"Committee on Small Business Hearing Raises Serious Concerns Over the SBA’s Changes to the 7(a) Lending Program"
Summary
A Committee on Small Business hearing recap dated May 10, 2023 for the full committee hearing "Taking on More Risk: Examining the SBA's Changes to the 7(a) Lending Program Part I," led by Chairman Roger Williams (R-TX). It carries a statement from Williams that the SBA's rule changes to the 7(a) Loan Program will reduce underwriting standards and add risk of a taxpayer-funded bailout. The recap quotes Rep. Meuser questioning a witness about a more subjective underwriting method for loans under $500,000, which Meuser says are 75 percent of all 7(a) loans. Rep. Luetkemeyer states that in 2019 the Inspector General claimed the Office of Credit Risk Management conducted only 108 of its planned 358 reviews of high-risk lenders, and that oversight staffing levels decreased by an additional 38 percent.
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Committee on Small Business Hearing Raises Serious Concerns Over the SBA’s Changes to the 7(a) Lending Program Full Committee Hearing Recap May 10, 2023 WASHINGTON, D.C. – Today, Chairman Roger Williams (R-TX) led a full Committee on Small Business hearing titled “Taking on More Risk: Examining the SBA's Changes to the 7(a) Lending Program Part I.” Chairman Williams issued the following statement after concluding today’s hearing. “Today’s hearing did nothing to assuage our concerns over the Small Business Administration’s reckless rule changes to their 7(a) Loan Program which will reduce underwriting standards and add more risk of a taxpayer-funded bailout of the program,” said Chairman Williams. “My colleagues and I are committed to protecting the integrity of the SBA’s flagship program while fighting to ensure taxpayers won’t be the ones left holding the bag should these risky loans go bad.” Watch the full hearing here. Below are some key excerpts from today’s hearing: “The SBA has the 7(a) rules have caused great concern among both Republicans and Democrats,” said Rep. Meuser. “Mostly everyone I speak to feels that you are hell-bent on rushing these rules without any concern for Democrats or Republicans ignoring the final rule. Why is that?” Mr. Kelley: “It’s not the case.” Rep. Meuser: “We believe it is. Based upon the facts of the situation and the fact that you're just blowing off any recommendation or question. But you just stated that's not the case and that's that.” Mr. Kelley: “Would you like me to elaborate?” Rep. Meuser: “Well, by moving the program, the 7(a) portfolio, towards a more subjective underwriting method for loans under $500,000, how does that protect taxpayers from losses? The OIG has concerns and you've actually used language, maybe not you, ‘to do what they do,’ for loans under $500,000, which is 75 percent of all the 7(a) loans. How does that instill confidence in us?” Rep. Luetkemeyer: “Well, in 2019, the Inspector General claimed that the Office of Credit Risk Management failed to perform effective oversight over the OCRM and only conducted 108 of its planned 358 reviews of high-risk lenders. COVID-19 only exasperated this issue as oversight staffing levels decreased by an additional 38 percent. Despite this, the SBA has lifted the SBLC moratorium, allowing for more non-depository entities who are purely regulated by SBA rather than federal regulators and the market. So it goes to the point that the Inspector General said you need more oversight and you have less people to do it. And they're not even at their office to do it themselves. This is a problem. It is a big problem.”
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