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

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

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

The proposed risk rating system allows for consideration ofadditional factors which may lead SBA to conclude that anindividual lender's composite rating is not fully reflective of itstrue risk. One of the most important overriding factors would be alender's on-site, risk- based reviews or assessments usuallyperformed on SBA's relatively large lenders, or that may, "underextraordinary circumstances," be performed on other lenders whoseperformance demonstrates a highly unusual deviation from their peergroup. Other overriding factors that may be considered are earlyloan default trends; purchase rate or projected purchase ratetrends; abnormally high default, purchase or liquidation rates;denial of liability occurrences; lending concentrations; rapidgrowth of SBA lending; inadequate, incomplete, or untimelyreporting 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 useof its Lender Portal. SBA Lenders with at least one outstanding SBAloan may apply for the Portal access.

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