Nine banks are the first approved lenders for a new SBA loan pool origination program that will assemble and sell pools of 504 program first mortgage loans to help jump start a secondary market.
Under the program, the SBA will provide a government guarantee on pools of portions of eligible 504 first mortgage loans assembled by approved pool originators to be sold to third-party investors. 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%.
Typically, a 504 project includes three elements: a loan or first mortgage secured with a senior lien from a private sector lender covering up to 50% of the project cost, a second mortgage secured with a junior lien from a certified development company backed by a 100% SBA-guaranteed debenture covering up to 40% of the cost, and a contribution of at least 10% equity from the small business borrower.
The new program allows portions of the senior liens to be pooled by pool originators and sold to investors in the secondary market. To be eligible for inclusion in a pool, the first mortgage must be associated with a 504 loan disbursed on or after Feb. 17, 2009. The program will be in place until Feb. 16, 2011, or until $3 billion in new pools are created, whichever occurs first.
The list of loan originators will be updated as more are approved, the SBA said.