The determining factor in whether you need to submit an OIC in order to have a lien on your home released (that was placed in connection with an SBA loan) is usually whether or not you are personally liable for your SBA debt. Pretty much every SBA loan requires personal guarantee from the business owners, so if you had an SBA loan, you probably personally guaranteed it.
So to summarize:
– If you are personally liable, you will likely need to submit an OIC since you will need to negotiate the release of your personal guarantee and the lien on your home simultaneously.
– If you are not personally liable, you do NOT need to submit an OIC in order to get your lien released. Preferred SBA lenders can make this decision WITHOUT notifying the SBA or seeking SBA approval.
There are two common scenarios that would result in you not personally guaranteeing the debt: 1) you filed for personal chapter 7 bankruptcy, and the debt was discharged, or
2) you pledged your home as a favor to a friend/family member who could not otherwise qualify for an SBA loan (I see this a lot….typically a parent pledges their home for a child who is starting a business.
There is always confusion about this topic. I even get calls from people who tell me their bank or attorney said they need to submit an OIC, so the confusion is not just limited to borrowers.