The Age of Coronavirus is upon us. Our concerns for health and well-being are universal. Now more than ever, our communities need calm in the face of the storm. For America’s small businesses, it’s critical that lenders be diligent. This is your opportunity to provide the services so badly needed by our small businesses. Judging by number of lender calls we’ve received this week, you’ve heard from many of them. Clients have heard me say that it’s our responsibility to “Be Calm, Be Patient. Be Prudent.”
Yet you’re asking, “What Can We Do?”
Calm. First, refer your businesses to www.Disasterloan.sba.gov/ela/. Here they can find out if their county and state are in eligible disaster areas and apply online for assistance. It is important to remind them that this is a direct loan from SBA and is limited up to an aggregate of $2 million to the Borrower and Affiliates. Also important to know: Loans over $25,000 will require RE collateral if it’s available.
Patience. Here’s where our patience comes in. In a recent call with lenders, SBA said they’re preparing many Notices providing additional emergency lending guidance. Until then it’s up to us to stay the course and assist as already allowed by the SOPs:
- Deferrals are available to all SBA Borrowers not already in default/liquidation status.
- Lenders have the unilateral Authority to defer up to six consecutive months payments for loans not sold on the secondary market or up to three months for those that are sold.
- If a sold loan requires more than three months deferment, you need only request approval from the Investor through the FTA (Colson), email@example.com.
- Additionally, when the loan is sold, you must notify Colson of the deferment through firstname.lastname@example.org. For more information, see SBA Information Notice 5000-20004.
Prudence. As always, prudence is key to protecting the guaranty.
- These 1502 actions are key to ensuring you avoid errors in reporting that could lead to exception reports and impact to your PARRiS score. For each loan deferred you must report:
- Next Installment Due Date: should reflect the date the borrower is to resume full principal and interest payments
- Status: should be Coded 4 as deferred for each month deferred and returned to current when the full payment resumes
- Document your deferral. Make sure your lender deferral procedures include:
- SOP 50 57 2 states that you should collect financials not that you must. However, you must be sure that your actions adhere to your institution’s policies and any federal/state regulatory policies.
- Collect from the borrower a written request for assistance and the impact the current coronavirus has had on their business.
- Prepare a memo to your file with the information you gather, the analysis you perform and the terms of the deferral. Provide a copy of this document to Colson.
- Finally, be sure to document with a Change in Terms or similar form and obtain the Borrower’s signature.
As a nationwide Lender Service Provider J.R. Bruno & Associates is here to help. Our thoughts are with you, your families and communities.