As an SBA Lender Service Provider, we are asked to perform annual loan reviews for many of our clients. With each one we add to our pool of “SBA compliance findings”.
You already know that SBA released two important updates to SOP 50 10 last year, with 50 10 7 effective in August, and 50 10 7.1 in November.
Since then, we’ve seen some challenges with Lenders maintaining consistency within a specific loan file, and with their internal lending practices.
Let’s take a look at five of the most common issues we’re seeing:
If the collateral values used in the Credit Memo aren’t based on SBA’s collateral requirements and guidelines, you run the risk of under-collateralizing the loan – even when there’s additional collateral available.
Is the collateral, as required in the Credit Memo, also listed in the Terms & Conditions?
Speaking of Terms & Conditions – it’s all too easy to end up with inconsistencies between the Credit Memo, the Terms & Conditions, and other file documentation. Double-check that the required borrowers, guarantors, collateral, and, well, everything else is consistent throughout every part of the file. This step should be part of your checklist!
Another area where we’ve seen inconsistencies crop up is with insurance. Is the insured name and address the same between the Terms & Conditions and the Credit Memo? Is the required endorsement present? And does the insurance cover the full recoverable value? More items for your checklist!
“Do what you do” has, unsurprisingly, created questions and uncovered inconsistencies between Lenders’ decision-making and SBA SOPs, especially given all the changes. Plus, in some cases, we’ve noticed that the decision-making process isn’t always clearly outlined in the Lender’s internal bank policies. Something to verify!
You’ve probably noticed that this is all about keeping everything lined up and consistent within a specific loan’s documentation as well as with your internal policies and procedures.
This is important to maintain your Lender SBA compliance as you create and submit your SBA loan packages.
We get that the struggle is real! When SBA makes changes such as those in the two 50 10 releases, it’s easy to overlook or miss the changes you need to make in your policies, procedures, and checklists.
That’s why we write these “most common problems” articles – and why we’re here to help. Not everyone has the time to read and integrate the full document in order to ensure the relevant updates to your internal processes. After all, the current 50 10 document is 420 pages, over 15,000 words, and clearly states right up front: “Key Pages Affected in this Version: All”!
We’ve read it. And as an SBA Lender Servicer Provider we have an experienced team that is here to help. Whether it is our Lender SBA consulting services (let’s make sure you’re not making any of these mistakes!), policy / procedure / checklist reviews, or, of course, SBA lender training to help bring your team up to speed on SBA’s requirements, we are just a phone call away. Call us today at 877-576-0819, or reach out through our Contact form and we can talk about how best to help!
(You can download the complete, and most up-to-date, SBA 50 10 document here.)
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