{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-constitutes-material-non-compliance-by-a-lender-during-underwriting-or-closing-that-c","api_url":"https://dealroom.so/api/public/questions/what-constitutes-material-non-compliance-by-a-lender-during-underwriting-or-closing-that-c","question":"What constitutes 'material non-compliance' by a lender during underwriting or closing that could result in a repair to the 7(a) guaranty?","topic":"Repairs & denials","audience":"lender","bot_mode":"lender","short_answer":"'Material non-compliance' includes deviations from SBA loan program requirements or prudent lending standards that significantly increase the risk of loss to the SBA. Examples are misrepresenting eligibility, not verifying equity, or failing to secure collateral.","rule":"Material non-compliance refers to actions or omissions by the lender that are fundamental to the SBA's loan program requirements or basic lending principles. Examples include: failing to confirm borrower eligibility, not verifying the source and use of equity injection, failure to take required collateral or perfect liens, not obtaining necessary personal guaranties, or making false statements in the application. These issues directly impact the SBA's risk exposure and can lead to a guaranty repair, reducing the amount the SBA pays on a defaulted loan.","example":"A lender submits a UPP, and the SBA discovers the lender misrepresented the borrower's industry to qualify for a higher loan amount. This would be material non-compliance, leading to a repair of the guaranty or potentially full denial.","what_lenders_check":"Lenders must adhere strictly to all SBA rules and their own prudent lending standards. Comprehensive documentation of all underwriting, closing, and servicing actions is vital to demonstrate compliance and protect the SBA guaranty. Regular internal audits are advisable.","required_facts":["SBA rule violation","Prudent lending standards","Risk increase to SBA","Underwriting/closing error","Guaranty repair consequence"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","Universal Purchase Package (UPP)"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"},{"title":"Universal Purchase Package (UPP)","url":"https://www.sba.gov/sites/default/files/2026-05/UPPv5.2.pdf"}],"related_questions":[{"question":"When does a lender's failure to properly monitor collateral value during servicing result in a 7(a) guaranty repair?","url":"https://dealroom.so/for-lenders/questions/when-does-a-lender-s-failure-to-properly-monitor-collateral-value-during-servicing-result-"},{"question":"What specific underwriting failures or omissions by a lender are categorized as 'material non-compliance' by the SBA, risking 7(a) guaranty repair or denial?","url":"https://dealroom.so/for-lenders/questions/what-specific-underwriting-failures-or-omissions-by-a-lender-are-categorized-as-material-n"},{"question":"What constitutes 'material non-compliance' with SBA lending policies that typically leads to a guaranty repair or denial?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-material-non-compliance-with-sba-lending-policies-that-typically-leads-to"},{"question":"Can an SBA 7(a) loan be repaired if the lender failed to ensure the borrower properly used all loan proceeds as authorized?","url":"https://dealroom.so/for-lenders/questions/can-an-sba-7-a-loan-be-repaired-if-the-lender-failed-to-ensure-the-borrower-properly-used-"},{"question":"What specific actions by a lender during loan origination would typically lead to a guaranty denial?","url":"https://dealroom.so/for-lenders/questions/what-specific-actions-by-a-lender-during-loan-origination-would-typically-lead-to-a-guaran"},{"question":"What constitutes a \"repair\" to the SBA guaranty during a purchase request?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-a-repair-to-the-sba-guaranty-during-a-purchase-request"}],"related_terms":[{"term":"Material non-compliance","url":"https://dealroom.so/glossary/material-non-compliance"},{"term":"Non-compliance","url":"https://dealroom.so/glossary/non-compliance"},{"term":"Lender underwriting","url":"https://dealroom.so/glossary/lender-underwriting"},{"term":"Inadequate Underwriting","url":"https://dealroom.so/glossary/inadequate-underwriting"},{"term":"Material information","url":"https://dealroom.so/glossary/material-information"},{"term":"Lender closing fees","url":"https://dealroom.so/glossary/lender-closing-fees"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/what-constitutes-material-non-compliance-by-a-lender-during-underwriting-or-closing-that-c","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}