1502 Reporting… Modernized?

Last December, we wrote optimistically about the new “modernized” Form 1502 reporting process. Given what we saw on the SBA website, it seemed things should roll out reasonably smoothly.

Oops. It hasn’t exactly gone as planned. In this article, we’ll touch on a few of the more challenging issues that have come up and offer some suggestions on what to do.

Technical Glitches

As with any technology rollout, there have been glitches – everything from problems logging on to valid data being mislabeled as incorrect. Perhaps unsurprisingly, many of the problems appear to be related to loans with specific conditions, such as partially-forgiven PPP loans (and yes, we’re still wrangling PPP loans more than three years after the last ones were issued).

Training

Back in December, we believed FTA’s SBA training looked reasonably well done and complete. While there have been many opportunities for training sessions, there’s still confusion surrounding error codes and exactly how to fix them. And some Lenders are feeling the timeline was rushed – which has been especially challenging for smaller Lenders with limited resources as well as Lenders with large SBA portfolios.

Vendor System Integrations

Many Lenders use outsourced vendor platforms for reporting – and many vendors are still catching up with the new reporting requirements. The workaround? Everyone’s favorite: manual data entry. Of course, manual data entry has its own issues, since rekeying information can lead to errors. Just remember that this, as with all the issues here, is temporary.

What Can Lenders Do?

Cultivate patience. Recognize that workarounds are going to be needed for a while, including relying on manual entry of some fields and extra time to make sure people are up to speed to ensure that loans in your SBA portfolio are processed accurately.

The FTA is working hard – also with limited resources – to resolve issues.

They continue to push for all Lenders to be up and running on the new system by June, with at least some leeway, allowing use of the Gateway again in July for June activity for loans that do not reconcile or have error codes.

That said, it’s essential to note that Lenders who have submitted requests to FTA for transcripts to aid in reconciliation are being placed in a queue for resolution. That doesn’t sound especially encouraging, but it actually is: once a loan is in the queue, the Lender’s reporting will be processed, and payments to investors will go out on schedule, thereby avoiding late fees and penalties.

For example, as far as we understand (and things continue to change), if a Lender has 200 loans to report, they should try to report all of them using the new system. They should then submit an email listing only those loans that appear to be out of sync between the FTA and Lender records, and for which the Lender is getting error codes from the FTA. Each individual loan that is out of sync and reported as such will be issued a code. That code indicates that the loan is in line for resolution, so reporting will be processed and payments won’t be held up.

That’s not ideal, but it’s better than having everything come to a halt!

In the meantime, stay focused on training. System fixes are being released, and attending training will keep your team up to date on what’s happening.

And consider attending focus group meetings with other Lenders, especially if you use a vendor for reporting – and encourage your vendor to create a focus group if they haven’t already. It’s a great way for Lenders to share ideas and workarounds, and for the vendor to hear in real time what’s happening and then respond.

What Not To Do

We’ve heard through the grapevine that some Lenders are contemplating cutting back on SBA 7(a) lending as a result. We’d hate to see that happening; small businesses depend on SBA loans to stay afloat, especially in today’s turbulent market.

How Can We Help?

As SBA consultants, while we don’t have access to the new MySBA Loan Portal that Lenders must use to submit their 1502 reports through the “modernized” submission process, we can help with loans that FTA is stating are out of balance between their records and Lenders’ records. We can assist with reconciling these issues, so if that’s something you’re wrestling with, give us a call at 877-576-0819, or drop us a note here.

Of course we can also offer other Lender consulting services to support your team while they work their way through these issues, helping keep your SBA portfolio in proper SBA compliance – despite the confusion!