“I am here today to shed light on a hardship now faced by homeowners who were encouraged—and in many cases pressured—to apply for Small Business Administration (SBA) disaster assistance. They did so not only to determine their eligibility for home disaster loans but also to qualify for additional future relief,” said Smith. “Due to a complete lack of information and disclosure in the loan process, many Sandy victims now find themselves ineligible for further relief through various grant programs.”

    Smith told the committee of a family in Manasquan, New Jersey who applied for and received an SBA home disaster loan after their home was destroyed by Sandy. After liquidating their retirement savings and incurring a substantial tax penalty as a result, the family applied for relief through NJ’s Reconstruction, Rehabilitation, Elevation, and Mitigation (RREM) Program. The family was shocked to learn of their ineligibility for a grant award solely due to their acceptance of the SBA loan—a circumstance that they were never informed of during the loan process.
 

    “As they emphasized in their letter to me, this begs the question—if they had been fully informed of the potential consequences, would they have taken the SBA loan? Of course not,” Smith said. He noted that while the U.S. Department of Housing and Urban Development (HUD) provided guidance in July 2013 allowing grantees to provide assistance to Sandy victims who had qualified for but declined an SBA loan, it has done nothing to assist the families who acted in good faith to immediately begin the rebuilding process.

    Smith sent a letter to SBA and HUD last month requesting further guidance permitting HUD grantees to provide grant awards to Sandy victims who previously accepted SBA loans—at least for the purposes of paying down the loan. He also asked that the matter be referred to SBA’s Office of Inspector General (OIG).

    “Homeowners considering home disaster loans must be made fully aware of their potential preclusion from further assistance,” Smith said. “In the post-Storm chaos, these loans were the primary option for homeowners needing to rebuild. Those who accept home disaster loans should not be precluded from future HUD assistance—subject to the grantee’s policies and procedures—merely because such assistance is not yet available. Sandy victims made great sacrifices to rebuild and recover—and unfortunately did so with incomplete or misinformation, through no fault of their own,” said Smith.

    “No two disasters are the same and the recovery process will vary based on the level of federal support provided, but we must not continue to ignore the lessons learned from prior experiences. It is egregious what these Sandy victims have been put through, and they must be provided an equitable solution.” Click here to read Cong Smith’s testimony.

    Chairman Steve Chabot of the House Committee on Small Business held the hearing entitled “The Calm Before the Storm: Oversight of SBA’s Disaster Loan Program.”

    “It was clear that following Katrina the SBA’s procedures needed change; but several years later, it appears that challenges still plagued the SBA in responding to Sandy,” Chabot said. “It is disheartening that the SBA is still not where we need them to be.”Click here to read Chairman Chabot’s opening statement.  

    Also testifying were:James Rivera, Associate Administrator, Office of Disaster Assistance, United States Small Business Administration, and William Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office.

    Smith led a NJ congressional delegation meeting with FEMA’s Brad Kieserman, Deputy Associate Administrator for Insurance, in March 2015 to address charges of fraud and underpayments of flood insurance claims to Sandy victims and discuss the reopening of such claims. Kieserman pledged to establish a robust and thorough claims process to review all potential Sandy-related underpayments. He also hosted a NJ delegation meeting with HUD Secretary Donovan in May 2014 to press for additional recovery assistance.

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