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Form 159 Questions with Answers from Office of Capital AccessOctober 10, 2018Q1.? I as the lender collect packaging fee from the applicant.? When Form 159 is completed, do I sign the form as the agent and the lender?? Just as the lender and not as an agent?A1. If the Lender is charging a packaging fee, the Lender would sign as the Lender and would not be required to sign as the Agent.Q2.? If a loan agent refer an SBA applicant to the lender, and the lender would like to pay the referral fee to the agent.? If the loan amount is $5 million, does it mean the maximum fee we can pay to the agent is $30,000?A2.? No, the $30,000 maximum limitation is on fees that may be charged to the Applicant on a percentage basis.? If the Lender agrees to pay a broker or referral Agent a fee; that fee must be disclosed on the SBA Form 159 and the Borrower must sign the SBA Form 159 acknowledging that the Lender disclosed the payment of an broker/referral fee to a third party Agent. The language in SOP 50 10 5 (J) Subpart B Chapter 2 Section IV. of the SOP 50 10 5 J, on pages 157 – 159, is in regards to? Fees Lenders and/or Third Parties may collect from an Applicant.? If the fee is not collected from the Applicant, it is not subject to the limitation; however, the Lender must still disclose to the Borrower on the SBA Form 159 any broker or referral fees the Lender pays to a third party agent.Q3. Form 159'S are to be sent to COLSON, if there is no referral or Agent to report on the Form, do we need to send the Form to COLSON?? The question is: If there is a lender fee of $2,500 and there is no other fee or referral feeTHERE IS NO OTHER FEE OR REFERRAL FEE, DXO WE NEED TO DEND TH FORM 159 TO COLSON?? THE ONLY FEE THAT IS RPORTED IS THE FEE TO THE LENDER FOR PACKAGING, BUT NO OUTSIDE AGENT OR OUTSIDE REFERRASL FEE BEING PAID.A3.? Yes, if the Lender charges a fee to the Borrower, the Lender must complete and sign the SBA Form 159 and have the Borrower also sign in acknowledgment.? If the lender charges a fee to the applicant, it must to be reported and sent to Colson(FTA).? Prior to the services being provided, the Lender must advise the Applicant in writing that the Applicant is not required to obtain or pay for unwanted services. If fees are charged to the Applicant, an SBA Form 159(7a) must be completed.Q4. If a lender pays an LSP for Underwriting and does not pass that cost on to the borrower, does that fee need to be disclosed to the borrower. This is separate from the Packaging Fee. A4. A “Lender Service Provider” (LSP) means an Agent who carries out Lender functions in originating, disbursing, servicing, or liquidating a specific SBA business loan or loan portfolio for compensation from the Lender.? If an Agent meets the definition of an LSP, a formal agreement between the Agent and Lender is required and must be reviewed by SBA.? The Lender is not required to complete an SBA Form 159 for fees the Lender pays an Agent operating as an LSP under an LSP agreement between the Agent and the Lender.? However, if the Agent acts as an Agent in any other capacity outside the LSP agreement – if the LSP also charges the Lender a referral fee for instance – then the Lender must complete and sign the SBA Form 159 and have the Applicant also sign the Form.Q5.? Are we allowed to have a graduated packaging fee, so $500 for $250K, $1000 for $500,000 $2500 for $2MM?A5. No, this would be considered a standard, or flat fee.? Current SBA policy fees for packaging may be based on a percentage of the loan amount or may be charged on an hourly basis.? With regard to fees for packaging or other services charged based on a percentage of the loan amount, in no event may the fee exceed 3 percent on loans of $50,000 or less; and may not exceed 2 percent for loans between $50,000 and the first $1,000,000 with an additional ? percent on amounts over $1,000,000.? All fees over $2,500 must be supported documenting the work performed and the time spent on each activity. With regard to fees for packaging and other services charged on an hourly rate, the fees must be reasonable, customary and for the actual services performed. There is no maximum fee for fees charged on an hourly rate; however, as stated above, all fees over $2,500 must be supported, documenting the work performed and the time spent on each activity.? A standard or flat fee charged to all Applicants is not acceptable.Q6. Where in E-Tran do we enter a servicing fee for a CAPLine or EWCP?A6.? The SBA’s Office of Performance and Systems Management (OPSM) is currently adding a field in E-Tran that will allow a Lender to input the extraordinary servicing fees into E-Tran.?? Currently, a Lender cannot charge the borrower a servicing fee on an SBA-guaranteed loan unless the servicing fee is to cover expenses for extraordinary servicing requirements connected with the loan.? Currently, they must have SBA’s prior written permission to charge an extraordinary servicing fee on any SBA loan.? I would advise Lenders who are requesting to charge a servicing fee to their Applicant that until the ability to add the servicing fee in E-Tran is completed by OPSM, the Lender should add the request and supporting documentation to the request as an separate document attached to the loan file in E-Tran.Q7. If the Bank pays its referral sources quarterly based on the volume of loan submitted for the quarter, and the amount of payment depends on the volume, submitted and closed - how would this be reflected on the Form 159?A7. Referral fees must be documented and referenced per loan.? Each referral fee paid should be aggregated to the actual loan it was paid for, for SBA reporting purposes.? The Lender’s internal documentation / payment method is a separate issue.? If the Lender wants to pay each agent a “volume” incentive this is the bank’s responsibility/business decision and the bank would assume the additional incentive cost and cannot directly or indirectly charge or pass on this fee to the Borrower.Q8. If we had a loan approved in February and collected a packaging fee, can we charge another packaging fee? And how much can we charge? The loan has not closed.A8.? Did the Lender already charge the Borrower?? Why would the Lender need to charge the Applicant a second packaging fee for the same loan?? The SOP 50 10 5 (J) Subpart B Chapter 2 IV A.2 Page 158-159 provides: “a) Fees for packaging and other services may be based on a percentage of the loan amount or may be charged on an hourly basis. i. With regard to fees for packaging or other services charged based on a percentage of the loan amount: (a) In no event may the fee exceed 3 percent on loans of $50,000 or less; (b) The fee may not exceed 2 percent for loans between $50,000 and the first $1,000,000 with an additional ? percent on amounts over $1,000,000; (c) All fees over $2,500 must be supported, documenting the work performed and the time spent on each activity (See VIII.B for detail) (d) The maximum fee that may be charged to an Applicant on a percentage basis is $30,000.ii. With regard to fees for packaging and other services charged on an hourly rate: (a) Fees must be reasonable and customary for the actual services performed. (b) There is no maximum fee for fees charged on an hourly rate. However, all fees over $2,500 must be supported, documenting the work performed and the time spent on each activity (See paragraph VIII.B for detail).b) A standard or flat fee charged to all Applicants is not acceptable.”The Lender must ensure any and all packaging fees the Lender/Agent charges the Applicant do not exceed these limitations.Q 9. If there is a referral agreement in place between lender and loan agent, how does an agent go about itemizing their fee?? Does this have to be disclosed and signed by the borrower even if the cost is not borne by the borrower?A 9.? If the total compensation exceeds $2,500, the compensation must be itemized ?and broken down into an hourly basis. If the fee is a referral fee, the Lender should document the file as “referral fee” and should attach a copy of the referral agreement.?? When a single provider charges an Applicant in connection with multiple applications, fees are aggregated to establish the $2,500 threshold for itemization. Separate SBA Forms 159(7a) must be completed for each application.Yes, the Lender will sign and disclose the referral fee paid to the referral agent and the Borrower should sign after the Lender completes the Form 159 even if the Lender pays the fee and not the Borrower.? Q 10.? If there is no agent, only lender and lender fees, must the 159 form be completed?A 10. If the Lender charges the Applicant a fee for packaging services (Lenders and their Associates are prohibited from charging the Borrower any fees for “other services”, such as referral fees, or broker fees) the Lender must complete and sign the SBA Form 159 disclosing the fees charged to the Applicant and then have the Applicant sign and acknowledge the form.Q 11. Does the broker (referral fee) paid by the Lender need to be disclosed to the Borrower?A 11. Yes.Q 12.? If all fees over $2,500 must be supported, documenting the work performed and the time spent on each activity, how would lender disclose the referral fee based on percentage by documenting the referral based on percentage of loan amount instead of time spent since referral is not related to the duration of the time?A 12.? A referral fee or broker fee does not have to be broken out on an hourly basis; however it still must be disclosed on the form and documented by the Lender in the loan file.? Documentation can include a copy of the referral or broker fee agreement.Q 13. Can you go thru the packaging fee again?? It cannot be a flat fee based upon loan amount? It must be a % of the loan amount?A 13. Please see SOP 50 10 5 (J) Subpart B. Chapter 3, Section VI. For SBA’s policies on fees a Lender and/or Third Parties may collect from an Applicant.Q 14. ?Confirming that if lender pays a loan referral fee to an agent, but does not pass the cost on to the applicant, it does not need to be disclosed on the form 159?A 14. No; If a Lender pays a referral or broker fee to a referral agent or Broker, they must disclose the fee on the SBA Form 159, the Lender must sign and then have the Borrower sign and acknowledge that the Lender paid the referral or broker fee.Q? 15. If the Lender is paying a referral/broker fee, but NOT charging the Applicant for the fee - shouldn't it be disclosed because there is a column on the 159 for "Amount Paid by SBA Lender"?A 15. Yes.Q 16. Regarding the broker referral fee and the lender pays for this, no cost to the customer...answer to a previous question.? Then why does the new form 159 have a spot for you to input that information.A 16. If a Lender pays a referral or broker fee to a referral agent or Broker, they must disclose the fee on the SBA Form 159.Q 17.? When do the packaging fee changes becomes effective?A 17. These fees are in the current SOP 50 10 5 (J) and are currently in effect Additional Questions Received regarding the SBA Form 159:Q 18.? Pursuant to reading the current release control#? 5000-18012? RE: page 2 #7 first item states: “(4) if SBA deems any portion or all of the fees charged in connection with the application for or making of the loan to be unreasonable or prohibited, the Agent agrees to refund that amount to the Applicant.”While the SBA form 159 page # 3 “SBA Lender’s Certifications states: “SBA Lender’s Certifications: The undersigned SBA Lender certifies that: (1) the representations of services rendered and the amounts charged as identified in this form are reasonable and satisfactory to it; (2) (s)he has no knowledge that any Agent, as defined in 13 CFR § 103.1, was engaged by, represented, or worked on behalf of the Applicant other than as disclosed above or in another executed compensation agreement (SBA Form 159); (3) any referral fees described above are the only referral fees paid by the SBA Lender to a referral agent in connection with this loan and were not charged directly or indirectly to the Applicant; (4) if SBA deems any portion or all of the fees charged in connection with the application for or making of the loan to be unreasonable or prohibited, the SBA Lender agrees to refund that amount to the Applicant; (5) it has consulted the System for Awards Management’s (SAM) Excluded Parties List System or any successor system to ensure that the Agent identified above is not debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from participation in this transaction by any Federal department or Agency; and (6) any fee it has charged is not a standardized amount and all fees charged to the Applicant comply with SBA Loan Program Requirements.”Can you please clarify if the form or the release is correct and if the Agent or the SBA Lender will be the responsible to refund the applicant in the event the SBA deems the fees to be unreasonable???A 18.? When SBA determines that any fee or portion of a fee charged to the Applicant/Borrower is excessive or not permitted, SBA will require the Lender to ensure any excessive or impermissible fees are reimbursed to the Applicant/Borrower by either the Lender or the Agent involved.? Q 20.? If the Lender collects a packaging fee and is thus considered an agent, is the159 being signed on behalf of Bank as both Agent and Lender (two signatures)?A 20. The Lender should only sign as the Lender and not the Agent, even if they charge a packaging fee.Q 21. How does this impact the SAM searches – Do I then need to run SAM’s on the Bank with every loan closing?? On which individuals must I also run SAM’s with this frequency – the Relationship Manager, Underwriter, Closer, President, CEO . . . ?? A 21. Lenders are responsible for consulting the System for Awards Management’s (SAM) Excluded Parties List System (EPLS) or any successor system to determine if an employee or an Agent has been debarred, suspended or otherwise excluded by SBA or other federal agency ().? For employees of the Lender, the Lender need only to verify with SAM once, not for every loan.? However, the Lender must consult with SAM to verify each Agent for each loan.Q 22. As to SAM’s on other Agents, we run SAM’s on the firm and the individual.? Do I have to go further?? If, for instance, I receive a loan referral from a paid source, SAM’s are run on the firm and the individual referrer.? Do I also need to run the owner of the firm if the referral came through an employee?? Do I need to run SAM’s on the Office Manager or AA who helped collect documents and prepare the request? A 22. The Lender needs to run the SAM verification for the individual agent(s) they are working with as well as the Agent entity and any employee who touches the 7(a) application must be checked.Q 23. ??? And that comes back to the Lender – to what extent must I run SAM’s on Bank employees?? When I had inquired to the SBA about this previously, I was advised that every employee that may “touch” a loan must be run – the relationship managers, the underwriters, credit officers, the back office people booking the loans, processing payments, filing recordables and monitoring collateral, the tellers who may collect payments, customer service reps who may receive phone inquiries and have the ability to view the loan on our computers.? It basically came down to every employee of the Bank.? My H.R. department actually agreed to run SAM’s on every employee and new hire going forward, but to do so every time a loan is closed would be ridiculous.? So, despite what SBA originally told me, what do they actually expect and find acceptable?? A 23.? Lender employee and Agent SAM searches must be for anyone conducting business with SBA.? ?The term “conduct business with SBA” is defined in 13 CFR 103.1(b) as:“(b) The term conduct business with SBA means: (1) Preparing or submitting on behalf of an applicant an application for financial assistance of any kind, assistance from the Investment Division of SBA, or assistance in procurement and technical matters; (2) Preparing or processing on behalf of a lender or a participant in any of SBA's programs an application for federal financial assistance; (3) Participating with or communicating in any way with officers or employees of SBA on an applicant's, participant's, or lender's behalf; (4) Acting as a lender service provider; and (5) Such other activity as SBA reasonably shall determine.”Q 24.? I understand that detailing Packaging Fee and services by lender should not include underwriting.? Are there any aspects for which time could be allocated; for instance when underwriting an SBA loan differs from underwriting conventional loans – affiliation and size standard evaluation, franchise doc review, 912 processing, tax return verification, STR report analysis (for hotels)?? Even if I’m not stating this correctly, I believe you understand the gist of my question and can address it appropriately. A 24. No, SOP 50 10 5(J), (p. 159) SBA specifically states:? “5. A Lender or a third party engaged by a Lender cannot charge an Applicant for the Lender’s costs associated with underwriting the loan including the completion by the Lender’s Application for Guaranty for all 7(a) Loan Programs (SBA Form 1920) and/or Lender’s analysis.”? This prohibition is intended to include all the elements of the lender’s loan processing/underwriting activities, even those that may be specific to 7(a) lending.? Also, an when an Agent is acting as a Lender Service Provider (LSP), the LSP contract must state that all compensation paid to the LSP will be paid by the Lender and that the Lender and the LSP are prohibited from charging the Applicant for the same services.Q 25. ??? As to service and packaging fees, “The Lender must advise the applicant in writing that the applicant is not required to obtain or pay for unwanted services.”? When and what format and method of delivery do you recommend?? A 25.? At a minimum a lender should have proof that it provided this information to a potential loan applicant.? We have heard that many lenders have provide this information in the written general loan information materials that they provide to all potential loan applicants as one of the first steps in considering a loan application and, they retain a copy of the information provided to the Applicant in the loan file.? Q 26.? As a Lender, we will be charging the Borrower a packaging fee not to exceed $2,500. Please advise if the following language will be sufficient to utilize for the itemized invoice to attach to the 159 Form: “Lender charges a 2% packaging fee not to exceed $2,500, for the processing of the SBA application documentation to obtain SBA approval. Services include, but are not limited to the following:?????????????? Collection and review of financial documentation?????????????? Collection and review of entity documentation?????????????? Pulling and reviewing credit reports, OFAC, SAMS, CAIVRS?????????????? File review for SBA application documentation including the 1919 form and 1920?????????????? Preparation of the Credit Memorandum?????????????? Submission of file to SBA for approval?????????????? Collection and review of all documentation required for closing?????????????? Preparation of SBA Authorization?????????????? Booking and Funding the transaction”Please let me know if any of these services are not allowed in the itemization.A 26. Unfortunately none of the nine tasks bulleted above may be charged to the Small Business Applicant.? SOP 50 10 5(J), Subpart B, Chapter 3 (hereinafter, “the SOP”) at Paragraph VI.A. states:“A. Fees for Packaging and Other Services.1.???????? The Lender or a third party may charge an Applicant fees for packaging and other services.a)???????? “Packaging services” provided by Lender or third party include assisting the Applicant with completing one or more applications, preparing a business plan, cash flow projections, and other documents related to the application.b)??????? “Other services” provided by a third party includes consulting as to what financing is needed and what type, and broker or referral fees.Note: The Lender and its Associates are prohibited from charging the Applicant for “other services,” as defined above.”“Assisting the Applicant with completing one or more applications” refers only to the Applicant’s portion of the applications.? ??The SOP at Paragraph VI. A. 5. states “A Lender or a third party engaged by a Lender cannot charge an Applicant for the Lender’s costs associated with underwriting the loan including the completion [of] the Lender’s Application for Guaranty for all 7(a) Loan Programs (SBA Form 1920) and/or Lender’s analysis.” ................
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