Office of Credit Risk Management Update Linda S. Rusche, Director - - PowerPoint PPT Presentation

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Office of Credit Risk Management Update Linda S. Rusche, Director - - PowerPoint PPT Presentation

Nov 30, 2022 219 likes •573 views

Office of Credit Risk Management Update Linda S. Rusche, Director Philadelphia District Office 04/20/2017 Mission The Mission of the Office of Credit Risk Management is to maximize efficiency of the Agencys lending programs by effectively

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Office of Credit Risk Management Update

Linda S. Rusche, Director Philadelphia District Office 04/20/2017

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Mission

The Mission of the Office of Credit Risk Management is to maximize efficiency of the Agency’s lending programs by effectively managing program credit risk, monitoring lender performance and enforcing lender program requirements.

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7(a) Loan Program

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$75,044,347,848 $81,197,594,823 250,401 256,831 $69,461,355,059 $77,066,756,196 229,738 240,900 $68,357,029,189 $75,841,793,742 224,660 235,878 $1,104,325,870 $1,224,962,454 5,078 5,022

$385,853,366 $450,917,680 1,891 1,932 $587,346,682 $597,502,778 2,895 2,737 $131,125,822 $176,541,996 292 353

$5,582,992,789 $4,130,838,627 20,663 15,931 $1,710,953,946 $1,455,073,022 8,745 7,308 $3,872,038,843 $2,675,765,605 11,918 8,623

PAST DUE BALANCE STRESSED BALANCE

Stressed = Past Due + Delinquent + Deferred Active Default = Liquidation + Active Purchases

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7(a) Portfolio Balance Sheet

1 YEAR AGO (12/31/2015) CURRENT (12/31/2016) 1 YEAR AGO (12/31/2015) CURRENT (12/31/2016)

$ #

OUTSTANDING GROSS BALANCE

Gross Loans = Active Servicing + Active Defaults

ACTIVE SERVICING BALANCE

Active Servicing = Current + Stressed

CURRENT BALANCE DELINQUENT BALANCE DEFERRED BALANCE

ACTIVE DEFAULT BALANCE

LIQUIDATION BALANCE ACTIVE PURCHASES BALANCE

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7(a) Lender Populations

1502 Lender Reported Data as of 12/31/2017 *Gross loan count and dollars do not include loans from lenders whose SBA agreement is not open

Federally Regulated Lenders

Program / Lender Type # of Lenders # of Loans Gross Dollars SBA Dollars 7(a) Federally Regulated Bank 3,159 235,122 $76,150,022,129 $56,668,025,545 7(a) Credit Union 380 7,020 $1,216,865,673 $889,264,949 7(a) Farm Credit 12 82 $58,298,836 $46,863,610 Total: 3,551 242,224 $77,425,186,638 $57,604,154,104

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7(a) Regulated Lender Peer Groups

1502 Lender Reported Data as of 12/31/2016 *Active status based on if lender has approved a loan in the past 2 years.

Gross Dollars # of Lenders # of Loans Gross Dollars SBA Dollars Cumulative %

  • f Active's

Gross $ Cumulative %

  • f Active

Lenders $350M or above 35 118,923 $37,392,169,437 $27,755,982,527 49.8% 1.5% $100M-<$350M 93 39,844 $16,191,501,800 $12,133,765,873 71.3% 5.6% $50M-<$100M 104 18,301 $7,153,186,370 $5,370,976,865 80.9% 10.2% $10M-<$50M 445 33,547 $9,879,089,715 $7,333,452,796 94.0% 29.9% $4M-<$10M 435 13,650 $2,808,990,927 $2,055,403,461 97.8% 49.1% $1M-<$4M 649 9,060 $1,447,975,021 $1,045,327,934 99.7% 77.7% <$1M 506 2,101 $230,138,912 $163,696,697 100.0% 100.0% Total 2,267 235,426 $75,103,052,182 $55,858,606,153 Active Gross Dollars # of Lenders # of Loans Gross Dollars SBA Dollars Cumulative %

  • f Inactive's

Gross $ Cumulative %

  • f Inactive

Lenders $350M or above

  • $0

$0 0.0% 0.0% $100M-<$350M 2 973 $274,708,438 $209,773,237 17.2% 0.2% $50M-<$100M

  • $0

$0 17.2% 0.2% $10M-<$50M 11 436 $168,348,022 $130,193,908 27.8% 1.0% $4M-<$10M 62 894 $364,145,527 $274,109,952 50.6% 5.8% $1M-<$4M 278 1,638 $523,429,551 $401,185,048 83.4% 27.3% <$1M 941 1,994 $265,210,775 $201,577,978 100.0% 100.0% Total 1,294 5,935 $1,595,842,313 $1,216,840,123 Inactive

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PARRiS Methodology And Review Processes

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PARRiS Re-structure

Performance Asset Management Regulatory Compliance Risk Management Special Items

5 Year Cumulative Net Yield 12 Month Default Rate 5 Year Default Rate Stressed Loan Rate Early Problem Loan Rate Loans in Default Status > 3YR Rate 24 Month Repair/Detail Rate 1502 Reporting Rate Total Risk Based Capital Ratio Non-Performing Asset Ratio Lender Purchase Rating Average Portfolio SBPS 5 Year Recovery Rate

  • Pub. Correct Action/No Regulator

5 Year Cumulative Net Yield 12 Month Default Rate 5 Year Default Rate Stressed Loan Rate Early Problem Loan Rate Average Portfolio SBPS Total Risk Based Capital Ratio Non-Performing Asset Ratio

  • Pub. Correct Action/No Regulator

Loans in Default Status > 3YR Rate 24 Month Repair/Detail Rate 1502 Reporting Rate High Risk Origination Rate Forecasted Purchase Rate Purple indicates metric creation, and red indicates proposed metric removal 5 Year Charge Off Rate High Risk Origination Rate

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Lender Profile Assessment (LPA) Scorecard

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PARRiS Scores and Risk Relationship

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Less than 30 ____________________________________________________ Lower Risk 30-43 ____________________________________________________ Moderate Risk 44 and Greater ____________________________________________________ Higher Risk

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Never reviewed Portfolio performance Prior Risk Based Review assessment Time since last Risk Based Review PARRiS score Passage for PARRiS Some Review Selection Criteria Rapid portfolio growth Federal Regulator Order(s)

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Lender Profile Assessment (LPA) PARRiS Analytical Review (PAR) PARRiS Targeted Review (PTR) PARRiS Full Review (PFR) Delegated Authority Renewal Review Diagnostic data driven virtual review performed quarterly on all Lenders Virtual Review

  • f quantitative

and qualitative aspect of each LPA PARRiS component Narrow in scope focused

  • n area(s) of

concern one or more PARRiS components or

  • ther areas

Comprehensive analysis of PARRiS components including on- site review of loan files Performed prior to expiration of delegated status analyzes LPA with other criteria

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Risk Based Review Protocol for 7(a) Regulated Lenders

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7(a) PARRiS Analytical Review (PAR) Timeline

LENDER SELECTED FOR PAR PAR KICKOFF: SBA CONTACTS LENDER BY PHONE AND DETERMINES PRIMARY POC (LIAISON TO SBA FOR THE REVIEW) CONFIRMATION/ INTRODUCTION EMAIL SENT BY SBA PAR NOTIFICATION EMAIL SENT TO LENDER BY CONTRACTOR (GARCIA & ORTIZ) LENDER SUBMITS REQUESTED DOCUMENTS TO SECURE DATA ROOM CONTRACTOR (GARCIA & ORTIZ) TAKES INVENTORY OF DOCUMENTS SUBMITTED BY LENDER LENDER ADVISED OF MISSING DOCUMENTS, REQUESTED TO SUBMIT REMAINING DOCUMENTATION ANALYTICAL REVIEW CONDUCTED BY CONTRACTOR PAR REPORT SUBMITTED TO SBA FOR FINAL REVIEW FINAL PAR REPORT ISSUED TO THE LENDER LENDER HAS 30 DAYS TO RESPOND TO CORRECTIVE ACTIONS

Day 0 Days 1 - 3 Day 3 Day 8 Days 9-18 Days 19-20 Days 20 -23 Days 24-37 Days 38 - 43 Day 44 Day 74

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7(a) PARRiS Targeted Review (PTR) Timeline

LENDER SELECTED FOR PTR PTR KICKOFF: SBA CONTACTS LENDER BY PHONE AND DETERMINES PRIMARY POC (LIAISON TO SBA FOR THE REVIEW) CONFIRMATION/ INTRODUCTION EMAIL SENT BY SBA PTR NOTIFICATION EMAIL SENT TO LENDER BY CONTRACTOR (GARCIA & ORTIZ) LENDER SUBMITS REQUESTED DOCUMENTS TO SECURE DATA ROOM CONTRACTOR (GARCIA & ORTIZ) TAKES INVENTORY OF DOCUMENTS SUBMITTED BY LENDER LENDER ADVISED OF MISSING DOCUMENTS, REQUESTED TO SUBMIT REMAINING DOCUMENTATION TARGETED REVIEW CONDUCTED BY CONTRACTOR PTR REPORT SUBMITTED TO SBA FOR FINAL REVIEW FINAL PTR REPORT ISSUED TO THE LENDER LENDER HAS 30 DAYS TO RESPOND TO CORRECTIVE ACTIONS

Day 0 Days 1 - 3 Day 3 Day 8 Days 9-18 Days 19-20 Days 20 -23 Days 24-37 Days 38 - 43 Day 44 Day 74

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7(a) PARRiS Full Review (PFR)

Timeline

LENDER SELECTED FOR PFR PFR KICKOFF: SBA CONTACTS LENDER BY PHONE AND DETERMINES PRIMARY POC (LIAISON TO SBA FOR THE REVIEW) CONFIRMATION/ INTRODUCTION EMAIL SENT BY SBA PFR NOTIFICATION EMAIL SENT TO LENDER BY CONTRACTOR (GARCIA & ORTIZ) LENDER SUBMITS REQUESTED DOCUMENTS TO SECURE DATA ROOM CONTRACTOR (GARCIA & ORTIZ) TAKES INVENTORY OF DOCUMENTS SUBMITTED BY LENDER LENDER ADVISED OF MISSING DOCUMENTS, REQUESTED TO SUBMIT REMAINING DOCUMENTATION LOAN FILE SELECTION SENT BY CONTRACTOR FULL REVIEW STARTS (ENTRANCE MEETING) EXIT MEETING FINAL PFR REPORT ISSUED TO THE LENDER LENDER HAS 30 DAYS TO RESPOND TO CORRECTIVE ACTIONS

Day 0 Days 1 - 3 Day 3 Day 8 Days 9-18 Days 19-20 Days 20 -23 Day 32 Day 39 Day 44 Day 74 Day 104

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DATE MILESTONE Day 0 Lender's Delegated Authority up for Renewal Day 1 Request for Certification Letter from lender Day 1 Request for comments from District Office Day 16 Lender submits Certification Letter Day 17-30 Follow up if Certification Letter and/or District Office comments not received Day 31-59 Delegated Authority Review conducted by Contractor Day 60 Renewal Letter and Agreement sent to Lender Day 61-90 Lender signs agreement and sends back to SBA

LENDER SELECTED FOR PDR REQUEST FOR CERTIFICATION LETTER FROM LENDER REQUEST FOR COMMENTS FROM DISTRICT OFFICE LENDER SUBMITS CERTIFICATION LETTER FOLLOW UP IF CERTIFICATION LETTER AND/OR DISTRICT OFFICE COMMENTS NOT RECEIVED DELEGATED AUTHORITY REVIEW CONDUCTED BY CONTRACTOR RENEWAL LETTER AND AGREEMENT SENT TO LENDER LENDER SIGNS AGREEMENT AND SENDS BACK TO SBA

Day 0 Day 1 Day 1 Day 16 Day 17-30 Day 31-59 Day 60 Day 61-90

7(a) Delegated Authority Review Timeline

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 Debt Service Coverage does not meet requirements of SOP (large

loans)

 Lenders that sell in Secondary Market fail to maintain separate account

“in trust” for Colson

 1502 reporting rate that exceeds high risk threshold  Stale-dated liquidations (older than 3 years with no resolution)  Recovery remittances submitted beyond 15-day limit  Use of Lender Service Provider without SBA-reviewed agreement 17

PARRiS Analytical Review Issues (PAR)

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Loan Underwriting Practices- Credit Memo does not align with file documentation or Loan Authorization

Eligibility- Credit Elsewhere T est narrative is not clear

Eligibility- Size Determination is not accurately determined

Eligibility- Debt Refinancing requirements are not fully met

Loan Underwriting Practices- Equity Injection is not documented, including source of funds

Loan Closing Practices- Lease terms do not match credit memo requirements

Loan Closing Practices- Standby Note does not contain all requirements of credit memo, or is not executed properly

1502 Reporting - Unscheduled Remittances are not sent in a timely manner

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PARRiS Full Review Issues (PFR)

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Types of Review Assessments

 Acceptable  Acceptable with Corrective Actions  Marginally Acceptable with Corrective Actions  Less Than Acceptable with Corrective Actions

SOP 51 00 page 25 and Policy Notice 5000-1332

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OCRM’s Approach to Corrective Actions

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Lenders are required to provide corrective action responses to findings within 30 days, including corrective actions already taken or planned to be taken to address the findings.

OCRM submits review report to lender Lender provides corrective action response to OCRM within 30 days OCRM validates effective corrective action If necessary, OCRM escalates any issues noted during the validation

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Risk Based Review Life Cycle

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2) Conduct Review 3) Review Report Issued 4) Lender Response to Findings 5) SBA Assessment

  • f Lender

Response 6) Resolution Letter 1) Lender Selected for Review

Life Cycle

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Lender Profile Assessment (LPA) Scorecard

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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Lender Profile Assessment (LPA)

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7(a) Lender Portal

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SBA One – PARRiS Scorecard

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Thank you for your participation!

Anne Goldberg anne.goldberg@sba.gov Lou Pham lou.pham@sba.gov