On October 6, 1999, the OIG issued Audit Report 0-01, Audit of An Early Defaulted Loan. The objective of this audit was to determine whether the early default was caused by lender or borrower non-compliance with SBA requirements. This loan was judgmentally selected for review as part of the OIG’s ongoing program to audit SBA guaranteed loans charged off or transferred to liquidation within 36 months of origination. The OIG determined that the loan default was caused by a lack of repayment ability not discovered by the lender because of borrower misrepresentations on the SBA loan application. Specifically, the OIG found that the borrower’s SBA loan application did not disclose all debts.
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