504 Credit Risk Management Improvement Act of 2025
S. 2659, introduced in the Senate on August 1, 2025 by Sen. Young (with Sen. Klobuchar as a co-sponsor), titled the 504 Credit Risk Management Improvement Act of 2025, would substantially tighten oversight and risk management for the Small Business Administration’s (SBA) 504 loan program (the certified development company, or CDC, program). It creates a formal Office of Credit Risk Management (OCRM) oversight within the SBA's framework and gives it expanded duties to supervise CDCs, conduct loan-closing file reviews, and take enforcement actions. The bill also adds a new requirement for annual portfolio risk analyses of all 504 loans and requires the SBA Administrator to issue rules clarifying environmental obligations for eligible CDCs under NEPA. In addition to oversight and risk analysis, the bill introduces new cost-recovery and transparency measures: a fee on CDCs to cover oversight costs (capped at 1 basis point of a CDC’s portfolio value), enhanced reporting to Congress on program risk and enforcement actions, and a rulemaking deadline (180 days after enactment) for NEPA-related procedures in relation to CDC environmental obligations. The overall aim is to drive stronger program integrity, risk mitigation, and environmental compliance, with penalties and suspension powers for noncompliance.
Key Points
- 1Establishes the Office of Credit Risk Management (OCRM) oversight for the 504 program, giving it authority to supervise Certified Development Companies (CDCs) and to conduct loan closing file reviews, with enforcement and fee-power options.
- 2Requires the OCRM to perform complete file reviews of a random selection of loan closings, produce written reports within 60 days of each review, and direct prompt corrective action if deficiencies could cause losses to the SBA.
- 3Grants the OCRM (through the Director) informal and formal enforcement authorities against CDCs, including penalties up to $250,000 and possible suspension from the program for failure to submit required annual reports; formal actions require approval by the Lender Oversight Committee.
- 4Mandates an annual portfolio risk analysis of all 504 loans and a biannual (annual) Congress-report on December 1 detailing program risk, industry concentration, risk contributions by large CDCs, losses, recoveries, and enforcement actions, with specific data and mitigation steps.
- 5Authorizes a CDC-specific fee to cover oversight costs, capped at 1 basis point of the CDC’s portfolio value, to be paid from the CDCs’ servicing fees; SBA must issue NEPA-related rules for eligible CDCs within 180 days, clarifying environmental obligation procedures without altering NEPA requirements.