for loan
purchases and the administrative costs borne by SBA in its liquidation
oversight and charge-off activities.
A few commenters that sell their SBA loans in the secondary market
believed that the use of purchase rates in the component factors and
composite ratings, rather than recovery or loss rates, was a
disadvantage to them given that SBA purchases all defaulted loans from
the secondary market. These commenters also stated that their recovery
rates should be higher than other 7(a) Lenders, since loans are
purchased by SBA out of the secondary market earlier in the default
curve. SBA agrees that loss rates may provide some evidence of SBA
Lender risk, since the rates may be an indicator of poor origination,
servicing, or liquidation on the part of the SBA Lender. In addition,
the rates--over time--do show SBA's actual losses from an SBA Lender's
portfolio. Therefore, SBA is reviewing its data to determine how to
incorporate some measure of losses into SBA Lenders' composite risk
ratings. At this time, we cannot identify the form such a measure would
take, or how the measure would be considered within the Risk Rating
System. For example, SBA may use net loss or recovery rates, or we may
use a calculation of net cash flows to account for the revenues
provided to SBA from guaranty fees and other fees. Once SBA has
developed its data measurements and determined what it believes to be
the best measure of losses, it will submit the proposal in the form of
a notice in the Federal Register. At least until then, SBA will use the
purchase rate as a key component because it is a more leading
indicator, it indicates purchase, liquidation, and charge-off costs,
and has tested as a better predictor of future purchases.
(ii) Longer Term Purchase Rate
A few commenters recommended that SBA continue to use purchase
rates as a rating component, but proposed a longer term purchase rate
of 36 months, rather than the 12 month purchase rate. During the Risk
Rating System development process, SBA considered using both 24 and 36
month historical purchase rates; however, the 12 month historical
purchase rate was selected because it proved to be more predictive of
future purchases than either of the other two terms.
(iii) Value of Pledged Collateral
A few commenters recommended that the value of pledged collateral
should be considered as a component factor. SBA considered the use of
value of pledged collateral in its Risk Rating System. However, SBA
believes that the use of pledged collateral should not be considered a
possible component factor for several reasons. First, SBA does not
regularly collect information on the value of pledged collateral on all
of its loans. Second, each SBA Lender has its own individual policy
regarding how it values pledged collateral; for example, different SBA
Lenders will assign different market value rates to the same form of
collateral. Finally, even where SBA collects data on pledged
collateral, it only does so for one tax identification number, which
may understate the amount of collateral actually pledged. For these
reasons, SBA has determined not to use pledged collateral as part of
its composite risk ratings.
(iv) Credit Scores for All Principals/Guarantors
A few commenters requested that SBA include credit information on
all principals and guarantors associated with a particular loan, rather
than the business and the principal owner. These commenters surmised
that without credit information on all of the principals of the
business, SBA might understate the loan's credit strength. Currently,
SBA can only collect information on one additional principal or
guarantor. SBA is in the process of increasing the number of principals
and guarantors whose credit information will be used, when available.
(v) Consideration of Economic Development Goals
Several commenters stated that the ratings failed to take into
consideration the economic development goals of SBA's lending programs
as may be evidenced through SBA Lenders' historical loan volume. SBA
appreciates the critical role that SBA Lenders play in helping to
achieve SBA's economic development goals. However, the Risk Rating
System is intended as a means to help SBA measure SBA Lender risk and
program risk. Thus, incorporating a factor that measures SBA Lenders'
success in helping SBA achieve its mission is not appropriate within
the Risk Rating System.
(vi) Problem Loan Rate
Seven commenters expressed concern that including the problem loan
rate as a component will be a disincentive to working with borrowers to
save a business or maximize recovery on the loan during the liquidation
process. SBA believes that this should not be a concern, because it is
in an SBA Lender's interest as holder of a remaining percentage in the
loan (generally 15% to 50%) to maximize recovery and minimize losses.
Further, under SBA Standard Operating Procedure (SOP) 50-50-4 (Loan
Servicing), Chpt. 7, para 1(c) and SOP 50-51-2A (Loan Liquidation and
Acquired Property), Chpt. 8, para. 1(a)(4), an SBA Lender should work
with borrowers to either allow the borrower to retain their business
or, failing that objective, to reduce both the SBA Lender's and SBA's
losses to the
[[Page 27614]]
greatest extent possible. Therefore, application of the Problem Loan
Rate as a component factor for all SBA Lenders should not serve as a
disincentive to working with borrowers and maximizing recoveries.
Use of the Override Component
The May 1, 2006 notice proposed that the occurrence of certain
factors may lead SBA to conclude that an individual SBA Lender's
composite rating is not fully reflective of the SBA Lender's true risk.
Therefore, the proposal provided for consideration of overriding
factors. The use of the overriding factors will enable SBA to include
key risk factors that are not necessarily applicable to all SBA
Lenders, but which indicate a greater or lower level of risk from a
particular SBA Lender than the calculated score will provide. Use of
overriding factors will occur on a case-by-case basis in SBA's
discretion. One of the most important overriding factors may be an SBA
Lender's on-site risk-based reviews/assessments. Another important
overriding factor may be the institution of enforcement actions by a
regulator or other authority. Examples of other overriding factors that
may be considered are: Early loan default trends; purchase rate or
projected purchase rate trends; abnormally high default, purchase or
liquidation rates; denial of liability occurrences; lending
concentrations; rapid growth of SBA lending; inadequate, incomplete, or
untimely reporting to SBA; inaccurate submission of required fees to
SBA; and audits or investigations conducted by the SBA Office of
Inspector General.
Commenters were generally supportive of the concept of allowing SBA
to override an SBA Lender's risk rating should circumstances indicate
that the SBA Lender's rating may not truly reflect SBA's risk. One
commenter suggested that SBA should provide additional information on
the override process. As stated in the proposal, SBA will notify an SBA
Lender in the event SBA plans to override that SBA Lender's risk
rating, and provide the SBA Lender with an explanation of the reason(s)
for the override. If the SBA Lender disagrees with the override, it may
ask SBA to reconsider the override, and provide to SBA all supporting
information.
Peer Groupings
The Notice proposed the separation of SBA Lenders into peer groups
based on SBA loan portfolio size, as determined by outstanding SBA
guaranteed dollars. SBA based the peer groups on portfolio size for
several reasons. First, it allows the peer groups to reflect each peer
group's relative risk to SBA--SBA Lenders in large peer groups will
generally represent a greater risk to SBA, in terms of potential
dollars of loans that SBA may be required to purchase, than SBA Lenders
in smaller sized peer groups. Second, basing peer groups by portfolio
sizes will significantly reduce the possibility of the same event
having a different impact on SBA Lenders in the same peer group. For
example, the effect of the purchase of one loan by SBA will have a
minimal impact on the purchase rates of SBA Lenders in a large peer
group; the purchase of one loan would have a similar impact for any SBA
Lender in a small peer group. Third, the size groups selected allowed
SBA to split both 7(a) Lenders and CDCs into peer groups that were
large enough to maintain a statistically valid number of SBA Lenders
within each peer group. Finally, splitting SBA Lenders into peer groups
based on the size of SBA-guaranteed loan dollars enables SBA to better
monitor those SBA Lenders in the largest peer groups that represent the
overwhelming majority of guaranteed dollars at risk, and allows SBA to
make the best use of its oversight resources.
SBA received several comments suggesting that SBA use alternative
or additional characteristics to set the peer groups. Most suggested
using geographic or regional characteristics. Others suggested
establishing peer groups based on loan originations, use of loan
proceeds, local economic events and conditions, portfolio industry
segment concentration, SBA delivery method, average loan term (months),
SBA Lenders' past contribution to SBA's success in meeting its public
objectives, SBA Lenders' underwriting quality, SBA Lenders' workout
standards and experience, new vs. experienced SBA Lenders, average SBA
loan size, SBA Lenders' business model, and organizational structure.
A number of commenters suggested that there may be a number of
alternative peer groups that might be established. However, portfolio
size is the only necessary alternative. This is due to the large
variance in performance measures of smaller sized portfolios. Since
Lenders with few loans are more likely to have extremely high or low
performance measures, all lenders in the largest two peer group would
only receive average ratings--none would receive above average or below
average ratings. Further, as additional factors are added to further
segment the peer groups, the reduced peer group size would reduce the
statistical validity of the peer groups (particularly for CDCs). As the
number of SBA Lenders in each peer group declines, the performance of
individual SBA Lenders within each peer group will become more evident
to its peers, and may affect competitive advantages or disadvantages
held by each SBA Lender. Also, most of the suggested peer group factors
do not provide additional measures of risk, or correlate to increased
purchases on the part of SBA. We, therefore, believe basing the peer
groups at this time on one metric, portfolio size, is the best measure
of potential purchase risk.
SBA agrees that one or more of the alternative peer grouping
categories that were suggested may be useful in understanding the
problems that have resulted in an SBA Lender having a poor risk rating.
However, the reasons for those risk ratings will vary from SBA Lender
to SBA Lender; therefore, it is difficult to isolate one particular
category among those suggested that may impact most SBA Lenders' peer
ratings, and that thus would be useful in the peer groupings. As noted
above, trying to implement peer groupings based upon several factors,
in order to explain all possible reasons for an SBA Lender's poor risk
rating, could destroy the statistical validity of the model. Therefore,
SBA feels that the types of factors mentioned by commenters would be
more useful in discussions between SBA and the SBA Lender as an
explanation of the reasons for the SBA Lender's specific portfolio
performance issues. Consequently, SBA will take such factors into
account during the corrective action process, to determine the causes
and remedies for the weaknesses resulting in the poor risk rating, as
well as when determining whether to take any enforcement action against
an SBA Lender.
Several commenters, accepting of SBA's use of portfolio size as the
basis for determining peer groupings, suggested increasing the number
of groups. Many of these commenters were concerned that the dollar size
range of certain peer groups was broad enough to include SBA Lenders
with different types and scales of operation, and thus could yield an
inaccurate comparison of SBA Lenders within the peer group. SBA
understands the concern; however, further segmentation of the size-
based peer groups will result in many of the same problems as those
noted in the preceding discussion regarding alternative or additional
peer group segmentation. As SBA was developing its Risk Rating System,
it was clear that each peer group would have to contain a statistically
significant number of SBA Lenders to ensure the validity of the
statistical model and methodologies used to risk rate SBA Lenders.
Further
[[Page 27615]]
splitting of the current peer groups would jeopardize the model's
validity at either one or several of the peer group levels. For
example, as of June 30, 2006, there were a total of eight 7(a) Lenders
with portfolios of more than $500 million in SBA guaranteed dollars. In
order to maintain the statistical validity of the largest dollar peer
group, it was necessary to set that peer group size at $100 million or
more, rather than $500 million or more.
Comparative Analysis
Some commenters noted that rating peers on a curve causes some SBA
Lenders in each group to have risk ratings that indicate relatively
weak portfolio performance. Commenters stated that an SBA Lender with a
certain risk rating in one peer group will not be comparable to another
SBA Lender with the same risk rating in a different peer group. This is
generally true. The nature of the Risk Rating System does not lend
itself to direct comparisons between SBA Lenders in different peer
groups. The Risk Rating System uses step-wise regression analysis to
determine the relative weighting of each of the component factors that
optimizes the system's predictiveness of future loan purchases. For
each peer group, the weighting of each component factor in predicting
future purchases will vary according to the relative weights that yield
the greatest level of predictiveness for that specific peer group.
Thus, the relative weightings of each of the component factors will
change from peer group to peer group, making a direct comparison of SBA
Lenders across peer groups less useful. SBA does not intend to evaluate
or compare SBA Lenders across different peer groups, or against the
overall portfolio. Rather, SBA will evaluate each SBA Lender according
to its performance as measured against those in its peer group.
Some of these commenters suggested that SBA consider establishing
benchmarks, either in lieu of, or in conjunction with, the comparative
ratings. Commenters expressed that SBA Lenders should not have a poor
risk rating if their portfolio performance was only slightly worse than
their peers, but still within an acceptable range. For example, one
commenter noted that by using the comparative analysis, some SBA
Lenders could be rated relatively poorly even if they were in
compliance with SBA's program. The commenter was concerned that SBA
would unnecessarily spend time and resources monitoring the risk of
``compliant'' SBA Lenders when overall program performance was
acceptable. Conversely, the concern was that there would not be enough
oversight when overall program performance became unacceptable.
The comment appears to suggest that SBA should not dedicate
resources to program and SBA Lender monitoring while the program is
performing well. However, there is no definition of acceptable program
performance; SBA would first have to develop subjective measures of
program performance in order to determine whether the program meets the
definition of ``acceptable performance.'' These measures would have to
be continually monitored and replaced, as program and economic
conditions change. Given the process required for implementation of new
measurements and standards, the measures might easily become outdated
by the time they are implemented. The comparative analysis in the
current Risk Rating System adjusts to changes in program and economic
conditions, so there is little possibility that the risk ratings will
be based on outdated performance measures.
Second, if program performance (and the performance of the
participating Lenders) is deemed ``acceptable'', it is implied that SBA
will reduce its monitoring of its Lenders. However, this reduction in
monitoring could result in SBA failing to detect negative performance
trends that could point to unacceptable performance in the future.
Without ongoing monitoring, SBA may be forced to react too late to
negative performance and then have to devote even greater resources to
resolve entrenched SBA Lender deficiencies. Using a relative
performance rating recognizes that there are always SBA Lenders that
present relatively higher risk, and that SBA Lender oversight is an
ongoing process to help ensure that SBA Lenders with poorly performing
portfolios (relative to the peer group) improve--which will help ensure
that the entire portfolio continues to perform well. By taking
preventative measures to monitor lower-rated SBA Lenders when portfolio
performance is relatively strong, SBA can reduce the likelihood of
overall portfolio deterioration, help keep SBA losses down, and reduce
SBA lending program costs.
Finally, it would be premature to develop the Risk Rating System
with benchmarks at this time. This is because the System has not been
available throughout an entire economic cycle. Benchmarks will be more
meaningful and equitable if developed based upon long-term portfolio
performance that reflects all stages of an economic cycle. We do not
believe the Risk Rating System has enough historical performance
information to establish meaningful benchmarks for the components. Once
that data is developed, SBA may consider incorporating benchmarks. SBA
will publish a notice for comments should SBA decide to propose
benchmarks.
Static Pool Measurements
Some commenters suggested that SBA include all originated loans in
its component factor measures, even those loans that have prepaid or
been liquidated and charged-off by SBA. These commenters believe that
measuring historical loan purchases as a percentage of all loans, for
example, would present a more accurate picture of the quality of loans
originated by SBA Lenders, because it would include good loans that had
improved their credit quality so much that the loan had become eligible
for conventional financing and had paid-off.
It is SBA's opinion that using only those loans still in the SBA
Lender's portfolio is a better indicator of an SBA Lender's risk for
the simple reason that, once a loan is paid-off, SBA no longer retains
any risk of purchase. In addition, SBA believes that such an approach
would be unfair to new SBA Lenders that do not have historical
prepayment history to offset high purchase rates. Finally, SBA believes
that prepayments affect all SBA Lenders, so the impact of one SBA
Lender's prepayment history should have a minimal effect on that SBA
Lender's risk rating relative to its peers.
Other Comments
Several respondents asked for more information on how the model
weighs factors so they could better understand and evaluate L/LMS. As
described above, in order to maximize the predictiveness of the Risk
Rating System within each peer group, each of the component factors has
a different weighting from peer group to peer group, and the weighting
can vary from quarter to quarter. Commenters were also unfamiliar with
the SBPS that is a key part of the model, and wanted to learn how it
works in credit evaluation. The SBPS is a proprietary portfolio
management (not origination) credit score based upon a borrower's
business credit report and principal's consumer credit report. It is
compatible with Fair, Isaac & Co.'s ``Liquid Credit'' origination
score, which is a commercially available, off-the-shelf product used by
many small business lenders.
Several commenters requested an appeals process of the rating
generated by the Risk Rating System. An appeals process presumes that
enforcement
[[Page 27616]]
actions will be automatically generated as a direct result of an SBA
Lender's risk rating. However, SBA generally does not intend to use the
Risk Rating System as the sole basis for taking enforcement actions
against SBA Lenders. The primary purpose of the system is to focus
SBA's oversight resources on those SBA Lenders whose portfolio
performance (as shown by the Risk Rating System) demonstrate a need for
further review and evaluation by SBA. SBA expects that enforcement
actions would typically be taken only after SBA has engaged the SBA
Lender, and generally will not be taken until after the SBA Lender has
had an opportunity to eliminate the problem through a corrective action
process.
Text of the SBA Lender Risk Rating System
Overview
Under SBA's Risk Rating System, SBA assigns all SBA Lenders a
composite rating. The composite rating reflects SBA's assessment of the
potential risk to the government of that SBA Lender's SBA portfolio
performance.
For 7(a) Lenders, the SBA composite rating is based on four common
components or factors. The common factors for 7(a) Lenders are as
follows: (i) 12 month actual purchase rate; (ii) problem loan rate;
(iii) three month change in the small business predictive score (SBPS),
which is a small business credit score on loans in the 7(a) Lender's
portfolio; and (iv) projected purchase rate derived from the SBPS.
For CDCs, the SBA composite rating is based on three common
components or factors. The common factors for CDCs are as follows: (i)
12 month actual purchase rate; (ii) problem loan rate; and (iii)
average SBPS on loans in the CDC's portfolio. The third factor replaces
the third and fourth factors used for 7(a) Lenders because it was
found, during the testing process, to be more predictive of SBA
purchases for CDCs. These factors for 7(a) Lenders and CDCs are
discussed in more detail in the section entitled ``Rating Components''
below.
In general, these factors reflect both historical SBA Lender
performance and projected future performance. The factors are derived
through formulas developed using regression analysis validated and
tested by industry experts. SBA performs quarterly calculations on the
common factors for each SBA Lender, so SBA Lenders' composite risk
ratings are updated on a quarterly basis. Each of the factors is
described in more detail in the Rating Components section below.
The composite risk rating is a measure of how each SBA Lender's
loan performance compares to the loan performance of its peers. Thus,
an individual SBA Lender's overall loan performance (using all common
factors) is compared to its peers to derive that SBA Lender's composite
risk rating. SBA Lenders whose overall portfolio performance (using all
of the common factors) is worse than their peers will receive a worse,
or higher score, while SBA Lenders whose overall portfolio performance
is better than their peers will receive a better, or lower, score.
SBA recognizes that it may be inequitable to compare all SBA
Lenders in a risk rating system, without separating them into peer
groups, because changes in loan performance would have dramatically
different impacts on the portfolio performance of SBA Lenders of
different sizes. For example, the purchase of one loan from an SBA
Lender will have a much higher impact on the actual purchase rate
component of an SBA Lender with a small portfolio than it will on the
actual purchase rate of an SBA Lender with a large portfolio.
Therefore, SBA has established peer groups to minimize the differences
that could result from changes in loan performance for portfolios of
different sizes. The peer groups are as follows (based on outstanding
SBA guaranteed dollars):
------------------------------------------------------------------------
7(a) Lender peer groups CDC peer groups
------------------------------------------------------------------------
$100,000,000 or more............. $100,000,000 or more.
$10,000,000-$99,999,999.......... $30,000,000-$99,999,999.
$4,000,000-$9,999,999............ $10,000,000-$29,999,999.
$1,000,000-$3,999,999............ $5,000,000-$9,999,999.
$0-$999,999 [7(a) Lenders Less than $5,000,000.
disbursed at least one loan in
past 12 months].
$0-$999,999 [7(a) Lenders did not
disburse at least one loan in
past 12 months].
------------------------------------------------------------------------
As noted above, the common components are used to derive a
composite risk rating for each 7(a) Lender and CDC. No single component
factor normally decides an SBA Lender's composite rating. However,
depending upon the size of the peer group, and the variation between an
SBA Lender's performance and that of its peers, a single factor can
carry a disproportionate weight among the three or four components.
Composite Rating
SBA assigns a composite rating of 1 to 5 to each SBA Lender based
upon its portfolio performance. A rating of 1 indicates strong
portfolio performance, least risk, and that the least degree of SBA
management oversight is needed (relative to other SBA Lenders in their
peer group), while a 5 rating indicates weak portfolio performance,
highest risk, and therefore, the highest degree of SBA management
oversight. SBA provides the following definitions for the composite
ratings.
Composite 1--The SBA operations of an SBA Lender rated 1 are
considered strong in every respect, and typically score well above
average than their peer group averages in all or nearly all of the
rating components described in this Notice. An SBA Lender rated 1
generally has relatively stable component factors and overall composite
rating from one quarter to the next. Since the component factors
measure previous performance, and also attempt to predict future
performance, an SBA Lender rated 1 is more likely to have well below
average historical purchase rates (as compared to its peers), as well
as well below average current problem loan rates that predict lower
than average future purchase rates. Overall, loans in the portfolio of
an SBA Lender rated 1 demonstrate highly acceptable credit quality and/
or credit trends as measured by credit scores and portfolio
performance. An SBA Lender rated 1 typically also has a well managed
SBA loan program as demonstrated through on-site or off-site reviews
and assessments (of mid-size and large SBA Lenders). Based on the
strengths outlined in this composite rating, SBA Lenders rated a 1
present SBA with the least amount of risk, and thus are subject to the
lowest level of SBA oversight compared to other SBA Lenders in the same
peer group.
Composite 2--The SBA operations of an SBA Lender rated 2 are
considered good, and typically are above average in all or nearly all
of the rating components described in this Notice. An SBA Lender rated
a 2 has component factors and a composite
[[Page 27617]]
rating that typically are relatively stable from one quarter to the
next. An SBA Lender rated 2 is more likely to have below average
previous (12 months) purchase rates (as compared to its peers), as well
as below average current problem loan rates that predict lower than
average future purchase rates. Generally, loans in the portfolio of an
SBA Lender rated 2 demonstrate better-than-acceptable credit quality
and/or credit trends as measured by credit scores and portfolio
performance. An SBA Lender rated 2 has a generally well managed (i.e.,
a few minor exceptions or findings) SBA loan program as demonstrated
through on-site or off-site reviews and assessments (of mid-size and
large SBA Lenders). Based on the strengths outlined in this composite
rating, SBA Lenders rated a 2 present SBA with a lower level of risk,
and thus are subject to a lower level of SBA oversight compared to
other SBA Lenders in the same peer group.
Composite 3--The SBA operations of an SBA Lender rated 3 are
considered about average in all or nearly all of the rating components
described in this Notice. An SBA Lender rated a 3 has, on average,
component factors and an overall composite rating that generally are
relatively stable from one quarter to the next. An SBA Lender rated 3
likely has average previous (12 months) purchase rates (as compared to
its peers), as well as average current problem loan rates that predict
future purchase rates in line with SBA peer averages. Generally, loans
in the portfolio of an SBA Lender rated 3 demonstrate acceptable credit
quality and/or credit trends as measured by credit scores and peer
performance. An SBA Lender rated 3 has an adequate (i.e., some minor
exceptions or findings, but few if any major exceptions or findings,
which can be corrected in the normal course of business) SBA loan
program as demonstrated through on-site or off-site reviews and
assessments (of mid-size and large SBA Lenders). However, SBA Lenders
rated a 3 have room for improvement, should monitor their portfolios
closely, and consider methods to improve loan performance. Based on the
strengths and weaknesses outlined in this composite rating, SBA Lenders
rated a 3 present SBA with an acceptable level of risk, and are thus
subject to standard SBA oversight compared to other SBA Lenders in the
same peer group. Oversight may include requests for corrective action
plans.
Composite 4--The SBA operations of an SBA Lender rated 4 are
considered below average in all or nearly all of the rating components
described in this Notice. An SBA Lender rated a 4 may have several
changes in any of its component factor rates; the component factors and
overall composite rating may demonstrate instability or negative
performance from one quarter to the next. An SBA Lender rated 4 is
likely to have above average previous (12 months) purchase rates (as
compared to its peers), as well as above average current problem loan
rates that predict future purchase rates above SBA portfolio averages.
Generally, loans in the portfolio of an SBA Lender rated 4 demonstrate
somewhat less-than-acceptable credit quality and/or credit trends as
measured by credit scores and portfolio performance. An SBA Lender
rated 4 likely has a poorly managed (i.e., both minor exceptions or
findings, and major exceptions or findings) SBA loan program as
demonstrated through on-site or off-site reviews and assessments (of
mid-size and large SBA Lenders). Based on the weaknesses outlined in
this composite rating, SBA Lenders rated a 4 present SBA with a less-
than-acceptable level of risk, and are thus subject to greater than
normal SBA oversight compared to other SBA Lenders in the same peer
group. Oversight measures can include (but are not limited to)
additional reviews or assessments, requests for corrective action
plans, and/or removal from delegated loan programs, depending upon the
level of activity and peer group.
Composite 5--The SBA operations of an SBA Lender rated 5 are
considered well below average in all or nearly all of the rating
components described in this Notice. An SBA Lender rated a 5 is most
likely to have changes in any of its component factor rates, and have
the greatest likelihood to have its component factors and overall
composite rating demonstrate instability or negative performance from
one quarter to the next. An SBA Lender rated 5 probably has well above
average previous (12 months) purchase rates, and well above average
current problem loan rates that predict future purchase rates above its
peer group. Generally, loans in the portfolio of an SBA Lender rated 5
demonstrate less-than-acceptable credit quality and/or credit trends as
measured by credit scores and portfolio performance. An SBA Lender
rated 5 likely has a record of significant SBA program compliance
issues as demonstrated through on-site or off-site reviews and
assessments (of mid-size and large SBA Lenders). Based on the
substantial weaknesses outlined in this composite rating, SBA Lenders
rated a 5 present SBA with the highest level of risk, and are thus
subject to extensive SBA oversight compared to other SBA Lenders in the
same peer group. Oversight measures can include (but are not limited
to) additional reviews or assessments, requests for corrective action
plans, and/or removal from delegated loan programs, depending upon the
level of activity and peer group.
The descriptions within each composite rating are not meant as
definitions of the ratings, but are given to provide, in general, the
characteristics an SBA Lender receiving a particular rating may
exhibit. Consequently, an SBA Lender assigned a particular composite
rating may not exhibit every characteristic described for that rating,
nor is SBA's action limited to those stated in the descriptions.
In some cases, SBA may have reason to believe that an SBA Lender's
calculated composite rating may not fully reflect the level of risk
that an individual SBA Lender presents. In those cases, SBA may
override the composite risk rating (either positively or negatively)
and assign a different composite score. Should a decision be made to
override the composite score, SBA will provide the SBA Lender with an
explanation of the reason(s) for the override. More information on
overrides of composite ratings is provided in the overriding factors
section of this Notice.
SBA's composite ratings system utilizes a numeric scale similar to
rating systems used by bank regulators and other federal loan
guarantors. For example, SBA's composite rating of 1 is similar to that
of a bank regulator in that it is indicative of an institution with
strong performance and requiring limited regulatory oversight. SBA's
rating system is similar to those of other federal loan guarantors
because it measures risk and portfolio performance of loan portfolios
guaranteed by SBA, rather than measuring the quality of the entire
institution.
Rating Components
The 4 Common Components for 7(a) Lenders
SBA's Risk Rating System for 7(a) Lenders features four common
component factors. The four common rating components are defined below.
(i) Past 12 Months Actual Purchase Rate--The Past 12 Months Actual
Purchase Rate is an historical measure of SBA purchases from the 7(a)
Lender in the preceding 12 months. Thus, this component provides a
measure of 7(a) Lender performance and risk as indicated by actual SBA
purchases. SBA calculates this ratio by dividing the sum
[[Page 27618]]
of total gross dollars of the 7(a) Lender's loans purchased during the
past 12 months (numerator) by the sum of total gross outstanding
dollars of their SBA loans outstanding at the end of the 12-month
period, plus gross dollars purchased during the past 12 months
(denominator).
(ii) Problem Loan Rate--The Problem Loan Rate provides an
indication of current 7(a) Lender risk. This problem loan indicator
helps measure 7(a) Lender performance and risk by showing current
delinquencies and liquidations, as well as predicting potential future
purchases by SBA. Calculated using a numerator of total gross dollars
of loans 90 days or more delinquent plus gross dollars in liquidation.
The denominator is total gross dollars outstanding. Active purchases,
dollars that are purchased but not yet charged off, are excluded from
this figure.
(iii) 3 Months Change in Small Business Predictive Scores (SBPS)--
The SBPS is a portfolio management (not origination) credit score based
upon a borrower's business credit report and principal's consumer
credit report. SBPS is a proprietary calculation provided by Dun &
Bradstreet, under contract with SBA, and is compatible with Fair, Isaac
& Co.'s ``Liquid Credit'' origination score. This component signals
increasing or declining purchase risk by measuring changes in borrower
credit trends, and acts as a predictor of possible future loan
delinquencies, liquidations, and SBA purchases. The 3 months change in
SBPS is calculated by measuring the percentage change, on a dollar-
weighted average basis, of the SBPS on all outstanding SBA loans held
by the 7(a) Lender, from the previous quarter to the current quarter.
(iv) Projected Purchase Rate--The Projected Purchase Rate is a
predictive measure of the probability of the amount of SBA guaranteed
dollars in a 7(a) Lender's portfolio that are likely to be purchased by
SBA. This factor uses credit bureau data on a 7(a) Lender's individual
SBA loans to project the purchase rate of a 7(a) Lender's SBA
portfolio. It is a 12-month projection of future performance based on
the most current credit data on a borrower's payment history. For each
of a 7(a) Lender's SBA loans outstanding, SBA multiplies the amount of
guaranteed loan dollars outstanding by the probability of its purchase
(as determined by the SBPS of the individual loan) and totals the sum
of each individual loan outstanding. This total (numerator) is then
divided by the 7(a) Lender's total SBA-guaranteed dollars outstanding
(denominator).
The 3 Common Components for CDCs
SBA's quantitative Risk Rating System for CDCs features three
common component factors. The three common rating components are
defined below.
(i) Past 12 Months Actual Purchase Rate--The Past 12 Months Actual
Purchase Rate is an historical measure of SBA purchases from the CDC in
the preceding 12 months. Thus, this component provides a measure of CDC
performance and risk as indicated by actual SBA purchases. SBA
calculates this ratio by dividing the sum of total SBA gross dollars of
the CDC's loans purchased during the past 12 months (numerator) by the
sum of total SBA gross dollars of their SBA loans outstanding at the
end of the 12-month period, plus total SBA gross dollars purchased
during the past 12 months (denominator).
(ii) Problem Loan Rate--The Problem Loan Rate provides an
indication of current CDC risk. This problem loan indicator helps
measure CDC performance and risk by showing current delinquencies and
liquidations, as well as predicting potential future purchases by SBA.
Calculated using a numerator of total gross dollars of loans 90 days or
more delinquent plus gross dollars in liquidation. The denominator is
total gross dollars outstanding. Note that for 504 only, active
purchases, dollars that are purchased but not yet charged off, that are
in liquidation (loan status of Liquidation or Purchase Pending) must be
added back into the denominator, as they are not included in the
outstanding figure. (This is because as a normal function of 504,
nearly all loans in Liquidation are active purchases.)
(iii) Average Small Business Predictive Scores (SBPS)--The SBPS is
a portfolio management (not origination) credit score based upon a
borrower's business credit report and principal's consumer credit
report. SBPS is a proprietary calculation provided by Dun & Bradstreet,
under contract with SBA, and is compatible with Fair, Isaac & Co.'s
``Liquid Credit'' origination score. This component provides an
indication of the relative credit quality of the loans in a CDC's SBA
portfolio. The score is calculated from the average SBPS score of the
loans in a CDC's portfolio, weighted by each loan's guaranteed loan
dollars outstanding.
Each of the common components described above reflects a different
means of measuring an SBA Lender's risk to SBA in terms of loan
purchase data. Loan purchase metrics provide a core gauge of SBA
lending success and program risk. SBA believes a Risk Rating System
emphasizing purchase indicators provides a good measure of SBA lending
risk because purchases are a strong indicator of the cost to SBA, and
when tested correlated with net losses (purchase less recoveries). In
addition, loan purchases are resource intensive and an administrative
expense to SBA that may affect SBA's ability to provide further
assistance to small businesses. Finally, SBA is a ``gap'' lender, and
purchases can be a prime indicator of the failure of the financing to
assist in the growth and development of small businesses.
Overriding Factors
In addition to the common components calculated through the use of
loan performance factors, the Risk Rating System allows for
consideration of additional factors. The occurrence of these factors
may lead SBA to conclude that an individual SBA Lender's composite
rating is not fully reflective of its true risk. Therefore, the Risk
Rating System provides for the consideration of overriding factors,
which may only apply to a particular SBA Lender or group of SBA
Lenders, and permit SBA to adjust an SBA Lender's overall composite
rating. The allowance of overriding factors in helping determine an SBA
Lender's risk rating enables SBA to use key risk factors that are not
necessarily applicable to all SBA Lenders, but indicate a greater or
lower level of risk from a particular SBA Lender than that which the
calculated score provides.
One of the most important overriding factors is an SBA Lender's on-
site risk-based reviews/assessments usually performed on SBA's
relatively large SBA Lenders, or that may (under extraordinary
circumstances) be performed on other SBA Lenders whose performance
demonstrates a highly unusual deviation from their peer group. SBA
conducts on-site reviews of large SBA Lenders, performs safety and
soundness examinations of SBA Supervised Lenders (SBLCs and Non-
Federally Regulated Lenders), and uses certain off-site evaluation
measures for less active SBA Lenders. Consequently, these assessments,
as a factor, may only be available for a fraction of SBA's
approximately 5,101 SBA Lenders (as of 12/31/2006). Examples of other
overriding factors that may be considered are: Early loan default
trends; purchase rate or projected purchase rate trends; abnormally
high default, purchase or liquidation rates; denial of liability
occurrences; lending concentrations; rapid growth of SBA lending;
inadequate, incomplete, or untimely reporting to SBA or inaccurate
[[Page 27619]]
submission of required fees to SBA; and enforcement actions of
regulators or other authority. This list is not all inclusive; however,
SBA does not expect any of the overriding factors to affect a
significant number of composite scores.
SBA has and will continue to perform annual validation testing on
the Risk Rating System, and will further refine the system as necessary
to improve the predictability of its risk scoring.
Lender Portal
Overview
SBA communicates SBA Lender performance to SBA Lenders through the
use of SBA's Lender Portal (Portal). The Portal allows SBA Lenders to
view their own quarterly performance data, including their current
historical composite risk rating. SBA Lenders can also access data on
peer group and portfolio averages. Consequently, an SBA Lender is able
to gauge its performance relative to its peer group and the portfolio
norm. While SBA Lenders may view their ratings, their performance
indicators, and peer and portfolio averages, they are not able to view
the individual ratings and performance indicators of other SBA Lenders.
SBA has added all previous quarters' data to the portal.
Portal Data
SBA updates the Portal data each quarter approximately six to eight
weeks after a calendar quarter ends. SBA Lenders can now access up to
eight quarters of data on SBA Lender performance.
Correcting Portal Data
Portal data includes both summary performance and credit quality
data. Because summary performance data is largely derived from data
that SBA Lenders provide to SBA through 1502 and 172 Reports, SBA
Lenders bear much of the responsibility for ensuring data accuracy. If
an SBA Lender reviews its performance components and they do not
comport with its own data records, the SBA Lender should confirm the
accuracy of the underlying data. If the SBA Lender determines that the
data is inaccurate, it should seek to amend any incorrect data through
SBA's normal processing channels (for example--for loan performance
data, SBA Lender should contact SBA's fiscal and transfer agent).
Credit quality data used to help establish certain component scores
is derived from credit bureau reports of the borrower business and its
principals or guarantors. To the extent that credit quality data relies
on information that an SBA Lender provides on the business, its
principals, or guarantors contained in the loan application and as
required to be updated by the SBA Lender, the SBA Lender must take
responsibility for ensuring this information is correct, complete, and
updated. SBA recognizes that underlying borrower credit data cannot be
changed by SBA or an SBA Lender. Therefore, any changes to data
provided to credit bureaus must be reported directly to Dun &
Bradstreet or Trans Union, as appropriate, by the borrower. All
corrections to the Portal data (both summary performance and credit
quality data) will be reflected in the quarterly update following the
quarter in which the correction is entered.
Portal Access
SBA Lenders with at least one outstanding SBA loan may apply for
the Portal access. Currently, SBA issues only one Portal user account
per SBA Lender; however, we are working with our contractors on the
possibility of increasing the number of Portal user accounts per SBA
Lender. SBA will provide a notice to SBA Lenders if we are able to
provide multiple user accounts. SBA Lenders must submit initial
requests for a Portal user account (or requests to switch or terminate
a user) by regular or overnight mail to SBA at the following address:
Office of Lender Oversight--Capital Access, Suite 8200; Mail Code 7011,
ATTN: Lender Portal, U.S. Small Business Administration, 409 Third
Street, SW., Washington, D.C. 20416.
SBA Lenders must take the following steps in requesting Portal
access:
1. Request must be made by a senior officer of the SBA Lender
(Senior VP or above).
2. Request must be sent via regular or overnight mail to the
address provided above.
3. Request must be made using the SBA Lender's stationery.
4. Request must include the user's business card.
5. The stationery and business card should include the SBA Lender's
name and address.
6. The request should include the following data:
(a) SBA FIRS ID Number(s).
(b) Account user's name.
(c) Account user's title.
(d) Account user's mailing address at the SBA Lender.
(e) Account user's telephone number at the SBA Lender.
(f) Account user's e-mail address at the SBA Lender.
(g) Requesting officer's name.
(h) Requesting officer's title.
(i) Requesting officer's mailing address at the SBA Lender.
(j) Requesting officer's telephone number at the SBA Lender.
(k) Requesting officer's e-mail address at the SBA Lender.
Once SBA receives and approves the user request, the Agency will
forward the approval to SBA's Portal contractor for issuance of a user
account name and password. The Portal contractor will e-mail the user
his or her user name and password within approximately two weeks of
account approval. The user can then access its data by logging into the
SBA Lender Portal web page at https:// pdp.dnb.com/pdpsba/pdplogin.asp.
SBA Lender Portal Responsibilities
SBA Lenders are responsible for complying with SBA's requirements
in obtaining and maintaining the Portal user accounts and passwords as
set forth below and as published from time to time. SBA Lenders are
also responsible for timely informing SBA to terminate or switch an
account if the person to whom it was issued no longer holds that
responsibility for the SBA Lender. Upon accessing the SBA Lender
Portal, SBA Lenders must take full responsibility for protecting the
confidentiality of the user password and SBA Lender risk rating
information and for ensuring the security of the data.
Confidentiality Agreement
By clicking on the Portal log-in button to access the Portal, SBA
Lender agrees to use the Confidential Information (defined in the
Portal) contained in the Portal only for confidential use within its
own immediate corporate organization, and to hold and maintain the
Confidential Information in confidence in accordance with the terms of
the Agreement. SBA Lender agrees to restrict access to the Confidential
Information to those of its officers and employees who have a
legitimate need to know such information for the purpose of assisting
the SBA Lender in improving the SBA Lender's 7(a) or 504 program
operations in conjunction with SBA's Lender Oversight Program and SBA's
portfolio management (each referred to as a ``permitted party''), and
to those for whom SBA has approved access by prior written consent and
for whom access is required by applicable law or legal process. If such
law or process requires SBA Lender to disclose the Confidential
Information to any person other than a permitted party, SBA Lender
agrees to promptly notify SBA and SBA's Information Provider (defined
below) in writing so that SBA
[[Page 27620]]
and the Information Provider have, within their sole discretion, the
opportunity to seek appropriate relief such as an injunction or
protective order prior to SBA Lender's disclosure. In addition, SBA
Lender agrees to ensure that each permitted party is aware of the
requirements of the Agreement and to ensure that each such permitted
party agrees to the terms and conditions. SBA Lender agrees not to
disclose, and agrees to protect from disclosure, SBA Lender's password
to enter the Portal. Further, any disclosure of Confidential
Information other than as permitted by the Agreement may result in
appropriate action as authorized by law. The Confidentiality Agreement
also provides that SBA Lender agrees to indemnify and hold harmless
each of SBA and any provider of the Confidential Information from and
against any and all claims, demands, suits, actions, and liabilities to
any degree based upon or resulting from the unauthorized use or
disclosure of the Confidential Information. ``Information Provider''
means Dun & Bradstreet. (Mail Provider Information notice to Dun &
Bradstreet, Legal Department, 103 JFK Parkway, Short Hills, NJ 07078.)
No information contained in the Portal shall be relied upon for any
purpose other than SBA's lender oversight and SBA's portfolio
management purposes. In addition, SBA Lender acknowledges and agrees
that the Confidentiality Agreement is for the benefit not only of the
SBA but also of any party providing the Confidential Information. Any
such party shall have the right and standing to pursue all legal and
equitable remedies against the SBA Lender in the event of unauthorized
use or disclosure.
Portal Inquiries
For general inquiries, an SBA Lender may submit its inquiry by e-
mail to [email protected]. If an SBA Lender needs to speak to an
individual on a non-technical matter, it may contact Paul Bishop,
Institutional Financial Analyst at 202-205-7516. SBA advises an SBA
Lender to state upfront its SBA Lender name, address, FIRS number, and
user name to expedite processing of all inquiries.
(Authority: 15 U.S.C. 634(b)(7), and 15 U.S.C. 687(f))
Dated: May 8, 2007.
Steven C. Preston,
Administrator.
[FR Doc. E7-9442 Filed 5-15-07; 8:45 am]
BILLING CODE 8025-01-P