SBA Announces That 504 First Mortgage Loan Pools Assembled, Ready For Sale On Secondary Market

WASHINGTON - Bank of America and United Midwest Savings Bank have
become the first financial institutions to assemble SBA 504 first mortgage
pools
to be sold on the secondary market, the U.S. Small Business Administration
announced today.

The announcement follows the launch of the 504 First Mortgage Loan Pooling
program on July 1, 2010. Authorized as part of the American Recovery and
Reinvestment Act of 2009, the measure is expected to jump start the
secondary market for the first mortgage loans made in conjunction with
Section 504 Certified Development Company loans. The ability to sell loans
into this secondary market will provide liquidity to those lenders that want
to
partner with a Certified Development Company to provide real estate and
fixed
asset financing to small businesses.

"The 504 loan pool guarantee program is one more tool we've added to SBA's
toolbox to expand access to capital for America's small businesses," SBA
Administrator Karen Mills said. "By jump starting the 504 secondary market,

more banks will have greater opportunity to strengthen their liquidity and
in
turn increase their lending to small businesses and entrepreneurs."

Bank of America pooled $32.07 million in loans it purchased from other
lenders,
with $25.65 million guaranteed by the SBA. United Midwest Savings Bank
assembled a pool of $7.96 million, with $6.4 million guaranteed by the SBA.

Under the program, the SBA provides a government guarantee on pools of
portions of eligible 504 first mortgage loans assembled by approved pool
originators who sell them to third-party investors. Lenders retain at least
15
percent of each individual loan, pool originators assume 5 percent of the
risk,
and the SBA guarantees the remaining 80 percent.

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
percent of the project cost, a second mortgage secured with a junior lien
from
a Certified Development Company (backed by a 100 percent SBA-guaranteed
debenture) covering up to 40 percent of the cost, and a contribution of at
least 10 percent equity from the small business borrower. Brokers, or pool
originators, purchase portions of the first mortgages, package and sell them
on
the secondary market.

For additional information on the pool originators, visit
http://www.sba.gov/aboutsba/sbaprograms/elending/secondarymarket/index.ht
ml. The list will be updated regularly as new originators are approved.

Release Date: Sept. 29, 2010
Internet Address: http://www.sba.gov/news

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