[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]






THE CALM BEFORE THE STORM: OVERSIGHT OF THE SBA'S DISASTER LOAN PROGRAM

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              JULY 8, 2015

                               __________

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

     

            Small Business Committee Document Number 114-018
              Available via the GPO Website: www.fdsys.gov
              
              
              
                                    ______

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                        TOM RICE, South Carolina
                         CHRIS GIBSON, New York
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        CARLOS CURBELO, Florida
                          MIKE BOST, Illinois
                         CRESENT HARDY, Nevada
               NYDIA VELAZQUEZ, New York, Ranking Member
                         YVETTE CLARK, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                       BRENDA LAWRENCE, Michigan
                       ALMA ADAMS, North Carolina
                      SETH MOULTON, Massachusetts
                           MARK TAKAI, Hawaii

                   Kevin Fitzpatrick, Staff Director
            Stephen Dennis, Deputy Staff Director for Policy
            Jan Oliver, Deputy Staff Director for Operation
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Chabot................................................     1
Hon. Nydia Velazquez.............................................     5

                               WITNESSES

The Honorable Chris Smith, (NJ-04), United States House of 
  Representatives, Washington, DC................................     2
Mr. William Shear, Director, Financial Markets and Community 
  Investment, United States Government Accountability Office, 
  Washington, DC.................................................     7
Mr. James Rivera, Associate Administrator, Office of Disaster 
  Assistance, United States Small Business Administration, 
  Washington, DC.................................................     8

                                APPENDIX

Prepared Statements:
    The Honorable Chris Smith, (NJ-04), United States House of 
      Representatives, Washington, DC............................    26
    Mr. William Shear, Director, Financial Markets and Community 
      Investment, United States Government Accountability Office, 
      Washington, DC.............................................    30
    Mr. James Rivera, Associate Administrator, Office of Disaster 
      Assistance, United States Small Business Administration, 
      Washington, DC.............................................    53
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Associated Press - Loans impacting grant money for Sandy 
      victims....................................................    58
    U.S. Small Business Administration...........................    61

 
THE CALM BEFORE THE STORM: OVERSIGHT OF THE SBA'S DISASTER LOAN PROGRAM

                              ----------                              


                        WEDNESDAY, JULY 8, 2015

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2360, Rayburn House Office Building. Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, Luetkemeyer, Hanna, 
Gibson, Brat, Radewagen, Knight, Curbelo, Bost, Hardy, Kelly, 
Velazquez, Hahn, Payne, Meng, Lawrence, Takai, Clarke, Adams, 
and Moulton.
    Chairman CHABOT. Good morning. The Committee will come to 
order.
    Before we begin, I would like to make a very nice 
announcement, and that is the fact that before we get started I 
want to take a moment to welcome our newest member, Congressman 
Trent Kelly, who represents Mississippi's First Congressional 
District, and he is joining us on the Small Business Committee. 
This will be his first hearing today.
    He is certainly no stranger to public service. In addition 
to serving Mississippi as a district attorney for the past 
number of years, Congressman Kelly is also Colonel Trent Kelly. 
I hear he is quickly closing in on 30 years in the Mississippi 
Army National Guard, and that is quite a record of service, and 
we appreciate your service, Congressman Kelly. Welcome to the 
Small Business Committee, and we are happy to have you. And we 
are all looking forward to working with you and getting to know 
you better and letting you get to know us better, which will be 
a wonderful experience I am sure. So, but thank you very much, 
and we are real happy to have you.
    We will go ahead and move on to one other introduction. 
Before I give my opening statement, we are going to go ahead 
and introduce another member, a witness we have this morning, 
if I can find it. Okay.
    We are pleased to recognize this morning our colleague, 
Congressman Chris Smith of New Jersey. I have had the pleasure 
of serving with Chris on the Foreign Affairs Committee for 19 
years now, and for those of you who do not serve on that 
Committee, I can tell you that he is one of the hardest working 
Members of Congress. A leader on foreign policy, veterans 
issues, and a good friend, and I am pleased to welcome him here 
today.
    We recognize that our colleague has a very busy schedule, 
as we all do, and has taken time away from it to testify this 
morning, so we will get right to it. Unless anybody has any 
pressing questions, there is generally the comity that we do 
not--and that is c-o-m-i-t-y, not the other comedy--that we 
generally do not ask our colleagues questions. So we will get 
to the second panel then.
    So without further ado, Mr. Smith, you are recognized for 
five minutes.

STATEMENT OF THE HONORABLE CHRIS SMITH, (NJ-04), UNITED STATES 
                    HOUSE OF REPRESENTATIVES

    Mr. SMITH. Thank you so very much, Chairman Chabot. And 
likewise, a good and extraordinarily effective friend. We do 
serve on the Foreign Affairs Committee, as you said, and I have 
lost track of the number of times that we have been hand-in-
hand, arm-in-arm, fighting on behalf of victims for human 
rights issues. You, as Asia Committee, last year, last 
Congress, and Nydia Velazquez, your ranking member, we have 
worked very hard. Jacob Ostreicher and some of the other human 
rights issues. So it is good to see such good friends serving 
in two important positions on behalf of our nation's small 
business. So thank you for this opportunity to be here.
    You know, I will just note parenthetically, in 1981, my 
first assignment was to the Foreign Affairs Committee chaired 
by Parren Mitchell and Ranking Member Joe McDade. Small 
business. What did I say? Oh, Small Business with Parren 
Mitchell and Joe McDade. So I know the good work that you do, 
and I appreciate it. We all do.
    Let me just say that it has been more than two and a half 
years since Super Storm Sandy devastated New York and New 
Jersey, and some of my constituents, especially those in hard-
hit Monmouth and Ocean Counties, are still recovering today. It 
is not over for them. The nightmare continues.
    As many of you are well aware, the federal response was far 
from perfect. The Federal Emergency Management Agency (FEMA) 
recently reopened all Sandy-related flood claims due to 
widespread fraud and a complete lack of oversight over the 
National Flood Insurance Program.
    Bipartisan delegations, as I think you know--and Nydia, you 
were certainly a part of this--from New Jersey and New York, 
fought hard to secure critical funding from the U.S. Department 
of Housing and Urban Development. Despite huge remaining unmet 
needs, HUD chose only to make nearly a billion dollars in Sandy 
supplemental funding through the Community Development Block 
Grant Disaster Relief Program available to applicants 
unaffected by Sandy.
    With that in mind, I am here today to shed some light on a 
hardship, an emerging problem that really has to be rectified, 
now faced by homeowners who were actively encouraged, and in 
many cases pressured, to apply for Small Business 
Administration Disaster Assistance. They did so not only to 
determine their eligibility for home disaster loans, but also 
to qualify for additional future relief. Due to a complete lack 
of information, however, and disclosure in the loan process, 
many Sandy victims now find themselves ineligible--I repeat, 
ineligible--for further relief through various grant programs.
    To illustrate, and I do have a letter from a constituent of 
mine, from Manasquan, who said that they liquidated--it was so 
bad, and they wanted to get their home back into a working 
order, that they liquidated their retirement savings to pay 
down debts taken out to finance their children's college 
education, just to qualify for a home disaster loan. This not 
only decimated their savings, but also resulted in a 
substantial tax penalty of $52,000 for the early retirement 
withdrawal. They subsequently applied for relief through New 
Jersey's Reconstruction Rehabilitation Elevation and Mitigation 
Program (RREM)--that is the HUD program--only to be shocked to 
learn--and I mean shocked. When they called my office, they 
could not believe that this was happening--of their 
ineligibility for a grant reward solely because they had 
qualified for and accepted the SBA loan, a circumstance that 
they were never informed about during the loan process.
    As they emphasized in their letter to me, this begs the 
question, if they had been fully informed of potential 
consequences, would they have taken the SBA loan? And the 
answer is a decided no. With more than 32,000 SBA disaster home 
loans approved following Sandy, there is no telling how many 
homeowners have found themselves in a similar situation. I am 
sure that today's witnesses can speak to the pile of papers 
presented to the homeowner during the loan closing, and it will 
be helpful to hear whether SBA had any discussions with HUD and 
their state grantees on this issue.
    While HUD provided guidance in July of 2013, allowing 
grantees to provide assistance to Sandy victims who had 
qualified but declined an SBA loan, they have done nothing to 
assist the families who acted in good faith to immediately 
begin the rebuilding process.
    Last month, I sent a letter to both SBA and HUD requesting 
further guidance, specifically permitting CD, BG, DR grantees 
to provide grant awards to Sandy victims who previously 
accepted an SBA loan, at least for the purposes of paying down 
that loan. I also asked that this matter be referred to the 
SBA's Office of Inspector General, to determine what action or 
inaction led to so many Sandy victims being left in the dark 
regarding this critical information.
    This very issue should not have been overlooked by SBA, nor 
should it have come as a surprise. Following the Gulf 
hurricanes in 2005 and Midwest flooding in 2008, SBA's OIG 
released a report entitled, and I quote, ``SBA's role in 
addressing duplication of benefits between SBA disaster loans 
and community development block grants detailing a serious lack 
of communication and agreement between federal agencies 
regarding the Stafford Act's duplication of benefit 
requirements.''
    If the Federal Government itself has failed to understand 
the implications of these requirements, how can they be counted 
on to explain it to disaster survivors? While SBA has taken 
steps to improve its coordination with FEMA and HUD, it has 
failed to communicate with the survivors it is tasked to 
assist. Homeowners considering home disaster loans must be 
fully aware of their potential preclusion from further 
assistance. In post-storm chaos, these loans were the primary 
option for homeowners needing to rebuild. And again, if you did 
not rebuild quickly, the water damage got worse. The black mold 
got worse. And when there was no sense of what might be offered 
in the future, they grabbed the SBA loan, only to find again 
they were precluded from any other further grant--not loan, but 
grant--in the future. Those who accepted home disaster loans 
should not, as I said, be precluded from future HUD assistance.
    Sandy victims made great sacrifices to rebuild and recover, 
and unfortunately, did so with incomplete or misinformation 
through no fault of their own. 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 these terrible experience. It is 
egregious that these Sandy victims have been put--what they 
have been put through, and they must be provided an equitable 
solution. And again, this on top of the National Flood 
Insurance problem debacle just begs the question we have got to 
get this right.
    I would ask that my letter, Mr. Chairman, be included in 
the record, as well as an Associated Press article entitled, 
``Buyer's remorse: Loans impacting grant money for Sandy 
victims,'' that was put over the wire last December.
    Chairman CHABOT. Without objection, so ordered.
    Mr. SMITH. Appreciate it.
    Chairman CHABOT. Thank you very much. And we thank you 
greatly, Mr. Smith, for your testimony. You are welcome to 
stick around. If you have other obligations, you are welcome to 
tend to those as well, and we will be having our next panel in 
just a few moments.
    Thank you very much, and we will now move to my and the 
Ranking Member's opening statements before getting to the 
panel.
    A natural disaster exposes us to the worst of nature, yet 
in some powerful way it brings out oftentimes the best in 
people. Communities ban together, neighbors help neighbors, and 
volunteers donate their time and energy, all in an effort to 
rebuild and to get their lives back together.
    In the last decade, America has faced some of its worst 
natural disasters with Hurricane Katrina in 2005 and more 
recently, Hurricane Sandy in 2012. While these disasters struck 
certain areas of the country, every Member on this Committee 
has experienced some disaster within their district I am sure, 
because these events do not limit themselves to one region, or 
one state, or one congressional district.
    In my home state of Ohio, we have had our fair share of 
devastating tornadoes and severe floods and a number of other 
natural disasters. In the aftermath of any disaster, it is 
vital that victims are able to rebuild and return to their 
normal lives as soon as possible.
    While most individuals are aware of the Federal Emergency 
Management Agency (FEMA) and its role in disaster assistance 
immediately following a disaster, most are unaware that longer 
term recovery assistance is provided by the Small Business 
Administration (SBA). In this role, the SBA touches more than 
just small firms. The SBA helps homeowners and renters and 
businesses and nonprofits by providing various long-term 
recovery loans. Given this, it is imperative that the SBA's 
Disaster Loan Program operate as efficiently and effectively as 
possible. On this Committee, we are tasked with evaluating the 
SBA's ability to properly respond to the needs of disaster 
victims and ensuring that the SBA is prepared to handle 
whatever may be next.
    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. It is 
disheartening that the SBA is still not where we need them to 
be. While we certainly do not hope for another catastrophe, we 
know it will happen, and this Committee wants to make sure that 
the SBA, the Small Business Administration, is ready.
    Today, we will discuss just how the SBA is doing in its 
mission to provide long-term disaster assistance. Our witnesses 
can hopefully shed light on the SBA's efforts. And as I said 
before, we appreciate Congressman Smith's addition to that 
attempt. And I want to thank our witnesses for taking time out 
of their busy schedules to be here, and we will introduce you 
very shortly, and we look forward to your testimony. And I will 
now yield to the Ranking Member for her opening statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Natural disasters profoundly disrupt our lives and affect 
tens of thousands of households every years. These 
unanticipated events leave families and small businesses facing 
significant costs when rebuilding. Typically, insurance covers 
monetary losses, but that is not always the case. Recognizing 
the gap in the market, Congress created the SBA Low Interest 
Disaster Loan Program in 1953. Over the past 62 years, SBA has 
responded to thousands of natural disasters, including several 
major storms. One of the worst was Super Story Sandy in 2012. 
When Sandy made landfall, the impact was particularly severe in 
New York City. The storm destroyed infrastructure, inundated 
thousands of homes with floodwater, and disrupted our vibrant 
small business community.
    For small businesses in particular, the first few weeks 
following a natural disaster are a critical period. It is 
estimated that 40 percent of impacted businesses failed to 
fully recover. One major reason is the lack of capital to 
rebuild. As such, it is critical SBA process and disperse 
disaster loans quickly to maximize the likelihood small 
businesses will survive. Unfortunately, soon after Sandy 
struck, it became clear SBA's response was lacking. As 
processing delays mounted, the deficiencies in SBA's management 
of the Disaster Loan Program demanded a closer look from 
Congress.
    In early 2013, the committee Democrats released a report on 
the application backlog and processing delays. We found small 
businesses waited 46 days to get their application processed by 
SBA, a threefold increase over previous Atlantic storms. To 
make matters worse, SBA had already been heavily criticized for 
its slow response to Hurricane Katrina, and made commitments to 
process applications in 21 days.
    To build on those findings and fully understand the costs 
of the delays experienced by Sandy victims, I requested the GAO 
report we are focusing on today. GAO identified a number of 
reasons for the problems at SBA, including failing to quickly 
staff up, underestimating the number of electronic submissions, 
and failing to implement Private Disaster Loan Programs signed 
into law four years prior.
    In 2008, bipartisan reforms were enacted by this Committee 
to help the Agency respond to large disasters by bringing in 
the private sector to meet loan demand. This included the 
Immediate Disaster Assistance Program, the Private Disaster 
Loan Program, and the Expedited Disaster Assistance Loan 
Program. It is likely one or more of these programs, if 
implemented before Sandy made landfall, could have injected 
much-needed capital into the community immediately after the 
storm. These private loan programs could have also helped free 
up SBA resources by handling the small dollar loan volume. SBA 
provided GAO with a number of reasons for its failure to timely 
process disaster loans following Super Storm Sandy; however, 
they were all self-created. Clearly, significant changes need 
to be made in SBA's administration of the Disaster Loan 
Program. It is unacceptable that Sandy victims have to wait 46 
days or longer to get vital funding to rebuild their 
businesses.
    I look forward to hearing from today's witnesses on the 
findings and recommendations contained in GAO's report.
    Thank you, Mr. Chairman, and I yield back.
    Chairman CHABOT. Thank you very much.
    Thank you. The gentlelady yields back.
    We would ask our witnesses if they would come on up to the 
table, please. We just have two this morning, and I will 
introduce them as they are approaching the bench.
    Our first witness on the panel this morning will be Bill 
Shear, who is the Director of the Financial Markets and 
Community Investment team at the Government Accountability 
Office. We look forward to your testimony.
    And our other witness will be James Rivera, who is the 
Associate Administrator for the Office of Disaster Assistance 
at the SBA, the Small Business Administration. In this role, 
Mr. Rivera is responsible for all aspects of the SBA Disaster 
Loan Program. And as I said, we appreciate you both being here 
today, and I will very briefly, and you are probably familiar 
with them already, but address our five-minute rule, which is 
basically you get five minutes to testify. The lighting system 
assists you in that somewhat. The yellow light will come on to 
let you know you have a minute to wrap up. The red light will 
come on and we would ask you to stay within that time if at all 
possible. We will give you a little leeway. So, and we also 
apply that same five-minute rule to ourselves, so it is 
reasonably fair.
    So we will begin with you, Mr. Shear. You are recognized 
for five minutes.

 STATEMENTS OF WILLIAM SHEAR, DIRECTOR, FINANCIAL MARKETS AND 
 COMMUNITY INVESTMENT, UNITED STATES GOVERNMENT ACCOUNTABILITY 
   OFFICE; JAMES RIVERA, ASSOCIATE ADMINISTRATOR, OFFICE OF 
       DISASTER ASSISTANCE, UNITED STATES SMALL BUSINESS 
                         ADMINISTRATION

                   STATEMENT OF WILLIAM SHEAR

    Mr. SHEAR. Thank you.
    Chairman Chabot, Ranking Member Velazquez, and members of 
the Committee, I am pleased to be here today to discuss the 
Small Business Administration's response to Hurricane Sandy, 
the costliest Atlantic storm since Hurricane Katrina in 2005.
    Sandy made landfall in the United States on the New Jersey 
Shore on October 29, 2012. My testimony today is based on 
information in our September 2014 report on SBA's response to 
Hurricane Sandy, and includes updates on steps SBA has taken to 
address two recommendations from that report.
    One recommendation related to better planning for high 
volumes of loan applications. Another recommendation related to 
evaluating lender feedback to inform SBA and Congress about 
challenges to implementing a new loan program and determining 
if statutory changes might be necessary to aid implementation.
    First, with respect to timeliness. Following Hurricane 
Sandy, SBA did not meet its timeliness goal of 21 days for 
processing business loan applications. From receipt to loan 
decision, SBA averaged 45 days to process physical disaster 
loans, and 38 days for economic injury loans.
    SBA did not expect early receipt of a high volume of loan 
applications and delayed increasing staffing, which in turn 
increased processing times. As of September 2014, SBA had not 
revised its disaster planning documents to reflect the effects 
that application volume and timing could have on staffing, 
resources, and forecasting models for future disasters. Since 
then, SBA has made updates to its disaster playbook.
    Second, with respect to loan approval, withdrawal and 
cancellation rates compared to previous disasters, the loan 
approval rate after Sandy was not consistently higher or lower, 
but the application withdrawal and loan cancellation rates, 
which were 32 percent and 38 percent, respectively, were 
consistently higher than other disasters.
    SBA approved 42 percent of business loan applications after 
Sandy. For Hurricane Sandy and for previous disasters, SBA 
primarily declined business loan applications because of 
applicants' lack of repayment ability and the applicants' 
credit history.
    Third, SBA has not implemented the Guaranteed Disaster Loan 
Programs Congress mandated in 2008, including the Immediate 
Disaster Assistance Program (IDAP), a bridge loan program in 
which private sector lenders would provide disaster victims 
with loans up to $25,000. SBA has not conducted a formal 
documented evaluation of lender feedback to establish what 
implementation challenges the Agency might face and determine 
what, if any, statutory changes Congress could consider.
    In June 2015, SBA provided us with documentation of 
additional outreach performed in October 2014, where lenders 
provided specific feedback regarding current statutory 
requirements and proposed program requirements. SBA has yet to 
adopt a plan for how and whether it will proceed with IDAP 
implementation or document the challenges it would face in 
implementing the program.
    Chairman Chabot and Ranking Member Velazquez, this 
concludes my prepared statement. I would be glad to answer any 
questions.
    Chairman CHABOT. Thank you very much.
    Mr. Rivera, you are recognized for five minutes.

                   STATEMENT OF JAMES RIVERA

    Mr. RIVERA. Good morning, Chairman Chabot, Ranking Member 
Velazquez, and distinguished members of the Committee. Thank 
you for inviting me to discuss SBA's Disaster Loan Program. SBA 
appreciates your strong support of the Agency's disaster 
operations.
    SBA's Office of Disaster Assistance is responsible for 
providing affordable, timely, and accessible financial 
assistance following a disaster to businesses of all sizes, 
private nonprofit organizations, homeowners, and renters. This 
financial assistance is available in the form of low-interest 
long-term loans, and since SBA's inception, we have approved 
almost two million loans for more than $53 billion.
    While SBA is not a traditional first responder agency, we 
are on the ground immediately following a disaster. SBA's 
primary focus is providing disaster loans as part of the 
recovery efforts in coordination with other government partners 
at all levels.
    SBA offers home loans of up to $240,000 to help rebuild 
homes and up to $2 million for nonprofit and businesses of all 
sizes. SBA also offers Economic Injury Disaster Loans to small 
businesses, agricultural cooperatives, and many nonprofit 
organizations who have suffered economic injury caused by 
disaster. These loans provide needed working capital to a 
business or organization until normal operations can resume.
    In recent years, we have made many improvements that have 
allowed us to better respond to disaster survivors, including 
streamlining application forms and implementing a redesigned 
electronic loan application, all of which have led to a more 
transparent and efficient application process. Over the past 
several years, SBA has seen significant increase in its 
electronic loan application activity.
    In Fiscal Year 2011, 27 percent of SBA disaster 
applications were submitted online using ELA, compared to 83 
percent this fiscal year. The continued increase in ELA 
activity reflects the improvements made by SBA to streamline 
its online application and ensure that disaster survivors have 
access to program information.
    In 2014, SBA launched a new communication plan referred to 
as a three-step process. When seeking SBA disaster loan 
assistance, we describe the first step as how do you apply for 
a loan? The second step describes how we verify your property 
and process your loan application. And the third step is how we 
close and disburse and fund your loan.
    The new strategy ensures that disaster survivors have a 
clearer understanding of steps involved when seeking SBA 
disaster loan assistance.
    SBA made another improvement in its communications with 
disaster survivors in 2014 by increasing direct contacts with 
potential disaster applicants. SBA contacts all disaster 
survivors referred to by the Federal Emergency Management 
Agency to SBA by phone within 48 hours and informs them of 
disaster loan assistance and various ways to apply.
    By increasing the number of direct contacts with potential 
disaster loan applicants, SBA helps ensure that disaster 
survivors are aware of all available assistance. SBA has 
established an accelerated approval process for both home and 
business loans. Based on set criteria, the new RAPID approval 
process allows us to expedite processing loans, and it has the 
potential to ease the stress on SBA's loan processing 
resources.
    In coordination with the launch of the new RAPID approval 
process, SBA implemented a second regulatory change, which 
raised the unsecured loan limit under presidential disaster 
declarations from $14,000 to $25,000 on home and business 
physical loans, and from $5,000 to $25,000 on economic injury 
disaster loans for all declarations. The increased unsecured 
loan limit allows SBA to disburse more funds to disaster 
survivors faster, which helps speed up the recovery of 
businesses that offer critical services in communities that are 
in greater need of limited funds.
    SBA has also established two separate tracks to process 
home and business loans in order to expedite loan processing. 
Earlier this month, we released an updated SOP (standard 
operating procedure) which is a complete rewrite and brings a 
back-to-basics approach of SBA disaster loan-making process. 
The refreshed SOP removed redundancies and streamlined the 
process for loan-making and disbursements by adding more 
flexible underwriting and guiding SBA staff to help businesses 
and homeowners. These changes should improve the overall 
customer experience for disaster survivors.
    In response to Super Stormy Sandy, SBA approved more than 
$2.4 billion in disaster loans to help nearly 37,000 
homeowners, renters, businesses, and nonprofit organizations 
recover and rebuild from disaster devastation. SBA responded to 
the needs of residents and business owners by deploying 695 
disaster assistance workers and field inspectors to staff 248 
disaster recovery centers located throughout the East Coast, 
during which time the SBA had more than 152,000 contacts in the 
field. Additionally, SBA's disaster customer service call 
center in Buffalo, New York, responded to over 212,000 calls 
with minimal wait times.
    In closing, I appreciate the opportunity to update the 
Committee on SBA's Office of Disaster Assistance, and I look 
forward to answering any questions. Thank you.
    Chairman CHABOT. Thank you.
    I ask Ranking Member Velazquez----
    Ms. VELAZQUEZ. To go first?
    Chairman CHABOT.--to go first.
    Thank you, Mr. Chairman.
    Mr. Rivera, SBA officials have stated that they will not 
begin regulatory work on the Private Disaster Loan Program or 
the expedited Disaster Assistance Program until IDAP is fully 
implemented. So my question to you is, is there anything in the 
Small Business Disaster Response and Loan Improvements as of 
2008 that says IDAP needs to be implemented before SBA can work 
on the others?
    Mr. RIVERA. No, ma'am. There is not anything that stops us 
from executing these other programs.
    Ms. VELAZQUEZ. Are you aware that the act required the 
administrator to issue rules for both of these programs within 
one year? If so, why has SBA ignored its legal mandate?
    Mr. RIVERA. So my understanding--you know, this guarantee 
loan program, we work in conjunction between the Office of 
Disaster Assistance and the Office of Capital Access. It is a 
guaranteed loan program with preferred lenders and with bank 
lenders from that perspective. The thought process behind this 
was to first pilot and implement the IDAP program for the 
immediate program, and see how that worked within the lending 
community. And then after that, you know, after we would take 
that process through, we would go to the other two programs.
    We have promulgated----
    Ms. VELAZQUEZ. You are not answering my question. My 
question is why have you not begun the regulatory work on the 
Private Disaster Loan Program or expedited it. I understand 
that you are saying that IDAP--that you will not do that until 
IDAP is fully implemented.
    My question to you is, in 2008, we passed legislation 
signed by the president, that gave the administrator one year 
to implement the program, more so when Congress in 2012, 
provided $3 million for a pilot program. What happened to that 
money? What did you do?
    Mr. RIVERA. So the money part, I mean, it is not 
appropriated to a specific program from that perspective. You 
know, to be honest with you, Congresswoman, I do not know why 
the other two regulatory programs were not implemented. What I 
can do is I can check back with the Office of Capital Access, 
and we can get back to you for the record.
    Ms. VELAZQUEZ. Well, I guess you knew you were coming here, 
and you knew that I would be asking those questions because 
those are basic fundamental questions. Do you understand what 
it means for small businesses in lower Manhattan when Con 
Edison's plant blew up and there was no electricity, no power? 
Do you know how many children and mothers crossed the 
Williamsburg Bridge to come into Williamsburg to get groceries 
that they were not able to get because businesses had to shut 
down? Do you know what it means for small businesses to get 
access to $25,000 to keep their doors open?
    Mr. RIVERA. Yes, ma'am. We are well aware of the----
    Ms. VELAZQUEZ. And that is why you have not implemented 
those programs? These are the tools that we provided you right 
after Katrina. That was a real disaster that required a 
monumental response and we failed the people. And again, this 
time, we provided the vehicles and mechanism.
    Mr. Shear, is there is any explanation as to why this 
regulation and this program have not been implemented?
    Mr. SHEAR. I can only make observations because I cannot 
get behind the minds of people at SBA. There was very little 
question in mine or others' minds when we had a sit-down with 
SBA, actually, on March 1, 2010, that there was a conscientious 
effort to at least establish IDAP, and that the others would 
probably follow shortly after that. And there seemed to be a 
concerted effort that was working across office lines at SBA 
involving the Office of Disaster Assistance, the Office of 
Capital Access, and the Office of Disaster Planning, which had 
been created by the 2008 Act. When we came in this time, there 
just seemed to be a complete lack of focus on IDAP or any of 
these programs.
    And in terms of observations, it just seems from our 
standpoint there was less coordinated effort among these three 
offices to try to push forward on IDAP or any of these. So 
these are observations I can make but I do not really have a 
good explanation for why, in a sense, the ball was dropped in 
developing these programs and in developing IDAP as the first 
program.
    Ms. VELAZQUEZ. Mr. Rivera, the GAO report on Sandy's 
response said that SBA did not respond as anticipated because 
it was challenged by an unexpectedly high volume of loan 
applications that it received early in its response to the 
disaster and other technological challenges. How is it possible 
for the SBA to have this kind of managerial and structural 
mishaps in light of the lessons learned from Katrina?
    Chairman CHABOT. Before the question is answered, just let 
me let you know what is going on. Mr. Hanna has yielded his 
five minutes.
    Ms. VELAZQUEZ. I thank the gentleman.
    Chairman CHABOT. So she will proceed with that. There are 
four minutes of it left.
    Mr. RIVERA. Okay. Thank you.
    So Hurricane Sandy, we are transparent with GAO and with 
the Inspector General. We provided the information to them. 
What happened in Hurricane Sandy is we had developed the 
electronic loan application where people can apply on line.
    There are two traditional bell curves. There is a paper 
bell curve or paper intake curve on how applications are 
received. That usually happens between week five and week 
eight, and then there is the new norm, which is the ELA curve, 
which happens between week one and week four. So what happened 
in Sandy is we did not anticipate getting 20,000 applications 
in that first four weeks through the electronic loan 
application queue. We have course corrected. We have done 
changes to our processes. Our preprocessing department now can 
handle that type of activity. Our current activity in the 
electronic loan application side is up over 80 percent. So we 
have adjusted.
    Every disaster is different. Every disaster is unique. We 
have never had this type of engagement from an electronic loan 
application perspective, so that was the big lesson learned. I 
mean, we have been real transparent.
    Ms. VELAZQUEZ. Sir, did you run any simulations?
    Mr. RIVERA. We have run simulations.
    Ms. VELAZQUEZ. Because that is part of the disaster 
preparedness.
    Mr. RIVERA. Yes. So we have run simulations. We run 
simulations all the time. On an annual basis we have, like, 
last year we did a mock earthquake in Oakland, California. What 
we have been able to do--staffing was not an issue. So if you 
go back to Katrina, we had three issues. We had space, 
staffing, and the computer system. Those three issues were not 
in place when Super Storm Sandy hit. What happened, we had 
sufficient staff. We just did not bring them on quick enough 
because we did not anticipate this new intake curve that the 
ELA has caused us by getting these additional 20,000 
applications in week one to week three. Usually, that is when 
we are bringing staff onboard. We peaked at 2,500 staff. Our 
staffing strategy has core staff of 1,000. We have 2,000 
reservists, so we had plenty of staff in reserve. Our mistake, 
in hindsight----
    Ms. VELAZQUEZ. Let me ask you, we are in the middle of the 
hurricane season; right?
    Mr. RIVERA. Yes, ma'am.
    Ms. VELAZQUEZ. So God forbid something happens. Tell me 
what steps are you taking right now that will position you to 
respond efficiently and timely.
    Mr. RIVERA. So that is what we have been doing the last 
couple of years. We have been very aggressive.
    Ms. VELAZQUEZ. That is what I heard right after Katrina and 
right after we provided all the tools that you needed. When we 
conducted hearing after hearing and we heard what problems you 
were facing that would not allow for the agency to respond 
adequately, we provided those tools, and today, it has not been 
implemented.
    Mr. RIVERA. Different issues in Katrina versus Sandy. Like 
I said before, Katrina was about not having a reserve force. We 
have 2,000 reservists. We have a contract that will bring on 
additional FTEs if we need additional full-time equivalents. We 
did not have space. We had 366 spaces in the Office of Disaster 
Assistance prior to Katrina hitting. We now have 2,100 seats. 
We have 1,750 seats in our Fort Worth processing center. We 
have another 300 seats in Sacrament in a surge capacity. The 
third is we could not get enough people on the system at the 
time. When Katrina hit, our Disaster Credit Management System 
was a year in. Now that system is pretty mature. We are 10 
years in. We could not get more than 800 concurrent users on 
the system. So think about this. You have 4,500 employees. We 
had to go to three shifts in order--in Katrina, in order to 
meet the capacity. Today, we can go to 10,000 concurrent users, 
and we test that every two years, and my annual report to 
Congress shows all the developments we have done from that 
perspective. Sandy was a completely different issue in that as 
the intake curve on the ELA side was much quicker. And we did 
not anticipate it. We acknowledge that. We provided that to 
GAO. We provided that to IGDAP.
    Ms. VELAZQUEZ. Do you know what the problem is? The problem 
is credibility. It is credibility.
    Mr. RIVERA. You are absolutely right. We are only as good 
as our last disaster.
    Ms. VELAZQUEZ. And lack of trust from the American people.
    Mr. RIVERA. Well, I do not know how you want----
    Ms. VELAZQUEZ. Right after we passed the legislation, you 
came back and told us that you were ready and all the systems 
were in place, when, in fact, they are not all in place but 
two. You promised that the processing would take only 21 days. 
You know, people shut their doors forever. You know and I know 
that when disaster strikes and we do not provide the assistance 
they need in the first three, four weeks, they are going to 
shut their doors forever.
    Mr. RIVERA. We understand everything you have just said, 
Congresswoman. I mean, we clearly take that to heart. We are 
working very hard and very diligently, and we appreciate all 
the input we have gotten from GAO and the Inspector General's 
office, and we have done a lot of process improvements 
internally.
    Ms. VELAZQUEZ. So this is my ask.
    Mr. RIVERA. Okay.
    Ms. VELAZQUEZ. I want a letter from the administrator to 
this committee as to when these assistance programs, the 
Expedited Disaster System Program, the Private Disaster Loan 
Program, will be up and running. That is the law and that is 
the mandate.
    Chairman CHABOT. And I would join the Ranking Member in 
that request/demand.
    So, and the Ranking Member's time has expired. We thank her 
for her questions. Now I will turn to myself for five minutes.
    Mr. Rivera, I assume that you are familiar with the 
National Response Framework, which superseded the National 
Response Plan in 2008.
    I note that you are nodding in the affirmative.
    Mr. RIVERA. Yes, sir, I am.
    Chairman CHABOT. Okay. In 2012, when Hurricane Sandy 
struck, are you aware of how the National Response Framework 
defined a catastrophic incident?
    Mr. RIVERA. We currently do not have a specific definition.
    Chairman CHABOT. Well, then let me stop you there and refer 
to the definition as it is defined in the framework. It was 
defined as any natural or manmade incident, including terrorism 
that results in extraordinary levels of mass casualties, 
damage, or disruption, severely affecting the population, 
infrastructure, environment, economy, national morale, and/or 
government function.
    Now, given that definition, understanding that the SBA did 
not label Hurricane Sandy--did not label Hurricane Sandy a 
catastrophic incident when it occurred under Section 12081 of 
the Small Business Disaster Response and Loan Improvement Act 
of 2008--given that definition of a catastrophic incident, it 
seems to me that Hurricane Sandy sure would have qualified. Do 
you agree or disagree?
    Mr. RIVERA. Chairman, the way we define disasters is by 
major and minor. I mean, it was a presidential declaration, so 
we defined it as a major.
    Chairman CHABOT. Well, I read the definition to you. You 
heard me read the definition; correct?
    Mr. RIVERA. Yes, sir. I did.
    Chairman CHABOT. Okay. Now, you apparently felt that it did 
not apply, and that was the framework. It was still in effect 
during this time. So does it not seem like a disaster of the 
magnitude of Hurricane Sandy, and the Ranking Member saw this 
stuff firsthand. I am all the way over in Cincinnati, so we did 
not see it like she saw it. She saw it. Does it not seem like 
that level of disaster would fit within that definition?
    Mr. RIVERA. So from my perspective----
    Chairman CHABOT. That should be a yes or no answer. I mean, 
do you not agree?
    Mr. RIVERA. So from my perspective, we treat every disaster 
survivor----
    Chairman CHABOT. From your perspective, yes or no? It is a 
fairly simple question.
    Mr. RIVERA. We do not have that specific definition within 
the SBA. I understand it is in the National Disaster Recovery 
Plan.
    Chairman CHABOT. It is required under the law. I read the 
law to you. You nodded in the affirmative that the National 
Response Framework had superseded the National Response Plan of 
2008, and you were aware of that. And I am not here to 
criticize you individually for this, but what we are trying to 
do is make sure the SBA is following the law in aiding American 
citizens who so desperately during one of these catastrophic 
events needs their assistance. And we are not trying to 
embarrass anybody; we are just trying to make sure that you 
cannot go back and undo or redo what you did not do or did do 
back then, but you sure as heck can follow in the future.
    But just answer me, as one human being to another, does not 
that definition which I read to you, does that not sound like 
Hurricane Sandy?
    Mr. RIVERA. That is the definition that is in the National 
Disaster Recovery Framework. Yes, sir.
    Chairman CHABOT. Okay. And that sounds like what happened; 
right? I mean, as far as Sandy.
    Mr. RIVERA. Yes, sir. It was a presidential declaration, 
and it was major.
    Chairman CHABOT. All right. Thank you very much. I 
appreciate your response.
    Mr. Shear, let me turn to you. Or did you want to say 
something about what I was just saying? You looked like you 
were kind of chomping at the bit.
    Mr. SHEAR. No, go ahead. Please.
    Chairman CHABOT. We are doing okay? All right, good. All 
right.
    If the SBA could fix one thing before the next big 
disaster, what would GAO place at the top of the list? If you 
need two things, I am okay with that, too. But what is the most 
important thing that you think the SBA needs to fix to get 
ready for the next big one before it hits?
    Mr. SHEAR. I am going to stick to our two recommendations 
here. It needs an approach that when there is a disaster of the 
magnitude of Sandy or worse, to be able to scale up. We have 
gotten some material from SBA that indicates they have updated 
their playbook. We are not quite sure yet, and I have talked to 
James about how we have to be convinced connecting the dots, 
that the changes made to the playbook and the disaster planning 
documents actually would lead to better preparedness. So I 
would say that is one area where we are not quite sure how much 
progress the Agency has made in preparing for the next disaster 
along this magnitude of Sandy or worse. So that is the first 
one.
    In dealing with the whole issue of electronic applications, 
back in Katrina we recommended expanded availability of 
electronic applications for victims of disasters. So there are 
advantages to that, but the advantages can dissipate real 
quickly if SBA cannot scale up to really serve those victims.
    The second part, and this is the part where I really have 
to be the most critical based on our evaluation here, I think 
SBA really, since 2010, when it looked like there was going to 
be movement--it might have been slow movement, but movement 
toward establishing IDAP and then the other two programs--is 
that it seems like the ball was completely dropped within the 
Agency; that there was not this concerted effort, and to the 
degree there was one at the time, it completely fell apart. And 
it is not just that these programs like IDAP could help serve 
victims. I hate to call a disaster an opportunity, but it is an 
opportunity and we supported starting with a pilot. It is an 
opportunity to see how well such a program or programs could 
work when the next major disaster or the next catastrophic 
disaster occurs. So those are really the two big things.
    Chairman CHABOT. Thank you very much. My time has expired.
    Ms. Hahn, the gentlelady from California, is recognized for 
five minutes.
    Ms. HAHN. Thank you, Mr. Chairman, ranking member.
    I am going to ask this question to Mr. Shear. So just 
listening to all of this, and being on the Small Business 
Committee and kind of understanding the core mission of SBA, it 
is really about small businesses, and since a long time ago SBA 
was involved in direct lending to businesses, so it sort of 
made sense that in the event of a disaster SBA would be doing 
these direct loans to families, homeowners, renters. But given 
the fact that SBA is not anymore involved in direct lending, 
and sort of listening to all this, do we think SBA is really 
the right agency in the aftermath of a disaster to be the 
agency that is handling these loan applications and these 
loans? Would FEMA be better equipped maybe to handle this kind 
of financial help to homeowners, renters, families after a 
disaster? I am just asking.
    Mr. SHEAR. You are asking a really good question, and I 
wish I had a really good answer to give you. We have not 
evaluated that. I will just say generally that when SBA cannot 
do a better job with its whole portfolio, including the direct 
business loans, and when there is a call by Congress in 
response to what has happened to the victims of disasters--
small businesses and others, the homeowners--to improve things, 
it puts the Congress in a very difficult position. FEMA many 
times, I do not direct FEMA work but our team's body of work 
shows that FEMA has certain challenges in terms of its 
responsiveness. But at the same token, SBA is putting you in a 
difficult situation, especially when it seems to have trouble 
standing up new programs, or at least trying to stand up new 
programs that Congress calls for. It just seems like SBA is 
especially challenged in this way.
    Ms. HAHN. Right. I am new around here, but just listening 
to all this, it does not seem like that is the core mission of 
SBA, particularly since they, again, have not been involved in 
direct lending for decades now.
    Mr. SHEAR. Let me just make reference--at the request of 
this Committee, we are doing a general management review at 
SBA, and we are trying to look at how can SBA be better at what 
it does across the board.
    Ms. HAHN. Right.
    Mr. SHEAR. And it is one that there are certain challenges 
that are created.
    Ms. HAHN. Right. It just seems like it is only in the event 
of a disaster that we are asking SBA to begin processing 
applications for loans. Again, to folks that are not business, 
it is families, renters, homeowners. That is not what they do 
regularly, so I was just curious if this might be better served 
in another agency.
    But Mr. Rivera, until that task is given to another agency, 
I am curious to know, particularly since I come from an 
earthquake region in California, and maybe you can explain to 
me, in the event of a hurricane or it seems like there's 
warning. It seems like we are following the weather and we sort 
of know when landfall is and what kind of category it is, I am 
assuming, but maybe you can tell me, is that when you begin 
hiring the reserves? And then how does that translate to we 
still have not figured out when earthquakes are coming. They 
happen very fast, and I am a little concerned that you only ran 
a model for Oakland, which is a very different city than, say, 
Los Angeles. And what is your scenario in terms of an 
earthquake, in terms of ramping up quickly staff processing 
applications for a major city like Los Angeles?
    Mr. RIVERA. So we had the smaller earthquake back in--last 
year in Napa. That was a small disaster. Well, it is not small 
if it is your business or if it is your home, but we loaned $39 
million. The Oakland exercise was just one of many exercises. 
We have exercised Seattle. We have exercised Los Angeles. In 
1994, we provided $4 billion to disaster survivors in the Los 
Angeles community. But you are right. That is the intangible we 
have. Most disasters tend to be seasonal.
    Ms. HAHN. And do you ramp up staff when there is a warning 
of a hurricane?
    Mr. RIVERA. So what we do is we----
    Chairman CHABOT. The gentleman's time is expired, but you 
can answer the question.
    Mr. RIVERA. We have a staffing strategy. It is something we 
have developed in the last four or five years. Basically, we 
have a core staff of 1,000 employees that work year round, 
currently between 800 and 1,000. We have 2,000 reservists we 
call on a quarterly basis. We ask them if they are available, 
if they are not available. If they are not available, we call 
them and we ask them why they are not available. But we have 
this reserve force in place. We are continuing to train. We are 
continuing to keep everybody prepared from that perspective. We 
do not have funding to keep 5,000 people at one time on the 
rolls, but at the same time, this staffing strategy seems to be 
a pretty successful model from that perspective.
    Chairman CHABOT. The gentlelady's time is expired.
    The gentlelady from American Samoa, Ms. Radewagen, who is 
the Chairman of the Subcommittee on Health and Technology is 
recognized for five minutes.
    Ms. RADEWAGEN. Thank you, Mr. Chairman. I want to thank 
both you and Ranking Member Velazquez for holding this 
important hearing today to discuss SBA's Disaster Loan Program.
    My questions are for Mr. Rivera.
    Following the killer tsunami of 2009 in American Samoa that 
took over 200 lives, and other natural disasters in the U.S. 
territories, what were your biggest takeaways regarding how the 
SBA can improve the disaster loan program concerning the U.S. 
insular areas?
    Mr. RIVERA. So as you mentioned, we do provide disaster 
loan assistance in the South Pacific, particularly in Guam and 
American Samoa and Palau and some of the islands in that area. 
So the biggest challenge we have when we are dealing in the 
South Pacific used to be the communication between having an 
operation in Texas which processes and disburses all of our 
loans in the Fort Worth, Texas office, in relation to the time 
zone difference that we have between the South Pacific, which 
is a day ahead, compared to the Texas operation. But it seems, 
we had a small disaster earlier this year in Palau that seemed 
to have worked pretty effectively where we were able to match 
the time zone differences and we shifted our staff to be able 
to cover the normal day that exists out in the South Pacific in 
relation to our process and disbursement centers in Fort Worth, 
Texas.
    Ms. RADEWAGEN. What is the average rate of approved versus 
submitted loans from all past disasters?
    Mr. RIVERA. So generally, we run about 50 percent. From our 
perspective, we try to make every loan possible. We are much 
more aggressive. Our disaster credit box is much more 
aggressive than a private sector bank, but we do not want to 
provide a loan to somebody that does not have the ability to 
repay or has adverse credit. In presidential declarations, we 
do have the opportunity to refer these individuals back to the 
Federal Emergency Management Agency, and they are generally 
able to get a grant of up to $30,000 for unmet needs, and that 
is a better fit if they are able to get a grant versus having 
to have to repay a loan. But to answer your question, we run 
about 50 percent on average.
    Ms. RADEWAGEN. What are some of the reasons applications 
are not approved and processed?
    Mr. RIVERA. Primary reasons are two. One is lack of 
repayment ability, and the second one is adverse credit. Even 
though we tend to be very aggressive--for example, we score the 
entire portfolio when it comes in. Eighty percent of our loans 
are to homeowners and 20 percent are to businesses. But if you 
have a really low FICO score--back in Katrina, we took 400,000 
individuals through the entire process. Since then, we 
bifurcate the process where we have the lower credit scores 
that are not going to have repayment ability under our 
traditional cash flow analysis. We go ahead and decline them 
and refer them back to the grant program.
    Ms. RADEWAGEN. I see.
    Do you find that any of those reasons are specific to 
American Samoa or other United States territories?
    Mr. RIVERA. So the quality of credit, obviously, there is a 
little bit of regionality, but generally speaking, we have--the 
statistics are very similar across the country in relation to 
American Samoa.
    Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    The gentlelady from New York, Ms. Clarke, is recognized for 
five minutes.
    Ms. CLARKE. I thank you, Mr. Chairman. And I thank Ranking 
Member Velazquez. And I would like to thank our witnesses for 
their testimonies today.
    One of the most damaging consequences of climate change is 
the increased frequency and veracity of natural disasters. 
Super Storm Sandy was a brutal reminder of this fact. Losses 
due to Super Storm Sandy topped $75 billion in damages to 
infrastructure, homes, businesses, and communities across the 
eastern seaboard, not including the unfathomable loss of life 
incurred by the storm.
    We do not know where or when the next super storm will 
occur; only that a storm of that magnitude will inevitably hit 
the United States again. Therefore, it is critical that the 
disaster response and assistance programs are some of the most 
important and significant programs that we can focus on and 
vulnerable and distressed Americans require that we get this 
right. We must ensure that these programs run efficiently and 
effectively and not compound their hardships.
    So I want to circle back to some of the questions raised--
well, the main question raised by Congressman Smith, which is a 
matter of financial transparency. And part of the challenge 
during a crisis like this is that when people are distressed, 
they are looking for any help that they can receive. Is there 
somewhere within the application process that borrowers are 
informed of restrictions or prohibitions on the use of these 
funds, and that accepting these funds would trigger a 
prohibition on victims receiving federal grant funding? Because 
I get the impression, particularly when people are under 
stress, that if one vehicle is moving faster than say another, 
they are just going to go with that vehicle in order to 
survive, in order to recover. If, however, they do not realize 
that at some point in time they are not going to be able to 
apply to another agency or another entity for support, that may 
govern their behavior. Is there something that specifically 
within the process, in bold letters, in red ink, indicates to 
individuals that if you do this, you will forfeit future 
opportunities to make you whole?
    I am sorry, that is to Mr. Rivera.
    Mr. RIVERA. Okay, thank you.
    So we follow the Stafford Act sequence of delivery, which 
is a FEMA grant, SBA loans, and any supplemental assistance 
behind it. To answer your question, 90 percent of the 
applications were processed when the HUD supplemental came 
through, so we were 90 percent into Super Storm Sandy when the 
HUD funds started becoming available. Since Katrina, the 
ranking member mentioned we have a memorandum of understanding 
between us and HUD similar to the way we have a memorandum of 
understanding between SBA and FEMA. So there is a lot of 
transparency between the federal agencies from that 
perspective.
    Ms. CLARKE. I am talking about the individuals, the 
borrowers.
    Mr. RIVERA. So the individuals. So what we have done since 
Super Storm Sandy, we heard a lot of individuals that did not 
want a loan; they wanted a grant. But we what we have done is 
we have gone in and we have highlighted and bolded, as you 
suggested----
    Ms. CLARKE. You are saying since the storm.
    Mr. RIVERA. Since then.
    Ms. CLARKE. So there are a whole bunch of folks out there, 
and I have a constituency that was badly hit. And what I am 
trying to say to you is that it is only human when you have 
mold growing in your home, you are being told that you are 
going to have to elevate your home, that the first vehicle that 
offers you some relief, that you are going to take it. But if 
within your documentation you indicate to individuals doing 
this will, in other words, make you ineligible for other 
opportunities, and people know that upfront, then people can 
make informed choices.
    Mr. RIVERA. Yes, ma'am. We understand. And what we have 
done is we do have that information prior to Super Storm Sandy.
    Ms. CLARKE. Post?
    Mr. RIVERA. Post, we did have that information, but 
apparently it was not as clear enough as we could have made it, 
so we have made it even clearer from a duplication of benefits 
perspective. If you have an SBA loan, that is a sequence of 
delivery. That is the option you have to take the loan versus 
if there is a grant opportunity behind it.
    Ms. CLARKE. I think that we really need to sort that out, 
sir.
    Mr. RIVERA. Okay.
    Ms. CLARKE. I mean, the average American in a crisis 
situation is not thinking Stafford Act. They are just not. And 
I think that is a bit much to ask that they do. They are 
thinking how do I keep my elderly well, how do I keep my 
children secure, how do I get my life back together? And 
oftentimes, the SBA is the most visible entity on the ground. 
You have got a lot of folks out there with jackets on saying, 
``We can help you.'' But they do not follow up with, ``But if 
you take our help, here are what some of the implications can 
be for you.'' And I think that is critical, that level of 
transparency.
    Chairman CHABOT. The gentlelady's time is expired.
    Ms. CLARKE. Thank you, Mr. Chairman.
    Chairman CHABOT. You are welcome.
    And if you want to make a response?
    Mr. RIVERA. Yes, ma'am. We understand. And as I have 
mentioned, we will--and we can work with your office, too, if 
you want to see what we have done to show the transparency and 
how if we provide you a loan, you know, the statute basically 
says we have to provide the assistance from that perspective.
    Chairman CHABOT. Mr. Shear, did you have something to say 
there?
    Mr. SHEAR. No.
    Chairman CHABOT. Okay, thank you very much.
    Okay. The gentlelady's time has expired.
    The gentleman from Nevada, Mr. Hardy, who is the Chairman 
of the Subcommittee on Investigations, Oversight, and 
Regulations is recognized for five minutes.
    Mr. HARDY. Thank you, Mr. Chairman, Ms. Velazquez, I 
appreciate the opportunity to discuss this today.
    Mr. Rivera, it was mentioned in Mr. Shear's testimony that 
the initial backlog of loan applications was due to the SBA not 
anticipating the loans were to come in such a rapid response. 
Did we not take into account that there are 83 percent of all 
American adults utilize the Internet?
    Mr. RIVERA. Yes, sir, we did. And if I can explain. Eighty 
percent of our loans were to homeowners. We have this generic 
goal, self-imposed goal of 21 days. We processed those in 24 
days, so we had 85,000 applications, 80 percent of them were 
homeowners. We did that in 24 days.
    What happened is that generally the home track comes in 
first and then the businesses apply subsequent to the 
homeowners coming in. So we have bifurcated our process now 
where we have a separate home track from front to end and a 
separate business track from front to end. And I strongly 
believe that is going to alleviate any sort of pressure points 
when we have businesses--because we are the Small Business 
Administration, we need to be sure that we service those 
businesses. They will be serviced first in, first out on the 
business track, at the same time we are addressing the home 
track with the home loan officers, with the home inspectors, 
with the business inspectors, with the business. So by 
bifurcating that process, we believe that that is going to be--
that will relieve that 40 day clock down and we will be able to 
really manage it within the 21 days.
    Mr. HARDY. Mr. Rivera, Congress passed the Small Business 
Disaster Response Loan Improvement Act in 2008. The SBA was 
expected to implement all the provisions required in a timely 
manner. Can you explain why the three provisions have not been 
fully implemented over seven years later? In my opinion, that 
is far too long to take to implement those.
    Mr. RIVERA. So the Disaster Guarantee Loan Programs, as I 
mentioned previously, we have--and we thank Bill Shear and GAO 
for providing us with one of the recommendations, which is 
something that we thought--which we responded to but we will 
continue to work with GAO to get the responses clear--the 
process, the methodology was to first look at IDAP and see how 
IDAP works.
    So recently, we met back in October 2014. There is a trade 
association called the National Association of Government 
Guaranteed Lenders (NAGGL). They are basically the 7(a) 
lenders. We met with 27 banks, three CDCs, and three lender-
service providers, and we asked what else do we need to do in 
order for you guys to play in the disaster scenario? Because we 
have done everything from an SBA perspective. Our systems, 
between our disaster system and the eTrans system where we fund 
our loans on the Cap Access side, that has been put. We 
promulgated regs back in 2010 as Mr. Shear mentioned earlier. 
We just cannot get the lenders to take the level of risk to 
provide this IDAP type of mechanism. There are issues 
regarding, you know, from the lender's perspective. And we can 
provide you with what the NAGGL response was on the board from 
that perspective.
    Ms. VELAZQUEZ. Would the gentleman yield just for a second?
    So you met with 7(a) lenders and all kinds of lenders. And 
when did you learn that they were not receptive?
    Mr. RIVERA. So this has been an ongoing conversation we 
have had with the lenders since the statute was passed. As a 
result of the GAO report----
    Ms. VELAZQUEZ. And so what did you do with that 
information? Did you send a letter to us to let us know that 
you were confronting those----
    Mr. RIVERA. Yes. My understanding is we provided a letter 
to GAO as part of our response.
    Ms. VELAZQUEZ. No, no, no. We passed legislation here. We 
wrote the law. So if there are--if we need to make some 
adjustment or some fixes or change regulation, we do it here. 
But if you do not share that type of information with us, how 
do you expect Congress to act?
    Mr. RIVERA. Okay. We can----
    Ms. VELAZQUEZ. Thank you. And I yield back.
    Mr. HARDY. Thank you.
    Mr. Shear, in your opinion, if those three other 
implementations you had recommended had been in place prior to 
Sandy, do you think it would have made a lot of difference?
    Mr. SHEAR. I will answer it in two ways.
    Mr. HARDY. Okay.
    Mr. SHEAR. The first part, and we focused on IDAP just 
because the agency came forward with us first in basically 2010 
and said they were going to develop a pilot on IDAP. It is the 
easiest one to implement. We can do it quickly was the 
argument. The idea of a pilot, we always supported it, and a 
thoughtful pilot, it could serve victims of really major, 
catastrophic disasters. And so it could provide those benefits. 
But even a relatively small pilot program would help inform how 
programs of this nature can be useful and what types of 
adjustments might be necessary to make those programs useful on 
a more permanent basis. So that was the major opportunity that 
was given up.
    Part of the reason to have a pilot is to see how well 
something works, and no pilot of any one of these three 
programs has occurred. So the answer is it could have been very 
helpful, but the opportunity lost was there was nothing in 
place to see how helpful it could have been.
    Chairman CHABOT. The gentleman's time is expired.
    The gentlelady from North Carolina, Ms. Adams, is 
recognized for five minutes, and she is the Ranking Member of 
the Investigations, Oversight, and Regulations Subcommittee.
    Ms. ADAMS. Thank you, Mr. Chairman, and thank you Ranking 
Member Velazquez for holding this important hearing. And 
gentlemen, thank you for your testimony.
    Disaster relief is critically important, as we have heard, 
to residents who lose literally everything as a result of a 
natural disaster. In my home state of North Carolina, many 
residents living on the Outer Banks were faced with limited 
routes on and off some of our most popular islands as a result 
of the impact of Hurricane Sandy. But in addition to homeowners 
who were impacted, there are many individuals who are business 
owners who are impacted as well and who worked hard to start 
their businesses and to expand them, only to have to rebuild 
them after the storm.
    Mr. Rivera, my question to you is, according to the 
bipartisan task force for Hurricane Sandy, many applications 
for SBA Disaster Loan Programs were required to use their 
residence as collateral. What percentage of business owners 
used their personal residences as collateral to obtain the SBA 
Disaster Loan in response to Hurricane Sandy? And how does that 
percentage compare to other disasters?
    Mr. RIVERA. I do not know the statistics for North Carolina 
in relation to how many residences we take as collateral when 
we have a business loan, but our policy is when we have a 
business loan, we take best available collateral, and if you 
are one-to-one, we do not pursue the residence as collateral 
from that perspective. We have changed our SOP where we have 
loosened up our guidelines where we are just not making the 
residence as collateral as the primary source of collateral. If 
there is sufficient business assets to get you to a reasonable 
place where we are collateralized, we will use the business 
assets and bypass the residence.
    Ms. ADAMS. So in the event that a business owner uses their 
personal residence as collateral and they defaulted, what 
options are provided for those persons?
    Mr. RIVERA. So looking back, it is a little bit harder for 
us to forgive any collateral that we have in place, but I mean, 
we can obviously have that discussion on a case-by-case basis 
and see what the situation is with each individual disaster 
survivor.
    Ms. ADAMS. Okay. Mr. Rivera, would you describe the general 
process by which a business owner must apply for an SBA 
disaster loan, how that compares to the process business owners 
had to take for Hurricane Sandy?
    Mr. RIVERA. So our current process, it is the same across 
the board. What we do is we provide the electronic loan 
application. It is a two-page application, front and back. It 
is very similar to a credit card application. It is SBA Form 5. 
We ask that you fill it out. We ask that you complete the IRS 
release form. We do not ask for copies of tax returns. We ask 
for a copy of a tax transcript that enables us to get copies of 
the tax transcripts from the IRS directly. And then we also ask 
that they provide us with any sort of personal information that 
they have, like a personal financial statement, so forth and so 
on. But we do provide * we have a call center that is open up 
in Buffalo, New York. For example, this year, we have taken 
about 125,000 phone calls and this has been a low year from a 
disaster perspective. And we provide on-the-ground support when 
there is a disaster recovery center to meet face-to-face. We 
also use our resource partners, our SBDCs, our WBCs, and our 
SCORE partners that help us on the ground that can help with 
any additional requests we have as far as any additional 
documentation that we need.
    Ms. ADAMS. So the earlier question that I asked regarding 
the numbers in North Carolina, if you could provide those for 
me I would appreciate it.
    Mr. RIVERA. Yes, ma'am. I will.
    Ms. ADAMS. Thank you.
    Mr. Chairman, I yield back.
    Mr. Chairman, I yield back.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    The gentleman from New Jersey, Mr. Payne, is recognized for 
five minutes.
    Mr. PAYNE. Thank you, Mr. Chairman. And to our ranking 
member, I appreciate all her hard work over the years on this 
Committee.
    Mr. Rivera, just to follow up on something my colleague, 
the gentlelady from New York, Ms. Clarke, brought up. In my 
information in preparing for this Committee hearing, there was 
an Associated Press article from December 14, 2014, called 
``Buyer's remorse: Loans impacting grant money for Sandy 
victims.'' And it talks about a homeowner that applied for your 
loan and got the loan, and subsequently, the loan repayment 
cost was a bit much for her and she was looking to possibly 
apply for some grants from some other area of FEMA, what have 
you, and was then told that, well, since you took that loan, 
you are ineligible. And I think that is the point that the 
gentlelady from New York was making, is that, you know, until 
it came down to it and she looked for other avenues, she did 
not realize that that disqualified her for any other type of 
help. So I think what we are asking is you need to make that 
clear to these loan applicants up front that this potentially 
disqualifies you from any other grants that you could possibly 
receive. I think that is the clearest way to make it--people do 
not understand that when they take this loan, it disqualifies 
them or they are not capable of accessing other governmental 
programs. Okay?
    Mr. RIVERA. Yes, sir. Understood.
    Mr. PAYNE. All right.
    You know, Mr. Shear, in your testimony, you noted that 
Super Storm Sandy, the approval rate for business loans was 
higher than for Hurricane Ike and comparable to Irene. However, 
the approval rate was lower than for Katrina, Rita, and Wilma. 
Just in New Jersey, we almost lost approximately 200,000 
businesses. Can you shed some light on why the approval rating 
varied so much?
    Mr. SHEAR. I cannot address your specific question because 
it was not like we analyzed basically individual loan 
applications, the credit histories of the borrowers, or what 
information was submitted from the standpoint of ability to 
repay. So we noticed a similar pattern, but I cannot explain 
why in this disaster the approval rate was 42 percent rather 
than something either higher or lower.
    Mr. PAYNE. Okay. All right. Thank you, sir.
    Let us see. Mr. Rivera, it looks like of the 14,558 
original business loan applications that were submitted, 4,715 
were withdrawn. Of that figure, the SBA was actually 
responsible for withdrawing almost 3,000. In New Jersey, it is 
estimated that small businesses incurred approximately $3.5 
billion in damages and the SBA issued $819 million, roughly 25 
percent of the need. Can you elaborate on why the SBA would 
withdraw an application, and what alternative services were 
offered to the small business owners in need of disaster 
relief?
    Mr. RIVERA. Yes, sir.
    In situations where we offer--we will make a loan 
commitment to a business, so we give them up to 60 days if they 
want to accept the loan commitment. And often, they do not like 
the terms of the conditions, and we will go back and we will 
try to rework the debt with them to see if we can make the 
payment more affordable. Or they will collect insurance and 
they will not want to secure their business assets because they 
do not want to have an SBA loan, because our debt is debt on 
top of debt. It is not to improve working capital. It is not 
for new facilities to expand to increase their working capital. 
Our debt is basically to take them back to where it was pre-
disaster, or as close to it as we can pre-disaster. So we often 
run across situations where somebody will have some insurance 
and they will decide based on their insurance recovery that 
they do not want to take any additional debt so they will go 
ahead and withdraw their application or cancel their 
application and they will say they will just go ahead and work 
from a smaller insurance recovery than they will with the SBA 
loan.
    Chairman CHABOT. The gentleman's time is expired. The 
gentlelady from New York, Ms. Meng, who is the Ranking Member 
of the Agriculture, Energy, and Trade Subcommittee, is 
recognized for five minutes.
    Ms. MENG. Thank you, Mr. Chairman. Thank you to our ranking 
member for your hearing on this issue.
    Obviously, this is something that has affected people from 
all across the country, but specifically, many of our 
constituents in New York. I wanted to get a better 
understanding of how the interest rates for disaster loans 
compare to other similar SBA small business loans. How are the 
interest loans determined and if there is any uniformity of 
that process from disaster to disaster?
    Mr. RIVERA. So we determine our interest rates on a 
quarterly basis. It is a statutory formula. It is based on 
treasuries compared to, for example, the 7(a) program where it 
is prime plus whatever. We are capped statutorily at 4 percent 
and 8 percent. Our current home rate is running around 2 
percent--2 percent for no credit elsewhere, 4 percent for 
credit elsewhere. And 90 percent of our loans are no credit 
elsewhere, so it is the lower rate. On the business side, we 
run the two rates of 4 percent and 6 percent, which prime is 
at, what, 2-3/4, so it is a point and a quarter over prime from 
that perspective. It is a fixed loan, fixed interest rate, and 
it is a fixed term also, so we can expand terms up to 30 years 
on a no-credit-elsewhere loan.
    Ms. MENG. So it is different for homeowners and for small 
businesses?
    Mr. RIVERA. Yes, ma'am. It is two different calculations 
based on the statutory definitions we have.
    Ms. MENG. And traditionally, it is lower for homeowners?
    Mr. RIVERA. Yes, ma'am. It is generally lower.
    Ms. MENG. Compared to small businesses?
    Mr. RIVERA. Mm-hmm.
    Ms. MENG. Regardless of the earnings of the small business?
    Mr. RIVERA. Yes, ma'am.
    So we can make loans to businesses of any size, and often, 
if it is a large business, they will have a credit-elsewhere 
loan, so it will be a 6 percent loan, and it terms out at seven 
years, where often they can borrow cheaper with commercial 
paper or with their lender themselves. They may be a prime 
borrower, and if prime is at 2-3/4 and they are getting a 6 
percent rate, they will not want our terms and conditions.
    Ms. MENG. Okay. Thank you.
    I yield back.
    Chairman CHABOT. The gentlelady yields back. And I now 
yield to the Ranking Member to make a statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    I would just like to ask Mr. Rivera that you submit for the 
record a Sandy era loan application that was filled out by an 
applicant during Sandy. Not the actual one that you have.
    Mr. RIVERA. Yes, ma'am. We can do that.
    Ms. VELAZQUEZ. Thank you.
    Chairman CHABOT. Thank you very much.
    And I want to thank you both for participating this 
afternoon. And as we have heard, the SBA serves a vital role in 
helping communities rebuild following a disaster. The Committee 
understands that is no easy task, but it is of utmost 
importance. It is imperative that the SBA continue to improve 
its process to ensure that future disaster victims are able to 
secure the necessary loans that they need, and the Committee 
will continue to monitor the SBA's progress.
    And I would ask unanimous consent that Members have five 
legislative days to submit statements and supporting materials 
for the record. And if there is no further business to come 
before the Committee, we are adjourned.
    Thank you very much.
    [Whereupon, at 12:24 p.m., the Committee was adjourned.]
    
    
    
    
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    Good morning Chairman Chabot, Ranking Member Velazquez, and 
distinguished members of the Committee. Thank you for inviting 
me to discuss SBA's Disaster Loan Program. SBA appreciates your 
strong support of the agency's disaster operations and your 
continued leadership in making our country better equipped to 
deal with natural and other disasters.

    I am James Rivera, the Associate Administrator for the SBA 
Office of Disaster Assistance (ODA). ODA is responsible for 
providing affordable, timely and accessible financial 
assistance following a disaster to businesses of all sizes, 
private non-profit organizations, homeowners, and renters. This 
financial assistance is available in the form of low-interest 
loans, and since SBA's inception in 1953, we have provided 2 
million loans for more than $53 billion dollars.

    SBA's Role in Responding to a Disaster:

    SBA is not a ``first responder'' agency even though we are 
on the ground in the immediate aftermath of a disaster. SBA's 
primary focus is providing low-interest, long term loans as 
part of the recovery effort in coordination with other 
government partners at all levels. As part of an overall effort 
to assist survivors to get back on their feet, SBA's disaster 
home loans of up to $240,000 help local community residents 
return and rebuild their homes. Moreover, nonprofits and 
businesses of all sizes are eligible for loans of up to $2 
million dollars.

    Additionally, SBA offers Economic Injury Disaster Loans 
(EIDL) to small businesses, small agricultural cooperatives, 
and most private non-profit organizations who have suffered 
economic injury caused by a disaster. These loans provide 
working capital to a business or organization until normal 
operations can resume following a disaster.

    Preparedness and SBA's Key Improvements to the Disaster 
Assistance Program:

    SBA has made a number of improvements in recent years that 
have allowed us to better respond to disaster survivors. First, 
we have streamlined application forms and implemented a 
redesigned electronic loan application--which has led to a more 
transparent and efficient application process.

    Over the past several years, SBA has seen significant 
increases in its Electronic Loan Application (ELA) activity. In 
Fiscal Year 2014, 79 percent of SBA disaster loan applications 
were submitted online using ELA, which was a substantial 
increase from previous years--27 percent in Fiscal Year 2011, 
36 percent in Fiscal Year 2012 and 55 percent in Fiscal Year 
2013. ELA activity continues to increase in Fiscal Year 2015, 
currently at 83 percent. The steady increase of ELA activity 
reflects the improvements made by SBA to streamline its online 
application and ensure that disaster survivors have access to 
ELA and program information. SBA's electronic loan application 
provides disaster survivors with immediate access to the 
disaster loan application and helps to ensure they have access 
to much needed disaster funds at the soonest possible time 
following a declared disaster.

    Second, SBA has taken several steps to enhance its 
communication strategy and improve customer service to disaster 
survivors. Effective and clear communication to the public 
about the availability of disaster loans is critical to ensure 
that disaster survivors have access to funds for repairing and 
rebuilding homes and businesses at the soonest possible time 
after a declared disaster.

    In 2014, SBA launched a new communications plan referred to 
as ``The Three Step Process'' when seeking SBA disaster loan 
assistance: Step 1) How do you apply for loan; Step 2) How do 
we verify your property and process your loan; and Step 3) How 
the loan is closed and funds disbursed. The new strategy 
ensures that disaster survivors have a clearer understanding of 
the steps involved when seeking SBA disaster loan assistance.

    SBA also made another important improvement in its 
communication with disaster survivors in Fiscal Year 2014 by 
increasing direct contacts with potential disaster loan 
applicants. SBA now calls all disaster survivors referred by 
the Federal Emergency Management Agency (FEMA) to SBA within 48 
hours and informs them of the availability of disaster loan 
assistance and the various ways to apply, including: 1) online 
using SBA's Electronic Loan Application (ELA); 2) in-person at 
a disaster recovery center; and 3) by mail. SBA supplements 
initial phone calls with follow-up calls, emails and in some 
cases a letter sent by mail. By increasing the number of direct 
contacts with potential disaster loan applicants, SBA helps to 
ensure that disaster survivors are aware of the availability of 
SBA disaster loan assistance and informed about the various 
ways to apply for assistance.

    Third, SBA has implemented separate home and business loan 
processing tracks in order to mitigate processing delays in the 
future. After a disaster, homeowners normally apply for loans 
faster than small businesses. Typically, small business owners 
first assess the economic damage to their businesses caused by 
disrupted supply chains, displaced consumers, structural 
damage, inventory loss, and a range of other complex factors. 
As a result, businesses tend to apply for disaster loans later 
than homeowners and renters. Separate home and business loan 
processing tracks helps to ensure that business applicants do 
not face long delays as a result of submitting applications 
behind a large number of home loan applications which are being 
processed in the order they were received.

    Fourth, in April 2014, SBA implemented a new regulatory 
that allows for a modified approval process (RAPID) for both 
home and business loans. In keeping with private lending 
practices, SBA recognized that applicants with higher credit 
ratings could generally be processed more quickly. The new 
RAPID approval process considers the applicant's credit without 
the need to complete the entire cash flow analysis and was made 
effective for disasters declared on or after April 25, 2014. 
Because the RAPID approval process provides an expedited 
processing channel for home and business loans, it also has the 
potential to ease the stress on SBA loan processing resources 
used to process files that require more time to complete.

    As part of the regulatory change implementing the new RAPID 
approval process, SBA also raised the unsecured loan limit from 
$14,000 to $25,000 on home and business physical disaster loans 
for Presidential (major) disaster declarations, and from $5,000 
to $25,000 on EIDL loans for all declarations. The increased 
unsecured loan limit allows SBA to disburse more funds to 
disaster survivors faster which not only helps homeowners and 
businesses to jumpstart their rebuilding project, it could also 
help to speed up the recovery of businesses that offer critical 
services in communities.

    On July 1, 2015, we released SOP 50 3 8, Disaster 
Assistance Program, a complete re-write of our standard 
operating procedures which brings a ``back-to-basics'' approach 
to SBA's loan making processes. The refreshed SOP collects for 
the first time our efforts made over the last several years to 
improve the disaster survivor's experience when applying for 
disaster loan assistance in several meaningful ways, including 
streamlining processes to help facilitate faster loan 
processing and disbursements, adding more underwriting 
flexibility to extend disaster loan assistance to more 
survivors, and helping business owners and homeowners in 
communities rebuild and prepare for future disasters. In an 
effort to improve the overall customer experience for disaster 
survivors, we have introduced new changes to the process and 
removed countless redundancies in the new SOP.

    Response to Superstorm Sandy

    A number of these improvements were made in response to 
lessons learned as a result of Superstorm Sandy. The effects of 
the devastation caused by Sandy were far-reaching. SBA approved 
more than $2.4 billion in disaster loans to help nearly 37,000 
homeowners, renters, businesses and non-profit organizations 
recover and rebuild.

    As reflected in SBA's Disaster Preparedness and Response 
Plan, ODA currently maintains 1,750 workstations in the Fort 
Worth processing and disbursement center and 350 more surge 
workstations in our Sacramento disaster center. During Sandy, 
we not only used the Ft. Worth location and our Sacramento 
surge space, but also expanded the loan processing footprint to 
include 50 workstations at the Buffalo Call Center. At the 
height of the response to Sandy, we had 2,451 employees engaged 
in disaster response. Additionally, SBA responded to the needs 
of residents and business owners by deploying 695 SBA disaster 
assistance workers and field inspectors to staff 248 Disaster 
Recovery Centers located throughout the East Coast. At these 
centers, SBA representatives provided one-on-one service to 
disaster survivors and personally met with disaster survivors 
to answer questions, explain SBA's disaster loan program and 
help complete disaster loan applications and close disaster 
loans. As such, during Sandy, SBA had more than 152,700 
contacts in the field.

    Superstorm Sandy disaster survivors in New York, New 
Jersey, Connecticut, Rhode Island, and Maryland--all of which 
received Presidential Disaster Declarations--were able to apply 
for home and business disaster loans online or in person at any 
of the Disaster Recovery Centers throughout the region. 
Disaster survivors could also apply for business disaster loans 
at any of the 49 Business Recovery Centers (BRCs) run by SBA 
with additional assistance from local resource partners such as 
SBDCs, SCORE, and Women's Business Centers. Additionally, North 
Carolina, Virginia, West Virginia, and Puerto Rico received SBA 
Administrative Disaster Declarations, making affected 
homeowners, renters, and businesses eligible for SBA disaster 
assistance.

    Many disaster survivors do not have easy access to 
television, radio or the internet. To address these situations, 
SBA has a telephone hotline, which also provides language 
translation services. For Superstorm Sandy, our Disaster 
Customer Service Call Center in Buffalo, New York, responded to 
over 212,200 calls with minimal wait times.

    In closing, I appreciate the opportunity to update this 
Committee on SBA's disaster recovery effort for Superstorm 
Sandy and recent improvements to the Disaster Loan Program. We 
firmly believe that the reforms we have instituted have enabled 
us to be prepared to efficiently and effectively respond to the 
needs of our nation's disaster survivors. I look forward to 
answering any questions. Thank you.


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