SBA’s Handling of Disaster Assistance Loan Real Estate Foreclosures

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Date Issued

Tuesday, June 23, 2026

Submitting OIG

Small Business Administration OIG

Agencies Reviewed/Investigated

Small Business Administration

Report Number

26-11

Report Description

The Office of Inspector General is issuing this audit report to evaluate the U.S. Small Business Administration’s (SBA) foreclosure process from when a loan is placed in liquidation.

We found that SBA 1) abandoned the pursuit of foreclosure on real estate collateral for 72 properties in which the recoverable value exceeded the foreclosure threshold, 2) unnecessarily increased some borrowers’ principal loan balances by an average of $525 because outstanding requests for property reports and appraisals were not canceled even though a borrower had requested a workout and made a good faith payment, and 3) did not have controls in place to prevent the sale of real estate collateral to SBA employees, vendors, or their close relatives and associates.

We made five recommendations for SBA to maximize recovery of real estate collateral and strengthen internal controls in its real estate foreclosure process.

SBA disagreed with Recommendations 1, 2, and 5, agreed with Recommendation 4, and partially agreed with Recommendation 3.

Report Type

Audit

Agency Wide

Yes

Number of Recommendations

Questioned Costs

Funds for Better Use

Report updated under NDAA 5274

Open Recommendations

This report has 5 open recommendations.

Recommendation Number	Significant Recommendation	Recommended Questioned Costs	Recommended Funds for Better Use
1	Yes	$0	$0
Review the 72 abandoned foreclosure properties and reassess for foreclosure.
2	Yes	$0	$0
Develop a plan to review the remaining 3,794 potentially improperly abandoned foreclosure properties (4,148 abandoned foreclosure properties less statistical sample of 354) and reassess for foreclosure.
3	Yes	$0	$0
Establish clear guidelines to prevent abandonment of foreclosure on property when sufficient recoverable value exists.
4	Yes	$0	$0
Establish clear guidelines to ensure unnecessary care and preservation of collateral costs are not incurred during active workout.
5	Yes	$0	$0
Establish controls to verify that SBA employees and their close relatives and associates do not purchase collateral and that these requirements be extended to the agency’s vendors and subcontractors.