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SBA’s new SOP 50 10-5 (I) effective January 1 presents SBA lenders a confusing mix of pitfalls and time-saving opportunities, but don’t underestimate the high stakes of compliance with the 4C’s — credit elsewhere, CAIVRS, collateral and character.
SBA’s Inspector General continues to audit SBA lender compliance with the agency’s “credit elsewhere” rule. If SBA determines the lender violated the credit elsewhere rule, by law, the borrower is ineligible for SBA lending and the guaranty is void. Last year, the agency eliminated two traditional credit elsewhere standards. Does your staff know the remaining four standards that must be documented in the borrower’s file?
Cut and paste template answers don’t count! Documentation must be specific for each loan!
SBA reviews are noting many lenders are failing to properly address prior federal debt, primarily student and home loan, by not obtaining a CAIVRS (Credit Alert Verification Reporting System) report for all borrowers and guarantors. By law, if a borrower has a delinquent or charged-off federal debt, they are ineligible for SBA lending. You need your staff to be experts about everything CAIVRS.
Collateral: the third C of this webinar. SBA requires the lender to address additional factors in assessing collateral adequacy. Understand SBA’s rules for collateral adequacy that protect the loan and don’t negatively affect your PARRiS rating.
Finally, character compliance. The SBA’s new January 1 creates new compliance responsibilities for lenders. In addition to revised credit elsewhere documentation, lenders must know how to process and underwrite the SBA 912 borrower history form. If an applicant has a criminal record the lender must adhere to these new guidelines.
Here’s the good news: Former SBA Little Rock Loan Servicing Center Deputy Director is the national training expert on SBA documentation.
In this 75-minute webinar he will make your underwriters and closers experts on adhering to 4 C’s of credit elsewhere CAIVRS, collateral and character. You’ll especially learn about the minefield of possible errors and how to document the credit memo and file correctly, avoiding false steps, and creating an IG-compliant file.
Above all, this event focuses especially on the most common mistakes likely to provoke red flags and punitive action by SBA auditors, let alone by the Department of Justice, loan committees, bank regulators, your board of directors and other overseers.
- Why the credit elsewhere rule is required and is the target of SBA Inspector General scrutiny
- Avoid common lender errors in documenting credit elsewhere
- Four credit elsewhere case studies with the SPECIFIC language to ensure SBA and Inspector General compliance
- The SBA credit elsewhere certifications you make when you sign SBA form 1920
- How to obtain and read the CAIVRS report
- A thorough understanding of when to obtain the personal residence as additional collateral
- A thorough understanding of when to waive additional real estate collateral from the guarantors
- Become an expert on collecting, underwriting and processing SBA Form 912. Know when you need to obtain SBA’s approval
- The SBA character certifications you make when you sign SBA Form 1920
Lance Sexton served as Deputy Director of the SBA Little Rock Commercial Loan Servicing Center managing the Servicing of SBA Loans, the liquidation of SBA Express Loans, and the Liquidation of SBA 504 loans in a 24 state area. Lance has 30 years of experience in the origination, servicing, and liquidation of SBA Loans, ten years of experience directly managing portfolios of SBA loans that are both performing and nonperforming, and six years of experience as a small business owner.
Bob Coleman is the Author of “Money Money Everywhere and Not a Drop for Main Street.” He is the Publisher of the Coleman Report, a trade newsletter and website for SBA and small business lenders. He produces online training videos and webinars for small business lenders to teach them to make less risky loans to Main Street.
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