As some banks discovered as they tried to move new 504 refinance loans through the SBA regional approval centers, their loans were getting thwarted — not by the SBA, but by the lender that held the note the new lender was trying to refinance.
SBA Form 2416 was modified effective April 14, 2011, so it no longer needs to be completed by the lender currently holding the first mortgage/deed of trust, unless it is the same institution. The original form was a problem for lenders looking to refinance debt held by another institution because if the loan was of sufficient credit quality to be refinanced by a “new” lender, then the current lender would likely not want to lose the loan out of its own portfolio. This is particularly true today with as much liquidity as banks currently have and banks’ strong desire to finance any good owner-occupied credit that they can find.
Until recently, Form 2416 had to be certified by the originating lender. When the originating lender received the authorization form, which required it to certify that the loan was in good standing, it could call the borrower and “derail” the refinance by offering a loan of similar or better terms to the borrower.
Credit the SBA for recognizing that this policy was quashing many refinance opportunities for other lenders and using a lot of resources and time. So now, Form 2416 needs to be completed only when a lender is refinancing its own debt. So CDCs and lenders that were reluctant to take on new transactions for fear they would be “taken back” by the current lenders need no longer be concerned about this prospect.