August 26, 2013
By Karen McHugh
Last week, we started a discussion of how we at SBA Complete approach SBA loan compliance reviews. As you may recall, we explained that our narrative report provides a summary of key findings, critical issues, and recommendations for best practices. We covered some “critical issues” in our previous article. Another area for consideration is what we determine as “key findings.”.
Key findings may not necessarily mean that SBA would impair their guaranty, on a one or two off situations in the portfolio; however, if patterns emerge showing that the lender is not aware of a certain technical requirement or consistently ignores compliance form from file to file, SBA could take action against the lender’s status or ask the lender to address these concerns as a follow up to the review. Examples of “key findings” that are commonplace in a loan review are:
Consistency between Original Credit Memo and Final Loan Authorization
Many times we see in files reviewed, we see requirements from the original internal credit approval did that do not match up to the verbiage in the final SBA Loan Authorization (e.g., use of proceeds, equity amounts, etc.). It is important to create a paper trail that accomplishes the following equation:
Credit memo = SBA approval = Loan Authorization (+ addendums) = Closing documentation
SBA Loan Application Documents
Regardless of SBA loan program and submission approach, make sure you keep a complete loan application in the file. For instance, for a PLP submission, even though you only send SBA a few documents for guaranty approval, the entire package must be kept in the file, including Form 4, Form 4-I, Eligibility Checklists, Form 912, etc. It is important to place a complete loan package in the file for future review by SBA and that application documents are properly dated and match back to the final Loan Authorization.
It seems commonplace for lenders not to prepare loan authorizations for “special” expedited loan programs such as SBA Express, Patriot Express, Small Loan Advantage, and CAPLines. It is important to prepare a loan authorization for every SBA loan program and to place put them in a prominent place in the file. Also, for the loan authorization located for PLP loans, make sure to include required conditions per the internal bank approval. Again, match bank approval conditions to the final loan authorization.
We can help not only review your SBA loan files for compliance, but also “scrub” them to make sure documentation is complete and organized for efficiency, consistency, and accuracy. We can provide loan review services either on-site or remotely, depending on what type of interaction you want with our reviewers as work is being completed. We provide several opportunities for the lender to clear “open issues” and exceptions identified in our review of files so that the final report fairly and accurately represents documentation provided for each loan.