LOAN PROGRAM.

SEC. 103. SECTION 7(a) LOAN PROGRAM. (a) Servicing and Liquidation of Loans by Preferred Lenders.— Section 7(a)(2)(C)(ii)(II) (15 U.S.C. 636(a)(2)(C)(ii)(II)) is amended to read as follows: “(II) complete authority to service and liquidate such loans without obtaining the prior specific approval of the Administration for routine servicing and liquidation activities, but shall not take any actions creating an actual or apparent conflict of interest.”. (b) Certified Lenders Program.— Section 7(a)(19) (15 U.S.C. 636(a)(19)) is amended by adding at the end the following new subparagraph: “(C) Authority to liquidate loans.— “(i) In general.— The Administrator may permit lenders participating in the Certified Lenders Program to liquidate loans made with a guarantee from the Administration pursuant to a liquidation plan approved by the Administrator. “(ii) Automatic approval.— If the Administrator does not approve or deny a request for approval of a liquidation plan within 10 business days of the date on which the request is made (or with respect to any routine liquidation activity under such a plan, within 5 business days) such request shall be deemed to be approved.”. (c) Limitation on Conducting Pilot Projects.— Section 7(a) (15 U.S.C. 636(a)) is amended by adding at the end the following new paragraph: “(25) Limitation on conducting pilot projects.— “(A) In general.— Not more than 10 percent of the total number of loans guaranteed in any fiscal year under this subsection may be awarded as part of a pilot program which is commenced by the Administrator on or after October 1, 1996. 110 STAT. 3009–727 “(B) Pilot program defined.— In this paragraph, the term ‘pilot program’ means any lending program initiative, project, innovation, or other activity not specifically authorized by law. “(C) Low documentation loan program.— The Administrator may carry out the low documentation loan program for loans of $100,000 or less only through lenders with significant experience in making small business loans. Not later than 90 days after the date of enactment of this subsection, the Administrator shall promulgate regulations defining the experience necessary for participation as a lender in the low documentation loan program.”. (d) Calculation of Subsidy Rate.— Section 7(a) (15 U.S.C. 636(a)) is amended by adding at the end the following new paragraph: “(26) Calculation of subsidy rate.— All fees, interest, and profits received and retained by the Administration under this subsection shall be included in the calculations made by the Director of the Office of Management and Budget to offset the cost (as that term is defined in section 502 of the Federal Credit Reform Act of 1990) to the Administration of purchasing and guaranteeing loans under this Act.”. (e) Sale of Unguaranteed Portions of SBA Loans.— Section 5(f)(3) (15 U.S.C. 634(f)(3)) is amended by adding at the end the following: “Beginning on March 31, 1997, the sale of the unguaranteed portion of any loan made under section 7(a) shall not be permitted until a final regulation that applies uniformly to both depository institutions and other lenders is promulgated by the Administration setting forth the terms and conditions under which such sales can be permitted, including maintenance of appropriate reserve requirements and other safeguards to protect the safety and soundness of the program.”. (f) Conditions on Purchase of Loans.— Section 7(a)(4) (15 U.S.C. 636(a)(4)) is amended— (1) by striking “(4) Notwithstanding” and inserting the following: “(4) Interest rates and fees.— “(A) Interest rates.— Notwithstanding”; and (2) by adding at the end the following new subparagraph: “(B) Payment of accrued interest.— “(i) In general.— Any bank or other lending institution making a claim for payment on the guaranteed portion of a loan made under this subsection shall be paid the accrued interest due on the loan from the earliest date of default to the date of payment of the claim at a rate not to exceed the rate of interest on the loan on the date of default, minus one percent. “(ii) Loans sold on secondary market.— If a loan described in clause (i) is sold on the secondary market, the amount of interest paid to a bank or other lending institution described in that clause from the earliest date of default to the date of payment of the claim shall be no more than the agreed upon rate, minus one percent.”. (g) Plan for Transfer of Loan Servicing Functions to Centralized Centers.— 110 STAT. 3009–728 (1) Implementation plan required.— The Administrator shall submit a detailed plan for completing the consolidation, in one or more centralized centers, of the performance of the various functions relating to the servicing of loans directly made or guaranteed by the Administration pursuant to the Small Business Act, addressing the matters described in paragraph (2) by the deadline specified in paragraph (3). (2) Contents of plan.— In addition to such other matters as the Administrator may deem appropriate, the plan required by paragraph (1) shall include— (A) the proposed number and location of such centralized loan servicing centers; (B) the proposed workload (identified by type and numbers of loans and their geographic origin by the Small Business Administration district office) and staffing of each such center; (C) a detailed, time-phased plan for the transfer of the identified loan servicing functions to each proposed center; and (D) any identified impediments to the timely execution of the proposed plan (including adequacy of available financial resources, availability of needed personnel, facilities, and related equipment) and the recommendations of the Administrator for addressing such impediments. (3) Deadline for submission.— Not later than February 28, 1997, the plan required by paragraph (1) shall be submitted to the Committees on Small Business of the House of Representatives and Senate. (h) Preferred Lender Standard Review Program.— Not later than 90 days after the date of enactment of this Act, the Administrator shall commence a standard review program for the Preferred Lender Program established by section 5(b)(7) of the Small Business Act (15 U.S.C. 634(b)(7)), which shall include annual or more frequent assessments of the participation of the lender in the program, including defaults, loans, and recoveries of loans made by that lender under the authority of this section. The Administrator shall require such standard review for each new entrant to the Preferred Lender Program. (i) Independent Study of Loan Programs.— (1) Study required.— The Administrator shall contract with one or more private sector parties to conduct a comprehensive assessment of the performance of the loan programs authorized by section 7(a) of the Small Business Act (15 U.S.C. 636(a)) and title V of the Small Business Investment Act of 1958 (15 U.S.C. 661) addressing the matters described in paragraph (2) and resulting in a report to the Congress pursuant to paragraph (5). (2) Matters to be assessed.— In addition to such other matters as the Administrator considers appropriate, the assessment required by paragraph (1) shall address, with respect to each loan program described in paragraph (1) for each of the fiscal years described in paragraph (3)— (A) the number and frequency of deferrals and defaults; (B) default rates; (C) comparative loss rates, by— 110 STAT. 3009–729 (i) type of lender (separately addressing preferred lenders, certified lenders, and general participation lenders); (ii) term of the loan; (iii) dollar value of the loan at disbursement; and (iv) underwriting characteristics of each loan that has entered into default, including term, amount and type of collateral, loan-to-value and other actual and projected ratios, line of business, credit history, and type of loan; and (D) the economic models used by the Office of Management and Budget to calculate the credit subsidy rate applicable to the loan programs. (3) Period of assessment.— The assessments undertaken pursuant to paragraph (2) shall address data for the period beginning with fiscal year 1986 of each loan program described in paragraph (1). (4) Access to information.— The Administrator shall provide to the contractor access to any information collected by or available to the Administration with regard to the loan programs being assessed. The contactor shall preserve the confidentiality of any information for which confidentiality is protected by law or properly asserted by the person submitting such information. (5) Contract funding.— The Administrator shall fund the cost of the contract from the amounts appropriated for the salaries and expenses of the Administration for fiscal year 1997. (6) Report to the congress.— (A) Contents.— The contractor shall prepare a report of— (i) its analyses of the matters to be assessed pursuant to paragraph (2); and (ii) its independent recommendations for improving program performance with respect to each loan program, regarding— (I) improving the timely collection and subsequent management by the Administration of data to measure the performance of each loan program described in paragraph (1); and (II) reducing loss rates for and improving the performance of each such loan program. (B) Submission to the congress.— Not later than June 30, 1997, the Administrator shall submit the report prepared under subparagraph (A) to the Committees on Small Business of the House of Representatives and the Senate. The Administrator shall append his comments, and those of the Office of Management and Budget, if any, to the report.