WASHINGTON -- The Small Business Administration will roll out its new lending rating system June 15.

The lending rating system would measure the aggregate strength of SBA's overall 7(a) and 504 loan portfolios and to assist the agency in managing the related risk. SBA plans to use the lender rating system to make more effective use of its on-site and off-site lender review and assessment resources. According to SBA, the agency would assign each lender a composite ranking based on the agency's assessment of the potential risk to the government of that lender's portfolio performance.

The composite is based on problem loan rate, 12-month actual purchase rate, three month change in the small business predictive score and projected purchase rate derived.
SBA said it would perform quarterly calculations on the common factors for each lender, so that their composite risk ratings would be updated on a quarterly basis. Lenders whose overall portfolio performance, using all of the common components, is worse than their peers will receive a worse, or higher score, the agency explained. Those whose overall portfolio performance is better than their peers will receive a better, or lower score. Composite scores range from one or strongest to five or weakest, SBA said.

The proposed risk rating system allows for consideration of additional factors which may lead SBA to conclude that an individual lender's composite rating is not fully reflective of its true risk. One of the most important overriding factors would be a lender's on-site, risk- based reviews or assessments usually performed on SBA's relatively large lenders, or that may, "under extraordinary circumstances," be performed on other lenders whose performance demonstrates a highly unusual deviation from their peer group. Other overriding factors that may be considered are early loan default trends; purchase rate or projected purchase rate trends; abnormally high default, purchase or liquidation rates; denial of liability occurrences; lending concentrations; rapid growth of SBA lending; inadequate, incomplete, or untimely reporting to SBA or inaccurate submission of required fees to SBA; and enforcement actions of regulators or other authority.

SBA communicates lender performance to lenders through the use of its Lender Portal. SBA Lenders with at least one outstanding SBA loan may apply for the Portal access.

SBA Lenders must submit initial requests for a Portal user account or requests to switch or terminate a user by regular or overnight mail to SBA at the following address: Office of Lender Oversight--Capital Access, Suite 8200; Mail Code 7011, ATTN: Lender Portal, U.S. Small Business Administration, 409 Third Street, SW., Washington, D.C. 20416.