Hello, I’m Jason, the founder of Distressed Loan Advisors. If you’d like to a 30-minute case evaluation with me, simply click on this link.
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Below is the transcript for my most recent Youtube video, which you can view below:
Today I want to talk a little bit about some additional data that I saw with regards to the SBA and their recent decision to, or the reversal of their initial decision to send loans idle loans for less than a hundred thousand dollars to the treasury for collection. And I’ll, I’ll sort of reach my conclusion here, but I just want to give you some of this some of the data that they threw out. ’cause I thought it was pretty interesting.
So essentially what I see happening here is the SBAs sort of trying to cover themselves and sort of show to the politicians who are yelling at them. Not to mention the IG or the Inspector General breathing down their neck, trying to show them like, look, we really are trying our best here to collect.
So, you know, to date they’re saying they’ve made 75 million phone calls. They’re saying they sent the letter to every active covid idle borrower the month before their deferment ended to remind them of their payment obligation. This is a question for you guys. Is that true? ’cause I have not had a lot of people tell me that. Not that I specifically ask, but I’ve had a number of people tell me I took this thing and I was on deferment for like three years, and honestly I forgot. So I’m curious, feel free to comment. Did you receive a letter at the end of your deferment stating that regular payments were gonna resume? I’d be interested to hear that. Because, you know, just because the government says it doesn’t make it true.
And then, you know, they’re saying that they’re being active about this. They send 9 million collection letters and another 1.4 million due process letters to, to borrowers. So they’re saying, look, we’re, we’re letting people know when they’re in default, so don’t blame us. And that’s fine, you know, that’s what happens when loans default. But you know, how effective was all that, considering that the SBA is really not giving a whole lot in the way of options, right?
So if you’ve had your two deferments at 10%, if you will owe over $200,000, the best they’re gonna give you for a third hardship accommodation is 50%. As I’ve discussed before, if you owe less than 200 people have reported, you can go into the portal and renew a third deferment at 10% or thereabouts by just through the system without actually having to talk to someone.
So anyway, so the SBA, they dispersed over $400 billion in covid idle funds, 800 billion in PPP. So, you know, there was a lot of fraud. And they had some estimates. Originally the Inspector General said it was 200 billion or 17% of the entire portfolio. And I had done a video about that, and that was like mind blowing. This is kind of funny. The SBA is pushing back and saying, no, it’s lower than that. It’s actually only 36 billion as opposed to 200 billion and we got 30 of it back. So, hmm, something’s a little off here. So the SBA is saying, no, we only lost 6 billion, and the IG is saying it’s gonna be more like 200 billion. So what are we supposed to do with that information? Clearly someone’s not right here. And as we go through this, I think we’ll start to see that, you know, things that they project tend not to be true. So moving on, moving right along on this.
So now we’re talking about default rates. And this is what I found to be interesting. So far. They’re saying 73.6% of the loans are current paid in full or in deferment, which means the default rate people who haven’t paid is 37%. Add to that, the number of people in deferment, I’m gonna turn that stat around. So if we say 37% haven’t paid, and some percentage probably higher than 13%, which would make it 50%, so probably about 50% either defaulted or on deferment. So all of a sudden, like them touting all these great collections isn’t looking so good. And I’m gonna predict that as more data comes out, these numbers are gonna get really, really ugly. Despite the fact that they’re trying to, I don’t know what’s the best way to put it, put lipstick on a pig. So yeah, I, I think the default, the overall default rate is gonna end up being close to 50%. It’s gotta be ’cause we’re only at the initial stages. So, you know, imagine over the next 30 years how many are gonna default and how many that are gonna come right off their hardship, accommodation, and immediately default.
So, and then they go on to talk about how it is they arrived at the decision to pursue loans under a hundred thousand dollars. And I, I’m going to challenge some of these statements. So they did a bunch of analysis and so the article’s funny. On their third analysis, they looked at two big factors to estimate the value of collectability of their loans. These are the loans under a hundred thousand. So one of the factors is private Sector debt collector data on how a portfolio with these characteristics would perform under collection. I mean, I call bss, first of all, where is there a widespread portfolio of non-recourse debt under a hundred thousand dollars? They, they, they don’t really exist. I mean, if you borrow under a hundred thousand dollars for a small business loan, it’s either in your name or you’re personally guaranteeing it. So I, I can’t imagine there is a portfolio anywhere like this where you have basically legal entities with no personal guarantee. So I I, I don’t think that there’s a data set out there who’s really gonna simulate this. And then here’s the other thing. They’re saying that basically there was more loans that were in default than they originally anticipated, and that the overall cost to, to try to collect these loans is not incrementally higher. So in other words, they’ve got this infrastructure and so whether or not it’s a hundred thousand, a hundred thousand loans or 400, the cost doesn’t increase. So then it made sense to go after them.
But, you know, here’s the thing. Them letting the world know that they were not going after these smaller loans after, you know, not going after loans, a hundred thousand encouraged people not to pay. So it became a self-fulfilling prophecy. So for them to turn around and say, oh, the default rate was much higher than we anticipated, is kind of silly because by virtue of announcing that they weren’t going to pursue them, they caused it, it was a self-fulfilling prophecy. So you know what to make of that. What I make of that is they’ve got politicians leaning on them and sort of embarrassing them and shaming them and putting political pressure on them. And so, you know, I think it was Mark Twain that said, you know, there’s three types of lies, lies,
lies and statistics. And I think they’re using statistics to justify something that I don’t believe to be true, which is you’re not gonna get much out of this. As I’ve said in my other videos, sole proprietors, yeah, it’s a problem for them, but for everybody else who borrowed really 200 or less, if your business goes under and doesn’t pay the SBA doesn’t have collection tools that are really gonna have much of an impact here. So say what you want. SBAI, I don’t see this resulting in any recovery. And if there is ever a report on it, I would like to you know, I’ll bet you a beer at the local tavern that the collection rates on this will not be what you’re projecting them to be. So that’s I think that’s most of it. And then the only other thing is, You know, know, then they throw in a a point about how these committee on small business you know, really get out there and beat their chest about what a great job they’re doing for, for John Q Taxpayer. But, you know, some of these statements are ridiculous.
Joni Ernst, Republican from Iowa, I will keep working to ensure that more than 200 billion the agency doled out to fraudsters does not go unpunished or uncollected. Well, Joanie, whoever said that we were gonna let that go. Like who’s advocating to not go after the fraudsters? Like nobody, like what does that statement mean? That’s like saying like, I don’t know. I’m gonna protect all the puppies in the world from people who wanna stomp them. Like, duh. Like that’s not a controversial statement.
And then you had this other guy, Roger Williams, Republican from Texas also said the same thing, you know? It’s great to see the committee’s oversight culminate in reversing the SBA reversing course. Okay, fine. I mean, you leaned on them, but, and you can, you know, shout from the rooftop, what a great job you did. But dollars to donuts when they come out with an analysis of recoveries for loans, a hundred thousand, I’m gonna guess they’ll probably lose money. If anything, there’s just not much to recover here. So that’s it.
I know this was pretty long, it was 10 minutes, but it just, just sort of further reiterating that, you know, the SBA iss just getting pushed around by politicians and the fact that the default rate was higher for these loans was higher than expected. It was because of their own policies. Had they just sort of shut up about it and not let people know or telegraph that that’s what they’re gonna do. The default rate definitely would’ve been lower. I mean, I’m on the message boards, I go on Reddit, I see what people are talking about. People are, were actively saying, Hey, under a hundred thousand, they’re not collecting. I ain’t paying it. There were other people who actually thought under a hundred thousand were forgiven. So, you know, there’s just a lot of bad information out there. So of course the default rate was gonna be huge.
So anyway, that’s it for today’s update. Thank you for watching. If you find this to be beneficial, please share it. I, you know, I’ve got a little bit of a niche here. I always get great comments from you guys. I try to respond. So if you know people who you think could benefit from it, please like, subscribe and share the videos. Thanks for checking in. We’ll see you on the next one.