What's Up With Your SBA Form 1502 Reporting?

Lori’s current SBA-geek fun: facilitating a monthly SBA Form 1502 Roundtable, with over 50 participants from 25 different Lenders.

(See below for how to join us!)

From our experience working with clients and from what we hear from Lenders at the Roundtable, there are four primary early-warning signs of SBA Form 1502 reporting trouble. All of them relate to mismatches between Lender and FTA records. Caught early, you’ll avoid long-term – and costly – problems while strengthening your SBA compliance efforts.

Let’s look at these four issues, and track back to the most likely cause for each.

Let’s look at the good ones first.

Interest

Two common issues arise here.

First issue: if the Lender’s portion of the payment doesn’t compute interest in full days, you’ll end up with excess interest in FTA’s calculations.

The second issue arises when the amounts paid-to-date don’t match up.

There are several possible root causes.

• The interest accrual basis is incorrect. 30/360 or Actual/365 are the only options for loans sold on the secondary market.

• The gross interest and / or net interest rate is out of sync.

• Lender’s core system may not be accurately accounting for the difference between the Gross Note interest rate and the Net Participant (sold loan portion) interest rate.

• Interest rate change effective dates aren’t in sync.

Payment Due Dates

If the next-payment due dates aren’t matching up, it can be as simple as a typo between the Lender’s and FTA’s records.

Or there might be a discrepancy between the secondary market settlement dates.

Principal Balances

This can go all the way back to the beginning: the starting principal balance might be out of sync.

Your core system didn’t include a partial prepayment, so it wasn’t reported to the FTA

Loan payments were reversed after the SBA Form 1502 report was submitted, but the bank’s core system didn’t calculate for the reversal.

And then there are the loan status codes, which – if not provided as needed or are entered incorrectly – will obviously cause problems and create additional SBA compliance concerns.

Reports to Review

FTA provides several reports that will help you catch problems.

1. Unreported loans

2. Loans with warnings or errors – clearly, you’ll want to carefully scrutinize the warning and error codes!

3. Guaranteed Portion Discrepancy reports for sold loans.

It’s obviously essential to catch SBA Form 1502 reporting issues as soon as possible and fix them as quickly as possible.

Want some help with that? As an experienced lender service provider, we’re experts on SBA Form 1502 reporting and reconciliation, and we’re here to help. If you’d like to explore how we can help solve any 1502 problems you’re wrangling, improve your SBA compliance, or you’d like to join the 1502 Roundtable, drop us a note here, or give us a call at 877-576-0819. As always, we’re here to help with all things SBA 7(a) – and as you know, we offer SBA loan reviews, we provide comprehensive SBA training for lenders and ongoing consulting support as your trusted lender service provider.