SBA offering up to $200,000 in loans to homeowners with damage

Owners or renters that experienced damage to their homes or personal property during either Hurricanes Gustav or Ike are eligible for up to $200,000 in loans from the U.S. Small Business Administration.

By law, the interest rates depend on whether each applicant has credit available elsewhere. Those that don’t will pay 2.875 percent interest, while those that do will pay an interest rate of 5.750 percent. The maximum loan term is 30 years.

SBA regulations limit home loans to $200,000 for the repair or replacement of real estate and $40,000 to repair or replace personal property, including automobiles, furniture, clothing and appliances.

SBA’s loan approval rates vary by disaster. For large disasters, which are those with 10,000 or more loan decisions, approval rates have ranged from 37 percent to 67 percent.

The average loan approval rate is about 50 percent.
Homeowners and renters seeking assistance from the SBA must first register with FEMA at 1-800-621-FEMA or online at www.fema.gov. During the registration process, disaster victims will be asked several questions about their circumstances, including income. Most homeowners and renters will then be referred to the SBA and sent disaster loan application packages. If SBA declines a home loan request, or cannot make a loan for all of the disaster victim’s losses, SBA will refer the applicant to FEMA to be considered for its “Other Needs Assistance” grant program.

Once an applicant has been approved, SBA will send loan closing documents with the terms and conditions, as well as any request for additional information needed to complete the collateral documents such as copies of property deeds, leases or insurance information.

The SBA can send the first $14,000 once the required documents have been submitted. The process is then similar to a construction loan and is made in installments as repairs are being completed. The borrower must keep receipts to document how the loan funds are spent.

Disaster assistance has been a part of the SBA since 1953, when the department was created by Congress. When an area is declared a disaster by the president, various forms of federal assistance, including SBA’s disaster loan program, become available. The majority of SBA disaster loans approved after natural disasters – about 80 percent – go to homeowners and renters.