SBA has published a new set of Frequently Asked Questions (FAQs) relating to PPP loans. The document, dated November 13, 2024, is intended to provide guidance “to address borrower and lender questions concerning forgiveness loan reviews and guaranty purchases of Paycheck Protection Program (PPP) loans, as provided under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as amended by the Paycheck Protection Program Flexibility Act (Flexibility Act), the Economic Aid Act (EAA), and the American Rescue Plan Act (ARPA)”.
NAGGL also has been informed that SBA’s Office of Financial Assistance (OFA) has reached out to some PPP lenders, on an individual basis, to advise them that SBA has “established a process to expeditiously address outstanding PPP loans for PPP lenders with large, active PPP portfolios” and to inform the individual lenders that they have been selected to participate in an SBA-led resolution process. The lenders that received this correspondence were advised that they had been selected to participate in the SBA process because they had “a sizable, active outstanding PPP portfolio of loans that are not in repayment, according to SBA records”.
The notice informs the lender that SBA will identify all of the PPP loans in the lender’s portfolio that “are active (not yet forgiven, paid in full, or guaranty purchased) that are not in repayment (at least 60 days delinquent, based on 1502 reporting)'” and will focus on these “Relevant Loans” for expedited guaranty purchase processing. According to the SBA message, the Agency “will take a statistically valid random sample (SVRS) of these Relevant Loans and review the loans in the sample as if each had been submitted for guaranty purchase”. As part of this process, SBA stated that it “will request documentation needed for its review, just as the Agency would if each loan were submitted for guaranty purchase”. Then, based on the reviews of this random sample of Relevant Loans, SBA “will determine which PPP loans would be approved for guaranty purchase and set a compliance rate for the SVRS” and “apply the compliance rate from the SVRS to the entire portfolio of Relevant Loans identified … [by SBA] for SBA guaranty purchase payment. After SBA pays the lender the amount derived from this calculation, “the Lender will release SBA from any further guaranty purchase claims on the Relevant Loans”. Based on our understanding of the SBA-provided information, lenders opting to have their guaranty purchase payments calculated under this system will receive payments based on SBA’s examination of only a sample of the lender’s PPP “Relevant Loans”, not on the Agency’s examination of the circumstances for each individual loan. To the best of our knowledge, this is the first time in the Agency’s history that SBA has proposed this type of calculation for guaranty purchase payments.
According to the SBA correspondence, the lenders identified by SBA as potential participants in the “PPP Portfolio Resolution Plan” have until December 20, 2024, to decide whether to opt into the expedited resolution process. For any lender that does not provide an affirmative response to SBA by this date, “the Agency will continue to review [the lender’s] PPP guaranty purchase requests in a loan-by-loan fashion, as outlined in SBA Procedural Notice 5000-812316, SBA Procedural Notice 5000-835955, 13 CFR 120.520, 13 CFR 120.524 and the PPP Post Origination FAQs”. SBA also reminds the lender that “all guaranty purchase requests must be submitted [to SBA] within 180 days of maturity or the opportunity to request guaranty purchase will expire”.
If the lender receiving the SBA correspondence has questions about the alternative purchase process, the SBA correspondence invites the lender to request an hour-long meeting with SBA where the core questions identified in the lender request may be addressed.
NAGGL will provide additional information on this proposed alternative PPP resolution process if it becomes available.
