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Below is a lightly edited transcript of the video above:
Today’s update is on the EIDL loans. Nothing tremendously new. Just wanted to give some updates about things that I’m hearing stuff that I’m reading, articles that I found information regarding EIDL loans that might be interesting to you.
So first and foremost I STILL have not spoken to anyone who’s had an Offer in Compromise approved. I actually just got off the phone with a gentleman who he submitted one in November, and I told him, as far as I know, nothing’s been approved (he’s heard nothing). In his case it was a little interesting in that his business is still open. So I told him, even with regular SBA loans the business being open is generally a non-starter.
I also surprised to hear him say that he was paying interest only. And I said, “I don’t believe interest only is an option that anyone’s being offered. Either you make the regular payment or you apply for the, the hardship accommodation.”
And he said, oh, I’ve just been paying interest only. And I asked him, have you logged into the portal at all? And he said, no. So it doesn’t sound like that one is going to be the “canary in the coal mine” Offer in Compromise that we’ve all been hoping for.
As far as treasury stuff I’ve still not heard or spoken to anyone who has had their loan successfully pulled back from the Treasury to the SBA (Note: One gentlemen was told early on in October 2023 by the SBA to bring it current, and if he did, they would take it back to regular servicing. He went to his Congressman/Senator and got it back to SBA successfully).
I’ve had a couple of circumstances where I think it’s worth fighting with the SBA about. The SBA claims that they sent out letters to everyone before their first payment was due as an attempt to ensure that people make current payments and stay current.
But I’m talking to a lot of people who never got anything. So I, I don’t know how the SBA can claim that they sent out these letters when so many people are saying they never got them. Of course this came from this was from the head of the SBA, and of course, she’s not on the ground day to day.
Side note: If you follow her on social media. She’s just shaking hands in different communities and saying what a great job they’re all doing. I do pop on there, so if you’re on Instagram or Twitter or any of that and you follow her or the SBA every time they tout what a great job they’re doing, it wouldn’t be a terrible idea for you to go on and say, “Hey, what about the EIDL borrowers? Why don’t you give them a break? Why don’t you help them? Rather than just kissing babies and and wave to the crowds, do something!”
That’s basically what I said. So yeah, I’m not hearing anything positive in terms of getting it brought back. And then the latest update is they just came out with the latest numbers about charge offs in the SBA loan program.
So as of September 30th, 2023 for the year 2023, they reported that they charged off $52 billion. That’s with a B. $52 billion in EIDL loans were charged off as of September 30th, 2023.
Based on the outstanding principal balances, that represents about 17% of the overall EIDL loan program.
If you don’t have experience in commercial lending, and I’m assuming most of you don’t, that is a tremendously high charge off number. Usually when we would have meetings quarterly when I worked for a lender, usually they would have a reserve for loan losses and usually they’re reserve number would be about 1%.
So a charge off rate of 17% is unbelievably high, and that means the default rate is significantly higher than that. I think the last figure I saw was like 37% or delinquent.
But just to go back to the charge off number, there were $390 billion in these loans given, and so we’re basically less than two years into the repayment period. And already if you add last year, I think it was like $50 million, they hadn’t charged off a lot, but basically we’re approaching 20%.
And don’t forget, that was as of September 30th, which means it’s been another, what, five months? October, November, December, January, four months. So that number at this point probably is over $20 over $52 billion, which means that they’ve charged off probably something approaching 20% of the dollars lent out for the EIDL program.
So one out of every $5 that was lent out is already gone, vanished into the wind, and we’re less than two years into this program, there’s another 28 to go. So what do you think is gonna happen here?
I’m hoping that as these numbers continue to just be absolutely brutal and hopefully embarrassing for the SBA, that somebody with in a position of authority looks at this and says, “SBA, you need to do a better job in recovering these funds.”
And it doesn’t mean that they just have to give away the store and give anybody the terms that they’re asking for. But what I am saying is when you’ve got borrowers who come to you and say, “I would like to be able to pay something I can’t afford the whole amount”, that the SBA should be willing to work with them, and in the event that a business closes, they should really be considering the offer in compromise.
And I know if you’ve watched my videos before, I’ve been beating this drum forever, but it really is true because the collection tools that the treasury has are not sufficient that they’re gonna really generate huge amounts of recovery for the SBA.
I have this conversation with people every day, I can’t imagine that the Treasury has very high collection rates , because they’re not suing people and getting judgements, which means they can’t go after real estate & they can’t reach into your bank accounts.
And so, and I’ve had plenty of people call me and say, look, I owe $300,000. If they took a $100,000 to settle this, I would do it. And meanwhile, the SBA is not willing to consider an offer in compromise.
And if it goes to the treasury, they’re unwilling to accept $100,000 to settle a $300,000 (they more likely want 70-80% of the balance). And so there’s this, this gap, this void, this opportunity that the SBA has to recover a lot more money and really minimize their losses here. And really what it comes down to is they need to cut their losses.
So instead of just charging off these $100,000, $300,000, and $500,000 loans and really getting nothing from the treasury, they should be willing to cut deals, because a 40% recovery on a loan is a lot better than zero. And the policies they have in place are really asking to skew towards the 0% collection as opposed to something much higher.
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