SBA Eyes Fees Paid To Rocket Loans, Contractor In Loan Program
The U.S. government’s Economic Injury Disaster Loan (EIDL) program, plagued by delays and fraud, has created attention for a firm that netted around $800 million in fees while subcontracting the work out to the nation’s largest mortgage lender, The Wall Street Journal (WSJ) reported.
The Small Business Administration (SBA) awarded $770 million to RER Solutions, a Herndon, Virginia-based contractor, to process loans for businesses hurting under the economic strife of the pandemic, according to government filings.
But RER instead decided to subcontract much of the loan processing to a Rocket Loans, a unit of lending giant Rocket Cos., which owns Quicken Loans as well. That company’s name doesn’t appear anywhere on RER’s paperwork, according to WSJ.
Rocket Cos. filed an initial public offering (IPO) in July.
The EIDL program was meant to process loans for small- to medium-sized businesses (SMBs) affected by the massive economic downfall of the pandemic, but groups representing SMBs have not been overly impressed. Karen Kerrigan, who heads the Small Business & Entrepreneurship Council, told lawmakers months ago that the program had been rife with confusion, demoralization and anger for SMB owners, although it has improved since then, WSJ reported.
In addition, instances of fraud have been reported, and as much as $250 million could have gone toward companies that weren’t eligible.
In response, Rocket said it had been working with RER since 2018, when it had first been the recipient of a contract to process EIDL loans.
But the SBA contract is the biggest one RER has received, and it is the eighth largest of all federal government contracts, according to the General Accounting Office, per WSJ. The expansion of the RER contract came through a tool called an “indefinite delivery, indefinite quantity” (IDIQ) contract, which lets agencies dole out an unspecified amount of future work.
While authorities say this is common, Trevor Brown, professor of public management at Ohio State University, said it could pose risk since “you are not competing,” WSJ reported.