Magazine article American Banker

SBA Programs Still Require Tweaks, Market Players Say

Magazine article American Banker

SBA Programs Still Require Tweaks, Market Players Say

Article excerpt

Byline: Emily Flitter

Optimism is building among Small Business Administration lenders and secondary market participants that two government programs can get the SBA loan market moving again, though they say there are important details left to be fixed.

A new lending facility for the SBA secondary market has made it through rounds of trimming in the Senate stimulus bill, and the terms of a Federal Reserve Board liquidity program have gotten sweeter. But market participants say the Fed program still needs some adjustments before it can be truly effective.

"There are still some things that need to be addressed, but I'm very comfortable that they're going to be addressed," said Scott Taylor, a vice president based in Memphis for Shay Financial Services Inc.

The Federal Reserve Bank of New York released details last week about the terms of its Term Asset-Backed Securities Loan Facility, a program designed to lend investors money to buy the securities. The program includes SBA loan-backed securities, and the industry holds high hopes that it can help get SBA lending going again by reviving the secondary market.

Participants had previously said that the collateral accepted under the program did not include the SBA securities that poolers had found hardest to sell: those created between Jan. 1, 2008, and Jan. 1 of this year. Last week's term sheet reflected the change - SBA securities created since Jan. 1, 2008, will be accepted as collateral.

The industry, along with the SBA itself, cheered the change. But secondary market participants said other new details of the program must be fixed.

"I think the consensus that's emerging is that, although we've made some progress in terms of the timing of what loans can be sold into Talf, there are still some issues with the interest rate being too high and the haircut being too high," said Chris Reilly, the president of CIT Group Inc. …

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