Pub. 3 2013-2014 Issue 2

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S September • October 2013 9 department or isn’t familiar with the SBA. In these cases, often the bank expects simply to take over servicing the loans and reaping the income. Yet overlooking the SBA loans they just bought could be an oversight that will come back and bite them. They need to ask themselves, “What’s in the closets of the house we just bought?” There could be poor quality or poorly documented loans lurking in those closets. Have the loans been serviced properly in order to keep the SBA guaranty intact? Has the 1502 monthly reporting been done properly, and if not do they need extra care in incorpo - rating the data into their monthly 1502 report? Even if the prior reporting was correct, there are certain requirements in transferring the purchased SBA portfolio to the acquiring bank. Are site visits conducted in accordance with the SBA servicing matrix, particularly if there are delinquencies or defaults in the portfolio? Not addressing these issues on SBA loans and “cleaning house” could cause these loans to go into default and the potential loss of SBA guarantees. Additionally, if your bank is considering selling some or all of the loans, you must make sure the guarantees are solid. A word to the wise: When you take over loans you also take over the liability. You are responsible for maintaining the SBA guaranty. Be aware when purchasing SBA loan portfolios from other lenders, and give these loans the due diligence they need in order to preserve your SBA guarantees and reduce risk in your portfolio! So like the new homeowner who is looking to remodel the kitchen and finds big trouble in the pantry, why take on problems that could have been identified and possibly avoided? It’s much better to clean house. Cleaning house entails conducting a thorough SBA portfolio review. This will allow you to check out the quality of the loans, make sure the loans complied with all the eligibility requirements for an SBA guaranty, that the documentation in the file is correct and current, and the ongoing servicing procedures are compliant with the SBA Standard Operating Procedures (SOP). If you discover errors or problems, you can take early pre-emptive action to repair the deficiencies, and/or make sure you handle any liquidation or guaranty purchase actions in a proper manner. n Vern Hansen, a former regional bank executive with 40 years of financial services and commercial lending experience, is the Colorado Associate with J.R. Bruno & Associates, a certified SBA Lender Service Provider and leading consulting firm to business lenders nationwide. Contact Vern Hansen at 720.663.8431 or email vern@ jrbrunoassoc.com . www.jrbrunoassoc.com Nationally recognized for our corporate, regulatory, and litigation practices for community banks Creative Solutions Since 1903 Denver · Colorado Springs · Casper O ering a full range of legal services to our banking community: RJ&L’s Banking Group: 303.623.9000 · www.rothgerber.com • A liate Transactions • Asset-Based Lines of Credit • Bank Operations • Brand Banking • Compliance & Disclosure • Consumer Finance • Credit Document Drafting and Review • Creditor’s Rights/Bankruptcy • DeNovo Financial Institutions Charters • Factoring • Foreclosures and Collections • Holding Company Formations • Lender Liability • Lending Limit Advice • Leveraged Acquisitions • Litigation • Loan Originations and Modi cations • Loan Restructuring • Mergers and Acquisitions • New Product Development • Project Finance • Recapitalization • Regulatory Advice • Regulatory Enforcement Defense • OREO Disposition • Stock Offerings • Strategic Planning • Subchapter S Corporate Restructuring • Uniform Commercial Code • Use of ESOPs Robert S. Arthur, Jr. Justin H. Boyd Tennyson W. Grebenar Stephen T. Johnson William P. Johnson Kevin M. Kelly David P. Kunstle Lindsay L. McKae Mark A. Meyer William T. Peffer Bruce N. Warren Karen L. Witt Contact: Karen L. Witt