Flooded Homeowners Frustrated to Learn How SBA Loans Impact Eligibility for State Grant Funds
Of the $1.6 billion Congress has appropriated for Louisiana’s flood recovery efforts, $1.3 billion is dedicated to homeowners. In the August flood alone, the Small Business Administration has approved nearly as much in disaster loans to repair flooded houses. But as Wallis Watkins reports, some homeowners feel getting that help has put them at a disadvantage.
Pat Forbes, Executive Director of the Louisiana Office of Community Development, says SBA loans are a huge part of the federal response to disasters. When a flooded homeowner goes to FEMA, they’re directed towards SBA. “And so consequently, we’ve got over a billion dollars in our impacted communities rebuilding homes right now," Forbes said.
So far, almost sixteen thousand disaster loans have been approved for a total of nearly $1.1 billion. About 40 percent of that has actually been paid out. These SBA loans were more immediately available to flooded homeowners to begin repairs. The state, on the other hand, didn’t receive the $1.6 billion approved by Congress until last month. Nearly eight months after the flood, the Louisiana Homeowner Assistance program could finally begin.
“People who got an SBA loan may be back in their home now, as opposed to people who are forced to wait for this grant," Forbes said.
The word ‘grant’ is important. hose who qualify for the state’s program won’t be responsible for paying anything back. But when it comes to an SBA loan, which has a low interest rate of 1.5 percent, the federal government considers it a grant - despite the fact that it must be paid back. So when a homeowner applies for the state’s program, that loan is considered a duplication of benefits.
“When we go calculate an award amount for someone, the first thing we do is calculate the cost to repair the home back up to our economy standards," Forbes explains. "And then we would look at - did they get flood insurance for repair? Did they get FEMA for repair? Did they get an SBA loan for repair? And any of those numbers we have to subtract from the award amount.”
And that’s causing frustration with some homeowners still trying to rebuild. Delvin Coston’s home flooded in August. In order to start repairs, he applied for an SBA loan and was approved. At a Restore Task Force meeting in Baton Rouge, Coston explained that frustration to Forbes.
Coston: “FEMA made us apply for an SBA. Okay."
Forbes: “I’m aware.”
Coston: “You know, they made us do this. And so if I got good credit and I work and I work hard, so I’m being penalized now. You can call it how you want it, I’m being penalized.”
Forbes: “I won’t call it anything other than that. It just doesn’t make sense. Until there’s a change, we don’t have an option.”
Coston says if he had known his SBA loan could decrease the amount awarded by the state, he wouldn’t have applied for it. “I would have only had fifteen more years on my house. So now, having to get the SBA loan extends it thirty years," he said.
Rogers Pope represents Denham Springs in the Louisiana House. He says his constituents didn’t understand that taking an SBA loan for repairs could count against any additional grant money from the state. He’s concerned about the economic consequences this debt could have on homeowners. “Their retirement age is not going to be sixty-five anymore. It’s going to be something later in life," Pope said.
That’s a concern Forbes hears often as well. “I can’t tell you how many homeowners I’ve talked to who, they’ve just retired, their husband is about to retire, their house is paid off, they got the SBA loan. Now, they’re sixty-five years old and they’re facing another thirty year mortgage they thought they had behind them.”
He says that’s why Governor John Bel Edwards has asked Congress to reconsider this federal law. “If we’re going to provide relief, as a policy it makes sense that that relief should not endanger people’s future well being, their future ability to pay their healthcare bills as they age beyond sixty-five, to do all the things they had been saving for their whole lives.”
This report was made possible by the Louisiana Public Radio Partnership, with funding from the Corporation for Public Broadcasting.