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.
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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.
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