Finding Text
Condition: During the year ended December 31, 2022, True Access Capital issued a loan that was collateralized by real property. A mortgage on the collateral was executed during the loan closing process but was not recorded for over one year after the closing. Criteria: 13 CFR section 307.11 (a)(1)(ii) requires the following: (ii) The RLF Recipient's certification that standard RLF loan documents reasonably necessary or advisable for lending are in place and a certification from the RLF Recipient's legal counsel that the loan documents are adequate and comply with the terms and conditions of the RLF Grant, RLF Plan, and applicable State and local law. The standard loan documents must include, at a minimum, the following: (A) Loan application; (B) Loan agreement; (C) Board of directors' meeting minutes approving the RLF loan; (D) Promissory note; (E) Security agreement(s); (F) Deed of trust or mortgage (as applicable); (G) Agreement of prior lien holder (as applicable); and (H) Evidence demonstrating that credit is not otherwise available on terms and conditions that permit the completion or successful operation of the activity to be financed. Cause: The mortgage was executed by a power of attorney that was not properly completed and could not be recorded by the recorder of deeds. The Organization engaged an attorney to conduct the loan closing and execution of the relevant loan documents. The Organization?s attorney did not discover this error until the mortgage was returned by the recorder of deeds indicating the power of attorney was not properly executed. Effect: The loan issued did not comply with the requirements of 13 CFR Section 307.11. Additionally, the Loan Fund and the Organization experienced a temporarily increased risk of loss because the mortgage was not properly recorded. Context: Two loans totaling $225,000 issued during the year ended December 31, 2022, were selected for audit. We found one loan in the amount of $200,000 was not in compliance with the program requirements. Recommendation: The Organization should review each closing to confirm it is completed in a timely and accurately manner.