It’s that time of the year again: The Central Servicing Agent (CSA) will soon produce annual Yearend Statements.

At JRB, we receive calls from CDCs every year at this time, asking if they’re required to send  Statements to their borrowers. And, if not required, should they send them anyway?

Since the Statements aren’t IRS tax forms, there is no requirement that they be sent to the borrowers. However, your internal Policies and Procedures may require you to send them. So the first step is to review your manual. It might require you to send a Statement to each borrower annually. In that case, you know what to do.

This also is a chance for you to review your Policies and Procedures. Make sure you have incorporated all applicable changes.

If your manual doesn’t provide guidance, then the decision should be determined on a loan-by-loan basis. One of the few tools a CDC has to encourage a borrower to comply with annual servicing requirements (submitting annual financials and/or tax returns, updated insurance documentation, etc.) is to provide information the borrower’s accountant usually requires. The annual Yearend Statement is one of those documents.

Our Recommendation. We recommend that if a borrower is in compliance with the servicing requirements, send the Statement. If the borrower is not in compliance, don’t send it. By not receiving the Statement, the borrower will likely contact your CDC for the information. This will give you an opportunity to discuss the requirements and hopefully receive the required documents.

Additionally, if your CDC doesn’t send the Statement to a noncompliant borrower, discuss the reason with the Business Development and Servicing staff so that if the borrower contacts them, they will request the required information.

Sandy Mortan
Senior Associate