May 16, 2023
SBA Hot Topic Tuesday – Representatives Concerned Over New Underwriting Standards and SBA Oversight Abilities
“There are serious concerns that these changes to the program will be detrimental to taxpayers and small businesses alike. If more loans start to default, the fees to the program are going to have to be raised, or the agency will come to Congress to ask for more taxpayer dollars to make up for the shortcomings. The Standard Operating Procedures released late last night are not sufficient and do not satisfy our concerns,” says Chairman Roger Williams of the House Committee on Small Business.
Of the House Committee’s scrutiny during the hearing, the staffing levels at the Office of Credit Risk Management were a point of contention. Oversight staffing levels decreased by 38% during the pandemic. Before this staffing reduction and the pandemic occurred, OCRM was not able to perform effective oversight or conduct its planned reviews according to reporting from the Inspector General. With the intention of introducing three new SBLC licenses, the hearing calls into question whether there will be proper oversight. Members of the Committee believe the problem can only be exacerbated further by the oversight staff not being present at their office.
Another focus during the hearing was the changes to underwriting standards. Multiple Committee members discussed that the underwriting standards that have been used for decades to determine eligibility will be sacrificed for more subjective underwriting methods. Representative Meuser asks, “How does that instill confidence in us?”
“Today’s hearing did nothing to assuage our concerns over the Small Business Administration’s reckless rule changes to their 7(a) Loan Program which will reduce underwriting standards and add more risk of a taxpayer-funded bailout of the program,” says Chairman Williams. “My colleagues and I are committed to protecting the integrity of the SBA’s flagship program while fighting to ensure taxpayers won’t be the ones left holding the bag should these risky loans go bad.”