Report: Bush Administration Rejecting Disaster Relief Home Loans at Record Clip
The Louisiana Weekly reports that the Bush Administration has rejected hurricane disaster and recovery loans at a higher rate than any other administration in the last 15 years.
The report, expected to be released Wednesday after being compiled by a Democratic congressional research team, suggests business and home loan approval rates averaged 60 percent after Hurricane Andrew devastated much of South Florida in 1992, when George H.W. Bush was in the White House. Figures remained similar throughout the Clinton administration, according to Democratic members of the House Small Business Committee.
But after Hurricane Wilma surged ashore in South Florida last year, the approval rate for low-interest loans by the Small Business Administration (SBA) dropped to barely 15 percent. Overall, Democrats said, approval rates for disaster-related home loans since 2004 have averaged about 35 percent.
“This was a monumental disaster, and requires a monumental response. That hasn’t happened. People are suffering, and it’s the SBA’s role to provide assistance.” said Congresswoman Nydia Velazquez of New York, the panel’s top Democrat.
With the Mississippi and Louisiana home loan markets in disarray, the SBA has tripled its staff over the past year to deal with the series of major Gulf Coast hurricanes. Yet despite the increase — from 1,500 employees to 4,500 — the congressional report found that the agency’s approval rate has continued to drop with each disaster. SBA officials offered several explanations for the sharp drop-off, including changes to the application process.
A huge number of hurricane victims are facing financial crises. During previous disasters, officials said, only applications that stood a chance of approval were calculated. A new computerized system counts all applications nowadays, regardless of whether the loan might be approved. The SBA also has argued that the scope of the devastation caused by three successive hurricanes and the area’s high number of low-income families are responsible for higher rejection rates.
In Louisiana, nearly 60 percent of applicants couldn’t meet the SBA’s credit standards. Another 25 percent couldn’t repay the loans, and while another 10 percent didn’t make enough money. Finally, the agency said, it still offered a record $6 billion in low-interest, taxpayer-guaranteed loans to more than 80,000 Gulf Coast homeowners and business owners. Last week, the SBA announced it would extend the deadline for victims of Katrina and Rita to apply for a physical damage loan to April 10.
“SBA has very lenient lending requirements with regard to the disaster loan program. However, it is necessary that the applicant have the ability to repay the loan, based on their pre-hurricane financial standing. It’s a balance between making all the loans we can and responsibly using taxpayer dollars,” SBA spokeswoman Anne Marie Frawley said.
A spokesman for Republicans on the House panel, Rich Carter, said the SBA should be given the benefit of the doubt, since the approval rate tends to increase with time. But Velazquez has urged the White House to fire Hector Barreto, head of the SBA. She acknowledged that early results often show high rejection rates, but believes that enough time has passed for better results to become apparent.
The agency’s slowness in responding to the disasters and the funding shortfall angered lawmakers on Capitol Hill. Sens. John Kerry (D-Mass.), and Mary Landrieu, (D-La.), blasted the SBA for not asking for more loan recovery money until it was almost broke. The two have asked the agency to give them a daily accounting of the balance in the loan program.
While the scope of the damage is unprecedented, the need for reform in disaster recovery is clear. Citizens who need Louisiana and Florida home loan recovery should be able to count on it under dire circumstances, while the administration should do whatever it takes to rebuild the Gulf Coast’s economic infrastructure through small business loans as well.
