EXIM is the official export credit agency  (ECA) of the United States, and its mission is to support the export of  U.S. goods and services, thereby supporting U.S. jobs. EXIM’s Policies and Procedures for Extending Credit

EXIM’s Manual describes EXIM’s underwriting policies and procedures  for each of its products offered, including short-, medium-, and long-term  loans and loan guarantees. EXIM’s Office of Board Authorized Finance is in the process of  streamlining the Manual, which is over 1,400 pages. The underwriting sections of the Manual are tentatively  scheduled for review in 2019. From July 2015  to May 2019, EXIM lacked a quorum on its Board of Directors, and as a  result, EXIM was unable to approve new transactions greater than $10  million. We found that the Manual provides EXIM’s divisions  involved in the underwriting process with direction and guidance for  making credit decisions and is to be updated at least annually, except for  material changes, which are required to be incorporated as soon as  possible. We evaluated  these policies and procedures for (1) applicant screening, (2) loan  documentation, (3) collateral requirements, (4) lender and servicer  eligibility, and (5) risk sharing practices. EXIM does  not require the TIN for medium- and long-term applications. EXIM’s underwriting policies and procedures state that it should have a  security interest in the financed export items. EXIM’s Policies and Procedures Were Not Fully Consistent with Federal Guidance Related to Lender and Servicer Eligibility

Federal guidance calls for policies and procedures related to lender and  servicer eligibility, monitoring, and recertification. EXIM reviews the performance of its primary medium-term lenders  quarterly. However, without documented policies and procedures for determining  the eligibility of the medium-term delegated authority lenders’ continued  participation in the program and for decertifying such lenders, as  appropriate, EXIM may allow lenders who are not qualified to underwrite  transactions, thus increasing the risk for improper underwriting and  defaults. As shown in table 6, EXIM’s underwriting  policies and procedures were generally consistent with the federal  guidance related to certain risk sharing practices for lenders and  borrowers to have a stake in full repayment and were partially consistent  with the federal guidance related to periodic program reviews. However, consistent with its charter, EXIM is  authorized to provide terms that are competitive with those of other ECAs. OMB Circular A-129 states that the agency should periodically review  programs in which the government bears more than 80 percent of any  loss. As a result,  EXIM runs the risk that it will not effectively review its programs to  determine whether the private sector could bear a greater share of the  risk. In its written comments, EXIM described planned actions to address our  recommendations. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine the extent to which Export-Import  Bank’s (EXIM) (1) process for updating its underwriting policies and  procedures is properly designed and implemented and (2) underwriting  policies and procedures for loan and loan guarantee transactions are  consistent with guidance for managing federal credit programs. To assess the extent to which EXIM’s process for updating its  underwriting policies and procedures was properly designed and  implemented, we reviewed EXIM’s policies and procedures for updating  its Loan, Guarantee and Insurance Manual (Manual) and interviewed  EXIM officials. To assess the extent to which EXIM’s underwriting policies and  procedures for loan and loan guarantee transactions were consistent with  guidance for managing federal credit programs, we reviewed relevant  requirements and guidance, including the Office of Management and  Budget’s (OMB) Circular A-129, Policies for Federal Credit Programs and  Non-Tax Receivables, and the Department of the Treasury’s Bureau of  the Fiscal Service’s Managing Federal Receivables: A Guide for  Managing Loans and Administrative Debt.
Why GAO Did This Study

EXIM serves as the official export credit agency of the United States, providing a range of financial products to support the export of U.S. goods and services. Following the 2007–2009 financial crisis, demand for EXIM support increased. However, from July 2015 to May 2019, EXIM lacked a quorum on its Board of Directors and, as a result, was unable to approve medium- and long-term transactions greater than $10 million.
The Export-Import Bank Reauthorization Act of 2012 includes a provision for GAO to evaluate EXIM's underwriting process. This report discusses the extent to which EXIM's (1) process for updating its underwriting policies and procedures is properly designed and implemented and (2) underwriting policies and procedures for loan and loan guarantee transactions are consistent with guidance for managing federal credit programs. To address these objectives, GAO evaluated EXIM's underwriting policies and procedures against federal guidance and discussed the underwriting process with EXIM officials.

What GAO Found

GAO found that Export-Import Bank's (EXIM) process for updating its underwriting policies and procedures was properly designed and implemented. EXIM's Loan, Guarantee and Insurance Manual (Manual) describes EXIM's underwriting policies and procedures for its short-, medium-, and long-term loans and loan guarantees. The Manual describes the responsibilities of divisions and loan officers involved in the underwriting process and is required to be updated at least annually, except for material changes (e.g., changes resulting from legislative actions or compliance with sanctions), which are required to be made as soon as possible.
EXIM has initiated a process to streamline the Manual, which consists of over 1,400 pages, by separating the policies and procedures, thus allowing for continuous reviews. The underwriting sections of the Manual are tentatively scheduled for review in 2019.
The primary guidance for designing and managing federal credit programs is Office of Management and Budget Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables . GAO found that EXIM‘s policies and procedures were consistent with three of five areas of federal guidance; two areas related to lender and servicer eligibility and risk sharing practices were partially consistent with federal guidance.
Applicant screening. EXIM's policies and procedures were consistent with guidance in that they require applicants to provide relevant financial information and assessments of applicant eligibility and creditworthiness.
Loan documentation. EXIM's process was consistent with guidance in that it requires the preparation of loan files, which include the application, credit reports, and related analyses, as well as collateral documentation and loan agreements.
Collateral requirements. EXIM's process was consistent with guidance in that it requires a security interest in the financed export items.
Lender and servicer eligibility. EXIM established eligibility and decertification procedures for short-term delegated authority lenders that were consistent with guidance. However, it did not establish similar procedures for medium-term delegated authority lenders.
Risk sharing practices. EXIM's process was generally consistent with guidance in that EXIM provides loan guarantee terms that officials stated were necessary to achieve program purposes. However, federal guidance also calls for an agency to periodically review programs in which the government bears more than 80 percent of any loss. While EXIM prepares various program reviews, it has not developed procedures to help ensure that its risk sharing practices are routinely reviewed.
Without enhancements to its policies and procedures, EXIM may allow lenders that are not qualified to underwrite transactions and runs the risk that it will not effectively review its programs.

What GAO Recommends

GAO is making two recommendations to enhance EXIM's policies and procedures related to (1) the use of medium-term delegated authority lenders and (2) periodic program reviews. EXIM concurred with GAO's recommendations and described actions planned to address them.