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U.S. Code › Title
15 › Chapter 14B › Subchapter V › § 697e

15 U.S. Code § 697e - Premier Certified Lenders
Program

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Code

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(a) Establishment

The Administration may establish a Premier Certified Lenders
Program for certified development companies that meet the requirements of
subsection (b) of this section.

(b) Requirements

(1) Application

To be eligible to participate in the Premier Certified
Lenders Program established under subsection (a) of this section, a certified
development company shall prepare and submit to the Administration an
application at such time, in such manner, and containing such information as the
Administration may require.

(2) Designation

The Administration may designate a certified development
company as a premier certified lender—

(A) if the company is an active certified development company in good
standing and has been an active participant in the accredited lenders program
during the entire 12-month period preceding the date on which the company
submits an application under paragraph (1), except that the Administration may
waive this requirement if the company is qualified to participate in the
accredited lenders program;

(B) if the company has a history of—

(i) submitting to the Administration adequately analyzed debenture
guarantee application packages; and

(ii)
of properly closing section 504 [15 U.S.C. 697a] loans and
servicing its loan portfolio;

(C) if the company agrees to assume and to reimburse the Administration
for 10 percent of any loss sustained by the Administration as a result of
default by the company in the payment of principal or interest on a debenture
issued by such company and guaranteed by the Administration under this section
(15 percent in the case of any such loss attributable to a debenture issued by
the company during any period for which an election is in effect under
subsection (c)(7) of this section for such company); and

(D) the
[1] Administrator determines, with respect to the company, that
the loss reserve established in accordance with subsection (c) of this section
is sufficient for the company to meet its obligations to protect the Federal
Government from risk of loss.

(3) Applicability of criteria after designation

The Administrator may revoke the designation of a certified
development company as a premier certified lender under this section at any
time, if the Administrator determines that the certified development company
does not meet any requirement described in subparagraphs (A) through (D) of
paragraph (2).

(c) Loss reserve

(1) Establishment

A company designated as a premier certified lender shall
establish a loss reserve for financing approved pursuant to this section.

(2) Amount

The amount of each loss reserve established under paragraph
(1) shall be 10 percent of the amount of the company’s exposure, as determined
under subsection (b)(2)(C) of this section.

(3) Assets

Each loss reserve established under paragraph (1) shall be
comprised of—

(A) segregated funds on deposit in an account or accounts with a
federally insured depository institution or institutions selected by the
company, subject to a collateral assignment in favor of, and in a format
acceptable to, the Administration;

(B) irrevocable letter or letters of credit, with a collateral
assignment in favor of, and a commercially reasonable format acceptable to, the
Administration; or

(C) any combination of the assets described in subparagraphs (A) and
(B).

(4) Contributions

The company shall make contributions to the loss reserve,
either cash or letters of credit as provided above, in the following amounts and
at the following intervals:

(A) 50 percent when a debenture is closed.

(B) 25 percent additional not later than 1 year after a debenture is
closed.

(C) 25 percent additional not later than 2 years after a debenture is
closed.

(5) Replenishment

If a loss has been sustained by the Administration, any
portion of the loss reserve, and other funds provided by the premier company as
necessary, may be used to reimburse the Administration for the premier company’s
share of the loss as provided in subsection (b)(2)(C) of this section. If the
company utilizes the reserve, within 30 days it shall replace an equivalent
amount of funds.

(6) Disbursements

(A) In general

The Administration shall allow the certified development
company to withdraw from the loss reserve amounts attributable to any debenture
that has been repaid.

(B) Temporary reduction based on outstanding balance

Notwithstanding subparagraph (A), during the 2-year period
beginning on the date that is 90 days after May 28, 2004, the Administration
shall allow the certified development company to withdraw from the loss reserve
such amounts as are in excess of 1 percent of the aggregate outstanding balances
of debentures to which such loss reserve relates. The preceding sentence shall
not apply with respect to any debenture before 100 percent of the contribution
described in paragraph (4) with respect to such debenture has been made.

(7) Alternative loss reserve

(A) Election

With respect to any eligible calendar quarter, any qualified
high loss reserve PCL may elect to have the requirements of this paragraph apply
in lieu of the requirements of paragraphs (2) and (4) for such quarter.

(B) Contributions

(i) Ordinary rules inapplicable Except
as provided under clause (ii) and paragraph (5), a qualified high loss reserve
PCL that makes the election described in subparagraph (A) with respect to a
calendar quarter shall not be required to make contributions to its loss reserve
during such quarter.

(ii)
Based on loss A qualified
high loss reserve PCL that makes the election described in subparagraph (A) with
respect to any calendar quarter shall, before the last day of such quarter, make
such contributions to its loss reserve as are necessary to ensure that the
amount of the loss reserve of the PCL is—

(I)
not less than $100,000; and

(II)
sufficient, as determined by a qualified independent auditor,
for the PCL to meet its obligations to protect the Federal Government from risk
of loss.

(iii)
Certification Before the end
of any calendar quarter for which an election is in effect under subparagraph
(A), the head of the PCL shall submit to the Administrator a certification that
the loss reserve of the PCL is sufficient to meet such PCL’s obligation to
protect the Federal Government from risk of loss. Such certification shall be in
such form and submitted in such manner as the Administrator may require and
shall be signed by the head of such PCL and the auditor making the determination
under clause (ii)(II).

(C) Disbursements

(i) Ordinary rule inapplicable Paragraph (6) shall not apply with respect to any qualified
high loss reserve PCL for any calendar quarter for which an election is in
effect under subparagraph (A).

(ii)
Excess funds At the end of
each calendar quarter for which an election is in effect under subparagraph (A),
the Administration shall allow the qualified high loss reserve PCL to withdraw
from its loss reserve the excess of—

(I)
the amount of the loss reserve, over

(II)
the greater of $100,000 or the amount which is determined
under subparagraph (B)(ii) to be sufficient to meet the PCL’s obligation to
protect the Federal Government from risk of loss.

(D) Recontribution

If the requirements of this paragraph apply to a qualified
high loss reserve PCL for any calendar quarter and cease to apply to such PCL
for any subsequent calendar quarter, such PCL shall make a contribution to its
loss reserve in such amount as the Administrator may determine provided that
such amount does not exceed the amount which would result in the total amount in
the loss reserve being equal to the amount which would have been in such loss
reserve had this paragraph never applied to such PCL. The Administrator may
require that such payment be made as a single payment or as a series of
payments.

(E) Risk management

If a qualified high loss reserve PCL fails to meet the
requirement of subparagraph (F)(iii) during any period for which an election is
in effect under subparagraph (A) and such failure continues for 180 days, the
requirements of paragraphs (2), (4), and (6) shall apply to such PCL as of the
end of such 180-day period and such PCL shall make the contribution to its loss
reserve described in subparagraph (D). The Administrator may waive the
requirements of this subparagraph.

(F) Qualified high loss reserve PCL

The term “qualified high loss reserve PCL” means, with
respect to any calendar year, any premier certified lender designated by the
Administrator as a qualified high loss reserve PCL for such year. The
Administrator shall not designate a company under the preceding sentence unless
the Administrator determines that—

(i) the amount of the loss reserve of the company is not less than
$100,000;

(ii)
the company has established and is utilizing an appropriate
and effective process for analyzing the risk of loss associated with its
portfolio of PCLP loans and for grading each PCLP loan made by the company on
the basis of the risk of loss associated with such loan; and

(iii)
the company meets or exceeds 4 or more of the specified risk
management benchmarks as of the most recent assessment by the Administration or
the Administration has issued a waiver with respect to the requirement of this
clause.

(G) Specified risk management benchmarks

For purposes of this paragraph, the term “specified risk
management benchmarks” means the following rates, as determined by the
Administrator:

(i) Currency rate.

(ii)
Delinquency rate.

(iii)
Default rate.

(iv)
Liquidation rate.

(v) Loss rate.

(H) Qualified independent auditor

For purposes of this paragraph, the term “qualified
independent auditor” means any auditor who—

(i) is compensated by the qualified high loss reserve PCL;

(ii)
is independent of such PCL; and

(iii)
has been approved by the Administrator during the preceding
year.

(I) PCLP loan

For purposes of this paragraph, the term “PCLP loan” means
any loan guaranteed under this section.

(J) Eligible calendar quarter

For purposes of this paragraph, the term “eligible calendar
quarter” means—

(i) the first calendar quarter that begins after the end of the 90-day
period beginning with May 28, 2004; and

(ii)
the 7 succeeding calendar quarters.

(K) Calendar quarter

For purposes of this paragraph, the term “calendar quarter”
means—

(i) the period which begins on January 1 and ends on March 31 of each
year;

(ii)
the period which begins on April 1 and ends on June 30 of
each year;

(iii)
the period which begins on July 1 and ends on September 30 of
each year; and

(iv)
the period which begins on October 1 and ends on December 31
of each year.

(L) Regulations

Not later than 45 days after May 28, 2004, the Administrator
shall publish in the Federal Register and transmit to the Congress regulations
to carry out this paragraph. Such regulations shall include provisions relating
to—

(i) the approval of auditors under subparagraph (H); and

(ii)
the designation of qualified high loss reserve PCLs under
subparagraph (F), including the determination of whether a process for analyzing
risk of loss is appropriate and effective for purposes of subparagraph (F)(ii).

(8) Bureau of PCLP Oversight

(A) Establishment

There is hereby established in the Small Business
Administration a bureau to be known as the Bureau of PCLP Oversight.

(B) Purpose

The Bureau of PCLP Oversight shall carry out such functions
of the Administration under this subsection as the Administrator may designate.

(C) Deadline

Not later than 90 days after May 28, 2004—

(i) the Administrator shall ensure that the Bureau of PCLP Oversight is
prepared to carry out any functions designated under subparagraph (B), and

(ii)
the Office of the Inspector General of the Administration
shall report to the Congress on the preparedness of the Bureau of PCLP Oversight
to carry out such functions.

(d) Sale of certain defaulted loans

(1) Notice

If, upon default in repayment, the Administration acquires a
loan guaranteed under this section and identifies such loan for inclusion in a
bulk asset sale of defaulted or repurchased loans or other financings, it shall
give prior notice thereof to any certified development company which has a
contingent liability under this section. The notice shall be given to the
company as soon as possible after the financing is identified, but not less than
90 days before the date the Administration first makes any records on such
financing available for examination by prospective purchasers prior to its
offering in a package of loans for bulk sale.

(2) Limitations

The Administration shall not offer any loan described in
paragraph (1) as part of a bulk sale unless it—

(A) provides prospective purchasers with the opportunity to examine the
Administration’s records with respect to such loan; and

(B) provides the notice required by paragraph (1).

(e) Loan approval authority

(1) In general

Notwithstanding section 697 (b)(6)
of this title, and subject to such terms and conditions as the Administration
may establish, the Administration may permit a company designated as a premier
certified lender under this section to approve, authorize, close, service,
foreclose, litigate (except that the Administration may monitor the conduct of
any such litigation to which a premier certified lender is a party), and
liquidate loans that are funded with the proceeds of a debenture issued by such
company and may authorize the guarantee of such debenture.

(2) Scope of review

The approval of a loan by a premier certified lender shall
be subject to final approval as to eligibility of any guarantee by the
Administration pursuant to section 697 (a)
of this title, but such final approval shall not include review of decisions by
the lender involving creditworthiness, loan closing, or compliance with legal
requirements imposed by law or regulation.

(f) Review

After the issuance and sale of debentures under this
section, the Administration, at intervals not greater than 12 months, shall
review the financings made by each premier certified lender. The review shall
include the lender’s credit decisions and general compliance with the
eligibility requirements for each financing approved under the program
authorized under this section. The Administration shall consider the findings of
the review in carrying out its responsibilities under subsection (g) of this
section, but such review shall not affect any outstanding debenture guarantee.

(g) Suspension or revocation

The designation of a certified development company as a
premier certified lender may be suspended or revoked if the Administration
determines that the company—

(1) has not continued to meet the criteria for eligibility under
subsection (b) of this section;

(2) has not established or maintained the loss reserve required under
subsection (c) of this section;

(3) is failing to adhere to the Administration’s rules and regulations;
or

(4) is violating any other applicable provision of law.

(h) Effect of suspension or revocation

A suspension or revocation under subsection (g) of this
section shall not affect any outstanding debenture guarantee.

(i) Program goals

Each certified development company participating in the
program under this section shall establish a goal of processing a minimum of not
less than 50 percent of the loan applications for assistance under section 697a of this title
pursuant to the program authorized under this section.

(j) Report

Not later than 1 year after October 22, 1994, and annually
thereafter, the Administration shall report to the Committees on Small Business
of the Senate and the House of Representatives on the implementation of this
section. Each report shall include—

(1) the number of certified development companies designated as premier
certified lenders;

(2) the debenture guarantee volume of such companies;

(3) a comparison of the loss rate for premier certified lenders to the
loss rate for accredited and other lenders, specifically comparing default rates
and recovery rates on liquidations; and

(4) such other information as the Administration deems appropriate.

[1]  So in original. Probably should be
preceded by “if”.

Source

(Pub.
L. 85–699, title V, § 508, as added and amended Pub.
L. 103–403, title II, § 217,Oct. 22, 1994, 108
Stat. 4185; Pub.
L. 105–135, title II, § 223(a),Dec. 2, 1997, 111
Stat. 2604; Pub.
L. 106–554, § 1(a)(9) [title III, §§ 305, 306], Dec. 21, 2000, 114
Stat. 2763, 2763A–685; Pub.
L. 108–232, §§ 2–3(c),May 28, 2004, 118
Stat. 649–652.)

Codification

May 28, 2004, referred to in subsec. (c)(8)(C), was in the
original “the date of enactment of this Act”, which was translated as meaning
the date of enactment of Pub.
L. 108–232, which enacted subsec. (c)(8), to reflect the probable intent of
Congress.

October 22, 1994, referred to in subsec. (j), was in the
original “the date of enactment of this Act”, which was translated as meaning
the date of enactment of Pub.
L. 103–403, which enacted this section, to reflect the probable intent of
Congress.

Amendments

2004—Subsec. (b)(2)(C). Pub.
L. 108–232, § 3(b), inserted “(15 percent in the case of any such loss
attributable to a debenture issued by the company during any period for which an
election is in effect under subsection (c)(7) of this section for such company)”
before “; and”.

Subsec. (b)(2)(D). Pub.
L. 108–232, § 3(c)(1), substituted “subsection (c)” for “subsection
(c)(2)”.

Subsec. (c)(5). Pub.
L. 108–232, § 3(c)(2), struck out “10 percent” after “the premier
company’s”.

Subsec. (c)(6). Pub.
L. 108–232, § 2, designated existing provisions as subpar. (A),
inserted heading, and added subpar. (B).

Subsec. (c)(7), (8). Pub.
L. 108–232, § 3(a), added pars. (7) and (8).

2000—Pub.
L. 106–554, § 1(a)(9) [title III, § 305], repealed Pub.
L. 103–403, § 217(b). See 1994 Amendment note below.

Subsec. (a). Pub.
L. 106–554, § 1(a)(9) [title III, § 306(1)], substituted “The” for
“On a pilot program basis, the”.

Subsecs. (d), (e). Pub.
L. 106–554, § 1(a)(9) [title III, § 306(2), (5)], added heading
and text of subsec. (d) and redesignated former subsec. (d) as (e). Former
subsec. (e) redesignated (f).

Subsec. (f). Pub.
L. 106–554, § 1(a)(9) [title III, § 306(2), (3)], redesignated
subsec. (e) as (f) and substituted “subsection (g)” for “subsection (f)”. Former
subsec. (f) redesignated (g).

Subsec. (g). Pub.
L. 106–554, § 1(a)(9) [title III, § 306(2)], redesignated subsec.
(f) as (g). Former subsec. (g) redesignated (h).

Subsec. (h). Pub.
L. 106–554, § 1(a)(9) [title III, § 306(2), (4)], redesignated
subsec. (g) as (h) and substituted “subsection (g)” for “subsection (f)”. Former
subsec. (h) redesignated (i).

Subsecs. (i), (j). Pub.
L. 106–554, § 1(a)(9) [title III, § 306(2)], redesignated subsecs.
(h) and (i) as (i) and (j), respectively.

1997—Subsec. (a). Pub.
L. 105–135, § 223(a)(1), struck out “not more than 15” before
“certified development companies”.

Subsec. (b)(2). Pub.
L. 105–135, § 223(a)(2)(A)(i), struck out “if such company” after
“premier certified lender” in introductory provisions.

Subsec. (b)(2)(A), (B). Pub.
L. 105–135, § 223(a)(2)(A)(ii), added subpars. (A) and (B) and struck
out former subpars. (A) and (B) which read as follows:

“(A) has been an active participant in the accredited
lenders program during the 12-month period preceding the date on which the
company submits an application under paragraph (1), except that, prior to
January 1, 1996, the Administration may waive this requirement if the company is
qualified to participate in the accredited lenders program;

“(B) has a history of submitting to the Administration
adequately analyzed debenture guarantee application packages; and”.

Subsec. (b)(2)(C). Pub.
L. 105–135, § 223(a)(2)(A)(iii), inserted “if the company” before
“agrees to assume” and substituted “; and” for period at end.

Subsec. (b)(2)(D). Pub.
L. 105–135, § 223(a)(2)(A)(iv), added subpar. (D).

Subsec. (b)(3). Pub.
L. 105–135, § 223(a)(2)(B), added par. (3).

Subsec. (c). Pub.
L. 105–135, § 223(a)(3), added subsec. (c) and struck out heading and
text of former subsec. (c). Text read as follows:

“(1) Establishment.—A company designated as a premier
certified lender shall establish a loss reserve for financings approved pursuant
to this section.

“(2) Amount.—The amount of the loss reserve shall be based
upon the greater of—

“(A) the historic loss rate on debentures issued by such
company; or

“(B) 10 percent of the amount of the company’s exposure as
determined under subsection (b)(2)(C) of this section.

“(3) Assets.—The loss reserve shall be comprised of
segregated assets of the company which shall be securitized in favor of the
Administration.

“(4) Contributions.—The company shall make contributions to
the loss reserve in the following amounts and at the following intervals:

“(A) 50 percent when a debenture is closed.

“(B) 25 percent not later than 1 year after a debenture is
closed.

“(C) 25 percent not later than 2 years after a debenture is
closed.”

Subsec. (d)(1). Pub.
L. 105–135, § 223(a)(4), substituted “to approve, authorize, close,
service, foreclose, litigate (except that the Administration may monitor the
conduct of any such litigation to which a premier certified lender is a party),
and liquidate loans” for “to approve loans”.

Subsec. (f). Pub.
L. 105–135, § 223(a)(5), substituted “certified development company”
for “State or local development company” in introductory provisions.

Subsec. (g). Pub.
L. 105–135, § 223(a)(6), substituted “revocation” for “designation” in
heading.

Subsec. (h). Pub.
L. 105–135, § 223(a)(7), added subsec. (h) and struck out heading and
text of former subsec. (h). Text read as follows: “Not later than 180 days after
October 22, 1994, the Administration shall promulgate regulations to carry out
this section.”

Subsec. (i)(3). Pub.
L. 105–135, § 223(a)(8), substituted “other lenders, specifically
comparing default rates and recovery rates on liquidations” for “other lenders”.

1994—Pub.
L. 103–403, § 217(b), which directed repeal of this section effective
Oct. 1, 2000, and was repealed by section 1 (a)(9)
[title III, § 305] of Pub.
L. 106–554, was not executed to reflect the probable intent of Congress and
the amendments to this section by section 1 (a)(9)
[title III, § 306] of Pub.
L. 106–554. See Termination Date note below.

Change of Name

Committee on Small Business of Senate changed to Committee
on Small Business and Entrepreneurship of Senate. See Senate Resolution No. 123,
One Hundred Seventh Congress, June 29, 2001.

Effective Date of 1997 Amendment

Amendment by Pub.
L. 105–135effective Oct. 1, 1997, see section 3 ofPub.
L. 105–135, set out as a note under section 631 of this title.

Termination Date

Section 217(b) ofPub.
L. 103–403, as amended by Pub.
L. 105–135, title II, § 223(c),Dec. 2, 1997, 111
Stat. 2606, which provided that this section was to be repealed effective
Oct. 1, 2000, was repealed by Pub.
L. 106–554, § 1(a)(9) [title III, § 305], Dec. 21, 2000, 114
Stat. 2763, 2763A–685.

Regulations

Pub.
L. 105–135, title II, § 223(b),Dec. 2, 1997, 111
Stat. 2606, provided that: “The Administrator shall—

“(1) not later than 150 days after the date of enactment of
this Act [Dec. 2, 1997], promulgate regulations to carry out the amendments made
by subsection (a) [amending this section]; and

“(2) not later than 180 days after the date of enactment of
this Act, issue program guidelines and fully implement the amendments made by
subsection (a).”

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