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H.R. 3719 (104th): Small Business Programs Improvement Act of 1996


The text of the bill below is as of Jun 26, 1996 (Introduced).


HR 3719 IH

104th CONGRESS

2d Session

H. R. 3719

To amend the Small Business Act and Small Business Investment Act of 1958.

IN THE HOUSE OF REPRESENTATIVES

June 26, 1996

Mrs. MEYERS of Kansas introduced the following bill; which was referred to the Committee on Small Business


A BILL

To amend the Small Business Act and Small Business Investment Act of 1958.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the ‘Small Business Programs Improvement Act of 1996’.

    (b) TABLE OF CONTENTS-

      Sec. 1. Short title; table of contents.

      Sec. 2. Administrator defined.

      Sec. 3. Effective date.

TITLE I--AMENDMENTS TO SMALL BUSINESS ACT

      Sec. 101. References.

      Sec. 102. Risk management database.

      Sec. 103. Section 7(a) loan program.

      Sec. 104. Disaster loan program.

      Sec. 105. Microloan demonstration program.

      Sec. 106. Small business development center program.

      Sec. 107. Women’s demonstration grant program.

      Sec. 108. Nonjudicial foreclosure.

      Sec. 109. Miscellaneous authorities to provide loans and other financial assistance.

      Sec. 110. Small business competitiveness demonstration program.

      Sec. 111. Amendment to Small Business Guaranteed Credit Enhancement Act of 1993.

TITLE II--AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT

      Sec. 201. References.

      Sec. 202. Modifications to development company debenture program.

      Sec. 203. Required actions upon default.

      Sec. 204. Loan liquidation pilot program.

      Sec. 205. Registration of certificates.

SEC. 2. ADMINISTRATOR DEFINED.

    In this Act, the term ‘Administrator’ means the Administrator of the Small Business Administration.

SEC. 3. EFFECTIVE DATE.

    Except as otherwise expressly provided, this Act and the amendments made by this Act shall take effect on October 1, 1996.

TITLE I--AMENDMENTS TO SMALL BUSINESS ACT

SEC. 101. REFERENCES.

    Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Small Business Act (15 U.S.C. 631 et seq.).

SEC. 102. RISK MANAGEMENT DATA BASE.

    Section 4(b) (15 U.S.C. 633) is amended by inserting after paragraph (2) the following:

      ‘(3) RISK MANAGEMENT DATABASE-

        ‘(A) ESTABLISHMENT- The Administration shall establish, within the management system for the loan programs authorized by subsections (a) and (b) of section 7 of this Act and title V of the Small Business Investment Act of 1958, a management information system that will generate a database capable of providing timely and accurate information in order to identify loan underwriting, collections, recovery, and liquidation problems.

        ‘(B) INFORMATION TO BE MAINTAINED- In addition to such other information as the Administration considers appropriate, the database established under subparagraph (A) shall, with respect to each loan program described in subparagraph (A), include information relating to--

          ‘(i) the identity of the institution making the guaranteed loan or issuing the debenture;

          ‘(ii) the identity of the borrower;

          ‘(iii) the total dollar amount of the loan or debenture;

          ‘(iv) the total dollar amount of government exposure in each loan;

          ‘(v) the district of the Administration in which the borrower has its principal office;

          ‘(vi) the borrower’s principal line of business, as identified by Standard Industrial Classification Code (or any successor to that system);

          ‘(vii) the delinquency rate for each program (including number of instances and days overdue);

          ‘(viii) the number of defaults in each program (including losses and recoveries);

          ‘(ix) the number of deferrals or forbearances in each program (including days and number of instances); and

          ‘(x) comparisons on the basis of loan program, lender, Administration district and region, for all the data elements maintained.

        ‘(C) DEADLINE FOR OPERATIONAL CAPABILITY- The database established under subparagraph (A) shall be operational not later than March 31, 1997, and shall capture data beginning on the first day of the first quarter of fiscal year 1997 beginning after such date and thereafter.’.

SEC. 103. SECTION 7(a) LOAN PROGRAM.

    (a) SERVICING AND LIQUIDATION OF LOANS BY PREFERRED LENDERS- Section 7(a)(2)(C)(ii)(II) (15 U.S.C. 636(a)(2)(C)(ii)(II)) is amended to read as follows:

            ‘(II) complete authority to service and liquidate such loans without obtaining the prior specific approval of the Administration for routine servicing and liquidation activities.’.

    (b) CERTIFIED LENDERS PROGRAM- Section 7(a)(19) (15 U.S.C. 636(a)(19)) is amended to read as follows:

      ‘(19) CERTIFIED LENDERS PROGRAM-

        ‘(A) ESTABLISHMENT- In addition to the Preferred Lenders Program authorized by the proviso in section 5(b)(7), the Administration is authorized to establish a Certified Lenders Program for lenders who establish their knowledge of Administration laws and regulations concerning the guaranteed loan program and their proficiency in program requirements.

        ‘(B) DESIGNATION OF CERTIFIED LENDERS-

          ‘(i) REQUIREMENT- The Administration may designate a lender as a certified lender only if the lender has made in each of the preceding 2 fiscal years--

            ‘(I) 8 or more loans guaranteed under this subsection to small business concerns located in areas other than a rural area; or

            ‘(II) 4 or more loans guaranteed under this subsection to small business concerns located in a rural area.

          ‘(ii) SUSPENSION AND REVOCATION- The designation of a lender as a certified lender shall be suspended or revoked at any time that the Administration determines that the lender is not adhering to its rules and regulations or that the loss experience of the lender is excessive as compared to other lenders, but such suspension or revocation shall not affect any outstanding guarantee.

          ‘(iii) RURAL AREA DEFINED- In this subparagraph, the term ‘rural area’ has the meaning given such term by subsection (m)(11)(C).

        ‘(C) UNIFORM AND SIMPLIFIED LOAN FORMS- In order to encourage all lending institutions and other entities making loans authorized under this subsection to provide loans of $50,000 or less in guarantees to eligible small business loan applicants, the Administration shall develop and allow participating lenders to solely utilize a uniform and simplified loan form for such loans.

        ‘(D) LOW DOCUMENTATION LOAN PROGRAM- The Administration may carry out the low documentation loan program for loans of $100,000 or less only through preferred lenders and certified lenders.’.

    (c) LIMITATION ON CONDUCTING PILOT PROJECTS- Section 7(a) (15 U.S.C. 636(a)) is amended by adding at the end the following new paragraph:

      ‘(25) LIMITATION ON CONDUCTING PILOT PROJECTS-

        ‘(A) IN GENERAL- Not more than 10 percent of the total number of loans guaranteed in any fiscal year under this subsection may be awarded as part of a pilot program established by the Administration.

        ‘(B) PILOT PROGRAM DEFINED- In this paragraph, the term ‘pilot program’ means any lending program initiative, project, innovation, or other activity not specifically authorized by law.’.

    (d) SECURITIZATION OF UNGUARANTEED PORTIONS OF SBA LOANS- Section 5(f)(3) (15 U.S.C. 634(f)(3)) is amended by adding at the end the following: ‘The Administration may not prohibit a lender from securitizing the non-guaranteed portion of any loan made under section 7(a) pursuant to the regulations contained in section 120.420 of title 13, Code of Federal Regulations, solely due to the status of the lender as a depository institution.’.

    (e) CONDITIONS ON PURCHASE OF LOANS-

      (1) SERVICING FEE- Section 5(g)(5) (15 U.S.C. 634(g)(5)) is amended by adding at the end the following:

    ‘(C) In the event the Administration pays a claim under a guarantee issued under this Act, the servicing fees paid to the lender from the earliest date of default to the date of payment of the claim shall be no more than the agreed upon rate, minus one percent.

      (2) PAYMENT OF ACCRUED INTEREST- Section 7(a)(17) is amended--

        (A) by striking ‘(17) The Administration’ and inserting ‘(17)(A) The Administration’; and

        (B) by adding at the end the following:

      ‘(B) Any bank or other lending institution making a claim for payment on the guaranteed portion of a loan made under this subsection shall be paid the accrued interest due on the loan from the earliest date of default to the date of payment of the claim at a rate not to exceed the rate of interest on the loan on the date of default, minus one percent.

    (f) TRANSFER OF LOAN SERVICING FUNCTIONS TO CENTRALIZED CENTERS- Not later than 60 days after the date of the enactment of this Act, the Administrator shall complete the transfer of loan servicing functions of the Administration, including arrangement for the transfer of appropriate personnel, from district offices to centralized loan servicing centers.

    (g) PREFERRED LENDER STANDARD REVIEW PROGRAM- Not later than 30 days after the date of the enactment of this Act, the Administrator shall implement the standard review program for the Preferred Lender Program established pursuant to section 5(b)(7) of the Small Business Act (15 U.S.C. 634(b)(7)). The Administrator shall require such standard review for each new entrant to the Preferred Lender Program.

    (h) INDEPENDENT STUDY OF LOAN PROGRAMS-

      (1) STUDY REQUIRED- The Administrator shall conduct a comprehensive assessment of the performance of the loan programs authorized by section 7(a) of the Small Business Act (15 U.S.C. 636(a)) and title V of the Small Business Investment Act of 1958 (15 U.S.C. 661) addressing the matters described in paragraph (2) and resulting in a report to Congress pursuant to paragraph (5).

      (2) MATTERS TO BE ASSESSED- In addition to such other matters as the Administrator considers appropriate, the assessment required by paragraph (1) shall address, with respect to each loan program described in paragraph (1) for each of the fiscal years described in paragraph (3), the following:

        (A) the number and frequency of deferrals and defaults;

        (B) default rates;

        (C) comparative loss rates, by--

          (i) type of lender (separately addressing preferred lenders, certified lenders, and general participation lenders);

          (ii) term of the loan; and

          (iii) dollar value of the loan at disbursement; and

        (D) the economic models used by the Office of Management and Budget to calculate the credit subsidy rate applicable to the loan programs.

      (3) PERIOD OF ASSESSMENT- The assessments undertaken pursuant to paragraph (2) shall address data for the period beginning with the first full fiscal year of the implementation of each loan program described in paragraph (1) through fiscal year 1995.

      (4) PERFORMANCE BY THE PRIVATE SECTOR-

        (A) CONTRACTOR PERFORMANCE- A private sector contractor shall be used by the Administrator to conduct the assessment required by paragraph (1) and to prepare the report to Congress required by paragraph (3).

        (B) SOLICITATION AND AWARD- The contract shall be awarded pursuant to a solicitation issued not later than 60 days after the date of the enactment of this Act, which shall provide for full and open competition. The Administrator shall make every reasonable effort to award the contract not later that 60 days after the date specified in the solicitation for receipt of proposals.

        (C) ACCESS TO INFORMATION- The Administrator shall provide to the contractor access to any information collected by or available to the Administration with regard to the loan programs being assessed. The contractor shall preserve the confidentiality of any information for which confidentiality is protected by law or properly asserted by the person submitting such information.

        (D) CONTRACT FUNDING- The Administrator shall fund the cost of the contract from the amounts appropriated for the salaries and expenses of the Administration for fiscal year 1997.

      (5) Report to congress.

        (A) CONTENTS- The contractor shall submit a report of--

          (i) its analyses of the matters to be assessed pursuant to paragraph (2);

          (ii) its independent recommendations, with respect to each loan program, regarding the following:

            (I) improving the Administration’s timely collection and subsequent management of data to measure the performance of each loan program described in paragraph (1); and

            (II) reducing loss rates for each such loan program.

        (B) SUBMISSION BY CONTRACTOR- The contractor shall submit the report required by subparagraph (A) not later than 6 months after the date of the contract award.

        (C) SUBMISSION TO CONGRESS- The Administrator shall submit the report received from the contractor pursuant to subparagraph (B) to the Committees on Small Business of the House of Representatives and the Senate within 15 days of receipt of the report.

SEC. 104. DISASTER LOAN PROGRAM.

    (a) INTEREST RATE- Section 7(c)(5) (15 U.S.C. 636(c)(5)) is amended to read as follows:

      ‘(5) INTEREST RATE FOR DISASTERS COMMENCING AFTER OCTOBER 1, 1996- Notwithstanding any other provision of law, the interest rate on the Federal share of any loan made under paragraph (1) or (2) of subsection (b) on account of a disaster commencing on or after October 1, 1996, shall be the rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loan plus an additional charge of 2 percent per year, adjusted to the nearest one-eighth of 1 percent.’.

    (b) REPEAL OF OBSOLETE PROVISIONS-

      (1) The undesignated paragraph following subparagraph (D) of section 7(b)(2) (15 U.S.C. 636(b)) is amended by striking the sentence that begins ‘Notwithstanding any other provision of law’ through the end of subsection (b).

      (2) Paragraphs (3) and (4) of section 7(c) (15 U.S.C. 636(c)) are repealed.

    (c) OUTSOURCING OF LOAN SERVICING-

      (1) PILOT PROGRAM- The Administrator shall carry out a pilot program under which the servicing of not less than 20 percent of the total portfolio of loans made to homeowners under section 7(b) of the

Small Business Act (including loans made before the date of the enactment of this Act) will be carried out by 1 or more private entities under contracts entered into by the Administration.

      (2) INITIATION DATE- Not later than 90 days after the date of enactment of this Act, the Administrator shall begin implementation of the pilot program.

      (3) REPORT- Not later than 2 fiscal years after the date of award of the contracts provided for in paragraph (1), the Administrator shall transmit to Congress a report containing a description and assessment of the results of the pilot program.

SEC. 105. MICROLOAN DEMONSTRATION PROGRAM.

    (a) TECHNICAL ASSISTANCE GRANT REQUIREMENTS- Section 7(m)(4) (15 U.S.C. 636(m)(4)) is amended--

      (1) in subparagraph (A) by striking ‘25 percent’ and inserting ‘20 percent’; and

      (2) in subparagraph (B) by striking ‘25 percent’ and inserting ‘35 percent’.

    (b) LIMITATION ON SPENDING- Section 7(m)(12) (15 U.S.C. 636(m)(12)) is amended by adding at the end the following new subparagraph:

      ‘(D) LIMITATION ON SPENDING- None of the amounts appropriated to carry out this subsection for fiscal year 1997 may be expended until such date as the Administrator has implemented the pilot program under this paragraph.’.

SEC. 106. SMALL BUSINESS DEVELOPMENT CENTER PROGRAM.

    (a) ELIMINATION OF REQUIREMENT FOR LOCATION AT INSTITUTIONS OF HIGHER LEARNING- Section 21(a)(1) (15 U.S.C. 648(a)(1)) is amended by striking ‘: Provided, That’ and all that follows through ‘small business community’.

    (b) AUTHORITY TO CHARGE REASONABLE FEES-

      (1) IN GENERAL- Section 21(a)(3) (15 U.S.C. 648(a)(3)) is amended by adding at the end the following:

        ‘(D) FEES- Small business development centers may charge reasonable and necessary fees for their services. Such fees may not exceed $15.00 per hour and may not be mandated by the Administration.’.

      (2) CONFORMING AMENDMENTS- Section 21 (15 U.S.C. 648) is amended--

        (A) in subsection (a)(3)--

          (i) by striking ‘(3) The Small Business’ and inserting the following:

      ‘(3) ADMINISTRATION OF PROGRAM-

        ‘(A) GENERAL MANAGEMENT AND OVERSIGHT- The Small Business’;

          (ii) by striking ‘(A) Small Business’ and inserting the following:

        ‘(B) ASSOCIATION OF SMALL BUSINESS DEVELOPMENT CENTERS- Small Business’;

          (iii) by striking ‘(B) Provisions’ and inserting the following:

        ‘(C) AUDITS, COST PRINCIPALS, AND ADMINISTRATIVE REQUIREMENTS- Provisions’; and

          (iv) by aligning the remainder of the text of each of subparagraphs (A), (B), and (C), as designated by clauses (i), (ii), and (iii) of this subparagraph, with the text of subparagraph (D), as added by paragraph (1) of this subsection; and

        (B) in subsection (k)(2) by striking ‘subsection (a)(3)(A)’ and inserting ‘subsection (a)(3)(B)’.

    (c) ASSOCIATE ADMINISTRATOR FOR SMALL BUSINESS DEVELOPMENT CENTERS-

      (1) DUTIES- Section 21(h) (15 U.S.C. 648(h)) is amended to read as follows:

    ‘(h) ASSOCIATE ADMINISTRATOR FOR SMALL BUSINESS DEVELOPMENT CENTERS-

      ‘(1) APPOINTMENT AND COMPENSATION- The Administrator shall appoint an Associate Administrator for Small Business Development Centers who shall report to an official who is not more than one level below the Office of the Administrator and who shall serve without regard to the provisions of title 5 governing appointments in the competitive service, and without regard to chapter 51, and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates, but at a rate not less than the rate of GS-17 of the General Schedule.

      ‘(2) DUTIES-

        ‘(A) IN GENERAL- The sole responsibility of the Associate Administrator for Small Business Development Centers shall be to administer the small business development center program. Duties of the position shall include, but are not limited to, recommending the annual program budget, reviewing the annual budgets submitted by each applicant, establishing appropriate funding levels therefore, selecting applicants to participate in this program, implementing the provisions of this section, maintaining a clearinghouse to provide for the dissemination and exchange of information between small business development centers and conducting audits of recipients of grants under this section.

        ‘(B) CONSULTATION REQUIREMENTS- In carrying out the duties described in this subsection, the Associate Administrator shall confer with and seek the advice of the Board established by subsection (i) and Administration officials in areas served by the small business development centers; however, the Associate Administrator shall be responsible for the management and administration of the program and shall not be subject to the approval or concurrence of such Administration officials.’.

      (2) REFERENCES TO ASSOCIATE ADMINISTRATOR- Section 21 (15 U.S.C. 648) is amended--

        (A) in subsection (c)(7) by striking ‘Deputy Associate Administrator of the Small Business Development Center program’ and inserting ‘Associate Administrator for Small Business Development Centers’; and

        (B) in subsection (i)(2) by striking ‘Deputy Associate Administrator for Management Assistance’ and inserting ‘Associate Administrator for Small Business Development Centers’.

    (d) EXTENSION OR RENEWAL OF COOPERATIVE AGREEMENTS- Section 21(k)(3) (15 U.S.C. 648(k)(3)) is amended to read as follows:

      ‘(3) EXTENSION OR RENEWAL OF COOPERATIVE AGREEMENTS-

        ‘(A) IN GENERAL- In extending or renewing a cooperative agreement of a small business development center, the Administration shall consider the results of the examination and certification program conducted pursuant to paragraphs (1) and (2).

        ‘(B) CERTIFICATION REQUIREMENT- After September 30, 2000, the Administration may not renew or extend any cooperative agreement with a small business development center unless the center has been approved under the certification program conducted pursuant to this subsection; except that the Associate Administrator for Small Business Development Centers may waive such certification requirement, in the discretion of the Associate Administrator, upon a showing that the center is making a good faith effort to obtain certification.’.

    (e) TECHNICAL CORRECTION- Section 21(l) (15 U.S.C. 648(l)) is amended to read as follows:

    ‘(l) CONTRACT AUTHORITY- The authority to enter into contracts shall be in effect for each fiscal year only to the extent and in the amounts as are provided in advance in appropriations Acts. After the administration has entered a contract, either as a grant or a cooperative agreement, with any applicant under this section, it shall not suspend, terminate, or fail to renew or extend any such contract unless the Administration provides the applicant with written notification setting forth the reasons therefor and affording the applicant an opportunity for a hearing, appeal, or other administrative proceeding under the provisions of chapter 7 of title 5, United States Code.’.

SEC. 107. WOMEN’S DEMONSTRATION GRANT PROGRAM.

    Section 29(g) (15 U.S.C. 656(g)) is amended by striking ‘1997’ and inserting ‘1996’.

SEC. 108. NONJUDICIAL FORECLOSURE.

    The Small Business Act (15 U.S.C. 631 et seq.) is amended by redesignating section 30 as section 31 and by inserting after section 29 the following:

‘SEC. 30. NONJUDICIAL FORECLOSURE.

    ‘(a) GENERAL RULE- The Administrator may foreclose a mortgage upon a breach of a covenant or condition in a debt instrument or mortgage if such debt instrument or mortgage authorizes acceleration or foreclosure.

    ‘(b) DESIGNATION AND REMOVAL OF TRUSTEE-

      ‘(1) DESIGNATION- The Administrator shall, in writing, designate by name, title, or position, a foreclosure trustee who shall have the power to conduct a foreclosure sale pursuant to this section and shall supersede any trustee designated in the mortgage. The Administrator may designate as foreclosure trustee--

        ‘(A) an officer or employee of the Small Business Administration;

        ‘(B) an individual who is a resident of the State in which the security property is located; or

        ‘(C) a partnership, association, or corporation authorized to transact business under the laws of the State in which the security property is located.

      ‘(2) AUTHORIZATION FOR MULTIPLE FORECLOSURE TRUSTEES- The Administrator may designate such foreclosure trustees as the Administrator determines necessary to carry out the purposes of this section. The Administrator may designate one or more foreclosure trustees for the purpose of proceedings with multiple foreclosures or a class of foreclosures.

      ‘(3) REMOVAL OF FORECLOSURE TRUSTEES- The Administrator may remove a foreclosure trustee and designate a successor trustee as provided in this section. The foreclosure sale shall continue, notwithstanding the removal of the foreclosure trustee and designation of a successor foreclosure trustee, unless otherwise postponed by the successor foreclosure trustee.

    ‘(c) NOTICE OF FORECLOSURE SALE-

      ‘(1) IN GENERAL-

        ‘(A) Not earlier than 21 days nor later than twenty years after acceleration of a debt instrument or demand on a guaranty, the foreclosure trustee shall serve a notice of a foreclosure sale in accordance with this section. In computing the time period, all periods during which there is in effect a judicially imposed stay of foreclosure or a stay imposed by section 362 of title 11, United States Code, shall be excluded.

        ‘(B) In the event of partial payment or written acknowledgement of the debt after acceleration of the debt instrument, the right to foreclosure shall be deemed to accrue again at the time of each such payment or acknowledgement.

      ‘(2) REQUIREMENTS OF FORECLOSURE SALE- The notice of foreclosure sale shall include--

        ‘(A) the name, title, and business address of the foreclosure trustee as of the date of the notice;

        ‘(B) the names of the original parties to the debt instrument and the mortgage, and any assignees of the mortgagor of record;

        ‘(C) the street address or location of the security property, and a generally accepted designation used to describe the security property, or so much thereof as is to be offered for sale, sufficient to identify the property to be sold;

        ‘(D) the date of the mortgage, the office in which the mortgage is filed, and the location of the filing of the mortgage;

        ‘(E) a statement that a default has occurred, and the date of the acceleration of the debt instrument;

        ‘(F) the date, time, and place of the foreclosure sale;

        ‘(G) a statement that the foreclosure is being conducted in accordance with this Act;

        ‘(H) the types of costs, if any, to be paid by the purchaser upon transfer of title; and

        ‘(I) the terms and conditions of sale, including the method and time of payment of the foreclosure purchase price.

      ‘(3) SERVICE OF NOTICE OF FORECLOSURE SALE-

        ‘(A) RECORD NOTICE- Not later than 21 days before the date of the foreclosure sale, notice of foreclosure sale shall be filed in the manner authorized for filing a notice of an action concerning real property according to the law of the State in which the security property is located.

        ‘(B) NOTICE BY MAIL-

          ‘(i) Not later than 21 days before the date of the foreclosure sale, notice of the foreclosure shall be sent by registered or certified mail, return receipt requested to--

            ‘(I) the current owner of record of the security property as the record appears on the date that the notice of foreclosure sale is recorded pursuant to subsection (a);

            ‘(II) all debtors, including the mortgagor, assignees of record of the mortgagor, and guarantors of the debt instrument;

            ‘(III) all persons having liens, interests or encumbrances of record upon the security property, as the record appears on the date that the notice of foreclosure sale is recorded pursuant to subsection (a); and

            ‘(IV) any occupants of the security property.

        If the names of the occupants of the security property are not known to the agency, or the security property has more than one dwelling unit, the notice shall be posted at the security property.

        ‘(C) NOTICE BY PUBLICATION- Notice of a foreclosure sale shall be published for three successive weeks prior to the sale in a newspaper of general circulation in any county or counties in which the security property is located. In a case in which no newspaper has a weekly general circulation in at least one county in which the security property is located, a copy of the notice of foreclosure sale shall be posted at least 21 days prior to the sale at the courthouse of any county or counties in which the property is located and at the place where the sale is to be held.

    ‘(d) CANCELLATION OF FORECLOSURE SALE-

      ‘(1) IN GENERAL- The foreclosure trustee shall cancel the foreclosure sale, at any time prior to the sale--

        ‘(A) if the debtor or the holder of any subordinate interest in the security property tenders the performance due under the debt instrument and mortgage, including any amounts due because of the exercise of the right to accelerate, and the expenses of proceeding to foreclosure incurred to the time of tender; or

        ‘(B) if the security property is the principal dwelling of the debtor, and the debtor--

          ‘(i) pays or tenders all sums which would have been due at the time of tender in the absence of any acceleration;

          ‘(ii) performs any other obligation which would have been required in the absence of any acceleration; and

          ‘(iii) pays or tenders all costs of foreclosure incurred for which payment from the proceeds of the sale would be allowed; or

        ‘(C) or any reason approved by the Administrator.

      ‘(2) LIMITATION- The debtor may not, without the approval of the Administrator, cure the default under paragraph (1)(B) if, within the preceding 12 months, the debtor has cured a default after being served with a notice of foreclosure sale pursuant to this Act.

      ‘(3) NOTICE OF CANCELLATION- The foreclosure trustee shall file a notice of the cancellation in the same place and manner provided for the filing of the notice of foreclosure sale under paragraph (2).

    ‘(e) STAY- If, prior to the time of sale, foreclosure proceedings under this section are stayed in any manner, including the filing of bankruptcy, no person may thereafter cure the default under the provisions of subsection (d)(1)(B) without the approval of the Administrator. If the default is not cured at the time a stay is terminated, the foreclosure trustee shall proceed to sell the security property as provided in this section.

    ‘(f) CONDUCT OF SALE-

      ‘(1) SALE PROCEDURES- Any foreclosure sale conducted pursuant to this section shall be at a public auction between the hours of 9:00 a.m. and 4:00 p.m. The foreclosure sale shall be held at the location specified in the notice of foreclosure sale, which shall be a location where real estate foreclosure auctions are customarily held in the county or one of the counties in which the property to be sold is located or at a courthouse therein, or upon the property to be sold. Sale of security property situated in two or more counties may be held in any one of the counties in which any part of the security property is situated. The foreclosure trustee may designate the order in which multiple tracts of security property are sold.

      ‘(2) BIDDING REQUIREMENTS- Written one-price sealed bids may be accepted by the foreclosure trustee, if submitted by the Administrator or other persons for entry by announcement by the foreclosure trustee at the sale. The sealed bids shall be submitted in accordance with the terms set forth in the notice of foreclosure sale. The Administrator or any other person may bid at the foreclosure sale, even if the Administrator or other person previously submitted a written one-price bid. The Administrator may bid a credit against the debt due without the tender or payment of cash. The foreclosure trustee may serve as auctioneer, or may employ an auctioneer who may be paid from the sale proceeds. If an auctioneer is employed, the foreclosure trustee is not required to attend the sale. The foreclosure trustee or an auctioneer may bid as directed by the Administrator.

      ‘(3) POSTPONEMENT OF SALE- The foreclosure trustee shall have discretion, prior to or at the time of sale, to postpone the foreclosure sale. The foreclosure trustee may postpone a sale to a later hour the same day by announcing or posting the new time and place of the foreclosure sale at the time and place originally scheduled for the foreclosure sale. The foreclosure trustee may instead postpone the foreclosure sale for not fewer than 9 nor more than 31 days, by serving notice that the foreclosure sale has been postponed to a specified

date, and the notice may include any revisions the foreclosure trustee deems appropriate. The notice shall be served by publication, mailing, and, if appropriate, posting in accordance with subsection (c), except that publication may be made on any of three separate days prior to the new date of the foreclosure sale, and mailing may be made at any time at least 7 days prior to the new date of the foreclosure sale.

      ‘(4) LIABILITY OF SUCCESSFUL BIDDER WHO FAILS TO COMPLY- The foreclosure trustee may require a bidder to make a cash deposit before the bid is accepted. The amount or percentage of the cash deposit shall be stated by the foreclosure trustee in the notice of foreclosure sale. A successful bidder at the foreclosure sale who fails to comply with the terms of the sale shall forfeit the cash deposit or, at the election of the foreclosure trustee, shall be liable to the agency on a subsequent sale of the property for all net losses incurred by the agency as a result of such failure.

      ‘(5) EFFECT OF SALE- Any foreclosure sale held in accordance with this Act shall be conclusively presumed to have been conducted in a legal, fair, and commercially reasonable manner. The sale price shall be conclusively presumed to constitute the reasonably equivalent value of the security property.

    ‘(g) TRANSFER OF TITLE AND POSSESSION-

      ‘(1) DEED- After receipt of the purchase price in accordance with the terms of the sale as provided in the notice of foreclosure sale, the foreclosure trustee shall execute and deliver to the purchaser a deed conveying the security property to the purchaser that grants and conveys title to the security property without warranty or covenants to the purchaser. The execution of the foreclosure trustee’s deed shall have the effect of conveying all of the right, title, and interest in the security property covered by the mortgage. Notwithstanding any other law provision of law, the foreclosure trustee’s deed shall constitute a conveyance of the security property.

      ‘(2) DEATH OF PURCHASER PRIOR TO CONSUMMATION OF SALE- If a purchaser dies before execution and delivery of the deed conveying the security property to the purchaser, the foreclosure trustee shall execute and deliver the deed to the representative of the purchaser’s estate upon payment of the purchase price in accordance with the terms of sale. Such delivery to the representative of the purchaser’s estate shall have the same effect as if accomplished during the lifetime of the purchaser.

      ‘(3) PURCHASER CONSIDERED BONA FIDE PURCHASER WITHOUT NOTICE- The purchaser of property under this Act shall be presumed to be a bona fide purchaser without notice of defects, if any, in the title conveyed to the purchaser.

      ‘(4) POSSESSION BY PURCHASER; CONTINUING INTERESTS- A purchaser at a foreclosure sale conducted pursuant to this Act shall be entitled to possession upon passage of title to the security property, subject to any interest or interests senior to that of the mortgage. The right to possession of any person without an interest senior to the mortgage who is in possession of the property shall terminate immediately upon the passage of title to the security property, and the person shall vacate the security property immediately. The purchaser shall be entitled to take any steps available under Federal law or State law to obtain possession.

      ‘(5) RIGHT OF REDEMPTION; RIGHT OF POSSESSION- This Act shall preempt all Federal and State rights of redemption or possession under statutory or common law. Upon conclusion of the public auction of the security property, no person shall have a right of redemption.

      ‘(6) PROHIBITION OF IMPOSITION OF TAX ON CONVEYANCE BY THE AGENCY- No tax, or fee in the nature of a tax, for the transfer of title to the security property by the foreclosure trustee’s deed shall be imposed upon or collected from the foreclosure trustee or the purchaser by any State or political subdivision thereof.

    ‘(h) RECORD OF FORECLOSURE AND SALE-

      ‘(1) RECITAL REQUIREMENTS- The foreclosure trustee shall recite in the deed to the purchaser, or in an addendum to the foreclosure trustee’s deed, or shall prepare an affidavit stating--

        ‘(A) the date, time, and place of sale;

        ‘(B) the date of the mortgage, the office in which the mortgage is filed, and the location of the filing of the mortgage;

        ‘(C) the persons served with the notice of foreclosure sale;

        ‘(D) the date and place of filing of the notice of foreclosure sale under subsection (c)

        ‘(E) that the foreclosure was conducted in accordance with the provisions of this Act; and

        ‘(F) the sale amount.

      ‘(2) EFFECT OF RECITALS- The recitals set forth in paragraph (1) shall be prima facie evidence of the truth of such recitals. Compliance with the requirements of paragraph (1) shall create a conclusive presumption of the validity of the sale in favor of bona fide purchasers and encumbrancers for value without notice.

      ‘(3) DEED TO BE ACCEPTED FOR FILING- The register of deeds or other appropriate official of the county or counties where real estate deeds are regularly filed shall accept for filing and shall file the foreclosure trustee’s deed and affidavit, if any, and any other instruments submitted for filing in relation to the foreclosure of the security property under this Act.

    ‘(h) EFFECT OF SALE- A sale conducted under this Act to a bona fide purchaser shall bar all claims upon the security property by--

      ‘(1) any person to whom the notice of foreclosure sale was mailed as provided in this Act who claims an interest in the property subordinate to that of the mortgage, and the heir, devisee, executor, administrator, successor, or assignee claiming under any such person;

      ‘(2) any person claiming any interest in the property subordinate to that of the mortgage, if such person had actual knowledge of the sale;

      ‘(3) any person so claiming, whose assignment, mortgage, or other conveyance was not filed in the proper place for filing, or whose judgment or decree was not filed in the proper place for filing, prior to the date of filing of the notice of foreclosure sale as required by subsection (c), and the heir, devisee, executor, administrator, successor, or assignee of such a person; or

      ‘(4) any other person claiming under a statutory lien or encumbrance not required to be filed and attaching to the title or interest of any person designated in any of the foregoing subsections of this section.

    ‘(i) DISPOSITION OF SALE PROCEEDS-

      ‘(1) DISTRIBUTION OF SALE PROCEEDS- The foreclosure trustee shall distribute the proceeds of the foreclosure sale in the following order:

        ‘(A)(i) First, to pay the commission of the foreclosure trustee, other than an agency employee, in an amount not to exceed 5 percent of the sum collected, plus the foreclosure trustee’s costs.

        ‘(ii) The amounts described in clause (i) shall be computed on the gross proceeds of all security property sold at a single sale.

        ‘(B) Thereafter, to pay the expense of any auctioneer employed by the foreclosure trustee, if any, except that the commission payable to the foreclosure trustee pursuant to subparagraph (A) shall be reduced by the amount paid to an auctioneer, unless the Administrator determines that such reduction would adversely affect the ability of the Administrator to retain qualified foreclosure trustees or auctioneers.

        ‘(C) Thereafter, to pay for the costs of foreclosure, including--

          ‘(i) reasonable and necessary advertising costs and postage incurred in giving notice pursuant to subsection (c);

          ‘(ii) mileage for posting notices and for the foreclosure trustee’s or auctioneer’s attendance at the sale at the rate provided in section 1921 of title 28, United States Code, for mileage by the most reasonable road distance;

          ‘(iii) reasonable and necessary costs actually incurred in connection with any search of title and lien records; and

          ‘(iv) necessary costs incurred by the foreclosure trustee to file documents.

        ‘(D) Thereafter, to pay valid real property tax liens or assessments, if required by the notice of foreclosure sale.

        ‘(E) Thereafter, to pay any liens senior to the mortgage, if required by the notice of foreclosure sale.

        ‘(F) Thereafter, to pay service charges and advancements for taxes, assessments, and property insurance premiums.

        ‘(G) Thereafter, to pay late charges and other administrative costs and the principal and interest balances secured by the mortgagee including expenditures for the necessary protections preservation, and repair of the security property as authorized under the debt instrument or mortgage and interest thereon if provided for in the debt instrument or mortgage, pursuant to the agency’s procedures.

      ‘(2) INSUFFICIENT PROCEEDS- In the event there are no proceeds of sale or the proceeds are insufficient to pay the costs and expenses set forth in paragraph (1), the Administrator shall pay such costs and expenses as authorized by applicable law.

      ‘(3) SURPLUS MONEYS-

        ‘(A) After making the payments required by paragraph (1), the foreclosure trustee shall--

          ‘(i) distribute any surplus to pay liens in the order of priority under Federal law or the law of the State where the security property is located; and

          ‘(ii) pay to the person who was the owner of record on the date the notice of foreclosure sale was filed the balance, if any, after any payments made pursuant to paragraph (1).

        ‘(B) If the person to whom such surplus is to be paid cannot be located, or if the surplus available is insufficient to pay all claimants and the claimants cannot agree on the distribution of the surplus, that portion of the sale proceeds may be deposited by the foreclosure trustee with an appropriate official authorized under law to receive funds under such circumstances. If such a procedure for the deposit of disputed funds is not available, and the foreclosure trustee files a bill of interpleader or is sued as a stakeholder to determine entitlement to such funds, the foreclosure trustee’s necessary costs in taking or defending such action shall be deducted first from the disputed funds.

    ‘(j) DEFICIENCY JUDGMENT-

      ‘(1) IN GENERAL- If after deducting the disbursements described in section 13, the price at which the security property is sold at a foreclosure sale is insufficient to pay the unpaid balance of the debt secured by the security property, counsel for the agency may commence an action or actions against any or all debtors to recover the deficiency, unless specifically prohibited by the mortgage. The agency is also entitled to recover any amount authorized by section 11 and costs of the action.

      ‘(2) LIMITATION- Any action commenced to recover the deficiency shall be brought within 6 years of the last sale of security property.

      ‘(3) CREDITS- The amount payable by a private mortgage guaranty insurer shall be credited to the account of the debtor prior to the commencement of an action for any deficiency owed by the debtor. Nothing in this subsection shall curtail or

limit the subrogation rights of a private mortgage guaranty insurer.’.

SEC. 109. MISCELLANEOUS AUTHORITIES TO PROVIDE LOANS AND OTHER FINANCIAL ASSISTANCE.

    (a) FUNDING LIMITATION; SEMINARS- Section 7(d) (15 U.S.C. 636(d)) is repealed.

    (b) TRADE ADJUSTMENT LOANS- Section 7(e) (15 U.S.C. 636(e)) is repealed.

    (c) WAIVER OF CREDIT ELSEWHERE TEST FOR COLLEGES AND UNIVERSITIES- Section 7(f) (15 U.S.C. 636(f)) is repealed.

    (d) LOANS TO HANDICAPPED PERSONS AND ORGANIZATIONS FOR THE HANDICAPPED- Section 7(h) (15 U.S.C. 636(h)) is repealed.

    (e) LOANS TO SMALL BUSINESS CONCERNS LOCATED IN URBAN OR RURAL AREAS WITH HIGH PROPORTIONS OF UNEMPLOYED OR LOW-INCOME INDIVIDUALS- Section 7(i) (15 U.S.C. 636(i)) is repealed.

    (f) LOANS TO SMALL BUSINESS CONCERNS FOR SOLAR ENERGY AND ENERGY CONSERVATION MEASURES- Section 7(l) (15 U.S.C. 636(l)) is repealed.

SEC. 110. SMALL BUSINESS COMPETITIVENESS DEMONSTRATION PROGRAM.

    (a) EXTENSION OF DEMONSTRATION PROGRAM- Section 711(c) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3890) is amended by striking ‘September 30, 1996’ and inserting ‘September 30, 2000’.

    (b) REPORTING OF SUBCONTRACT PARTICIPATION IN CONTRACTS FOR ARCHITECTURAL AND ENGINEERING SERVICES- Section 714(b)(5) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3892) is amended to read as follows:

      ‘(5) DURATION- The system described in subsection (a) shall be established not later than October 1, 1996 (or as soon as practicable thereafter on the first day of a subsequent quarter of fiscal year 1997), and shall terminate on September 30, 2000.’.

    (c) REFERENCES TO ARCHITECTURAL AND ENGINEERING SERVICES-

      (1) IN GENERAL- The Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3889 et seq.) is amended by striking ‘architectural and engineering services (including surveying and mapping)’ each place it appears and inserting ‘architectural and engineering services (including surveying, mapping, and landscape architecture)’.

      (2) DESIGNATED INDUSTRY GROUPS- Section 717(d) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3894) is amended by inserting ‘standard industrial classification codes 0731 and 0739 (if identified as pertaining to mapping services),’ after ‘(if identified as pertaining to mapping services),’.

    (d) SMALL BUSINESS PARTICIPATION GOALS-

      (1) ENHANCED GOALS FOR DESIGNATED INDUSTRY GROUPS- Section 712(a) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3890) is amended to read as follows:

    ‘(a) ENHANCED GOALS FOR DESIGNATED INDUSTRY GROUPS- Each participating agency shall establish an annual small business participation goal (calculated on the basis of the total dollar value of contract awards) that is--

      ‘(1) 35 percent in the case of the designated industry group for architectural and engineering services (including surveying, mapping, and landscape architecture); or

      ‘(2) 40 percent in the case of each of the other designated industry groups.’.

      (2) EMERGING SMALL BUSINESS CONCERNS-

        (A) REPEAL OF RESERVE- Section 712(b) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3890-3891) is amended to read as follows:

    ‘(b) [Struck out->][ Reserved ][<-Struck out] .’.

      (B) CONFORMING AMENDMENT- Section 713(b) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3892) is amended by striking ‘, which are in excess of the reserve thresholds specified pursuant to section 712(b)’.

    (3) MODIFICATIONS TO SOLICITATION PRACTICES- Section 712(d)(3) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3891) is amended by striking ‘40 percent of the contract awards’ and inserting ‘the percentage applicable to the designated industry group pursuant to subsection (a)’.

    (e) PARTICIPATING AGENCY- Section 718(c) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3894) is amended--

      (1) by striking ‘as part of the Program test plan’;

      (2) by redesignating paragraphs (2) through (10) as paragraphs (3) through (11), respectively; and

      (3) by inserting after paragraph (1) the following:

      ‘(2) the Department of Commerce,’.

    (f) REPORTS TO CONGRESS-

      (1) IN GENERAL- Section 716 of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3893) is amended--

        (A) in subsection (a), by striking ‘fiscal year 1991 and 1995’ and inserting ‘each of fiscal year beginning with fiscal year 1991 and ending with fiscal year 1999’;

        (B) in subsection (a), by striking ‘results’ and inserting ‘cumulative results’; and

        (C) in subsection (c), by striking ‘1996’ and inserting ‘1999’.

      (2) CUMULATIVE REPORT THROUGH FISCAL YEAR 1995- A cumulative report of the results of the Small Business Competitiveness Demonstration Program for fiscal years 1991 through 1995 shall be submitted not later than 60 days after the date of the enactment of this Act pursuant to section 716(a) of the Small Business Competitiveness Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3893), as amended by paragraph (1) of this subsection.

SEC. 111. AMENDMENT TO SMALL BUSINESS GUARANTEED CREDIT ENHANCEMENT ACT OF 1993.

    Section 7 of the Small Business Guaranteed Credit Enhancement Act of 1993 (Public Law 103-81; 15 U.S.C. 634 note) is repealed effective September 29, 1996.

TITLE II--AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT

SEC. 201. REFERENCES.

    Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.).

SEC. 202. MODIFICATIONS TO DEVELOPMENT COMPANY DEBENTURE PROGRAM.

    (a) INCREASED LOAN TO VALUE RATIOS- Section 502(3) (15 U.S.C. 696(3)) is amended to read as follows:

      ‘(3) CRITERIA FOR ASSISTANCE-

        ‘(A) IN GENERAL- Any development company assisted under this section must meet the criteria established by the Administration, including the extent of participation to be required or amount of paid-in capital to be used in each instance as is determined to be reasonable by the Administration.

        ‘(B) COMMUNITY INJECTION FUNDS-

          ‘(i) SOURCES OF FUNDS- Community injection funds may be derived, in whole or in part, from--

            ‘(I) State or local governments;

            ‘(II) banks or other financial institutions;

            ‘(III) foundations or other not-for-profit institutions; or

            ‘(IV) the small business concern (or its owners, stockholders, or affiliates) receiving assistance through a body authorized by this title.

          ‘(ii) FUNDING FROM INSTITUTIONS- Not less than 50 percent of the total cost of the project to be financed shall come from the institutions described in subclauses (I), (II), and (III) of clause (i).

        ‘(C) FUNDING FROM A SMALL BUSINESS CONCERN- The small business concern (or its owners, stockholders, or affiliates) receiving assistance through a body authorized by this title shall provide--

          ‘(i) at least 15 percent of the total cost of the project financed, if the small business concern has been in operation for a period of 2 years or less;

          ‘(ii) at least 15 percent of the total cost of the project financed if the project involves the construction of a limited or single purpose building or structure;

          ‘(iii) at least 20 percent of the total cost of the project financed if the project involves both of the conditions set forth in clauses (i) and (ii); or

          ‘(iv) at least 10 percent of the total cost of the project financed, in all other circumstances, at the discretion of the development company.’.

    (b) GUARANTEE FEE FOR DEVELOPMENT COMPANY DEBENTURES- Section 503(b)(7)(A) (15 U.S.C. 697(b)(7)(A)) is amended by striking ‘0.125 percent’ and inserting ‘0.625 percent’.

    (c) FEES TO OFFSET SUBSIDY COST- Section 503(d) (15 U.S.C. 697(d)) is amended to read as follows:

    ‘(d) CHARGES FOR ADMINISTRATION EXPENSES-

      ‘(1) LEVEL OF CHARGES- The Administration shall continue to impose charges for administrative expenses with respect to each debenture for which payment of principal and interest is guaranteed under subsection (a) at the level in effect on the date of the enactment of this paragraph. To the extent that such charges exceed the administrative costs of the program as provided by non-governmental employees, such excess proceeds shall be used to offset the cost (as such term is defined in section 502 of the Credit Reform Act of 1990) to the Administration of making guarantees under subsection (a).

      ‘(2) PARTICIPATION FEE- The Administration shall also impose a one-time fee of 50 basis points on the total participation in any project of any institution described in subclause (I), (II), or (III) of section 502(3)(B)(i). Such fee shall be imposed only when the participation of the institution will occupy a senior credit position to that of the development company. Such fee shall be collected by the development company, forwarded to the Administration, and used to offset the cost (as such term is defined in section 502 of the Credit Reform Act of 1990) to the Administration of making guarantees under subsection (a).

      ‘(3) DEVELOPMENT COMPANY FEE- The Administration shall collect annually from each development company a fee of .0125 percent of the outstanding principal balance of any debenture guaranteed by the Administration. Such fee shall be derived from the servicing fees collected by the development company pursuant to regulation, and shall not be derived from any additional fees imposed on small business concerns. All proceeds of the fee shall be used to offset the cost (as such term is defined in section 502 of the Credit Reform Act of 1990) to the Administration of making guarantees under subsection (a).’.

    (d) FEES COLLECTED BY AGENTS FOR CENTRAL REGISTRATION OF TRUST CERTIFICATES- Section 505(d) (15 U.S.C. 697b(d)) is amended by adding at the end the following: ‘The excess of any fees collected for the functions described in subsection (f)(2) shall be used to offset the cost (as such term is defined in section 502 of the Credit Reform Act of 1990) to the Administration of making guarantees under subsection (a).’.

SEC. 203. REQUIRED ACTIONS UPON DEFAULT.

    Section 503 (15 U.S.C. 697) is amended by adding at the end the following:

    ‘(f) REQUIRED ACTIONS UPON DEFAULT-

      ‘(1) DEADLINES-

        ‘(A) INITIAL ACTIONS- Not later than the 45th day after the date on which a payment

on a loan funded through a debenture guaranteed under this section is due and not received, the Administration shall--

          ‘(i) take all necessary steps to bring such a loan current; or

          ‘(ii) implement a formal written deferral agreement.

        ‘(B) PURCHASE OR ACCELERATION OF DEBENTURE- Not later than the 65th day after the date on which a payment on a loan described in subparagraph (A) is due and not received, and absent a formal written deferral agreement, the Administration shall take all necessary steps to purchase or accelerate the debenture.

      ‘(2) PREPAYMENT PENALTIES- The Administration shall--

        ‘(A) negotiate the elimination of any prepayment penalties on defaulted loans made prior to September 30, 1996;

        ‘(B) decline to pay any prepayment penalty on the default based purchase of loans issued after September 30, 1996; and

        ‘(C) for any project financed after September 30, 1996, decline to pay any default interest rate on the portion of any project funded through community injection funds described in section 502(3).’

SEC. 204. LOAN LIQUIDATION PILOT PROGRAM.

    (a) IN GENERAL- The Administrator shall carry out a loan liquidation pilot program (in this section referred to as the ‘pilot program’) in accordance with the requirements of this section.

    (b) SELECTION OF DEVELOPMENT COMPANIES- Not later than 60 days after the date of the enactment of this Act, the Administrator shall--

      (1) select no more than 35 and no less than 15 development companies authorized to make loans and issue debentures under title V of the Small Business Investment Act of 1958 to participate in the pilot program. The development companies selected shall--

        (A) have a minimum of 6 years experience in the program established by such title V;

        (B) have made an average of 10 loans per year through the program established by such title V; and

        (C) have shown at least 2 years experience in liquidating loans under the authority of some other Federal, State, or local lending program.

    (c) AUTHORITY OF DEVELOPMENT COMPANIES- The development companies selected under subsection (b) shall, for all loans in their portfolio of loans made through debentures guaranteed under title V of the Small Business Investment Act of 1958 that are in default after the date of enactment of this Act, be authorized to--

      (1) perform all liquidation and foreclosure functions, including the acceleration or purchase of community injection funds; and

      (2) liquidate such loans in a reasonable and sound manner and according to commercially accepted practices.

    (d) AUTHORITY OF THE ADMINISTRATOR- In carrying out the pilot program, the Administrator shall--

      (1) have full authority to rescind the authority granted any development company under this section upon a showing of good cause;

      (2) consider the inclusion of additional development companies in the pilot program (subject to the criteria of subsection (b)(1)) in the event an insufficient number of liquidations occur to enable a valid sample of the effectiveness of the pilot program; and

      (3) implement the pilot program no later than 90 days after the selection of the development companies specified in subsection (b).

    (e) REPORT-

      (1) IN GENERAL- The Administrator shall issue a report on the results of the pilot program to the Committees on Small Business of the House of Representatives and the Senate. The report shall include information relating to--

        (A) the total dollar amount of each loan and project liquidated;

        (B) the total dollar amount guaranteed by the Administration;

        (C) total dollar losses;

        (D) total recoveries both as percentage of the amount guaranteed and the total cost of the project; and

        (E) a comparison of the pilot program information with the same information for liquidation conducted outside the pilot program over the period of time.

      (2) REPORTING PERIOD- The report shall be based on data from, and issued not later than 90 days after the close of, the first eight 8 fiscal quarters of the pilot program’s operation after the date of implementation.’.

SEC. 205. REGISTRATION OF CERTIFICATES.

    (a) CERTIFICATES SOLD PURSUANT TO SMALL BUSINESS ACT- Section 5(h) of the Small Business Act (15 U.S.C. 634(h)) is amended--

      (1) by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D);

      (2) by striking ‘(h)’ and inserting ‘(h)(1)’;

      (3) by striking subparagraph (A), as redesignated by paragraph (1) of this subsection, and inserting the following:

      ‘(A) provide for a central registration of all loans and trust certificates sold pursuant to subsections (f) and (g) of this section;’; and

      (4) by adding at the end the following:

    ‘(2) Nothing in this subsection shall prohibit the utilization of a book entry or other electronic form of registration for trust certificates. The Administration may, with the consent of the Secretary of the Treasury, use the book-entry system of the Federal Reserve System.’.

    (b) CERTIFICATES SOLD PURSUANT TO SMALL BUSINESS INVESTMENT COMPANY PROGRAM- Section 321(f) (15 U.S.C. 6871(f)) is amended--

      (1) in paragraph (1) by striking ‘Such central registration shall include’ and all that follows through the period at the end of the paragraph; and

      (2) by adding at the end the following:

    ‘(5) Nothing in this subsection shall prohibit the use of a book-entry or other electronic form of registration for trust certificates.’.

    (c) CERTIFICATES SOLD PURSUANT TO DEVELOPMENT COMPANY PROGRAM- Section 505(f) of the Small Business Investment Act of 1958 (15 U.S.C. 697b(f)) is amended--

      (1) by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D);

      (2) by striking ‘(f)’ and inserting ‘(f)(1)’;

      (3) by striking subparagraph (A), as redesignated by paragraph (1) of this subsection, and inserting the following:

      ‘(A) provide for a central registration of all trust certificates sold pursuant to this section;’ and

      (4) by adding at the end the following:

    ‘(2) Nothing in this subsection shall prohibit the utilization of a book entry or other electronic form of registration for trust certificates.’.