SBA Loan Sales Spike as Banks Seek to Beat the FAS 166 Clock
New accounting rule will negatively impact bank profitability
NEW YORK, NY - December 7, 2009 - GovGex, the leading exchange for government guaranteed loans, today announced a measurable spike in SBA loan sales. The flurry of activity comes in the final month before banks are required to comply with a new securitizations accounting rule.
According to the Financial Accounting Standards Board (FASB), Statement # 166, the rule in question was initiated at the request of investors, the SEC, and President's Working Group on Financial Markets. It is widely agreed that the rule change negatively impacts profitability for SBA lenders reliant on the secondary market.
"Without a doubt this is a big change for lenders that sell their SBA loans," said Bob Coleman, publisher of the Coleman Report, the leading information provider on small business lending. "For those lenders, like Wells Fargo or Chase that historically don't sell their SBA loans there is no issue, but for everyone else, this change hurts the bottom line."
Michael Cohen, CPA and Senior Manager in the New Jersey office of Friedman LLP agrees that this is an important issue for banks which sell their SBA loans. "In 2010, banks selling SBA loans are required to delay income recognition by 90 days - in practice reducing the bank's 2010 gain on sale income by one quarter. The change is particularly painful to capital constrained banks. This must be on the radar screen of bank CFOs and SBA managers."
"After seeing a four fold increase in GovGex loans sale volume in the two weeks after Thanksgiving compared to the two weeks before, it’s hard not to conclude that lenders are looking to sell prior to the implementation of FAS 166" said Mike Rozman, President of GovGex.com. "I expect to see even more sales as the deadline approaches its final weeks.
About GovGex.com
GovGex is the secure online exchange for selling SBA and USDA loans. Banks turn to GovGex to access over 30 buyers when selling government guaranteed loans including leading SBA pool assemblers vital to the SBA market and in turn to America's small businesses. GovGex is an independent source for secondary market pricing information - built on actual bid levels as seen on GovGex.
To learn more, visit: www.GovGex.com.
Media Contact:
Brian O'Boyle
GovGex.com
boboyle@govgex.com
|
