BAY ST. LOUIS, Miss. -- Six months after back-to-back-to-back hurricanes lashed the Mississippi Gulf Coast and southern Florida, the Small Business Administration says it has been processing and approving low-cost disaster loans at a record pace for tens of thousands of hurricane victims.
But those figures carry little weight with critics who say that even a record pace isn’t fast enough given the scope of the natural disaster, or with victims left wondering why their application has been denied or, worse, if it has gotten lost in some bureaucrat's computer.
The SBA has the numbers to back up its claims. As of Feb. 21, its records show it has approved a total of 17,136 home loans worth a total of $1.2 billion in Mississippi and 30,188 home loans worth $2 billion in Louisiana. Across all the areas hit by the hurricane trifecta of Katrina, Rita and Wilma, the SBA has approved $4.12 billion in loans to more than 58,000 residents who qualified for loans of up to $200,000 at below-market interest rates to repair or rebuild their homes or up to $40,000 to replace renters' lost possessions.
In hard-hit Hancock County, Miss., alone, the SBA has approved 2, 416 home loans totaling more than $245 million.
"The SBA has been approving disaster loans at an unprecedented pace," says SBA Administrator Hector Barreto. "Never before in our history has the SBA been asked to respond to a disaster of this magnitude, and our people have worked tirelessly, compassionately and with urgency to meet the needs of the people affected by these hurricanes. Our results beat by more than six months the time it took SBA to reach $4 billion after (California's) Northridge Earthquake, which was the only other disaster to surpass the $2 billion mark in our 52-year history."
But it's also possible to look at the glass as half empty. Six months after Katrina, the SBA still hasn't processed 31 percent of the home loan applications it has received in Mississippi and 41 percent from Louisiana residents. And of those applications it has processed, 41 percent were rejected in Mississippi and 39 percent in Louisiana.
Criticism over qualifying criteria
Criticism over qualifying criteria
The SBA has no explanation for the high numbers of rejected loans other than to say that the applicants didn’t have adequate income or good credit ratings.
"We’re a little bit more lenient (than banks) when it comes to qualifying standards," says Matthew Young, an SBA spokesman in Mississippi. "However, we still have to be accountable and prudent in making the loans because it’s taxpayer money."
That statement highlights the Catch-22 nature of the disaster loan process: Many Katrina victims are out of work and forced to lean more heavily on credit cards than ever before, a combination that few lenders are likely to consider a good credit risk. And despite their desperate financial circumstances and the fact that many Gulf Coast residents had comparatively low incomes before the storm, the SBA hasn't taken any steps to adjust its qualifying criteria.
The agency's response also has left some hurricane victims with clean credit but little cash feeling bitter and frustrated.
Patrick Kimbrell of Bay St. Louis said he applied for an SBA loan after FEMA rejected his request for disaster assistance because he hadn't yet applied for a loan. Then the SBA turned down his application because the agency deemed him not creditworthy, he says.
"My wife and I bought a house just five months before Katrina hit," Kimbrell says. "The bank saw nothing wrong with my credit and loaned me the money.
"I don't know what the heck is wrong with the SBA. I've never missed a payment in life; paid off several loans, including some car loans, and didn't carry any balance on my credit card."
Kimbrell says he is making repairs on his home using a small insurance settlement. "It won't be enough to repair (the house) all the way," he says. "But at least we got a roof put on it."
The SBA does have an appeal process for those that have been denied a loan, and Kimbrell said he might challenge the ruling if he can find the time between making repairs to his home, making a living and getting his family's life back on track.
Process, process, process
Getting an SBA loan can be a daunting process, especially if all your financial records were wiped out along with your home. SBA applicants must submit loan applications and provide income statements, tax returns and other income-verifying data. Loan officers then assess an applicant's capability to repay the loan based on its internal criteria. SBA "loan verifiers" also physically inspect the damaged properties. The agency also requires that applicants put up some kind of collateral, which in disaster situations usually means the real estate they are rebuilding.
Although the agency averaged more than $36 million in loan approvals a day during December, some applicants say they have been waiting for months to hear whether their applications have been approved.
"We've had an SBA application in since before Thanksgiving and haven't heard a single word," says Yancey Pogue, a Bay St. Louis real estate agent. "Now, to be fair, I also haven't been pestering them on the phone every day like you have to do with every other government agency these days, so maybe it's time I get started on that mission. But don't you think that ... waiting for that long just to hear back is, well, wrong?"
Pogue isn't the only one criticizing the SBA for the pace at which it is processing applications. Lawmakers have ripped SBA officials at congressional hearings, accusing officials of dragging their feet at a time when people need critical help.
SBA's Barreto acknowledges that in the early days after the hurricanes his agency suffered through computer snafus, had problems gaining access to the stricken areas and that its 880-person disaster assistance section was overwhelmed. But he says the first two problems have been solved and the agency has grown its disaster-assistance team to more than 4,000 since then.
"More than two-thirds of SBA's 6,346 employees are working seven days a week to handle the demand for loans," he says. "We are committed to doing whatever it takes to make sure every person who needs and qualifies for help, gets it quickly."
SBA chief has his defenders
SBA chief has his defenders
And although some in Congress called for Barreto to resign, he has his supporters on Capitol Hill as well. Hurricanes Katrina, Rita and Wilma were a "triple whammy (that) caused unprecedented challenges for government officials trying to provide assistance to the hurricane victims," House Small Business Committee Chairman Don Manzullo, R-Ill., said at a December press conference. "Quite frankly, the SBA is in a no-win situation with this disaster. It is understandable that those affected by the disaster want to get their loans as soon as possible. At the same time, taxpayers demand accountability and a reasonable expectation that the loans will be paid back. That takes time to determine whether applicants can pay back the loans."
Manzullo noted that owners of businesses that received SBA loans to rebuild after the 9/11 terrorist attacks also complained about the slow processing times. "Earlier this year we learned that twice as many of the 9/11 loan recipients defaulted on their loans than any previous disaster, saddling taxpayers with the added costs of repaying the loans," he said. "And still, the SBA was criticized for not responding fast enough."
Such statistics hardly register with someone like Kimbrell, who is juggling two jobs and scrambling every day to make ends meet. "I'll tell you about disaster," he says. "The SBA is a disaster, that's what that is."
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