This eBulletin is a follow-up to the JRB NewsFlash regarding annual Yearend Statements posted on our website on January 18 2024.

All CDCs are required to collect, review and monitor certain documents at least annually. At a minimum, these documents include updated proof of required insurance coverage; payment of real estate taxes; updated financials and/or tax returns. In addition, some items must be collected at other specific intervals (e.g., 2-year jobs verification).

Each CDC should review their Procedures/Internal Controls Policy manual to determine if internal policy requires additional documents be collected or be collected more frequently.

If any required document(s) are missing, the borrower should be contacted and asked to provide them. Most borrowers respond promptly to the requests, but some borrowers do not. Besides constant follow-up emails or calls, there isn’t much a CDC can do to encourage a borrower to respond and provide the required documentation. With the exception of an ACH change, if a servicing request is received, a CDC can inform the borrower that they will review the request, but not submit it until the missing item(s) is received.

This only works if a request is received. If not, what …

The Annual Statement that the CSA generates contains the information regarding loan payments needed by the borrower or accountant to prepare annual financial statements and tax returns. This Statement isn’t a tax form; and there isn’t an IRS requirement that it be sent to a borrower. The CDC’s Procedures/Internal Controls Policy manual should be reviewed to determine if internal policy requires that the Statements be sent to borrowers. If not, informing the borrower that the statement is available, but will not be sent until the missing documents are received, may prompt compliance.

If this approach is being utilized, loan officers and all other staff a borrower may contact should be notified. Explaining the SOP requirements to them will enable the person being contacted to explain what is required or refer the call to the appropriate individual at the CDC.

We at J.R. Bruno are always looking for innovative ideas to make the annual document collection process work more efficiently. If you have any ideas, we would appreciate it if you would share them with us, in turn, we will share with the CDC community.

Sandy Mortan
Senior Associate