Hurry! Quick!! Take a look at your loan policy. Recent changes in federal regulations might call for an update. Even if your policy is more restrictive than the CFR, it’s likely you’ll want to change it to accommodate more loans. Better take care of it before your next OCRM review so your loans will be in compliance. Here are a couple sample scenarios:
Scenario #1. Let’s say your loan policy requires hazard insurance on all assets pledged as collateral in conformity with SOP 50 10 6. But that’s not what the new SOP requires. Instead, for 504 loans, 50 10 7 requires hazard insurance a) on all assets pledged as collateral for loans greater than $500,000; and b) for all real estate acquired, refinanced, or improved for loans up to $500,000.
Scenario #2. Or let’s say your loan policy includes thresholds for personal liquidity. At JRB, we still get a handful of questions about personal liquidity thresholds, even though previous amended regulations have eliminated them. So if your loan policy contains limits to personal liquidity, better do a fast 180-degree turn before August 1. Here’s why:
“Personal resources from owners enhance SBA’s ability to mitigate loan losses to the taxpayer due to the personal guaranty required of all owners of the small business Applicant.”(SOP 50 10 7, pg. 23)
As an SBA lender, you’re not required to consider the personal resources of owners of the Applicant. Additionally, SBA will not evaluate the personal liquidity of owners at the time of loan origination or during an SBA loan review.
Of course, you could retain the more restrictive provisions in your loan policy. But if so, you’ll only be able to take advantage of the new provisions as exceptions to policy. That means tracking them or explaining them to SBA, and making sure you applied exceptions equally to all your clients.
I’m guessing that you’re not looking forward to combing through your loan policy line-by-line and checking it against the new SOP. That’s what we do at JRB. Contact us to review your SBA loan policy to make sure it conforms to the latest requirements.