The SBA recently announced changes regarding Form 159. The purpose of this email is to share information about these changes so you can take appropriate and measured actions for your loan files.
What is SBA Form 159?
Form 159 is the SBA’s “Fee Disclosure and Compensation Agreement” for use with 7(a) and 504 loan programs. For more information on its purpose and an outline of who must complete it, please see the form in its entirety.
What is changing and why?
In a move to improve security and to promote standardization across SBA loan programs, Form 159’s generation and submission process is changing and becoming digitized. The SBA’s FAQ on this topic provides additional insight to their evolving protocols.
How will Prudent Lenders accommodate the changes to Form 159?
As before, Prudent Lenders will continue to gather the pertinent information used to populate Form 159 at the time of application. This information flows into and is necessary for the credit memorandum. Pertinent information for Form 159 includes: packaging fees charged by the Lender to the Applicant and all agent and referral fees to be paid by the Borrower or Lender. Agents are generally identified as an individual or entity serving as a loan consultant, packager and/or a broker. Any fee from agents, including Lenders, must be documented on Form 159. This was true prior to the recent changes made by the SBA.
Our underwriting/processing team will provide a Form 159 as soon as the Authorization is issued and/or SBA Loan Number is available. Thereafter, if any changes are needed or if additional Forms 159 are needed, our closing team will provide a Form 159 to be executed before or at closing. Lenders need to communicate required modifications to the Form, if any. Immediately after closing, we will ask for booking documents. Though Form 159 has always been on the list, now our team will upload it on behalf of Lenders as with other closing documents. As a reminder, Prudent Lenders cannot process requests for secondary market loan sales without the booking documentation. More about our closing process is detailed in this article we produced regarding closing.
Critical: What certifications are Lenders making when executing Form 159?
Lender certifications are detailed on page 3 of Form 159. Perhaps the most important certification is item #5. As a Lender, you will certify that you have consulted the System for Awards Management (SAM) to ensure agents that are party to the transaction have not been “debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from participation in this transaction by any Federal department or Agency.”
The SBA has cracked down on disreputable program participants by way of its use of SAM. We suspect the digitization of Form 159 will help in this effort.
If, as a Lender, you are accepting loans packaged and/or referred by agents, you will require a new SAM finding on the agent for each transaction. Prudent Lenders can always help with a SAM search; let us know if you need help. However, Lenders ought to be prepared to run searches themselves as this is an increasing area of focus by the SBA.
How does one access SAM?
If your institution is new to SAM, please see the helpful resources Prudent Lenders has curated below:
- SBA Information Notice: Registration Required for System for Award Management (SAM.gov)
- SBA PPT: System for Award Management (SAM) Training for Lenders
- Quick Start Guide for Contract Registrations
- Process to Submit Notarized SAM Letter Designating Authorized SAM Account Users
As always, please let us know if you have follow-up questions or need assistance.
Be safe. Stay healthy!
President & CEO