Report 12-11R: High-Dollar Early-Defaulted Loans Require an Increased Degree of Scrutiny and Improved Quality Control at the National Guaranty Purchase Center

This is the final report in a series of memorandums related to our audit of twenty-five purchased 7(a) Recovery Act loans.  Overall, material deficiencies were identified in 14 of the 25 early-defaulted loans selected for audit.  These deficiencies resulted in questioned costs or recoverable guaranty payments totaling approximately $10.7 million.  The audit found that the National Guaranty Purchase Center (NGPC) either made a purchase error or did not identify the deficiencies during its guaranty purchase reviews on six of the nine loans it reviewed.  This resulted in improper payments totaling approximately $3.3 million.  Due to the high number of deficiencies identified and the resulting improper payments, we recommended that the SBA establish a specialized early-default purchase review unit at the NGPC.