SBA Hot Topic Tuesday – OCRM Fails to Perform Effective Oversight of High-Risk Lenders

December 3, 2019

By Caity Witucki
Contributing Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday – OCRM Fails to Perform Effective Oversight of High-Risk Lenders

On November 12, 2019, the SBA OIG released a report which presented the results of an audit of the SBA’s oversight of high-risk lenders. The audit found that OCRM only conducted 250 of its 358 planned high-risk lender reviews for FYs 2015 through 2017. Additionally, OCRM did not provide sufficient rationale to substantiate why they did not conduct the high-risk lender reviews as planned, did not recommend adequate risk mitigation actions, and did not communicate the deficiencies to SBA’s loan approval and purchase centers.

The audit identified several factors which contributed to these conditions:

  • OCRM did not have policies and procedures requiring them to document their justification for not conducting planned reviews.
  • OCRM did not have policies and procedures governing the process of identifying and prioritizing lender reviews.
  • OCRM did not have a comprehensive database to manage its oversight of high-risk lenders.
  • OCRM did not have clear and specific guidance to outline adequate corrective and enforcement actions for the identified deficiencies.
  • OCRM did not conduct an overall assessment of the high-risk lender review results to ensure analysts recommended adequate and consistent actions.
  • OCRM did not have a requirement to communicate significant lender review findings and loan deficiencies to SBA’s approval and purchase loan centers.

According to the OIG report, these factors resulted in an increased risk that lenders with repeated identified systemic deficiencies would continue to participate in SBA’s 7(a) and 504 loan programs, thus jeopardizing the integrity of the programs and increasing the risk of financial loss.

As a result, the SBA OIG has recommended that the Director of OCRM should develop and implement policies and procedures to document the justification for planned reviews and communicate systematic lender issues to the appropriate SBA loan approval and purchase center.

SBA OIG Report 20-30