Significant SBA 7(a) loan growth in recent years has the attention of Capital Hill. Though Congress continues to appropriate adequate funds to the program, the continued support has brought a demand for increased oversight of the program and its lenders.
The Office of Credit Risk Management (OCRM) is tasked with this oversight requirement and recent legislation gives OCRM additional power. In addition to giving corrective actions and recommending monetary actions, OCRM can now strip lenders of their Delegated Authority for processing SBA loan applications. Lenders have always been expected to be stewards of the program but additional oversight requires extremely thorough preparation for both onsite and offsite OCRM audits.
Here are 3 tips to be successful with SBA program compliance:
1. Use the Tools OCRM Provides
Because OCRM audits are often loan file specific, lenders should be familiar with OCRM’s expectations. OCRM now publishes an online checklist which helps lenders identify any documentation gaps in their current processes. Lenders should implement a file review process for both origination activities (actions between receipt of application and closing) and historical files. To assist with current portfolio documentation, Windsor offers file review services to help lenders identify where they should focus efforts prior to an OCRM audit.
2. Be Consistent
Consistent file organization can help examiners complete their process more efficiently. This seems simple, but because SBA loan s are documentation heavy, having a standard and consistent process across your organization for every loan closed and serviced is vital to success with OCRM audits. If your organization faces an onsite review from OCRM, the examiners will expect to see similar items in each file. Responding to these additional requests in a timely and consistent manner will demonstrate your institution’s expertise and effective controls.
3. Stay Up to Date
SBA rules and guidance are changing on a regular basis. Most recently, the SBA published notice of its new SOP (effective April 1, 2019). The agency expects to issue another new SOP in the next Fiscal Year. To keep current on the environment, lenders must stay active in the space and monitor program updates regularly. Joining a trade organization (such as NAGGL), registering for educational courses and/or utilizing a Lender Service Provider can help assure your institution is up to date. Always remember to document any training you receive as this is an effective way to show OCRM that you are keeping up with the program.
With increased lender oversight from Congress, the remainder of 2019 should be a year for lenders to focus on process and program compliance. Taking a few small steps to confirm current processes are in line with the SBA’s requirements, completing file reviews, updating internal folder organization and educating your department are all great ways to ensure SBA 7(a) loan program compliance in 2019 and beyond.
About Windsor Advantage, LLC
Windsor Advantage provides banks, credit unions and CDFIs with a comprehensive outsourced SBA 7(a) and USDA lending platform.
Since 2010, Windsor has processed more than $2.3 billion in government guaranteed loans and currently services a portfolio in excess of $1.3 billion (as of May 31, 2019) for over 85 lenders nationwide. With more than 150 years of cumulative SBA and USDA lending experience, cutting edge technology, rigid controls and consistent processes, Windsor is uniquely qualified to assist any size lender with implementing a thoughtful and profitable government guaranteed lending initiative.
Windsor Advantage has a team of 30 professionals with offices in Chicago, Illinois; Indianapolis, Indiana; Seattle, Washington and Charleston, South Carolina.
About the Author: Jeff Nogle manages Windsor’s overall risk management process, with a focus on documentation and compliance. Prior to joining Windsor, Jeff was an associate at Charles River Associates where he gained extensive experience in business valuation and complex litigation.