- Tip of the Month: It's Never Too Late to Review Documentation Files
- April 19, 2012
- Law Firm: Lerch Early Brewer Chartered - Bethesda Office
Lenders are well advised to review the complete loan credit, collateral and documentation files after all documents have been received. In the instance of government guaranteed loans, a careful review of the loan file may result in curing any documentation deficiencies that would otherwise result in a denial of all or part of the guaranty.
Lenders should organize all of the documents that been received and place them in the proper place in the credit, collateral and documentation files. Where a loan is guaranteed by the SBA, the SBA offers a convenient tool to organize files - the 10 Tab System, which is available on the SBA website. After the file is broken down properly and organized into the requisite component credit, collateral and documentation files, the lender has an opportunity to see if there are any missing documents. Obviously, the lender is in a better position to have a borrower or a guarantor execute any necessary missing or corrective documents shortly after the loan closes than months or years after the loan is closed.
Particularly in the instance of SBA guaranteed loans, a careful review of the file may result in preventing the SBA from denying the guaranty or requiring a lender “repair” of documentation deficiencies. In some instances, even after a loan is in default - and the loan has been submitted to the SBA for repurchase - a borrower or a guarantor may cooperate in signing any necessary corrective documents.
Remember, it’s never too late to carefully review your documentation files-you may be able to rectify a problem even in the instance of a loan that is closed and funded, thereby protecting your guaranty.