Guidelines

Section B: Registration, Administration and Reporting

9 Transfer of Loans Between Lenders

9.1 Transfer of Individual Loans

For the purpose of calculating the Minister's liability (See Section B, Item 15), when a loan is transferred between lenders, the CSBFP Directorate deducts the amount of the original loan from the total loans made and registered amount of the transferor (original lender), and adds it to the account of the transferee (acquiring lender). It is possible, in cases where the transferor has used all or nearly all of the Minister's liability, that the transfer would cause the Minister's liability of the transferor to become negative. In this case, the CSBFP Directorate will not accept the transfer. Regs s.29; Bulletin – October 1999

At the request of the borrower, a CSBF loan can be transferred from one lender to another provided that:

• the transferee is a lender under the CSBFA;
• the Minister's liability resulting from the transfer, calculated in favour of the transferor (original lender), does not exceed the amount already paid by the Minister, and;
• the transferor's total number of transferred CSBF loans, during each 5-year period starting April 1, 1999, does not exceed the greater of 20 loans and 1% of the number of loans made and registered by it during that period. For any particular lender, the limit applies only to the transfers out i.e., transfers it makes to other lenders.

Regs ss.29(1)

Example: A lender with 1 000 CSBF loans registered in one of the program's 5-year periods could transfer up to 20 of those loans. A lender with 3 000 loans could transfer up to 30.

Where the transferee completes new loan documentation for a transferred CSBF loan, the new loan can only finance the principal outstanding amount of the transferred loan. The new loan:

• must be made under the same class(es) of loan;
• must be for the same term as the original loan;
• must maintain the rank and nature of security as existed at the time of transfer;
• must maintain any personal or corporate guarantee or suretyship for the same amount;
• will be governed by the legislation in effect as at the date of the first disbursement of the funds for the original loan.

Regs s.30

Requesting a Transfer: The transferee must request a transfer by completing the form, "Request for the Transfer of a Loan between Lenders" (see Section D, Item 4). The request form must be signed by both lenders and the borrower. If the CSBFP Directorate determines that the requirements under ss. 29(1) of the CSBF Regulations have been met, it will notify both lenders and the Minister's liability will continue in favour of the acquiring lender. If the requirements have not been met, both lenders will be notified.

Effective Date of Transfer: A transfer is effective on the date the CSBFP Directorate signs the request form. The Minister's liability for each lender will be adjusted on that date.

Transferee's Responsibilities: The transferee is responsible for:

• obtaining the relevant loan documentation from the transferor. In the event a future claim for loss is made, the transferee must provide all documentation to substantiate the loan. If a transferor refuses to provide documentation that is private and/or confidential (e.g., internal loan authorizations), a written confirmation from the transferor as to the documented facts (e.g. the loan approval date), will be acceptable.
• satisfying itself that the loan complies with all of the requirements of the Act and Regulations. In the event of a claim for loss, failure on the part of the transferor to have complied with all program conditions, or its failure to have corrected any defects within the stipulated time frame, will result in rejection or reduction of the claim.
• paying the administration fee accrued from the beginning of the month in which the transfer is made between the lenders.

Bulletin – October 1999

Note: To avoid transferring a CSBFA loan under which the Minister's liability would not continue, it is strongly recommended that the transferee (acquiring lender) notify the Minister prior to registering the transfer by submitting to the CSBFP Directorate a Request for Transfer form completed and signed by the borrower and both lenders (transferee and transferor). The lenders will then be informed whether the proposed transfer meets the terms and conditions of the Regulations.

9.2 Bulk Transfer of Loans

This occurs when one lender assumes the administration and responsibility of loans when a branch of one lender ceases its lending operations and sells its CSBF loan portfolio to another lender. The CSBFP Directorate must be advised in writing of the details prior to a proposed bulk transfer, so the impact on the Minister's Liability to both lenders may be ascertained.