By Jonathan Salant of the Star Ledger -

When his home in Manasquan was destroyed by Hurricane Sandy, David Armstrong secured a low-interest loan from the Small Business Administration to rebuild it.

But when the federal government later offered grants to Sandy victims, Armstrong was out of luck. His $300,000 loan precluded him from getting any of that money.

"We had no clue when we signed up and accepted the SBA loan that it would prohibit us from any other types of financial aid," said Armstrong, a computer software salesman. "Do you think I would have signed up for the loan? Of course not."

U.S. Rep. Chris Smith (R-4th Dist.) told Armstrong's story recently at a hearing of the House Small Business Committee as he said Sandy victims who took out SBA loans weren't told they couldn't get other federal aid.

"Homeowners considering home disaster loans must be made fully aware of their potential preclusion from further assistance," Smith said. "Sandy victims made great sacrifices to rebuild and recover—and unfortunately did so with incomplete or misinformation, through no fault of their own."

The SBA is the federal agency that makes loans to homeowners trying to recover from disasters. It made 36,900 Sandy loans totaling $2.5 billion, with 32,700 of them going to homeowners.

At Smith's request, the agency is looking at the issue to see if anything can be done, said James Rivera, associate administrator with the SBA's Office of Disaster Assistance. Smith also asked the Department of Housing and Urban Development, which administers grants, to address the problem, and asked the SBA's inspector general to investigate.

"If we can do something, we will do it," Rivera said. "I'm empathetic to the disaster survivor. They want a grant; they don't want a loan."

 

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RELATED: Sandy homeowners face Sept. 15 deadline for FEMA review of damage claims

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The SBA told homeowners, including in the loan documents, that the loans could affect their eligibility for other federal help, Rivera said. Even so, he said the agency will make the rules clearer going forward.

"We're all for better messaging," he said.

Armstrong said he had to cash in his Individual Retirement Account and pay a penalty for premature withdrawals in order to pay off his sons' student loans before he could qualify for SBA help.

At this point, he said, any additional federal assistance would be welcome. 

"The hope is we could be able to get the grant money and use that money to pay down the loan, which would be a tremendous help to us," Armstrong said.

 

 
The original story was printed in the July 11 edition of he Star Ledge at:

 http://www.nj.com/politics/index.ssf/2015/07/hurricane_sandy_victims_lose_grants_because_of_loa.html