January 5, 2017

SBA's Office of Financial Assistance has published Information Notice 5000-1357, approving the SBA 504 Debenture Schedule for Calendar Year 2016. Below is the full schedule, which can also be found on the DCF LLC and Eagle Compliance, LLC websites:

Click here to download the calendar in PDF format. 

Remember that per SBA Information Notice 5000-1355, DCF LLC is transitioning 504 Fiscal & Selling Agent duties to the new Fiscal Agent, Eagle Compliance, LLC (Eagle).

Beginning with the November 2015 debenture funding, Eagle will be the lead Fiscal Agent and all duties related to 504 debenture pricing and funding will be handled by Eagle.

Please also keep in mind that all CDCs should IMMEDIATELY begin using the revised version (09/2015) of Form 1528 for all funding packages submitted for the November 2015 funding. Click here to access the form.

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Frank Keane, the DCF LLC Fiscal Agent, has provided a special commentary to provide a market update as it relates to last week's Federal Open Market Committee (FOMC) meeting and subsequent decision to keep federal interest rates unchanged.

September 21, 2015

What does the decision mean?
The wording of the announcement identified global concerns (read China) and its impact on emerging markets as a consideration for not changing policy. The Fed has focused on full employment as the engine to drive higher interest rates, but has now introduced an international perspective for its consideration, and that further clouds the transparency for Fed policy. Chairwoman Yellen was candid about emerging market weakness and cautioned about the risk of an abrupt slowdown in China. Whether an abrupt slowdown or just gradual weakening of Chinese GDP, the impact is widely felt since they are the biggest trading partner for emerging market economies. Its reduced demand for raw materials impacts commodity prices and foreign exchange rates resulting in weaker global growth.

Speaking of lower community prices, they are impacting domestic Gas and Oil businesses which are filing for bankruptcy at a rate of 4.8%, the sector’s highest level since 1999 and double the rate of businesses in general. The volume of defaulted bonds YTD stands at $10.4 billion and yields in this sector of the junk bond market are as high as 11%.

CT-10’s closing rate of 2.135% is its 200-day Moving Average and represents a rate the market has frequently settled at in weakness and strength going back four months. Indications are that we will remain with this low rate sentiment as the Fed exercises increased patience before normalizing monetary policy.

Even their modest projections seem inflated as officials still maintain a 2015 rate hike is probable. Here is the schedule of projected federal funds rates:

The .375% projection for 2015 assumes a 25 bps increase in the next three months and then little else if the Fed is to maintain the gradual path they have advertised.

20-year Debenture rates and spreads
If we are going to see this 2.135% Treasury rate serve as a magnet until the Fed is confident of the global market’s tolerance for higher rates we might see our debenture rate hold near its two most recent levels of 2.82%, compared to our twelve-month average rate of 2.73%. The challenge will be to maintain historical pricing spreads, because that is where investors will demand more for their participation. The absence of clarity will encourage investors to remain neutral as they sift through endless commentary about economic growth, commodity prices, and global concerns.

Click here to download this commentary as a PDF.

Visit the DCF LLC website for additional information on the SBA 504 Loan Program.

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Overview

At the SBA's direction, the CSA is updating CDC Online to reflect the SBA's branding, as well as some additional useful features. September 17, 2015 is the target release date for these new features.

Changes to the Website

Users will see a more streamlined layout that includes SBA’s branding, name and design on applicable pages and reports. While the appearance of CDC Online will change, all of the current functionality will remain the same.

CDC Online now features a “time-out” notification to enable users to continue browsing the Web site without being logged out automatically.

As a part of this change, we would like to encourage all users to use Internet Explorer 11 when accessing CDC Online for the best user experience. Consistent with prior versions of CDC Online, Firefox and older versions of Internet Explorer are still compatible with the site, but Google Chrome and Apple’s Safari are not.

The new version of CDC Online has undergone extensive and detailed testing, however, if you notice any performance issues; please let us know as soon as possible.

We appreciate your patience with us during this transition period and we hope that the new site provides you with a positive user experience.

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The Central Servicing Agent has created a collection of frequently asked questions pertaining to the servicing of SBA 504 loans, timelines on the CSA's internal processes, and other general information.

The CSA Frequently Asked Questions Resource Guide can be found on the DCF LLC website on the CSA Manual Page under the "Resources & Information" tab. Click here to view.

If you have any questions or concerns regarding this issue, please contact Wells Fargo either by email at SBA504CSA@WELLSFARGO.COM or by phone at 1-855-572-1637 (Option 4).

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On July 30, 2015, Wells Fargo Corporate Trust Services as Central Servicing Agent (CSA) for the SBA 504 Program conducted an educational webinar on loan deferments and catch-up plans. Topics included: current requirements to process a deferment and catch-up request, recommendations on how to monitor loans on catch-up, identifying if a plan is incorrect, and suggestions on items to review once a loan is off of catch-up.

To view the webinar, click the following link and then click "Launch Presentation": http://event.on24.com/wcc/r/1026560/16351040A4960EFA78DD3B2163BC0867

You may also access the webinar through the DCF LLC website by clicking here and navigating to "Educational Webinars" under the "Resources & Information" tab.

If you have any technical difficulties, questions or concerns regarding this issue, please contact Wells Fargo either by email at SBA504CSA@WELLSFARGO.COM or by phone at 1-855-572-1637 (Option 4).

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Overview
The CSA debits borrower accounts through codes governed by the National Automated Clearing House Association (NACHA), which manages the ACH payment network. NACHA has ACH transaction codes that allow different rejection time periods and are used for different types of accounts.

Currently, the CSA debits borrower accounts through Prearranged Payment and Deposit (PPD), which allows for a 60 day reject period and is used primarily for personal accounts. At the SBA's direction, beginning with the August 2015 debit, the CSA will be debiting borrower accounts via Cash Concentration or Disbursement (CCD), which allows for a 24 hour reject period and is used for credits and debits between two organizations.

Notice
Borrowers will now have a shorter window to voluntarily reject ACH debits from their accounts, which may impact their cash flow.

After a loan has prepaid or matured, the CSA will no longer receive ACH rejects for previous monthly payments. This will reduce the number of requests to CDCs for additional borrower payment for these loans.

Debits initiated before the August release will still have a 60 day window to reject the ACH, but all debits starting in August will be CCD and have only 24 hours to reject.

If you have any questions or concerns regarding this issue, please contact Wells Fargo either by email at SBA504CSA@WELLSFARGO.COM or by phone at 1-855-572-1637 (Option 4).

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This is a follow-up to the communication distributed on June 2, 2015 when the CSA noted that there were connectivity issues between CDC Online and the SBA systems due to the recent SBA data center migration.

The SBA has corrected the issue and users should now be able to access the Post Debenture Purchase Loan Accounting report for accelerated loans via CDC Online.

The SBA and the CSA appreciate your patience.

If you have any other questions or concerns regarding this issue, please contact Wells Fargo either by email at SBA504CSA@WELLSFARGO.COM or by phone at 1-855-572-1637 (Option 4).

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Currently there are connectivity issues between CDC Online and the SBA systems due to the recent SBA data center migration. CDCs will receive an error when attempting to access the “Debenture” hyperlink located on the Loan Detail screen for accelerated loans. The SBA and the CSA are working to correct the issue, with the resolution scheduled to be released on June 11, 2015.

In the interim, CDCs are requested to contact the CSA to obtain necessary loan details for accelerated loans.

A follow-up communication will be distributed when the issue is resolved and the systems are operating as expected. We apologize for any inconvenience this may cause and appreciate your patience during this time.

If you have any other questions or concerns regarding this issue, please contact Wells Fargo either by email at SBA504CSA@WELLSFARGO.COM or by phone at 1-855-572-1637 (Option 4).

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Overview

The CSA has created a new report that will show a loan level breakout of the late fees that were collected and disbursed for loans within a CDC’s portfolio. This report was made available on CDC Online beginning Friday, May 15, 2015.

Late Fees Disbursed Report

Late fees are disbursed by the CSA to CDCs via check. Checks are sent during the second week of the month for all late fees that were collected during the previous month. Historically, CDCs have received the check without a loan-level break down of the late fees.

CDCs will now be able to see the late fees with the loan numbers, borrower names, dates incurred and dates collected. CDCs will be able to run this report for a rolling 6-month period. The report will be titled with the month the fees were paid by the borrower to the CSA.

This report will be available on CDC Online under “Other Reports.”

If you have any other questions or concerns regarding Late Fees Disbursed Reports, please contact Wells Fargo either by email at SBA504CSA@WELLSFARGO.COM or by phone at 1-855-572-1637 (Option 4).

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DCF LLC Fiscal Agent, Frank Keane, presented on the 504 funding process, giving us a closer look at what happens behind the scenes leading up to the funding of small business borrowers' 504 debentures in a free, educational webinar on Tuesday, April 28 entitled "SBA 504 Funding Process - Small Business Window to Wall Street."

The webinar outlined the steps of the funding process and explained the parties involved. It helped to uncover some of the mystery behind the derivation of effective interest rates, debenture rates, note rates, and more! 

The webinar was recorded and is now available on the DCF LLC website, on the "Educational Webinars" page under the "Resources" tab. You can also download a copy of the slide deck there.

Click here to access the recording and slide deck.

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DCF LLC is very excited to announce the release of the updated Central Servicing Agent (CSA) Manual. The manual is now available on the CSA Manual page of DCF LLC's website under the "Resources & Information" tab.

Click here to view the updated CSA Manual

The manual is currently posted in a downloadable PDF format. A web-based format will also be released soon. The new version is intended to be read electronically, with documents that were previously contained within the manual, now shown as links. Using links will aid in keeping the information within the Manual up to date.

This manual reflects a great team effort by DCF LLC staff, the CSA User Committee who contributed their industry knowledge to the content and edits, specifically Cat Riddle and Sandy Mortan, and the Wells Fargo CSA staff. Thank you to all who contributed!

If you have any questions, or difficulties accessing the document, please contact Kim Chuday by email at kchuday@dcfllc.com.

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Due to inclement weather, Wells Fargo will be closing its Columbia, MD office at 11:00AM EST on Thursday, March 5, 2015.

If you have any questions or concerns, please contact Wells Fargo by email at SBA504CSA@WELLSFARGO.COM. 

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Due to inclement weather, Wells Fargo will be opening its Columbia, MD office at 11:00AM EST on Tuesday, February 17, 2015. All business operations are expected to resume as normal after 11:00AM EST.

If you have any questions or concerns, please contact Wells Fargo by email at SBA504CSA@WELLSFARGO.COM. 

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Ready, Set, ??? - ​the Federal Reserve Bank might not be as ready to raise rates as once thought

The Background:

From December 2013, when ten-year Treasury yields were 3.0%, to their Friday close at 1.67%, market analysts have expected rates to move higher due to the end of the Fed’s bond buying program at the end of last year’s third quarter, strengthening domestic GDP (driven by increased consumer spending), and the global economy following along.

​​​What's happening now?

​Federal Reserve rate hikes have been forecast to begin this June, but that is starting to look a bit shaky. So, while capital markets interest rates have changed, the benchmarks that determine most adjustable rate loan levels remain unchanged at this time. Federal Funds remain near 0.125%, one-month Libor is 0.25%, and the Prime Rate is still 3.25%, the same as it has been since December 2008.

Besides absolute rate levels, what has also changed is the slope of the Treasury yield curve as short-term rates (the two-year Treasury) inch higher in expectation of the first Fed rate hike since 2004, and longer maturities (like the ten-year note that is the benchmark for our twenty-year debentures) improve in price, dramatically dropping their yield. The current spread is +121 bps, compared to 262 bps thirteen months ago.

This chart shows the twelve-month shift in the yield difference of that part of the curve and explains why our twenty-year debenture in January was priced at 2.52% vs. the December 2013 issue priced at 3.38%. In other words, two-year yields have increased 20 bps since December 2013 and ten-year yields have declined 133 bps.

What does that mean for me?

With rates approaching the historic lows that were set in the fourth quarter of 2012, market conditions strongly support the 504 program’s ability to provide fixed-rate, term funds to small business borrowers. A major challenge, though, is the extremely low cost of funds for banks now providing fixed-rate term loans as they view commercial real estate to be a superior asset class than low-yielding bonds or stocks that have shown increased volatility. So what does that mean for the industry? Unfortunately, it most likely means more competition from banks who traditionally do not like to lend at fixed rates.

What happens next?

Even with Friday’s slightly disappointing GDP rate of 2.6% for the fourth quarter of 2014, the U.S. economy grew at a 2.5% pace for the year, but stubbornly low inflation, weak deflationary euro zone growth, and turmoil in Russia and Greece compel the Federal Reserve to be cautious about raising rates, so this trend can continue until there is a broader based global recovery with increased inflation.

The sharp drop in energy prices has produced a consumer friendly price ≤$2.00 a gallon for gas, but may have more than a temporary effect on inflation, pushing it further down from the Fed’s target of 2%. A resulting effect could be an economic slowdown and layoffs in energy dependent states, further dampening the economic recovery, thereby increasing the Fed’s dilemma about a rate change.

If you wish to view this commentary as a PDF, you may access it from the DCF LLC website by clicking here.

If you have any questions regarding this commentary from DCF LLC Fiscal Agent, Frank Keane, you may contact him by email at frank.keane@dcfllc.com. 

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Overview

In preparation for the upcoming holidays, the CSA would like to request CDCs to consider submitting the January 2015 funding packages ahead of the funding cut-off date, if possible.

Please consider submitting the January 2015 funding packages by 12/18/14 in advance of the actual funding cut-off date of 12/24/14.

As originally communicated on November 10, 2014, the early submission of funding packages is not required of CDCs; however, this will provide the CSA with additional processing time during the holiday season.

If you have any questions or concerns regarding these requirements, please contact CSA either by email with the subject heading "504 SBA January 2015 Funding Packages" at SBA504CSA@WELLSFARGO.COM  or by phone at 1-855-572-1637 (Option 4).

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