The OIG High Risk 7(a) Loan Review Program

This report presents the results of our ongoing High Risk 7(a) Loan Review Program from March 2017 to August 2017 and an overall summary of our work to date.

The Office of Inspector General’s (OIG’s) review of five early-defaulted loans identified material lender origination and closing deficiencies that justified denial of the guaranty for one loan totaling $917,107.  We also identified suspicious activity on two purchased loans totaling $1.9 million, resulting in formal referrals to our Investigations Division.  OIG recommended that the Small Business Administration (SBA) require the lender to bring the loan into compliance and, if not possible, seek recovery of $917,107, plus interest, on the guaranty paid by SBA.  SBA agreed with the recommendation and has contacted the lender to obtain additional information to bring the loan into compliance.

Since fiscal year 2014, under the OIG’s High Risk 7(a) Loan Review Program, we have reviewed 20 loans with purchase amounts totaling $17.7 million.  We have recommended recoveries on seven loans totaling approximately $6 million and have referred another four loans totaling $3.3 million for further investigation.  As described above, this report includes our findings and recommendation on one of the seven loans.  SBA reviewed the six loans we previously reported on with recommended recoveries totaling approximately $5 million and contacted lenders to obtain additional information on the material deficiencies we identified.  To date, SBA has recovered approximately $1.3 million on three loans.  SBA did not recover the guaranty from the lender on another loan.  SBA is reviewing the remaining loans.