New SBA system to scrutinize loan risk
- By Jason Miller
- Apr 25, 2003
The Small Business Administration this week contracted with two financial vendors to strengthen its lender oversight, which the General Accounting Office had criticized in December for insufficient resources and independence.
SBA awarded a five-year, $9.8 million contract to Dunn & Bradstreet Corp. of Short Hills, N.J., and Fair Isaac Corp. of San Rafael, Calif., to build a loan-risk monitoring system. SBA currently collects and analyzes lender information in-house.
'The new system will give us more information than we ever had before,' said Janet Tasker, associate administrator for lender oversight. 'We will be able to see where the loans are going and what the risk profile is by industry, geography or SBA program.'
The new system will obtain SBA loan information from lenders, match it with Dunn & Bradstreet's commercial database, and run it through a scoring model developed by Fair Isaac. The model will analyze SBA's 7(a) and 504 loans, which account for about 85 percent of the agency's $114 billion loan portfolio, Tasker said.
'Fair Isaac's scoring model is the industry standard,' Tasker said. 'It predicts the probability of default. We have used it before for our LowDoc loans.'
Information from the new system will set a baseline for loan performance so that SBA can make changes where needed to its loan programs, based on the lenders' success rates.
Dunn & Bradstreet and Fair Isaac must deliver a workable model by mid-June and have a finished product by Sept. 30.
'As this office has evolved over time, we felt we needed more information to assess how well lenders are doing and the quality of our portfolio,' Tasker said.