Letter from Rapid Financial Services counsel to Chairman Clyburn and Chairwoman Velazquez, Mar. 7, 2021

Summary

Pages of a letter from Rapid describing its work with RER, Rocket Loans and the SBA on a loan decision platform for the SBA. It states that the SBA defined system requirements on calls twice per day, that the SBA was clear it must make the final decision on all loan approvals, and that the system does not approve loans. The letter says the system has declined 5.2 million applications as duplicates and more than 4.4 million as failing basic eligibility criteria, and that loan officers declined more than 1.6 million. It also refers to Exhibits D, E and F listing informational messages, fraud alerts and quote messages, and to eleven daily management reports for February 24, 2021 in Exhibit C.

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Full text

Almost immediately a call was scheduled with RER, Rocket Loans, and numerous people from the
SBA. The call was to discuss whether Rapid’s current system could be leveraged to assist with
the unprecedented challenge facing the SBA - a national emergency that affected every business
in the United States. We explained what our system did, how it was structured and how it is
scalable. The SBA explained they needed a highly scalable platform that could assist loan officers
in making the loan application decision process faster and easier.
The SBA did not want a system that would make loan approval decisions as SBA employees would
always need to be the ones making the final decisions to approve a loan. Based on the
architecture of our existing system, we informed Rocket Loans and RER that we believed the
“backbones” of our system could be used to assist the SBA. However, getting a system in place
would be extraordinarily difficult given the time frame requested to begin disbursing aid to small
businesses. To do something like this would normally take many months or even years. The SBA
was already taking applications through their existing system which was unable to keep pace with
demand and ultimately failed within days of our first conversation with the SBA. They asked us
to begin taking applications within a week and start processing those applications within days
after that.
Standing up a system to accept and process loan applications in the timeframe needed would
generally be considered an impossible task. However, under this unique set of circumstances, it
was in fact possible. Based on Rapid’s then existing technology and our technology team’s deep
knowledge of business loan application processing, it was possible to move with incredible speed
to meet the SBA’s time-frame. However, even though we had a platform we could modify for
the SBA, we knew nothing about the SBA process and current platform(s). But Rocket Loans and
RER did and they played a critical role in making it possible to meet the SBA’s requirements. For
example, Rocket Loans already had an understanding of the SBA existing EIDL systems and
processes and had built the necessary infrastructure needed for certain integrations that would
be required. RER knew EIDL program requirements and how government contracting worked.
Without the expertise and experience of Rocket Loans and RER, there is no way Rapid could have
come close to satisfying the SBA’s timeline.
We started work immediately. We had calls with the SBA twice per day, including frequent
weekends for the first few months. To this date, we still have calls every weekday with the SBA.
These calls typically included numerous SBA leaders and managers, SBA contracting officers, RER,
Rocket Loans and various Rapid employees. During these calls, the SBA defined system
requirements, tasks were assigned, progress was identified and release dates were decided.
Rapid, Rocket Loans and RER were being directed by SBA to take action in accordance with the
discussions in these calls. Even today, decisions continue to be made on these calls about system
modifications, enhancements and even new features as Congress enacts new COVID relief laws
that provide for more funding to be distributed to businesses by the SBA. We believe the system
we have built for the SBA can now be used to quickly and efficiently deliver funds to small
businesses directly (broadly or in a targeted fashion) without having to go through intermediaries
such as banks and pay them a fee.




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The SBA has worked tirelessly to move the project forward and has maintained control since
day one. We are now going on almost a year and the SBA employees we work with have
worked overwhelming hours, nights, weekends and holidays to help distribute money to
businesses to address the effects of the pandemic. It has been an honor to work with such
dedicated government employees on this project.
The above is simply a 40,000 foot view of the background from our perspective. It would take
hundreds of pages to highlight every decision, every report, every system modification, every
communication, etc. related to this project. However, we did want to address some specifics
given various issues raised in your letter. Accordingly, please note the following:
       A. The Rapid loan decision platform is designed to process certain information related
          to loan applications and display that information to human loan officers. The system
          does not approve loans. The SBA was very clear from the beginning that they must
          make the final decision on all loan approvals and obligations. So while some
          underwriting systems are automated and no human loan officer is needed, that is
          not what was configured for the SBA. Note that the system does decline
          applications that fail to satisfy certain criteria or are marked as duplicates. To date,
          the system has declined 5.2 million applications as duplicates and declined more
          than 4.4 million applications as having failed to satisfy basic eligibility criteria (such
          as minimum credit score or certain self-certifications included in the application
          form). Additionally, more than 1.6 million applications have been declined by loan
          officers.

       B. If a loan application fails to satisfy certain criteria (e.g., bank information is not
          confirmed), the system provides messages to the loan officer to look into the
          applicable issue. The system does not stop the application from progressing or
          decline the application. It is up to the loan officer to decide how to address the
          message. The system has provided informational and/or fraud alert messages for
          many applications that have been approved by loan officers. The only times the
          system stops a loan application from progressing is when an application is a
          duplicate application, certain basic eligibility criteria is not satisfied (e.g., credit score
          threshold not met, etc.), certain application information precludes a loan from being
          provided by the SBA (e.g., applicant self-certification failed to meet an eligibility
          criteria, etc.), or certain information is not provided (e.g., no bank account
          information provided).

       C. The EIDL program was required to make decisions based on stated revenue only (no
          bank statement verification permitted) and was prohibited from asking applicants
          for tax returns (or tax transcripts). Early in this process, we had numerous calls with
          the SBA and the IRS asking if the system could access limited information the IRS had


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          so that certain application information could be verified. However, it is our
          understanding that the SBA learned that was not possible.

       D. An SBA employee had the final approval on every application that was approved and
          funded. No application could be funded without an SBA Team Lead approving and
          obligating it.

       E. The OIG report you reference in your letter includes a response from the SBA. We
          believe the SBA’s response included in that report more accurately reflects how the
          system functions and the resulting outcomes of loan decisions made by SBA loan
          officers.

       F. As mentioned above, the system simply could not have been built in the time-frame
          required without Rapid’s, Rocket Loans’ and RER’s involvement. Each entity brought
          its own expertise to make this process move at the lighting speed required.

       G. SBA made decisions about system functionality and modifications, often in real time
          on our daily telephone calls.

       H. Business lending is very different from consumer lending and unique issues arise in
          commercial lending. For example, there is no commercially available national
          register of all businesses and no way to confirm certain businesses actually exist.
          Take a sole proprietorship for example. In many states, no filing is needed to start a
          sole proprietorship. So without detailed underwriting (e.g., bank statements, tax
          returns, site visits, etc.) it is not possible to confirm the business is real.
Your letter requests broad categories of documents and information that would take weeks or
months to assemble. Because we continue to work long hours to assist the SBA in providing
support to small businesses as well as to modify the system for new requirements, we simply
do not have the bandwidth to assemble everything in response to your letter. We are providing
the items that appear to be most explanatory together with written responses. Below is a list
of your requests followed by our responses.

   1. All non-disclosure or confidentiality agreements signed by Rapid employees or
      contractors relating to the EIDL contract.

       We think it would be more informative to provide a list of titles of Rapid’s team
       members who worked on the project. The list is Attached as Exhibit A (Rapid-
       CSC0000001-2) (actual names are not included for privacy reasons) and includes 148 of
       Rapid’s current team members working on this project as well as 15 former team



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   members that worked on the project in some manner. Team members include full time
   employees and full time contractors.

2. All documents indicating the attendance by Rapid employees or contractors at meetings
   or conference calls relating to the EIDL contract.

   Most all the conference calls would include Rapid, Rocket Loans, RER and the SBA. As
   mentioned above, when the program was first launched we had conference calls twice
   per day, including frequent weekends and this lasted for months. The following Rapid
   employees participated in the conference calls on a regular basis: Will Tumulty,
           , Bogdan Nastea,                                              . Other Rapid
   employees participated on an as needed basis. Collection and production of all
   documents indicating attendance by Rapid or contractors at all of these meetings and
   calls would be unduly burdensome under the circumstances.

3. All documents and communications regarding SBA’s requirements, specifications, or
   guidance regarding the business process rules for managing the application work flow,
   including but not limited to how the loan software should classify applications for
   various recommendation queues (e.g., approval, denial, or manual review), and
   descriptions of the relevant SQL code.

   This broad request would require us to disclose proprietary information about the
   system. In an effort to provide you helpful information, attached as Exhibit B (Rapid-
   CSC0000149-323) are the release notes for system modifications. These release notes
   reflect the implementation of the requirements, directions, and guidance
   communicated by the SBA for the Rapid decision platform. Also attached as part of
   Exhibit B are the EIDL Criteria for application declines and manual review
   recommendations that the SBA requested the system to make (two versions are
   attached – one from the initial launch and the other the criteria currently in place).

4. All documents and communications regarding fraud checks conducted on EIDL
   applications, including any reports regarding the performance of those fraud checks.

   As explained above, the system was designed to reflect SBA’s requirement of alerting
   loan officers or Team Leads of issues with an application. The system was not intended
   to make decline decisions based on potential fraud automatically as that is largely a loan
   offer function in the SBA system. See response to question 6 below regarding
   Informational Messages, Fraud Alerts, and Quote Messages in the system.

   The system does preclude certain types of applications from progressing. Those include
   applications that have been identified as duplicates, applications that fail basic eligibility
   criteria (e.g. checked a box in the online application that makes the applicant ineligible),
   and applications where the applicant withdraws or abandons their application.

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    5. All reports and updates provided by the project team to SBA, including but not limited
       to reports and updates tracking the number of applications received, decisioned, and
       pending; and reports and updates documenting the performance of the loan
       recommendation software or fraud checks.

       The February 11 Letter states that Will Tumulty indicated in his call with your office that
       there are “‘a couple dozen’ reports to [the] SBA that included the results of [the fraud]
       controls.” This is not what Will Tumulty intended to indicate during that call. Mr.
       Tumulty was trying to explain simply that Rapid provides the SBA about a dozen daily
       reports – not that those reports are fraud reports.1

       With respect to fraud, Mr. Tumulty attempted to make it clear that Rapid does not
       provide any fraud reporting and cannot do so as Rapid does not communicate with
       applicants, does not disburse funds (that is done through E-Tran), and does not engage
       in any loan servicing. An information message or fraud alert in the system does not
       mean fraud occurred. It simply means the loan officer should review the relevant issue
       carefully and address it. The loan officer may review the applicable issue and approve
       the application if the loan officer decides the information message or fraud alert is
       resolved or not relevant.

       We hope this explanation clarifies how the system works with respect to potential
       fraud.

    6. A list of all potential alert messages generated by the project’s loan recommendation
       software and presented to SBA loan officers.

       Attached as Exhibits D, E, and F (Rapid-CSC000145-148) are lists of informational
       messages, fraud alerts, and quote messages in the system that are presented to loan
       officers and Team Leads. The system tour provided to staff members on March 3, 2021,
       demonstrated how the system displays these messages. Note that these lists as
       compiled here did not previously exist. In order to provide the comprehensive lists, one
       of our software developers reviewed code and extracted messages.




1
  The SBA has access to the data warehouse, and we are not privy to any official or other reports they
may run. The SBA asked Rapid to run certain high level management reports tracking application and
loan volume metrics that we continue to provide to the SBA. Attached in Exhibit C (Rapid-CSC0000003-
144) are examples, for February 24, 2021, of the eleven daily management reports sent to the SBA. We
also provide the SBA fourteen operational level reports each day that often include business names and
contact information, loan officer information, and other non-public data points. We will supplement
this letter in the coming days with a redacted copy of those reports for February 24, 2021.

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