Sec. 2. Office of Credit Risk Management; stress analyses
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The Small Business Act ( 15 U.S.C. 631 et seq. ) is amended— by redesignating section 47 as section 49; and by inserting after section 46 the following: There is within the Administration the Office of Credit Risk Management (in this section referred to as the Office ). The Office is headed by the Director of the Office of Credit Risk Management (in this section referred to as the Director ). The Director shall issue any final report relating to a review of any entity authorized to issue a loan or loan guarantee under section 7 or under title V of the Small Business Investment Act of 1958 ( 15 U.S.C. 695 et seq. ).
An employee of the Office shall be present for and supervise any full review conducted by a contractor of the Administration. In addition to other enforcement actions authorized under regulations promulgated by the Administration, the Director shall impose penalties on any lender that finances loans under section 7(a) if the lender knowingly and repeatedly— fails to properly determine and document that a loan is eligible for financing under this Act and regulations promulgated under this Act, including a failure to document that a loan is eligible for financing under section 7(a) because the applicant is unable to obtain credit elsewhere; sells the guaranteed portion of a loan under section 5(f) when the proceeds of the loan have not been fully disbursed in accordance with program requirements; imposes on an applicant for a loan under section 7(a) a fee that the Administration has not specifically authorized; or re-amortizes a loan solely to make the loan appear current.
In addition to the authority of the Administrator to deny liability for a loan, the Director may impose a penalty on a lender that knowingly and repeatedly violates the requirements of section 7(a) and the regulations promulgated under that section, including by committing violations described in paragraph (1), which— shall be based on— the severity of the violations; and the frequency with which the lender fails to comply with the requirements; and may include— issuing the lender a warning and an order to comply; if the lender is a participant in the Preferred Lenders Program (in this subsection referred to as the program ), as defined in section 7(a)(2)(C)(iii), suspending the lender from participating in the program for a period of not less than 90 days and not more than 1 year, which shall include the right of the lender to appeal the decision of the Director to the Office of Hearings and Appeals; prohibiting the lender from issuing loans under section 7(a) under processes determined by the Administrator through regulation, which shall include the right of the lender to appeal the decision of the Director to the Office of Hearings and Appeals; assessing a civil monetary penalty against the lender in an amount that is not less than $5,000 and not greater than $250,000, which shall include the right of the lender to appeal the decision of the Director to the Office of Hearings and Appeals; prohibiting a lender from selling in the secondary market, under section 5(f), the guaranteed portion of any loan made by the lender; and any other penalty that the Director determines to be appropriate after considering the severity and the frequency of the violations of the lender.
With respect to the penalties described in clauses (ii), (iii), and
(iv)of paragraph (2)(B), the Administrator shall— not later than 180 days after the date of enactment of this section, propose amendments to any regulations in effect on the date of enactment of this section; and not later than 1 year after the date of enactment of this section, publish a final regulation. During any period in which a lender is suspended from participating in the program, or if a lender is prohibited from issuing loans under section 7(a), the lender shall remain obligated to maintain all servicing and liquidation activities delegated to the lender by the Administrator. Not later than December 31 of each year, the Office shall submit to Congress a report detailing the subject matter and frequency of actions taken by the Office during the year preceding the submission of the report. The Administrator shall annually conduct a risk analysis of the portfolio of the Administration with respect to all loans issued under section 7(a). Beginning on April 1, 2018, and annually thereafter, the Director of the Office of Credit Risk Management shall submit to Congress a report containing the results of each portfolio risk analysis conducted under subsection (a). A report submitted under paragraph
(1)shall include— an analysis of overall program risk; an analysis of program risk— by industry concentration; by geography; and by program loan interest rates; without identifying individual lenders by name, a consolidated analysis of the risk created by the individual lenders responsible for not less than 1 percent of the gross loan approvals for the year covered by the report; and a summary of the steps taken by the Administration to mitigate the risks identified in subparagraphs (A), (B), and (C). .
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