Screen Outs - 5 common errors in Guaranty Purchase Packages
In this, our second article on the dreaded Screen Out notice from SBA, we’ll cover common errors in Guaranty Purchase packages, and what you can do about them. If you missed the first article in the series, on errors we commonly find in Loan Origination packages, you can find it here.
1. Justifications and explanations
Items are often pending at this stage, and you may even have to explain an action taken or not taken. Don’t leave any questions or status points for SBA to question. Instead, simply insert a quick explanation or justification in the necessary tabs.
2. Missing documents (that aren’t actually missing)
Let’s face it: these packages can be large. Often an item is included, but SBA can’t find it. If you don’t already do this, consider bookmarking documents for SBA’s ease in locating them.
3. Early default date determination
Begin 18 months from -
Final disbursements, when final disbursement occurs 6 months after initial disbursement
Last regular payment due date, when borrower fails to make payment under a deferral agreement or 1st regular payment due after a deferral period.
See your 50 57 to ensure you’re starting your calculations correctly.
Your disbursement record-keeping may be missing backup documentation, or might also be such a large volume that they should be bookmarked for ease of review by SBA. And if you put them in the order of the Form 1149, that helps SBA match them up. The sequence should be Check/Wire followed by the corresponding Invoice/Quote.
5. Fixed asset list
Last but far from least – this one is so common! SBA wants to see your list from origination and post default. Their expectation is that you compare them and address any discrepancies, especially if they impact the amount you recover in liquidation.
The same simple steps for Loan Origination Screen Outs apply here as well.
Open the email right away
Most will have a deadline, and you need to get that on the calendar to stay compliant.
Avoid the knee-jerk defensive reaction
Don’t get defensive and hammer out a quick response. You usually have a three-to-five day window before the deadline. Take that time to review the issues, your documents, the SOP (if necessary), and develop a well-thought-out response, with relevant backup documentation.
Don’t send in piecemeal responses.
Seriously: do not send piecemeal responses. SBA is a once-and-done organization. Send one coherent response with all your arguments and documentation for every item in their letter.
Keep yourself and SBA focused in your response
Don’t just put your response on their email or letter. Draft a letter, using their number system and a subject line for each item, followed by your response. The more focused you are, the more focused they will be, and the faster you’ll get through the review process.
Most important in this process? Keep a cool head!
And then make sure you have a good filing system to maintain the required documents as well as thorough familiarity with the SOP 50 57 for the appropriate workout, liquidation, and litigation requirements.
If you’ve been following our work, you know what we always say: “Originate and service with the end in mind.” That will get you through the Guaranty Purchase process with as little stress as possible.
And of course we’re always here to help. Staffing shortages can leave you overwhelmed even if you don’t have a lot of Screen Outs to deal with. Let’s see how we can help. Let’s talk!