The “Extender” bill (HR 4213) that passed the House a couple of weeks ago and is now in the Senate for consideration might not pass anytime soon, if at all, according to Chris Crawford, President and CEO of NADCO. This huge and controversial bill, which includes funding to continue the offset for the bank first mortgage fee and the CDC processing fee that are normally paid by the borrower, also includes many other spending items, such as unemployment and tax reductions.
These 504 fee reductions are part of the American Recovery and Reinvestment Act passed in February 2009 and funded two additional times over the past 15 months by Congress. However, the mood in Congress for continuing these costly bills is fading; Republicans and perhaps even some Democrats are becoming more concerned about rapidly growing federal deficits in an election year.
According to NADCO’s legislative advisors, it has become extremely difficult for the Senate Majority Leader to gather the votes to move the current extender bill, which includes unemployment, tax relief, and (way down at the bottom) SBA loan program fee funding relief. Late last week, the Senate tried twice to pass versions of this bill and worked the weekend to devise plans to appease dissenting Senators, but had little success.
The number-one question NADCO gets, according to Crawford, is “What about the fee funding for loans in the SBA’s loan queue?” Right now, he said it is looking pretty bleak for funding unless the Senate reaches some agreements on spending cuts. Possible? Yes. Probable? Unknown, but dropping quickly.
What will the SBA do? It’s not likely to “turn off” the loan queue and stop accepting loan packages soon because this would be the Administration’s recognition that the Senate will fail to pass any extender bill. And that’s not a good admission when your party also runs the Senate.
The key now is that every CDC needs to be in close contact with their borrowers who have packages sitting in the loan queue. You need to know how long your borrowers can/will wait for fee relief before needing to have that package authorized for funding.
At some point, the SBA may be told by the Administration to shut down the loan queue by not accepting any more packages. Then, the SBA may be asked to tell every CDC with packages sitting there to inform borrowers that there is not likely to be any more funding for fees and that normal processing with charges for the two fees should resume. We don’t know when this will happen; it could be a month or it could be September, if the Senate cannot act on the extender bill.
One suggestion from Crawford: Ask your borrowers to call their Senators and tell them about the cost of the combined loan fees if Congress doesn’t act. Urge them to work out the compromises to get the bill passed. This may not be very effective, though, as the SBA part of this $100-billion-plus bill is under $500 million.
Unfortunately, future actions by the Senate are not predictable so continuing to submit packages for the SBA loan queue will enable CDC’s to pass on fee savings to those borrowers who are able to wait out this confusing situation with hope that Congress will act to continue the fee relief.