Additional Efforts Are Needed To Minimize Lease Guarantee Losses

GAO evaluated the Small Business Administration's (SBA) efforts to minimize losses of lease guarantee defaults.

GAO found that, for the majority of default cases, lease guarantee losses are minimized through re-rentals or settlements. However, the SBA efforts to manage some lease guarantee defaults have not been adequate to assure that its losses are minimized. SBA standard operating procedures require a review of lessor and real estate agent activities to assure that a diligent effort is made to re-rent. The private insurers also believe that such reviews are important to assure re-rentals. However, in some cases, SBA field offices have not complied with the procedures and have little assurance that efforts are made to re-rent. In most of these cases, SBA received little specific information from the lessor on re-rental efforts and did not follow up with either the lessor or the lessor's agent. In addition, in some cases, SBA was not pursuing the collection of rents which could offset its losses substantially. GAO recognizes that SBA has limited staff whose attention is directed, on a priority basis, to servicing business loans.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Lowell Dodge Team: General Accounting Office: Community and Economic Development Division Phone: (202) 512-8389