PPP Forgiveness and Beyond

Lender’s Log 9.17.2020

It’s been 174 days since the Paycheck Protection Program was signed into law. The SBA has initiated the platform for Forgiveness submission and has started accepting requests. There is still lots to be explored and further understood. Lenders around the states remain at a loss for guidance and many are still determining their course of action.

Forgiveness and beyond is pretty accurate, given that so many lenders who have originated these PPP loans are now trying to figure exactly where we go from here.

Fraud

It seems every day in the news we see another article of fraud or abuse of funds received from this program by borrowers. While the SBA and the Treasury Department have identified in their issued guidance that lenders will not be held accountable, it sure will provide a headache for those lenders who are trying to get reimbursed for these funds.

As lenders identify and escalate these findings, the SBA hasn’t provided any additional instructions to follow besides the normal escalation outlined in the Servicing and Liquidation SOP 50 57. Which requires the lender to refer the loan to the Office of Inspector General. Lenders may want to re-read the chapter outlining those guidelines and include a process for their team members to follow when these loans are identified. Having an outlined process for escalation and reporting will help, and relying what is outlined in SOP is always the fall back for this program.

Hurry up and Wait

What we have seen since the Forgiveness process has started is that businesses and lenders are not rushing to submit. Most lenders are still identifying their internal process, creating training for the teams who will be submitting and learning the SBA Forgiveness system. Essentially having to create a whole new team and guidelines.

Many lenders are hoping to see another Act (HEALS) approved and signed into law that would alleviate the Forgiveness process for both lenders and borrowers. Of course, with all the different Acts currently on the table and it also being an election year it seems as though these may be on the back burner for now.

What remains

In our last PPP blog with the updates from IFR 23, we discussed what lenders would need to do for changes to the loans. While the hopes of lenders are that the majority of the loan funds will be forgiven, what happens when there is a remaining loan balance to pay? We know the approval needs to be disclosed to the borrower but what the lender should do to document and re-amortize the loan is also not well outlined. Leaning once again on SOP 50 57 the lender will need to document the file and obtain written consent from the borrower. Leaning on the legal and compliance departments and what would be prudent should be part of the review and documentation of the changes.  

Where do we go from here- As we are all aware, lenders have repeatedly expressed their frustration about PPP origination and Forgiveness. The SBA and its team members have been just as frustrated trying to figure out how to process these and answer questions when there was limited guidance from the Treasury Department. We are all in the same boat but luckily there are many resources you can reach out to for help.

SBA District Offices - Each lending area has a district office to serve them. District offices are there to help provide small businesses guidance through many of its offerings. They also have Lender Relation Specialists who help guide lenders to not only become an SBA lender but to also provide guidance in the origination of SBA loans.

SBA Loan and Guaranty Centers - Each lender is assigned a servicing and liquidation office for their loans. There are 3 offices who help guide lenders to service, liquidate, and purchase the loans guaranteed by the SBA program.

                            National Guaranty Purchase Center

                            Commercial Loan Service Centers (Fresno, CA and Little Rock, AR)

National Association of Government Guaranteed Lenders (NAGGL) – We are a proud member of NAGGL who offer training and other resources for SBA lending. If you haven’t attended any of their events or checked out their web page, I highly suggest you do.

While we all would probably love to say “beam me up, Scotty” to get us out of the space we are in, continue to boldly go where no man has gone before.

You might also like:

Interim Final Rule on the Paycheck Protection Program (PPP) and What it Means for Lenders

Author Bio

As the Director of Implementation Analysts at Baker Hill, Jennifer Foraker manages the team that implements Baker Hill NextGen®. She collaborates with clients and internal teams to give knowledgeable insights into Baker Hill NextGen® product capabilities and functionality throughout the implementation process. With more than 20 years in the banking industry responsible for both consumer and small business processes for banks of all sizes and previously serving as a Loan Operations Manager, Jennifer’s areas of expertise include small business loans, SBA lending, construction loans, operations management, regulatory documentation and portfolio management.