Regulations

§120.520 Purchase of 7(a) loan guarantees.
(a) When SBA will purchase---{1) For loans approved on or after May 14, 2007. A Lender may
demand in writing that SBA honor its guarantee if the Borrower is in default on any installment for more
than 60 calendar days (or less if SBA agrees) and the default has not been cured, provided all business
personal property securing the defaulted SBA loan has been liquidated . A Lender may also submit a
request for purchase of a defaulted ?(a) loan when a Borrower files for federal bankruptcy once a period
of at least 60 days has elapsed since the last full installment payment. If a Borrower cures a default
before a Lender requests purchase by SBA, the Lende~s right to request purchase on that default lapses.
SBA considers liquidation of business personal property collateral to be completed when a Lender has
exhausted all prudent and commercially rea sonable efforts to collect upon these assets. In addition, SBA,
in its sole discretion, may purchase the guaranteed portion of a loan at any time whether in default or not,
with or without the request from a Lender.
(2) For loans approved before May 14, 2007. The regulations applicable to the time that a Lender
may make demand for purchase that were in effect immediately prior to this date will govern such loans.
{b) Documentation for purchase. SBA will not purchase its guaranteed portion of a loan from a
Lender unless the Lender has submitted to SBA documentation that SBA deems sufficient to allow SBA
to determine whether purchase of the guarantee is warranted under §120 .524 .
{c) Purchase of loans sold in Secondary Market. When the Lender has sold the guaranteed portion
of a loan in the Secondary Market, under subpart F of this part, Lenders must perform all necessary
servicing and liquidation action s for such loan even after SBA has purchased the guaranteed portion of
such loan from a Registered Holder {as that term is defined in §120.600{i)). In the event that SBA
purchases its guaranteed portion of such a loan from the Registered Holder, Lenders must provide SBA
with a loan status report within 15 business days of such purchase . This report should include but not be
limited to, a status report on the borrower and current condition of the collateral, plans for any type of loan
workout or loan restructuring , existing liquidation activities including the sale of loan collateral, or the
status of ongoing foreclosure proceedings. The report should accompany requested documentation that
SBA deems sufficient to be able to review the Lende~s administration of the loan under §120.524. A
Lender's failure to provide sufficient documentation may constitute a material failure to comply with SBA
requirements under §120.524{a){1), and may lead to initiation of an action for recovery from the Lender of
all or some of the moneys SBA paid to a Registered Holder on a guarantee. SBA will also evaluate the
Lende~s continued participation in the Secondary Market and may restrict further sale of guaranteed
portions into the Secondary Market until SBA determines that the Lender has provided sufficient
documentation for purchases.
{d) No waiver of SBA 's rights. Purchase by SBA of the guaranteed portion of a loan, or of a portion
of SBA's guarantee of a loan, either through a negotiated agreement with a Lender or otherwise, does not
waive any of SBA's rights to recover from the responsible Lender any money paid on the guarantee
based upon the occurrence of any of the events set forth in §120.524{a) in connection with that loan.
[72 FR 18360, Apr. 12, 2007]