SBA 504 Secondary Market for First Mortgage Loans Returns
The Small Business Administration announced today the first 9 “Loan Pool Originators” authorized by the SBA to sell pools of SBA 504 first mortgage loans.
The new secondary market is important because for the last few years most (formerly) active SBA lenders have been sitting on the sidelines since there’s been no place to sell first mortgages and no premiums as a result. Banks have had to hang onto (or portfolio) any 504 first mortgage loans which has been a huge problem given all of the other difficulties they’ve encountered these last few years. This new market should give them a place to sell the loans and get the capital they need to do more lending.
The secondary market has been in the works for a while since it was originally announced as part of the Recovery Act and there is hope that with SBA Loan Rates for both first and second mortgage rates remaining low that SBA lending will continue to increase and that 504 loans in particular will be easier to obtain.
This new version of a secondary market is not quite the traditional model as it has been tweaked in a way that prevents some players from participating so time will tell if it gets the desired result.
It can’t hurt.