Consolidated Results of the Office of Inspector General High Risk 7(a) Loan Review Program

This report presents the consolidated results of our ongoing High Risk 7(a) Loan Review Program from December 2017 through September 2018 and a contextual summary of our work for fiscal years (FYs) 2014 through 2018.

The Office of Inspector General’s (OIG’s) review of eight early-defaulted loans in FY 2018 identified material lender origination and closing deficiencies that justified denial of the guaranty for four loans in the amount of nearly $2.7 million. We issued two advisory memorandums regarding these four loans to SBA for appropriate corrective action. We also identified suspicious activity on one purchased loan totaling $665,126, resulting in a formal referral to our Investigations Division. We did not identify any material deficiencies with the remaining three loans reviewed.

Since FY 2014, under the OIG’s High Risk 7(a) Loan Review Program, we have reviewed 27 loans with purchase amounts totaling almost $23.2 million. We have recommended recoveries on 11 loans totaling more than $8.5 million. Also, we have referred five loans totaling nearly $4 million for further investigation.

SBA reviewed the 11 loans we previously reported on with recommended recoveries totaling more than $8.5 million. To date, SBA has contacted the lenders to obtain additional information to mitigate the identified deficiencies and has recovered more than $4 million in guaranty payments to lenders on 5 of the 11 loans.