Don’t Let SBA Form 1502 Reporting Discrepancies Get the Best of You

Let’s start with a sense of real urgency: all SBA Form 1502 errors reported to you by the FTA should be handled as your top priority, in the same month as you’re notified.

Why?

Because if the mismatches aren’t corrected in the reporting month, corrections are likely to become more complex, and the mismatches may continue to increase.

Furthermore, for loans sold on the secondary market, leaving errors uncorrected may trigger a repurchase request if the FTA reports the loan as past due, but it’s current on the Lender’s records. That’s because loans with unresolved reporting discrepancies may be flagged as past due, even when they’re not.

So, with that said, what are the most common 1502 discrepancy issues? Let’s take a look.

Past Due or Payment Due Date is incorrect

The next Payment Due Date doesn’t match the FTA’s records. There are several reasons this can happen: posted payments that are subsequently reversed; payments mistakenly left off the 1502 report; or payments with principal and interest mismatches.

Ending Balance discrepancies

The FTA’s ending balance doesn’t match the Lender’s ending balance. Usually, this means the previous ending balance minus the current principal payment plus any funds disbursed in the current month doesn’t reconcile to the new Ending Balance.

Undisbursed loan not reported

The FTA unreported loan report says the loan was funded by SBA, but the Lender hasn’t yet funded the loan for the Borrower. If the loan was funded by SBA in one month, but closed and disbursed in a subsequent month, the loan must be reported as undisbursed until the loan is actually disbursed by the Lender.

Interest Paid to Date discrepancies

FTA’s record of interest paid to date doesn’t match what the Lender reported. This can be caused by several things, such as: interest rate change dates; interest basis; payments applied incorrectly between principal and interest; or the interest paid-to-date is reported as the payment due date – especially on interest-only payments. And don’t forget loans with deferred payments, because those can be tricky.

In summary

None of these mismatches are difficult to correct. The key is to make sure someone’s monitoring the FTA’s 1502 warning and error reporting and the unreported loans report. It’s imperative to act quickly to research and make the corrections.

This is where having a defined process for reviewing the FTA reporting – including clear ownership of the task within your team – is essential. There’s nothing more frustrating than having a simple problem go unresolved, only to discover that it’s created a whole host of follow-on challenges.

If you’re staring at a discrepancy thinking, “We’ve tried everything to reconcile this… now what?”,  you’re not alone. We’re here to help – with SBA Form 1502 support and comprehensive SBA lender training across all aspects of SBA lending! So give us a call at 877-576-0819, or drop us a line here. Let’s start the New Year out right!