Report 12-18: A Detailed Repayment Ability Analysis is Needed on High-Dollar Early-Defaulted Loans to Prevent Future Improper Payments

On August 16, 2012, the OIG issued Report 12-18, A Detailed Repayment Ability Analysis is Needed on High-Dollar Early-Defaulted Loans to Prevent Future Improper Payments.  The limited scope audit found that the assessment of delegated lender underwriting performed at the National Guaranty Purchase Center (NGPC) on early-defaulted loans was not effective in identifying whether lenders were clearly negligent in determining the borrowers’ repayment ability.  As a result, the NGPC made improper payments, which resulted in unnecessary losses to the Agency.  Based on previous audit work, the OIG's  analysis indicated that improved reviews for repayment ability could result in a cost savings to the SBA of at least $43 million over the next two years.  To prevent future losses, the OIG recommended that the SBA perform a detailed analysis of the delegated lenders’ computation of repayment ability on all high-dollar early-defaulted loans and provide training to NGPC purchase staff.