SBA Failed to Review High-Risk Lenders, Putting Loan Portfolio at Risk: IG
The report is released just as the SBA and NCUA attempt to convince more credit unions to participate in SBA programs.
The Small Business Administration failed to review many of its high-risk lenders between 2015 and 2017, placing billions of dollars of loan guarantys at risk, the agency’s Inspector General said, in a just-released report.
The agency’s Office of Credit Risk Management did not always perform adequate oversight of those lenders to identify and mitigate risk, the IG said.
“We found that OCRM did not always conduct planned high-risk lender reviews, recommend adequate and consistent risk mitigation actions, or communicate loan deficiencies they noted during their high-risk lender reviews to SBA approval and purchase loan centers,” the reported stated.
The report also said that SBA officials could not provide reasons for why the reviews had not been conducted.
“As a result, there is an increased risk that lenders with repeated identified systemic deficiencies will continue to participate in SBA’s [loan] programs, which could jeopardize the integrity of the programs and increase the risk of financial loss to the $120 billion loan portfolio,” the IG said.
The SBA told the IG that it is instituting policies to ensure that such reviews are conducted.
The report was released, just as the SBA and the NCUA are attempting to convince more credit unions to participate in SBA programs. The two agencies earlier this year announced a three-year campaign to link credit unions with SBA programs.
On Wednesday, SBA and NCUA officials are holding a webinar aimed at demonstrating how credit unions can preserve their loan guarantees throughout the review cycles.
In April, the SBA said almost 200 credit unions had participated in the agency’s guaranty program.
The IG report does not break the lenders it reviewed into categories, so it is impossible to determine if credit unions were included in its review of high-risk lenders.