4-Addendum2-SOW-Final-SBAHQ-13-R-0002.pdf

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 1 of 27

PERFORMANCE-BASED

DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

FISCAL TRANSFER AGENT FOR THE SBA 7(a) GUARANTEED LOAN PROGRAM

1.0 – Executive Summary

C-1 Purpose of Contract

C-2 Background

C-3 Overview

2.0 – Specific Requirements

C-4 Secondary Market Activities

C-5 Loan Administration and Reporting

C-6 Lender Financing and Loan Securitizations

C-7 Document Management

C-8 Technology

3.0 – Special Contract Requirements

C-9 Bonding Requirements

C-10 Auditing Requirements

4.0 – Deliverables

5.0 – Travel

6.0 – Other Direct Costs

7.0 – Government-Furnished Property and Services

8.0 – Security Requirements

9.0 – Place of Performance

10.0 – Period of Performance

11.0 – Performance-Based Contract Administration

12.0– Miscellaneous Contract Requirements

C-11 Invoicing

C-12 Non-Personal Services Statement

C-13 Monthly / Yearly Reporting Statements

C-14 Daily Balance of Accounts

C-15 Transition

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 2 of 27

1.0 EXECUTIVE SUMMARY

C-1. Purpose

This Statement of Work details the functions required by the U. S. Small Business

Administration (SBA) for Contractor services to facilitate the delivery of the 7(a) Guaranteed

Loan program to stakeholders in the small business lending community. SBA requires

Contractor services in the development and implementation of an electronic loan origination and document management system that can be used by SBA and its lender participants to establish and monitor government guarantees linked to loans made to qualified small business borrowers.

Required services include the receipt and recordation of small business borrower loan payments representing the guaranteed interests of SBA loans made by lending institutions participating in the SBA 7(a) Guaranteed Loan Program. This contract also requires the Contractor to provide for the continued delivery and administration of a primary and secondary market of individual and pool certificates guaranteed by the SBA, in accordance with regulations issued by the SBA.

The contract requires the development and implementation of an interactive, electronic fiscal and transfer payment system that SBA can rely on to fulfill its secondary market program objectives.

This transfer payment system shall provide the SBA with audit-verifiable data on the condition of all SBA 7(a) and America’s Recovery Capital (ARC) loan accounts. The Contractor shall have primary responsibility for its own operations, and shall have the requisite staff and resources to properly manage this system according to SBA instruction.

Contractor shall also provide custodial care and safekeeping services for documents relating to structured credit facilities and loan portfolio securitization instruments involving SBA loans.

In addition, the Contractor shall provide a full suite of status reports that detail the condition of the SBA 7(a) and ARC loan portfolio. Contractor shall be able to provide market information on the condition of all SBA loan pools upon request.

C-2. Background

The SBA is an independent agency of the United States, established on July 30, 1953, pursuant to the Small Business Act, as amended (the "Small Business Act"). The SBA derives its authority principally from the Small Business Act and the Small Business Investment Act of

1958, as amended (the "Small Business Investment Act").

The 7(a) Guaranteed Loan Program is the primary federal lending program devoted to small business in the United States. Established under Section 7(a) of the Small Business Act of 1953, as amended, the program extends a full faith and credit guarantee of the U.S. Government to lenders that make small business loans pursuant to SBA rules and regulations. This program currently provides guarantees on loans up to $5.0 million, and a maximum guarantee amount of

$3.75 million. The 7(a) portfolio of loans numbers approximately 300,000 accounts with an outstanding gross principal balance of $60.8 billion.

SBA’s America’s Recovery Capital (ARC) Loan Program is a temporary guaranteed-loan program authorized by the American Recovery and Reinvestment Act of 2009 (the Recovery

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 3 of 27

Act) (P.L. 111-5, 123 Stat. 115) enacted on February 17, 2009. ARC Loans were 100% SBA guaranteed loans of up to $35,000 that were interest-free to the borrower. SBA pays the monthly interest to the SBA Lender. The ARC portfolio of loans numbers approximately 7,000 active loans with an outstanding gross principal balance of $156 million. The ARC Loan Program is closed with no new loans being made.

C-3. Overview

The Contractor shall be responsible for the delivery and of an end-to-end electronic loan origination and document management System that will seamlessly interface with the SBA’s existing GOTS system and any subsequent electronic data information system SBA adopts during the contract period. The Contractor shall provide staffing necessary for the successful operation of the System and its complete integration with SBA’s electronic information systems.

The Contractor will serve as the central registry for owners of Guaranteed Interests ("Registered

Holders”) in SBA guaranteed loans and loan pools, and will provide fiduciary services associated with securities custody, account administration, electronic execution and transmission of investment securities to investors. Services shall also include safekeeping services for documents related to structured credit facilities and loan portfolio securitization instruments. Finally, the

Contractor will deliver a full suite of program status reports that detail the condition of the SBA

7(a) and ARC loan portfolio and secondary markets, as well as written periodic reports on process improvements to make the SBA 7(a) loan program more efficient and less costly to the taxpayers and to the small business community.

The figure below details the new functionality that the system is expected to provide which includes:

Eligibility

Proposal

Underwriting

Credit Review

Closing

Commitment Packaging

Document Management

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 4 of 27

Figure 1. System New Functionality

In completing tasks detailed in this contract, SBA shall retain full discretion over actions taken by the Contractor that may impact SBA borrowers, lenders, broker-dealers and other market participants. The Contractor shall seek prior SBA authorization on decisions involving Systems development, testing, and implementation, and will comply with prevailing SBA guidance on decision documentation and disclosure. The Contractor shall make available to SBA all tools and resources used to develop and operate the System, and shall have senior management and operations staff available to meet with SBA upon request.

2.0 SPECIFIC CONTRACT REQUIREMENTS

C-4. Secondary Market Activities

C-4.1. Secondary Market Information Systems. The Contractor shall employ, at its own expense, a best-in-class, information systems application centered on securities custody, account administration, electronic execution and transmission of investment securities to investors. The Contractor shall provide real-time market access to lenders, investors and broker-dealers for annual fee as detailed in the Pricing

Schedule here in this contract, and shall have in place at the time of full contract assumption, a website platform that provides a full suite of data analytics on the condition of the SBA secondary market. Information on this website platform shall include general characteristics of the GICs sold and of each of the loan pools formed.

C-4.2. Central Registry for Certficates of Guaranteed Interests. The Contractor shall provide for central registration of all SBA Guaranteed Interests, which shall include the

Responsible for agency wide financial reporting requirements.

Support single budgetary solution

Performs loan accounting

Lenders

Electronic Lending System

(ETRAN)

Origination

Electronic Lending System

(ETRAN)

Servicing

Loan Associated Names and Addressed Programs

Web Environment

Oracle

Loan Accounting System (LAS)

Credit Bureau Reporting

General Ledger Only

(GLO)

IRS 1099C

System

Loan Accounting Daily Update Cycle

(LADUC)

Generate Accounting

Non-Proprietary COBOL

Reports

Lender Portfolio Management Risk Management

Loan Lender Monitoring Systems (L/LMS)

SAS/MS-Access

Loan accounting transactional data Loan collection detail data Provides loan record details, borrower’s history, and transcript of accounts

Electronic Loan Information Processing System (ELIPS)

Oracle

Financial Reporting

OMB

Allotment, Apportionment

(SF132)

Financial Systems

Back Office Processes

Lenders

Lenders SBA Loan Center

Originates Disaster, business loan guaranties, and microloans Service Loans (The following functions now occur on the web:

Litigation; Liquidation; Collateral Purchase; Collateral Sale;

Disbursement; Deferment; Loan Workout; UCC Filing; Federal Records; Disaster Funding; Disaster Servicing)

Purchase loans

Treasury

External Business Partners

Budget Reporting

Electronic Lending System

(ETRAN) Post Servicing

Guaranty Purchase Tracking

System (GPTS)

Collects fees and reports status on bank serviced 7A/504 loans

7A/504 Fiscal Transfer Agents

Lenders

SBA Loan Center

SBA Office of Risk Management

Small Business

Credit Commitment

Packaging

Loan Application Process...online

Closing

Document Management

No

Yes Yes Eligibility Proposal Underwriting

Yes

Yes

Declined No

No

No

New Functionality

New Functionality

New Functionality

New Functionality

New Functionality

New Functionality New Functionality

New Functionality

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 5 of 27 following information in electronic format with respect to each sale, including transfers:

a. SBA Loan Number

b. Servicing Office Designation Code and Servicing Office Name

c. Lender's Name, Address, Contact and Phone

d. Borrower's Name and Address

e. Purchaser's Name, Address, Contact and Phone

f. Broker/Dealer Identification

g. Original Face Amount of Note

h. Total Loan Amount Outstanding at Time of Sale

i. Guaranteed Loan Amount Outstanding at Time of Sale

j. Guaranteed Opening Principal Balance

k. SBA Sale Form 1086

l. Price Paid by Purchaser for Guaranteed Interest or Certificate in dollar amount

m. Price Paid by Purchaser for Guaranteed Interest or Certificate in percentage over par amount

n. Percent of SBA's Guarantee

o. Type of Interest Rate (Fixed or Variable)

p. Interest Rate Base (for Variable Rate loans)

q. Interest Rate Fluctuation Frequency (for Variable Rate loans)

r. Date Interest Rate first fluctuates

s. Interest Rate Paid by the Borrower to the Lender (Gross Interest Rate)

t. Lender's Initial Servicing Fee

u. Lender's Servicing Fee

v. Interest Rate Paid by the Lender to the Contractor (Net Interest Rate)

w. Originator Fee Rate

x. Program Fee

y. FTA Fee

z. Interest Rate Paid by the Contractor to Registered Holder (Certificate Interest

Rate)

aa. Three Previous Interest Rates Paid by the Contractor to Registered Holder (for variable rate loans), if applicable

bb. Interest Rate Ceiling to Borrower

cc. Interest Rate Ceiling to Investor

dd. Interest Rate Floor to Borrower

ee. Interest Rate Floor to Investor

ff. Interest Rate Calendar Basis (30/360 or Actual/365)

gg. Mortgage Yield

hh. Bond Equivalent Yield

ii. Constant Annual Prepayment Rate Assumption

jj. Borrower's Payment Frequency

kk. Registered Holder's First Payment Due Date

ll. Purchaser Taxpayer Identification Number mm.Registered Holder's First Interest Paid From Date

nn. Approximate Payment Amount Expected from Lender to the Contractor

According to Note

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 6 of 27

oo. Number of Prior Registered Holders

pp. Guaranteed Interest Certificate Number

qq. Loan Authorization Date (529B Date)

rr. Note Date

ss. Certificate Maturity Date

tt. Original Settlement Date.

C-4.3. Functions of Central Registrar. The Contractor shall perform the assigned duties as the central registrar for all SBA 7(a) Secondary Market securities. The Contractor shall:

With respect to the initial issuance of a guaranteed interest, accept an SBA Form

1086 to effectuate such issuance signed by the lender and first purchaser or

Registered Holder, together with the appropriate supporting documents as may be required by SBA;

Operate as a fiduciary to the Government in preparing, authenticating and delivering certificates of guaranteed interest (“Certificates”) to Registered Holders or their representatives. The Contractor shall enter upon each blank Certificate, signed in advance by SBA, the information required in such Certificate following which a person, duly authorized by the Contractor, will date and sign the

Certificate;

Prepare the Certificates from (a) a completed and fully executed SBA Form 1086 in paper or electronic format as determined by SBA, with supporting documents,

(b) if a Pool is to be formed, the SBA Form 1454, which is used to apply for the formation of a pool of SBA guaranteed interests, and (c) any other form as may be required by SBA;

Utilize an authorized facsimile signature of the SBA Administrator and a facsimile of the SBA seal for Individual or Pool Guarantee Certificates;

Rely on the accuracy of all documentation it receives in connection with the formation of a Pool, issuance of a Certificate, or transfer of any guaranteed interest, and shall have no liability whatsoever for any issuance or transfer, provided that action is taken in conformance with the requirements of this contract. Each subsequent transfer of a Certificate will be processed by the

Contractor subject to and in accordance with Article 8 of the Uniform

Commercial Code of the state of New York;

At its own expense, make available supplies of sequentially numbered Individual and Pool Certificates, which the Contractor shall retain and store in a secure facility. SBA will provide an initial supply of 10,000 blank certificates along with the name and address of the forms supplier for reordering. The Contractor or its employees may rely and act upon any written list, instruction, certification, authorization, certificate or other written instrument believed by the Contractor or its employees in good faith to be genuine and to have been signed, countersigned or executed by SBA, lender, purchaser, Registered Holder, Pool Certficate Holder or an authorized official or approved agent of any of them, as the case may be;

and

Notwithstanding any provision herein to the contrary, the Contractor may record any transfer of a Certificate which it believes in good faith to have been authorized by the transferor Registered Holder, or may refuse to record any such

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 7 of 27 transfer if, in good faith, it deems such refusal necessary to avoid improper transfer, and may require as a condition of any such transfer the guaranty of the transferor Registered Holder.

C-4.4. The Contractor shall track Constant Prepayment Rates (CPRs) reported in the disclosure information that is included with each secondary market loan sale. A copy of a summary report of CPRs of similar maturities will be attached to each guaranteed interest certificate issued. The report will consist of summary information based on a rolling six month basis.

C-4.5. Market Execution of Guaranteed Individual Certificates.

a. Form 1086 Verification. SBA lenders may elect to sell their interests in the guaranteed portion of the SBA loans they disburse through the secondary market program. This secondary market includes broker dealers that make a market for the guaranteed interests, and investors designated as Registered Holders in the transaction. The SBA Form 1086, "Secondary Participation Guaranty Agreement" is an integral part of the secondary market program. It is the formal agreement detailing the terms and conditions under which the lender will transfer payments from guaranteed principal portions of SBA loans through the Contractor over to the Registered Holder. Accordingly, the Contractor shall fulfill all fiscal transfer agent (“FTA”) functions identified with in the Form.

b. The SBA Form 1086 may be modified from time to time during the course of the contract. The Contractor shall have an opportunity to comment on proposed changes in advance of implementation and the Contracting Officer. The

Contractor shall negotiate a modification to the contract, if necessary, at the time of implementation of the revised Form.

c. The Contractor shall be responsible for completing the sales settlement process on loans presented for sale in accordance with Acceptable Quality Measure listed in the Performance-Based Contract Administration schedule provided in this contract. Required activities to be performed in each settlement of an individual

Certificate include verifying the accuracy of information provided by market participants presenting a Form 1086 for sales settlement. This verification shall include validation of lender representations on the Form, and reconciling all discrepancies prior to settlement. Once all signatures have been received and verification of good funds affirmed, the Contractor shall distribute sale proceeds as instructed in the transaction documents in accordance with the Acceptable

Quality Measure detailed in the Performance-Based Contract Administration schedule contained elsewhere in the contract.

d. The Contractor shall be the primary point-of-contact for telephone, electronic and written correspondence from market participants regarding questions surrounding execution of GIC sales settlements. The Contractor shall seek authorization from the COR on actions to be taken by the Contractor which are not expressly stated in this contract, or may be outside of routine, day-to-day processing of guarantee sales settlements.

e. The Contractor shall process all lender requests for consent of the Registered

Holder or pool investor arising from loan modifications affecting a loan sold in the secondary market. Requests shall be addressed in accordance with the

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 8 of 27

Acceptable Quality Measure described in the Performance-Based Contract

Administration schedule provided in this contract.

f. With the written approval of the Registered Holder of an individual Guaranteed

Interest, the Contractor shall provide to the lender the Registered Holder's name, address, and telephone number as reflected in the records of the Contractor if so requested by the lender. Such disclosure shall only be made for the limited purpose of accomplishing a reasonable servicing action or a willing buyer/willing seller repurchase.

g. The Contractor shall monitor the delinquency status of all loans sold in the secondary market, and shall coordinate the SBA purchase of defaulted loans upon

SBA notice. The Contractor is expected to determine the amount of principal and interest due to the investor and fee amounts owed to the SBA at the time of guarantee purchase. The Contractor will have an audit-verifiable trail of purchase activity, and shall complete the execution of all purchase requests from SBA as detailed in the specific task listed in the Performance-Based Contact

Administration table appearing elsewhere in this contract.

h. In the case of payment modification requests, the Contractor will forward the lender’s written request to the Registered Holder within one business day of receipt. The Contractor shall forward Registered Holder’s response to the lender within one business day of receipt

i. Reconciliation of Account Information. The Contractor shall check all loan payments received to determine if the guaranteed portion of the lender's principal balance and paid to date information, as reported on SBA Form 1502, agree with the Contractor’s information. If there is a principal discrepancy greater than

$10.00 or a paid to date discrepancy greater than two days, the lender will be notified by electronic mail or facsimile and the payment reconciled.

j. The Contractor shall reconcile loans via a transcript of account listing the correct application of payments in question and a corresponding letter of explanation.

Should the Contractor’s reconciliation of a loan result in a claim for funds from the Registered Holder or from the Lender, the Contractor shall follow up the transcript and letter with additional letters requesting funds until the funds are paid in full. If necessary, the Contractor shall contact the appropriate SBA

District Office and SBA Central Office for assistance in collecting the funds due.

k. At the time of receipt of final payment, the Contractor shall reconcile the amount received with the principal balance on the books of the Contractor. If the principal discrepancy is less than $10.00, the Contractor shall consider the loan to be paid in full.

l. Guaranteed Individual Certificate Sales and Analytics. Guarantee Individual

Certificate sales shall be recorded by the Contractor and made available for SBA inspection upon request. At a minimum, monthly sales settlement reports detailing guarantee amounts sold, amounts paid, premiums paid, net note rates, and lenders involved should be formatted into an electronic report that is available to the COR. This report shall be available to the COR within 2 business days following calendar month end. Sales data shall also be assembled by the

Contractor for public release on a website devoted to providing analytical data on

GIC sales activity. The Contractor shall work with the COR in the phase-in

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 9 of 27 period of this contract on the components of this website, and shall provide all development, testing and implementation of the application as scheduled out by the Contractor to the COR within 60 days of the contract award. The Contractor shall make revisions to the application as authorized by the COR at no additional cost to the government.

C-4.6. Market Execution of Guaranteed Pool Certificates. The Contractor shall maintain a verifiable system for administering the SBA pooled loan guarantee program. The

Contractor shall be expected to demonstrate its experience in data and electronic payments with the SBA or with other similar government guaranty programs.

a. Form 1454 Verification. The Contractor shall be responsible for validating ownership of all guarantee certificates presented for pool formation, and reconciling all discrepancies prior to settlement.

b. Pool Formation, Certificate Exchange and Delivery. The Contractor shall have primary responsibility for registering all pool formations, administering the surrender of related GICs and completing the exchange and delivery of the SBA

Pool Certificates to designated nominees as instructed by SBA Pool Assemblers.

c. Pool Administration and Record-keeping. All fund flows derived from borrower payments made through SBA lenders to the Fiscal Transfer Agent will be captured, reported and distributed to investor and other market participants as delineated in each pool formation document. Payment receipts and distributions shall be audit-verifiable and shall be compiled into an electronic payment system that provides relevant market information while maintaining all requisite Privacy

Act protections.

d. All PCs issued, transferred or retired shall be cleared through the Contractor.

Recording journals shall be available for review by the COR or SBA internal and external audit representatives including the SBA Office of Inspector General.

e. The Contractor shall also produce program reports as needed by SBA. These reports include, but are not limited to the following:

• Transaction Buys. A report detailing the Treasury note purchase transactions of MRF.

• MRF – T-bills. A report detailing the Treasury bill purchase transactions of MRF.

• MRF Treasury Maturity Report. A report detailing the maturity dates of

Treasury bills and Notes owned by the MRF.

• MRF coupon rates. A report detailing the coupon rates of the Treasury notes owned by the MRF.

• Cohort Bal. A Secondary Market Guarantee report and Master Reserve

Fund balance data by cohort provided to SBA’s Office of the Chief Financial

Officer.

• SBA_LOAN. Loan level, outstanding principal balances underlying

Secondary Market Guarantee pools, provided to SBA. SBA is to receive two copies of this file – the first is produced at the end of the quarter (March 31, June

30, September 30, and December 31), the second is produced on the 18th of the month following the end of the quarter.

• SBA_CHECKS. Transaction level, loan payoffs and principal payments of

20% or more of the outstanding principal balance for loans underlying the

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 10 of 27

Secondary Market Guarantee pools. The file is produced on the 18th of the month following the end of the quarter.

• SBA_HIST_UNDLYING. Transaction level, all historical loan payments for loans underlying Secondary Market Guarantee pools. The file is produced on the 18th of the month following the end of the quarter.

• SBA_HIST_POOLS. Investor level, all historical Secondary Market

Guarantee pool payments. The file is produced on the 18th of the month following the end of the quarter.

• COHORT_BALANCES. Cohort level, historical daily total and available

Master Reserve Fund balances by cohort. The file is produced at the end of the quarter.

• TFMMMYY.csv (where MMMYY represents the month and year). Pool level files contain static information and outstanding pool balance. Each quarter, SBA receives two copies of this file – the first is produced at the end prior to the end of the quarter, the second is produced at the end of the month following the end of the quarter. For example, files are produced on August 31st and October

31st for the quarter ending on September 30 th

C-4.7. Interest-only Strip Securities. In forming SBA pool securities, SBA Pool Assemblers will create excess interest-only securities from loans placed in an SBA pool. These instruments are referred to in the market as Confirmation of Originator Fee

(“COOF”) securities.

a. The Contractor shall maintain a registry of all COOF securities, issue receipts upon sale, and will coordinate ownership transfers and make payments to holders of these securities when due. Servicing fees the Contractor shall charge for servicing these securities are provided in the Pricing Schedule found elsewhere in this solicitation.

b. The Contractor shall have the option to offer investors a consolidated pool security identified as a Receipt of Multiple Originator Fees (“RMOF”), but shall be prohibited from charging a fee other than a nominal setup fee for registration of the multiple COOFs.

C-4.8. Secondary Market Pool Reporting and Data Analytics

a. Pool Certificate sales shall be recorded by the Contractor and be made available for SBA inspection upon request. This information shall be made available on a web-based report application and shall be available to the COR and to the Fiscal and Transfer Agent Program Managers at no additional cost to the Government.

At a minimum, information shall include monthly sales settlements:

Number of pools formed;

Amounts paid;

Type of pool security;

Identification of the Pool Assembler(s) that formed the pool;

The number of loan accounts and the amounts sold in the pool at settlement;

The current number of loan accounts outstanding and related guarantee balance;

The initial pool rate to the investor;

The reset period for the pool; and

The current pool rate to the investor.

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 11 of 27

This report shall be available to the COR within 2 business days following calendar month end.

b. Sales data shall also be assembled by the Contractor for public release on a website devoted to providing analytical data on SBA pool sales activity. The

Contractor shall work with the COR in the phase-in period of this contract on the components of this website, and shall provide all development, testing and implementation of the application as scheduled out by the Contractor to the COR within 60 days of the contract award. The Contractor shall make revisions to the application as authorized by the COR at no additional cost to the Government.

The Contractor shall receive fees for this service as provided in the Pricing

Schedule found elsewhere in this solicitation.

C-4.9. The SBA Master Reserve Fund

The SBA Master Reserve Fund (“MRF”) supports the timely payment requirement of

SBA pool securities in the 7(a) secondary market program.

a. The Contractor shall be responsible for recommending to the COR an investment advisor for the MRF. The identification of the investment advisor shall be made by the Contractor in its response to this solicitation.

b. Upon written notification from SBA of advisor selection, the Contractor shall lead in the coordination all payment and data flows with the investment advisor to ensure the proper transmittal and timely payments to SBA pool investors.

c. Investment advisor fees and expenses for managing the MRF shall inure solely to the investment advisor and shall be established by separate written agreement between the investment advisor and SBA. The Contractor shall receive no compensation for investment performance and services provided by the investment advisor to the MRF.

d. The Contractor shall provide written policies and procedures on the functions performed by the Contractor and the investment advisor related to the MRF within 90 days of contract award. This guidance shall specify the roles and responsibilities of each party in the relationship, and clearly detail each party’s reporting requirement to the SBA.

e. Within 90 days of SBA’s selection of the investment advisor, the Contractor shall establish a secured, electronic payment connection with the investment advisor to:

i. provide daily deposits of funds on pools settled within a calendar month;

ii. support daily transaction activities associated with loan pool prepayments;

and

iii. execute the monthly request for demand disbursement of funds from the

MRF to satisfy payment obligations owed to pool investors.

f. The Contractor shall be responsible for timely delivery, at no additional cost to the SBA, of the following:

i. Audited annual financial statements of the MRF within 90 days of investment advisor’s fiscal yearend; and

ii. Release of all SSAE-16 SOC-1 reports from an independent financial auditor detailing the test results of the internal control environment existing in the investment advisor. These written reports shall be released unconditionally to SBA, no less than semi-annually.

g. Agency Accounting Requirements.

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 12 of 27

Cohort Tracking. The Contractor shall account for the cash flows in the MRF at the “cohort” level. The term “cohort” refers to all pools formed during any given federal fiscal year period. All pools formed prior to October 1, 2004 will constitute the FY04 cohort. For all other cohort years, the term “cohort” will be referred to as all pools formed during any given federal fiscal year period. The

Contractor will maintain cohort accounting in its accounting system and provide cohort variables in the following data items and be able to provide to the COR at the loan and/or pool level:

i. Basic loan information (i.e. loan number, borrower name, address);

ii. Loan balances;

iii. Loan level payment history;

iv. Trading factor reports; and

v. Loan level payoff history;

Investment Allocation. The Contractor shall track all loan and pool payment information at the loan and/or pool level and allocate the investment earnings of the MRF by pool and cohorts. The allocation method must produce results that are equivalent to the results that would be obtained if funds were invested separately for each cohort and must not make assumptions that could result in limitations on how investments are made. In particular, the allocation method must correctly handle the following conditions:

i. When securities are purchased in one fiscal year and redeemed (or matured) in a subsequent fiscal year, the proceeds must not be attributed to cohorts that were not yet in existence at the time of purchase;

ii. When securities are purchased, ownership shares should be attributed to cohorts on the basis of their cash positions in the MRF at the time of purchase;

iii. When a cohort has a negative position in the MRF (cumulative outflows to investors have exceeded cumulative inflows from loan payments plus earnings on investments), it must pay interest to other cohorts at a rate equal to what they would have received in the absence of such borrowing.

Allocation Method. The Contractor shall implement the investment earnings allocation method described below. The method requires (a) the availability of close-of-business cash position of each cohort on a daily basis; and (b) that purchases and redemption of securities be treated as occurring at the close of business.

i. Close-Out Transactions. When a cohort is extinguished, it is expected that there will be a residual cash position associated with it. The Contractor shall track the residual cash position of each cohort until it receives disbursement instructions (for positive positions) or funding instructions

(for negative positions) from the COR. Those instructions will detail the specific SBA financing account designated to receive such funds and the related wire instructions. If there is a residual cash shortfall in the fund balance, the COR will provide the Contractor with written instructions on which financing account may be debited by the Contractor to make up the shortfall. Once extinguished, a cohort’s residual cash position is excluded from all future short term and long-term investment allocations. All

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 13 of 27 extinguished cohorts retain their established positions in long-term investments through the maturity of the affected long-term instruments.

Investment earnings from these long-term instruments will be allocated to the extinguished cohorts through maturity. When all applicable instruments have matured, the final position of the cohort may be positive or negative. The final position will remain in the MRF pending instructions from the SBA.

ii. Other Transactions. For various small monetary transactions that impact the MRF either as income or expenses, the Contractor shall allocate expenses by cohort on an accrual basis and the expenses as the date cohort accounting commences cover trustee fees, investment management fees, and sub accounting fees. The cash position of the cohort will decrease when expenses are paid in subsequent months beyond the month in which the expense was incurred.

h. Transfer of Funds Collected by the Contractor Ultimately Paid to SBA. The

Contractor shall send the SBA Finance Center a daily wire transfer of all funds owed to SBA. The daily wire shall consist of funds accumulating in the

Contractor’s demand deposit account from the following collection accounts to the extent that the account balance on a given day exceeds $5,000. When the total account balance is less than $5,000, the Contractor shall retain the funds until the

$5,000 minimum amount is attained, but by no later than Thursday of each week at which time the Contractor shall wire transfer all outstanding balances to the

SBA Finance Center.

i. Premiums on Sold Loans. A fee equal to 50 percent of the portion of the sale price which is in excess of 110 percent of the outstanding principal amount of the portion of the loan guaranteed by the SBA.

ii. Subsidy Recoupment Fee on Sold Loans. The Contractor shall separate these funds from the prepayment funds remitted by the lender.

iii. Pool Transfers and Certificate Redemptions. The Contractor shall forward

SBA’s portion of pool and individual certificate transfer fees as described in detail in the Pricing Schedule found elsewhere in this solicitation.

iv. Late Penalty for Late Submission of the SBA Form 1502 Payments. The

Contractor shall separate the late payment funds owed to SBA from the payment funds received from the lender.

v. Secondary Market Guarantee Fee. The Contractor shall receive instruction from the COR on the assessment of a secondary market guarantee fee to be charged to investors of guaranteed loan pools. The

Contractor shall be responsible for the notice and collection of all fees assigned to each pooled security, and to report unpaid fee receivables to

SBA on no less than a quarterly basis.

For subparagraphs i. through v. above, the Contractor shall use the SBA Business

Account Classification codes to be supplied by the SBA Chief Financial Officer’s office when including these funds in the daily wire.

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 14 of 27

C-5. Loan Administration and Reporting

The Contractor shall serve as the primary hub for electronic lender loan payment reporting and 7(a) and program fee collection and remittance. SBA requires the

Contractor to process all reported 7(a) and ARC loan payment activity within a monthly report cycle and to be able to provide SBA staff and lenders with 24/7 access to their report filings.

a. At no additional cost to the Government, the Contractor shall have in place a system that accommodates all existing forms of SBA loan program delivery methods and payment formats (i.e. monthly versus seasonal), term and revolving loan transactions, secondary market sale and guarantee retention reporting, as well as all possible loan status designations and payment remittance methods.

b. The Contractor system shall also provide a seamless interface to the SBA’s government off-the-shelf (COTS) loan program management system.

c. The Contractor shall have a full-time working staff presence at SBA headquarters in

Washington, D.C. to handle the following lender loan reporting functions:

Loan payment report intake and data verification;

Loan exception reporting and reconciliation;

Fee computation and payment processing;

Fee receivable construction, lender notification and collection;

Fee receivable report and fund transmission to SBA’s Denver Finance Center;

Electronic user interface support and customer service including lender training;

Extend full-time support for SBA Loan Program employees including SBA headquarters, Fiscal Program Operations and SBA field office staff;

Representation before SBA in support of interdepartmental objectives and projects involving 7(a) lender loan reporting;

Coordination of electronic loan information and systems security with SBA information technology specialists;

Representation before government audit and examinations;

Preparation and delivery of periodic reports on the condition of lender loan reporting; and

Development and implementation of recommendations for action surrounding lender loan reporting improvements.

d. Contractor shall maintain proper insurance for these employees, including but not limited to, worker’s compensation, unemployment, and any other form of insurance the Contractor provides for employees at its own facilities.

e. The Contractor shall implement a web-based, commercial off-the-shelf solutions

(COTS) that has the following out of the box functionality:

i. Tracks the completion of a loan application submission package;

ii. Integrates with SBA’s electronic lending system (ETRAN) which operates on a

ColdFusion/Oracle/Java platform so that data does not have to be reentered

iii. Organizes the loan package to support eligibility;

iv. Implements a solution that generates SBA forms and a complete loan package based on borrower/lender questionnaire answers;

v. Generates the loan application package, closing/funding documentation, and credit worthiness documentation;

vi. Includes electronic signature capability that leverages encryption;

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 15 of 27

vii. Business intelligence to support eligibility filtering and decision making;

viii. Uses data inputs to generate the credit memorandum;

ix. Integrates with SBA’s loan authorization software/wizard;

x. Integrates with a document management system that includes workflow to track the completeness of documents;

xi. Generates loan documents that are compliant with SBA operating procedures;

xii. Implements a solution that utilizes intuitive questions and answers to navigate the user completing SBA forms based on SBA rules and regulations;

xiii. Any changes in the data fields used to generate the credit, packaging, or closing documents will result in an automatic change to those documents;

xiv. Tracks and alerts the lender if any eligibility documents are missing;

xv. Includes workflow that tracks documents required at each stage of loan processing—at time of loan approval, closing, and underwriting;

xvi. Provides audit tracking of users that view or edit a record;

xvii. Leverages software development best practices so that the software can be updated as there are changes to SBA loan programs and SOPs;

xviii. Integrates with SBA to allow the creation and entry of the lender loan reporting data;

xix. Allows SBA personnel to access documents that should be maintained based on SOP requirements;

xx. Eligibility is based on a decision tree that considers the loan type, structure, and additional key eligibility criteria as defined in the SOP;

xxi. Generates a credit memo and includes financial statement analysis tools based on standard industry trends;

xxii. Provides workflow diagrams required to approve a loan package.

xxiii. Generates a closing checklist that identifies requirements for completing loan authorization;

xxiv. Provides an interface for lenders to track disbursement and settlement of loans;

xxv. Alerts lenders about loans that are delinquent and may require workout;

xxvi. Supports multiple roles which include, but are not limited to, lender agent, lender management, borrowers, and administrators;

xxvii. Tracks loan collateral;

xxviii. Provides workflow diagrams to manage loan authorization agreement;

xxix. Supports daily closing of all accounts; and

xxx. Provides daily verification of fees paid and earned.

f. The Contractor shall implement a document management system that can support the following requirements:

uploading of forms including tax returns, income statement, balance sheets, credit memos, and franchise agreements;

uploading of documents in Word, .pdf., and Excel formats;

g. The Contractor shall implement a solution that allows business rules/controls to be defined for validating a loan application based on SBA loan guaranty criteria.

h. The Contractor shall implement a solution that provides functionality that includes:

online support;

proposal generation and budget prep;

guarantee commitment documentation; and

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 16 of 27 tracking of communication.

i. The Contractor shall implement a solution to enable the loan purchasing process.

j. The Contractor shall have an online training and support manual.

k. The Contractor shall implement a solution that allows the SBA to define the risk management metrics for tracking performance. The system shall also display the metrics using a dashboard.

l. The Contractor shall implement a solution that packages loans and allows a user to submit the package using a “wet signature” or electronic signature.

m. The Contractor shall implement a solution that prints a loan application and stores it in alternate formats (i.e. pdf, Word)

n. The Contractor shall implement a solution that tracks the following:

loan disbursements;

loan collateral;

status of loan authorization agreements;

loan denials and reason;

credit review and comment, underwriter response, and approval;

submitted and pending documentation;

status of loan authorization agreement; and automated credit scoring.

o. The Contractor shall implement a solution that offers notification functionality. The system shall contact a lender about an incomplete application or if a borrower is ineligible for a loan.

p. Maintenance of Electronic Records. The Contractor shall maintain the following records electronically for as long as reasonably necessary (but in no event less than seven (7) years from the date of the last transaction) with respect to each

Guaranteed Interest, and in any event, no less than 7 years from the closing of the pool.

q. The Contractor shall be required to remit all fees that accompany submitted loan reports and that inure to the SBA as required by the Miscellaneous Receipts Act.

This applies to all sums collected daily by the Contractor that when added to any prior balance exceeds of $5,000. Balances less than $5,000 may be held by the

Contractor until such balance exceeds this dollar threshold, but in all cases, the funds shall be remitted to SBA no later than one week from initial receipt.

r. a record of the current outstanding balance and payment history for each

Guaranteed Interest, pool, and pool certificate; and

s. records of Certificates presented for transfer and last known address records of

Registered Holders.

t. The Contractor shall support identity Federation standards which include:

Web services-based Federation which includes enabling the sharing of identity information between security domains;

Security Assertion Markup Language (SAML) 2.0 or the current standard;

The Internal Revenue Service (IRS) shall be the preferred identity provider.

C-6. Lender Financing and Loan Securitization C-6.1. The Contractor shall enter into custodial agreements to safeguard the pledge of SBA loans in secured lending facilities and SBA loan-backed securitization transactions.

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 17 of 27

a. For lender financing transactions, the Contractor, in its role as bailee to the transaction, shall be responsible for reviewing, recording, and verifying loan documents received, establishing custody and control of documents in a secured facility, and safeguarding release of pledged collateral documentation as instructed and agreed to by the Contractor in an executed Multi-Party Agreement with SBA.

b. For SBA loan securitization transactions, the Contractor shall enter into custodial agreements for the purpose of safeguarding loans pledged in a loan pool securitization. The Contractor shall review, record, and verify related loan documents received, and shall establish custody and control of documents in a secured facility as agreed to by the Contractor in an executed SBA Multi-Party

Agreement specific to each loan securitization.

c. The Contractor shall verify loan pool construction, coordinate payment receipt and distribution of funds to investors.

d. The Contactor shall issue to SBA loan pool securitization statements including computed pool loss experience data which shall be provided to the SBA and associated trustees on no less than a quarterly basis. This statement shall be sent to the COR within 15 days following each calendar quarter.

e. The Contractor shall uphold a fiduciary standard of duty and standard of care in its provision of service to the parties identified in the transaction.

f. In providing these services, the Contractor shall assume all financial risks associated with actions or omissions that adversely impact the parties to the transaction, including the SBA.

C-7. Document Management

1. The Contractor shall implement a document management solution that supports:

information sharing/collaboration;

search capability;

evaluating and tracking of portfolio trends and performance via a dashboard;

workflow for data analytics and intelligence; and roles-based user profiles – which limit lenders so that they can only access information for the loans they originate and no others.

2. The Contractor shall implement a solution that tracks all forms of documents SBA will accept for uploading --.pdf, xls, word, etc.

3. The solution shall support checklists that can be automated using the built in workflow functionality. Checklists that should be implemented include:

a. Required documents based on the loan type

4. The System will track data based on set categories. Document exceptions will be flagged and tracked for future reporting.

5. The Contractor shall implement a solution that tracks documentation for purchases, repairs, and denials.

6. The Contractor shall implement a solution that utilizes workflow to track lender oversight review process, corrective action follow up, and delegated authority processes.

7. The Contractor shall implement a solution that supports electronic signature.

8. The Contractor shall implement a solution that integrates with SBA’s current electronic lending environment.

Performance-Based Statement of Work – Fiscal Transfer Agent for the SBA 7(a) Guaranteed Loan Program Page 18 of 27

9. The Contractor shall implement a solution that provides data store/warehouse capabilities of stored electronic documents.

10. The Contractor shall implement a solution that provides data and business analytics that will be used to support the organizational strategic goals.

11. The System will be scalable to support holding an average size of 500kb per loan at 2000 loans per year. Assume all data must be retained at least 7 years.

12. The solution must include the capability to archive data that can be retrieved based on loan information.

13. The System shall support tracking documents using a workflow tools that alert if documents are missing.

14. The System shall support the virtual retrieval of…