FAS 166 will delay secondary market sale gains by 90 days beginning Jan 1st.
The net effect is the income of all SBA 7(a) lenders who sell their loans to the secondary market will be reduced by 25% in 2010.
Small banks will be hit especially hard as they will not be able to immediately recognize the gain, not only resulting in reduced profitability, but delaying the contribution to the bank's capital base.
The Solution: SBA must change its regulations to allow broker/dealers to waive the 90 day warranty period currently required by SBA in the 1086
The secondary market will demand a reduction in the premium for this waiver, but the cost would be worth it for smaller community banks.
Experts are saying “SBA department managers need to be prepared to recognize the loss of a quarter’s worth of gain on sale when preparing their 2010 budgets and business plans.”
Coleman Publishing’s Coping With FAS 166 -- Compliance for 2010 Audio Conference will review the effects of FAS 166 and how lenders can plan for the transition. On December 29, 2009 at 2pm Eastern Small Business Bankers should plan on attending one of the Small Business Lending industry’s most valuable conferences for:
• Full Analysis of FAS 166 amending FAS 140
• Obtain New FDIC Requirements
• Secondary Market Outlook for 2010
• Plan your 2010 Budget
Bob Coleman is the Founder of Coleman Publishing, an online media company covering the small business banking industry. Coleman started in 1993 with the Coleman Report, a newsletter covering the United States' Small Business Administration loan programs. He is the national small business banking expert. His son, Joseph Coleman joined the company last year and is the company’s web editor.
For further information contact Annie Wadhams at annie@colemanpublishing.com.
Coleman Publishing
P.O. Box 546
La Canada Flintridge
CA, 91012
