1. Good afternoon!! I am pleased to have been given this opportunity to share with you all, the process in which OCRM (the Office of Credit risk Management) performs its lender oversight and some helpful tips on .
My name is Anne Goldberg. I am an Financial Analyst with the Office of Credit Risk Management which is located in Washington, DC.
I assist in the office’s various lender oversight functions;
overseeing SBA lenders in Georgia, Florida, North and South Carolina.
OCRM deals with Risk. Our Mission is to maximize efficiency of the Agency’s lending programs by
effectively managing program credit risk,
monitoring lender performance and
enforcing lender program requirements.
Topics to cover are:
The tools in which we m– risk
Review Life Cycle
The various review assessments
Common findings and their associated corrective action
Attributes of a successful SBA Lender
And ways to improve the SBA Review Experience
Before I begin, I want to know how many have experienced an OCRM Review within the last 2 years? I would like to have this as an interactive time, so please ask questions as we move along.
Office of Credit Risk Management Anne Goldberg, Financial Analyst WPASGL Quality Circle March 14-16, 2018

3. PARRiS Lender Profile Assessment Scorecard
Pictured here is the PARRiS Lender Portfolio Assessment or LPA . 
The PARRiS tool is populated using data in “hidden” source spreadsheets.
These source spreadsheets are compiled by SAS software using SBA and Dun & Bradstreet data, Lender/Loan Monitoring System (L/LMS System), lender reported data, SBA Approvals, 1502 Reporting, credit scores, SBA Cash transactions along with other internal and external data sources.
This Report is the property of the U.S. Small Business Administration, Office of Credit Risk Management, and is furnished for the confidential use of the examined entity. Under no circumstances shall any recipient of this report or its parent company, or any of their directors, officers, employees, attorneys or auditors disclose or make public this report or any portion thereof. Unauthorized disclosure of any of the contents of this report is subject to the penalties in 18 USC The Office of Credit Risk Management must be notified immediately if the examined entity receives a subpoena or other legal process calling for the production of this report.

4. PARRiS Scores and Risk Relationship
Less than 30
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Lower Risk
The LPA and the lender’s score is updated on a quarterly basis. The PARRiS score has an overall score range between
Risk is broken down into 3 levels.
Scores less than 30 indicate a -- lower risk to SBA
 Scores between indicate a -- moderate level of risk
 And a PARRiS score between indicate a --higher level of risk
A higher PARRiS risk score may trigger a review.
The majority of our lenders fall within the moderate risk range and
to a lesser degree, higher risk range.
30-43
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Moderate Risk
44 and Greater
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Higher Risk

5. Risk Based Review Life Cycle
2) Conduct Review
3) Review Report Issued
4) Lender Response to Findings
5) SBA Assessment of Lender Response
6) Resolution Letter
1) Lender Selected for Review
Life cycle of a Risk Based Review.
First- OCRM selects the lender for review
Second - the review is conducted
Third - a review report is issued
Fourth- lender provides its corrective action response to any review findings
Fifth - SBA assesses the lender’s response
Sixth - SBA sends the lender a resolution letter indicating that the lender’s response was satisfactory or whether further monitoring is required on some metric.
However, if there is no Resolution or if the lender is uncooperative, the lender may be placed under Increased Supervision.
Which may result in one or multiple Increased Supervision actions detailed in OCRM’s SOP entitled Lender Supervision and Enforcement
Some examples of Increased Supervision action are:
downgrade in the lender’s Risk Rating
Shortened renewal or non-renewal of its delegated authority and/or
Meeting with SBA senior management
Life Cycle

6. Types of Review Assessments
Acceptable
Acceptable with Corrective Actions
Marginally Acceptable with Corrective Actions
Less Than Acceptable with Corrective Actions
As I mentioned, at the conclusion of a Review, a report is generated and issued to the lender.
The report will have 1 of 4 assessments;
Acceptable Acceptable with corrective actions
Marginally acceptable with corrective actions, or
Less than acceptable with corrective actions
Most lenders receive one of the Acceptable assessments.
The Marginally acceptable assessment is given when there is a heightened awareness of risk. (Policy Notice 1332)
The Less than acceptable assessment is given when there is a higher level/frequency and severity of policy non-compliance.
An assessment, other than Acceptable, will require some sort of corrective action.

7. Common Findings - Eligibility
Size Determination
Finding: The Lender used incorrect NAICS code for size standards in E-Tran and Form 1920; however, the Lender used correct NAICS code in the credit memorandum.
13 CFR details how the SBA determines a concern’s “primary industry” and 13 CFR Part 121 defines the Small Business Size Regulations. SOP (J) Subpart B states when sending data to SBA, use the same NAICS Code that was used to determine size for the Small Business Applicant.
EPC/OC Conditions
Finding: All EPC/OC conditions were not met; evidence of disbursement of working capital to the Operating Company was missing in the loan files.
SOP (J) requires that all EPC/OC conditions must be met including evidence of disbursements of working capital to the Operating Company.
Debt Refinancing Conditions
Finding: The credit memo failed to include written analysis and supporting documentation justifying debt refinancing.
SOP (J), Subpart B, Chapter 2 states that when refinancing debt, the lender’s loan file must include a written analysis and supporting documentation of the refinancing issues including why was the debt incurred.

8. Common Findings - Eligibility
Form 1919
Finding: Lender did not accurately review the required SBA Form 1919 for completion.
An incomplete Form 1919 may result in approval of an ineligible loan which subsequently the SBA may repair or deny liability on its guaranty.
Credit Elsewhere Test
Finding: Credit Elsewhere Test documentation was inadequate.
13 CFR , which requires the lender to certify or otherwise show that the desired credit is unavailable to the applicant on reasonable terms and conditions from non-Federal sources without SBA assistance and must include substantiation in its file to support the certification. SOP (J), Subpart B, Chapter 2 requires that a lender must certify that credit is not available elsewhere on reasonable terms.

9. Common Findings - Underwriting
Collateral Analysis
Finding: the Lender’s underwriting was deficient as the analysis of collateral adequacy, including liquidation value, was not documented.
SOP 50 10(J), Subpart B, Chapter 4 states that the lender’s credit memorandum and analysis must demonstrate the Small Business Applicant’s ability to repay the loan from the cash flow of the business by documenting collateral adequacy assessment (using market or net book value).
Evidence/Source of Equity Injection
Finding: Lender failed to verify equity injections prior to disbursement through supporting documents.
If the Lender’s policies and procedures for its similarly-sized, non-SBA guaranteed commercial loans ($350.0M and less) require verification of equity, it must do so for SBA loans in accordance with SOP (J), Chapter 4.
Credit Memo vs. Loan Authorization
Finding: Loan authorization not in agreement with the credit memo (credit memo indicated refinancing of Same Institution Debt, whereas Loan Authorization indicated refinancing of external debt; correct usage was for external debt)
The Lender must ensure it follows all SBA Loan Program Requirements at origination and during servicing in accordance with SOP (J).

10. Common Findings - Underwriting
Adequate Projections
Finding: there was no evidence of an analysis of projections or discussion of capital adequacy located in file.
In order to demonstrate reasonable assurance of repayment, on loans larger than $350.0M, SOP (J), Subpart B, Chapter. 4 states that the lender’s credit memorandum must document, among other things, an analysis of financial ratios, industry standards, and borrower projections.

11. Common Findings – Loan Closing Practices
Secure Collateral
Finding: Lender was deficient in obtaining all required collateral positions.
SOP (J), Subpart B, Chapter 7 states that for the PLP Program, the Lender must obtain all required collateral positions and must meet all other required conditions before loan disbursement.
Flood/Hazard Insurance
Finding: Appropriate Insurance Not Obtained / Documented)
The Lender is not in compliance with 13 CFR which states under the Flood Disaster Protection Act of 1973, a loan recipient must obtain flood insurance if any building (including mobile homes), machinery, or equipment acquired, installed, improved, constructed, or renovated with the proceeds of SBA financial assistance is located in a special flood hazard area.
Life Insurance
Finding: required life insurance was not adequately obtained as the loan file was not documented with the insured amount of the three life insurance policies assigned to the Lender.
SOP (J) Subpart B, Chapter 5 states if the loan is not fully secured, life insurance is required for the principals of sole proprietorships, single member LLCs, or for businesses otherwise dependent on one owner’s active participation, consistent with the size and term of the loan.

12. Common Findings – Loan Closing Practices
Standby Agreement
Finding: In 1 of 2 loan files reviewed with a standby agreement, a copy of the Note was not attached to the Standby Agreement.
SOP (J), Subpart B, Chapter 5 states that a copy of the Note must be attached to the standby agreement.

13. Common Findings – Servicing Practices
Site Visits
Finding: Site visit not conducted when loan became 60 days past due.
SOP (J), Subpart B, Chapter 5 states that a site visit must be conducted when a loan becomes 60 days past due.
Release of Lien
Finding: Lenders released collateral, on an under-collateralized loan, and did not require the borrower to provide available collateral injection. Premature requests for the release of liens on real and/or personal property collateral, without prudently analyzing the implications on the quality and security of the SBA loan could result in a repair or denial of guaranty.
SOP , Chapter 8 requires that that the Recoverable Value of any remaining collateral must be sufficient to adequately secure the SBA loan after the proposed release.
Timely Wrap Up Reports
Finding: the Lender failed to submit a Wrap-up Report in a timely manner.
SOP , Chapter 26, Paragraph B states that a Wrap-up Report must be prepared and submitted in electronic format to the appropriate SBA Loan Center for review and approval within 30 calendar days after Prudent Liquidation is complete or upon receipt of a request from SBA, whichever occurs first.

14. Common Findings – Servicing Practices
Continued Creditworthiness
Finding: Lender’s monitoring of continued creditworthiness was not evident in the loan file.
SOP , Chapter 3, Paragraph E states the borrower’s creditworthiness, i.e., financial and operational condition, should be monitored through the use of tools such as periodic submission of financial statements.

15. Attributes of a Successful SBA Lender
Dedicated and trained staff
Formal, complete
procedures
Committed management
Technology
SBA partner relationships

16. Attributes of a Successful SBA Lender
Industry partners: WPASGL, NAGGL
Do what you know: approve and disburse loans in familiar industries
Periodic internal check up and audits
Servicing acquired loans to be sure these loans are converted after acquisition/merger and 1502 reported

17. Successful Review Experience
Data uploaded by deadline
Transparent approach
Walk through staff availability
Exceptions quick turnaround time
Complete loan documentation