Back in April of last year (2020), SBA began making payments covering principal, interest, and fees for certain types of loans. This was under Section 1112 of the CARES act.
The funds for these payments have been expended. Payments to qualifying loans have either already ended, or are scheduled to end within the next few months. Borrowers are, or shortly will be, responsible for their own payments.
There are many variables involved in which loans were eligible and which weren’t. Since this isn’t an ongoing situation, I’m not going back to revisit them; those variables are no longer relevant.
Instead, let’s look at the questions you need to ask as SBA CARES Act payments come to an end.
- Are your Borrowers prepared to begin making their loan payments?
- How are the businesses impacted by this change doing overall?
- How are you, the Lender, handling deferral requests?
- Have you had your post-closing files reviewed by an independent third party? If not – why not?
- How are you handling loans that were in process to be approved by SBA when you were informed that the CARES Act funds had been expended?
- Have you communicated with your Borrowers to let them know that future payments will not be made?
- Will your Borrowers need additional funding support?
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What staffing do you have on hand to manage the effect these changes will have on your servicing department?
- What other resources do you need to be sure you can stay on top of the situation?
These are all questions only you, the Lender, can answer. And they’ll require research, outreach to the Borrowers impacted, and a whole lot of care and attention.
This is what we here at LRM Lender Consultants do: we help you develop and use the tools and processes you need to work with your Borrowers are these types of issues. So if you’re looking at these questions and wondering where to start and how to find the resources, why not start with
scheduling a free consultation to see how we can help?
