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Statement of the Hon. Nydia M. Velázquez on "SBA Management Review: Office of Credit Risk Management"

Washington, February 5, 2020

Today, the Committee will examine the management and performance of SBA’s Office of Credit Risk Management – otherwise known as OCRM.  OCRM is responsible for conducting oversight of SBA’s lending programs and its $120 billion 7(a) and 504 loan portfolios.

All of us are acutely aware that access to capital plays a vital role in the success of our nation’s 30 million small businesses.  Without it, small businesses can’t stock their shelves, pay their employees, or upgrade equipment. Capital is the key to unlocking opportunities to grow and create new jobs in the local economy. Yet, this Committee has heard from numerous small businesses from across the country, and they consistently tell us that one of the biggest challenges they face is accessing affordable capital.

The SBA 7(a) loan program plays an essential role in filling the gap left by the private markets.  In FY2019, almost 52,000 small businesses were approved for 7(a) loans, injecting over $23 billion in long-term capital into local communities across the country and supporting approximately 500,000 jobs. To optimize SBA’s lending programs, SBA established the Office of Credit Risk Management within the Office of Capital Access. OCRM conducts reviews of lenders to ensure that they are complying with the program requirements.

While the Office played an integral role in lender oversight, unprecedented growth in the program combined with GAO-identified deficiencies in SBA’s credit risk management prompted Congressional action. To that end, Congress passed the Small Business 7(a) Lending Oversight Reform Act, which codified OCRM and gave it the tools needed to conduct proper oversight and hold non-compliant lenders accountable.

Today, I would like to learn more about how the SBA is implementing the legislation. The regulation was expected to be finalized months ago, so I am eager to hear when the final rule will be published.

Secondly, I would like to find out what is currently working at OCRM, and what more can be done to address the ongoing concern the Inspector General has with high-dollar, early-default loans, which present a significant credit risk to the 7(a) program.

And finally, I would like to know more about the steps you are taking to address the concerns of the Inspector General’s November report.  The report highlighted some areas where there is room for improvement, and my motto always is – if it is not perfect, let’s make it better. 

So, on the heels of that IG report, and in anticipation of SBA’s budget submission to Congress, this hearing is a timely one.

We look forward to hearing from the Director of the Office of Credit Risk Management, Ms. Susan Streich, regarding the challenges she’s faced since taking over at OCRM, as well as whether there are any additional tools Congress can provide OCRM as it works to continue strengthening the 7(a) loan program.

 

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