SBA Creates Secondary Market for 504 First Mortgage Loans
The SBA said it will launch a secondary market guarantee program with the aim of providing greater liquidity for credit unions and other lenders.
Designed to also expand access to capital for small businesses, under the new program portions of eligible 504 first mortgages pooled by originators or broker dealers could be sold with an SBA guarantee to third-party investors in the secondary market. Lenders will retain at least 15% of each individual loan, pool originators will assume 5% of the risk, and the SBA will guarantee the remaining 80%.
To be eligible to be included in a pool, the first mortgage must be associated with a 504 loan disbursed on or after Feb. 17, 2009. According to the SBA, the program will be in place until Feb. 16, 2011, or until $3 billion in new pools are created, whichever occurs first.
The SBA said it will begin accepting applications to become a pool originator from lenders and broker dealers immediately, and expects to be operational for the settlement of pools in about 60 days.
The 504 CDC program provides credit for the purchase of real estate and other fixed assets tied to a business' expansion. For details on the secondary market program, credit unions, can contact James Hammersley, SBA deputy assistant administrator for policy and strategic planning, at firstname.lastname@example.org.