SBA Hot Topic Tuesday Part Deux — SBA Inspector General Wants Loan Service Provider Regulations

March 17, 2015

By Bob Coleman
Editor, SBA Hot Topic Tuesday

SBA continues to push for greater control and regulation of all SBA loan program participants.

Their next niche?

Loan Service Providers. There are 90 LSPs with over 900 lender agreements approved by SBA. Three LSPs sign 29% of all agreements.

The OIG was SBA to develop a method to identify all LSPs in order to track and evaluate the LSPs related loan portfolio performance.

Second, the OIG found several referrals of LSPs and lenders not following rules ended up sitting on someone’s desk. SBA agreed with the OIG recommendation of establishing a formal process for addressing issues relating to LSPs.

Says the OIG, ‘LSPs are deeply involved in all phases of the loan life cycle, including originating, closing, servicing, and liquidating SBA business loans.

‘Since the number of LSPs and their agreements with lenders have significantly increased in recent years, SBA will need to improve its internal controls to ensure LSPs’ performance and conduct complies with SBA’s requirements.

‘We determined that SBA had not established a method to track LSP portfolio activities, and therefore could not adequately assess potential risks associated with LSP involvement in SBA loan programs.

‘In addition, SBA did not adequately investigate a number of potential violations of SBA policy by lenders and LSPs, such as a lack of approved agreements.’

Read the SBA OIG Audit Report: “Improvemnt is Needed in SBA’s Oversight of Lender Service Providers”