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110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     110-82

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



 
  RELIEF FOR ENTREPRENEURS: COORDINATION OF OBJECTIVES AND VALUES FOR 
         EFFECTIVE RECOVERY ACT OF 2007 OR THE ``RECOVER ACT''

                                _______
                                

 March 30, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Ms. Velazquez, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1361]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Small Business, to whom was referred the 
bill (H.R. 1361) to improve the disaster relief programs of the 
Small Business Administration, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                            C O N T E N T S

                                                                   Page
   I. Amendment.......................................................2
  II. Purpose and Summary.............................................9
 III. Background and Need for Legislation............................11
  IV. Hearings.......................................................15
   V. Committee Consideration........................................15
  VI. Committee Votes................................................15
 VII. Section-by-Section Analysis of H.R. 1361.......................23
VIII. Congressional Budget Office Cost Estimate......................30
  IX. Committee Estimate of Costs....................................35
   X. Oversight Findings.............................................35
  XI. Statement of Constitutional Authority..........................35
 XII. Compliance With Public Law 104-4...............................35
XIII. Congressional Accountability Act...............................35
 XIV. Federal Advisory Committee Statement...........................35
  XV. Statement of No Earmarks.......................................35
 XVI. Performance Goals and Objectives...............................36
XVII. Changes in Existing Law Made by the Bill, as Reported..........36

                       I. Amendment to H.R. 1361

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Relief for 
Entrepreneurs: Coordination of Objectives and Values for Effective 
Recovery Act of 2007'' or the ``RECOVER Act''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

                           TITLE I--PLANNING

Sec. 101. Comprehensive disaster response plan.
Sec. 102. Annual disaster simulation exercise.
Sec. 103. Disaster reserve corps.
Sec. 104. Plans to secure additional office space.
Sec. 105. Coordination of disaster assistance programs with FEMA.
Sec. 106. Associate Administrator for Disaster Assistance.

                           TITLE II--LENDING

Sec. 201. Incidents of National Significance.
Sec. 202. Information tracking and follow-up system.
Sec. 203. Immediate Disaster Assistance program.
Sec. 204. Increased deferment period.
Sec. 205. Revised repayment terms.
Sec. 206. Revised disbursement process.
Sec. 207. Revised collateral requirements.
Sec. 208. Enhanced lending authority for private lenders.
Sec. 209. Disaster processing redundancy.
Sec. 210. Grant program.
Sec. 211. Waiver of prohibition on duplication of certain benefits.
Sec. 212. Increase legislative limit.
Sec. 213. Net earnings clauses prohibited.
Sec. 214. Economic injury disaster loans to nonprofits.
Sec. 215. Applicants that will constitute a major source of employment 
due to changed economic circumstances.
Sec. 216. Preliminary application process for assistance for small 
business concerns with essential employees ordered to serve on active 
duty in the Armed Forces.
Sec. 217. Economic injury disaster loans in cases of ice storms and 
blizzards.
Sec. 218. Economic injury disaster loans for businesses affected by 
lack of snowfall.

                          TITLE III--OVERSIGHT

Sec. 301. Reports on disaster assistance.

                           TITLE I--PLANNING

SEC. 101. COMPREHENSIVE DISASTER RESPONSE PLAN.

  The Small Business Act is amended by redesignating section 37 as 
section 99 and by inserting after section 36 the following:

``SEC. 37. COMPREHENSIVE DISASTER RESPONSE PLAN.

  ``(a) Plan Required.--The Administrator shall develop, implement, and 
maintain a comprehensive written disaster response plan. The plan shall 
include the following:
          ``(1) For each region of the Administration, a description of 
        the disasters most likely to occur in that region.
          ``(2) For each disaster described under paragraph (1)--
                  ``(A) an assessment of the disaster;
                  ``(B) an assessment of the demand for Administration 
                assistance most likely to occur in response to the 
                disaster;
                  ``(C) an assessment of the needs of the 
                Administration, with respect to such resources as 
                information technology, telecommunications, human 
                resources, and office space, to meet the demand 
                referred to in subparagraph (B); and
                  ``(D) guidelines pursuant to which the Administration 
                will coordinate with other Federal agencies and with 
                State and local authorities to best respond to the 
                demand referred to in subparagraph (B) and to best use 
                the resources referred to in that subparagraph.
  ``(b) Completion; Revision.--The first plan required by subsection 
(a) shall be completed not later than 180 days after the date of the 
enactment of this section. Thereafter, the Administrator shall update 
the plan on an annual basis and following any incident of national 
significance (as declared by the President or his designee).
  ``(c) Knowledge Required.--The Administrator shall carry out 
subsections (a) and (b) through an individual with substantial 
knowledge in the field of disaster readiness and emergency response.
  ``(d) Report.--The Administrator shall include a report on the plan 
whenever the Administrator submits the report required by section 
47(a).''.

SEC. 102. ANNUAL DISASTER SIMULATION EXERCISE.

  The Small Business Act is amended by inserting after section 37 (as 
added by section 101) the following:

``SEC. 38. ANNUAL DISASTER SIMULATION EXERCISE.

  ``(a) Exercise Required.--The Administrator shall conduct a disaster 
simulation exercise at least once each fiscal year. The exercise shall 
include the participation of, at a minimum, not less than half of the 
individuals in the disaster reserve corps and shall test, at maximum 
capacity, all of the information technology and telecommunications 
systems of the Administration that are vital to the activities of the 
Administration during such a disaster.
  ``(b) Report.--The Administrator shall include a report on the 
disaster simulation exercise whenever the Administration submits the 
report required by section 47(a).''.

SEC. 103. DISASTER RESERVE CORPS.

  The Small Business Act is amended by inserting after section 38 (as 
added by section 102) the following:

``SEC. 39. DISASTER RESERVE CORPS.

  ``(a) Corps Required.--The Administrator shall maintain within the 
Administration a disaster reserve corps, the purpose of which is to 
perform the functions of the Administration related to disaster 
response. The corps shall consist of at least 1,000 individuals, each 
of whom--
          ``(1) does not ordinarily have the duties of a full-time 
        officer or employee of the Administration; but
          ``(2) is able to assume duties related to disaster response 
        when the Administrator so requires.
  ``(b) Training.--The Administrator shall ensure that each individual 
in the corps receives training each year in one or more functions 
relating to disaster response. To the maximum extent practicable, the 
function in which an individual is trained in one year shall be 
different from the function in which the individual was trained in 
prior years.
  ``(c) Geographic Distribution.--The Administrator shall ensure that 
not more than 30 percent of the individuals in the corps reside in any 
one region of the Administration.
  ``(d) Report.--The Administrator shall include a report on the corps 
whenever the Administration submits the report required by section 
47(a).''.

SEC. 104. PLANS TO SECURE ADDITIONAL OFFICE SPACE.

  The Small Business Act is amended by inserting after section 39 (as 
added by section 103) the following:

``SEC. 40. PLANS TO SECURE ADDITIONAL OFFICE SPACE.

  ``(a) Plans Required.--The Administrator shall develop long-term 
plans to secure additional office space to accommodate an expanded 
workforce in times of disaster.
  ``(b) Report.--The Administrator shall include a report on the plans 
whenever the Administration submits the report required by section 
47(a).''.

SEC. 105. COORDINATION OF DISASTER ASSISTANCE PROGRAMS WITH FEMA.

  The Small Business Act is amended by inserting after section 40 (as 
added by section 104) the following:

``SEC. 41. COORDINATION OF DISASTER ASSISTANCE PROGRAMS WITH FEMA.

  ``(a) Coordination Required.--The Administrator shall ensure that the 
disaster assistance programs of the Administration are coordinated, to 
the maximum extent practicable, with the disaster assistance programs 
of the Federal Emergency Management Agency.
  ``(b) Regulations Required.--The Administrator, in consultation with 
the Director of the Federal Emergency Management Agency, shall 
establish regulations to ensure that each application for disaster 
assistance is submitted as quickly as practicable to the Administration 
or directed to the appropriate agency under the circumstances.
  ``(c) Completion; Revision.--The initial regulations shall be 
completed not later than 270 days after the date of the enactment of 
this section. Thereafter, the regulations shall be revised on an annual 
basis.
  ``(d) Report.--The Administrator shall include a report on the 
regulations whenever the Administration submits the report required by 
section 47(a).''.

SEC. 106. ASSOCIATE ADMINISTRATOR FOR DISASTER ASSISTANCE.

  The Small Business Act is amended by inserting after section 41 (as 
added by section 105) the following:

``SEC. 42. ASSOCIATE ADMINISTRATOR FOR DISASTER ASSISTANCE.

  ``(a) In General.--There is established in the Administration an 
Associate Administrator for Disaster Assistance, appointed by the 
President by and with the advice and consent of the Senate, from among 
individuals who have--
          ``(1) proven management ability; and
          ``(2) substantial knowledge in the field of disaster 
        readiness and emergency response.
  ``(b) Director of Disaster Planning.--
          ``(1) Appointment.--There is established in the 
        Administration a Director for Disaster Planning, appointed by 
        the Administrator from among the personnel of the 
        Administration.
          ``(2) Duties.--Subject to the authority, direction, and 
        control of the Associate Administrator for Disaster Assistance, 
        the Director shall--
                  ``(A) develop and implement the Administration's 
                plans for responding to disasters; and
                  ``(B) direct the Administration's training exercises 
                with respect to disasters.
          ``(3) Coordination.--In carrying out the duties under 
        paragraph (2), the Director shall coordinate with--
                  ``(A) the Associate Administrator for the Office of 
                Disaster Assistance of the Administration;
                  ``(B) the Director of the Federal Emergency 
                Management Agency; and
                  ``(C) other Federal, State, and local disaster 
                planning offices, as necessary.
  ``(c) Director of Disaster Lending.--
          ``(1) Appointment.--There is established in the 
        Administration a Director for Disaster Lending, appointed by 
        the Administrator from among the personnel of the 
        Administration.
          ``(2) Duties.--Subject to the authority, direction, and 
        control of the Associate Administrator for Disaster Assistance, 
        the Director shall direct all aspects of the disaster lending 
        program under section 7(b).
  ``(d) Resources.--The Administrator shall ensure that the Associate 
Administrator for Disaster Assistance, the Director of Disaster 
Planning, and the Director of Disaster Lending have adequate resources 
to carry out the duties under this section.''.

                           TITLE II--LENDING

SEC. 201. INCIDENTS OF NATIONAL SIGNIFICANCE.

  (a) Disaster Loans to Private Nonprofit Organizations.--Section 
7(b)(2) of the Small Business Act (15 U.S.C. 636(b)(2)) is amended--
          (1) in subparagraph (D) by striking the period at the end and 
        inserting ``; or''; and
          (2) by inserting after subparagraph (D) the following:
                  ``(E) an incident of national significance, as 
                declared by the President or his designee, in which 
                case assistance under this paragraph may be provided, 
                subject to the other applicable requirements of this 
                paragraph, to a private nonprofit organization (as that 
                term is defined in section 29(a)(2)) that is located in 
                an area affected by the incident of national 
                significance.''.
  (b) Mitigation Loans to Small Business Concerns.--Section 7 of the 
Small Business Act (15 U.S.C. 636) is amended by inserting after 
subsection (d) the following:
  ``(e) Disaster Mitigation Loans.--
          ``(1) Authority.--The Administrator may make or guarantee a 
        mitigation loan to a small business concern that receives a 
        loan under section 7(b)(1)(A) for the damage or destruction, by 
        reason of an incident of national significance (as declared by 
        the President or his designee), of property owned by the small 
        business concern.
          ``(2) Amount of loan.--The amount of a loan under paragraph 
        (1) shall not exceed 20 percent of the total amount of the cost 
        of the damage or destruction referred to in paragraph (1). The 
        total amount shall be calculated without regard for any costs 
        for which the small business concern is reimbursed under any 
        insurance policy or otherwise.''.
  (c) Applicability for Fiscal Year 2006 to Hurricanes Katrina, Rita, 
and Wilma.--
          (1) In general.--For fiscal year 2006, the Administrator--
                  (A) may carry out subsection (e) of section 7 of the 
                Small Business Act (as added by subsection (b) of this 
                section) with respect to a private nonprofit 
                organization that was located, as of August 28, 2005, 
                in a hurricane-affected area; and
                  (B) may carry out such subsection (e) with respect to 
                a small business concern that was located, as of August 
                28, 2005, in a hurricane-affected area, for damage or 
                destruction by reason of Hurricane Katrina, Hurricane 
                Rita, or Hurricane Wilma.
          (2) Hurricane-affected area defined.--In this section, the 
        term ``hurricane-affected area'' means a county or parish in 
        the State of Alabama, Florida, Mississippi, Louisiana, or 
        Texas, that has been designated by the Administrator of the 
        Small Business Administration as a disaster area by reason of 
        Hurricane Katrina, Hurricane Rita, or Hurricane Wilma under 
        disaster declaration 10176, 10177, 10178, 10179, 10180, 10181, 
        10203, 10204, 10205, 10206, 10222, or 10223.

SEC. 202. INFORMATION TRACKING AND FOLLOW-UP SYSTEM.

  The Small Business Act is amended by inserting after section 42 (as 
added by section 106) the following:

``SEC. 43. INFORMATION TRACKING AND FOLLOW-UP SYSTEM FOR DISASTER 
                    ASSISTANCE.

  ``(a) System Required.--The Administrator shall develop, implement, 
and maintain a centralized information system to track communications 
between personnel of the Administration and applicants for disaster 
assistance. The system shall ensure that whenever an applicant for 
disaster assistance communicates with such personnel on a matter 
relating to the application, the following information is recorded:
          ``(1) The method of communication.
          ``(2) The date of communication.
          ``(3) The identity of the personnel.
          ``(4) A summary of the subject matter of the communication.
  ``(b) Follow-up Required.--The Administrator shall ensure that an 
applicant for disaster assistance receives, by telephone, mail, or 
electronic mail, follow-up communications from the Administration at 
all critical stages of the application process, including the 
following:
          ``(1) When the Administration determines that additional 
        information or documentation is required to process the 
        application.
          ``(2) When the Administration determines whether to approve 
        or deny the loan.
          ``(3) When the primary contact person managing the loan 
        application has changed.''.

SEC. 203. IMMEDIATE DISASTER ASSISTANCE PROGRAM.

  The Small Business Act is amended by inserting after section 43 (as 
added by section 202) the following:

``SEC. 44. IMMEDIATE DISASTER ASSISTANCE PROGRAM.

  ``(a) Program Required.--The Administrator shall carry out a program, 
to be known as the Immediate Disaster Assistance program, under which 
the Administration participates on a deferred (guaranteed) basis in 85 
percent of the balance of the financing outstanding at the time of 
disbursement of the loan if such balance is less than or equal to 
$25,000 for businesses affected by a disaster.
  ``(b) Eligibility Requirement.--To receive a loan guaranteed under 
subsection (a), the applicant must also apply for, and meet basic 
eligibility standards for, a loan under section 7(b).
  ``(c) Use of Proceeds.--A person who receives a loan under section 
7(b) must use the proceeds of that loan to repay all loans guaranteed 
under subsection (a), if any, before using the proceeds for any other 
purpose.
  ``(d) Approval or Disapproval.--The Administrator shall ensure that 
each applicant for a loan under the program receives a decision 
approving or disapproving of the application within 36 hours after the 
Administration receives the application.''.

SEC. 204. INCREASED DEFERMENT PERIOD.

  Section 7 of the Small Business Act (15 U.S.C. 636) is amended by 
inserting after subsection (e) (as added by section 201(b)) the 
following:
  ``(f) Additional Requirements for 7(b) Loans.--
          ``(1) Increased deferment authorized.--
                  ``(A) In general.--In making loans under section 
                7(b), the Administrator may provide, to the person 
                receiving the loan, an option to defer repayment on the 
                loan.
                  ``(B) Period.--A deferment under subparagraph (A) may 
                not exceed 4 years.''.

SEC. 205. REVISED REPAYMENT TERMS.

  Section 7 of the Small Business Act (15 U.S.C. 636) is amended in 
subsection (f) by adding after paragraph (1) (as added by section 204) 
the following:
          ``(2) Revised repayment terms.--In making loans under section 
        7(b), the Administrator--
                  ``(A) shall not require repayment to be made until 12 
                months after the date on which the final disbursement 
                of approved amounts is made; and
                  ``(B) shall calculate the amount of repayment based 
                solely on the amounts disbursed.''.

SEC. 206. REVISED DISBURSEMENT PROCESS.

  Section 7 of the Small Business Act (15 U.S.C. 636) is amended in 
subsection (f) by adding after paragraph (2) (as added by section 205) 
the following:
          ``(3) Revised disbursement process.--In making loans under 
        section 7(b), the Administrator shall disburse the loan amounts 
        in stages as follows:
                  ``(A) Loans up to $150,000.--If the total amount 
                approved is less than or equal to $150,000--
                          ``(i) the first disbursement shall consist of 
                        40 percent of the total loan amount, or a 
                        lesser percentage of the total loan amount if 
                        the Administrator and the borrower agree on 
                        such a lesser percentage;
                          ``(ii) the second disbursement shall consist 
                        of 50 percent of the amounts that remain after 
                        the first disbursement, and shall be made when 
                        the borrower has produced satisfactory receipts 
                        to demonstrate the proper use of the first half 
                        of the first disbursement; and
                          ``(iii) the third disbursement shall consist 
                        of the amounts that remain after the preceding 
                        disbursements, and shall be made when the 
                        borrower has produced satisfactory receipts to 
                        demonstrate the proper use of the first 
                        disbursement and the first half of the second 
                        disbursement.
                  ``(B) Loans from $150,000 to $500,000.--If the total 
                amount approved is more than $150,000 but less than or 
                equal to $500,000--
                          ``(i) the first disbursement shall consist of 
                        20 percent of the total loan amount, or a 
                        lesser percentage if the Administrator and the 
                        borrower agree on such a lesser percentage;
                          ``(ii) the second disbursement shall consist 
                        of 30 percent of the total loan amount 
                        remaining after the first disbursement, and 
                        shall be made when the borrower has produced 
                        satisfactory receipts to demonstrate the proper 
                        use of the first half of the first 
                        disbursement;
                          ``(iii) the third disbursement shall consist 
                        of 25 percent of the total loan amount 
                        remaining after the first and second 
                        disbursements, and shall be made when the 
                        borrower has produced satisfactory receipts to 
                        demonstrate the proper use of the first 
                        disbursement and the first half of the second 
                        disbursement; and
                          ``(iv) the fourth disbursement shall consist 
                        of the amounts that remain after the preceding 
                        disbursements, and shall be made when the 
                        borrower has produced satisfactory receipts to 
                        demonstrate the proper use of the first and 
                        second disbursements and the first half of the 
                        third disbursement.
                  ``(C) Loans greater than $500,000.--If the total 
                amount approved is more than $500,000--
                          ``(i) the first disbursement shall consist of 
                        at least $100,000, or a lesser amount if the 
                        Administrator and the borrower agree on such a 
                        lesser amount; and
                          ``(ii) the number of disbursements after the 
                        first, and the amount of each such 
                        disbursement, shall be in the discretion of the 
                        Administrator, but the amount of each such 
                        disbursement shall be not less than 
                        $100,000.''.

SEC. 207. REVISED COLLATERAL REQUIREMENTS.

  Section 7 of the Small Business Act is amended in subsection (f) by 
adding after paragraph (3) (as added by section 206) the following:
          ``(4) Revised collateral requirements.--In making a business 
        loan under section 7(b), the total approved amount of which is 
        less than or equal to $100,000, the Administrator shall not 
        require the borrower to use the borrower's home as 
        collateral.''.

SEC. 208. ENHANCED LENDING AUTHORITY FOR PRIVATE LENDERS.

  The Small Business Act is amended by inserting after section 44 (as 
added by section 203) the following:

``SEC. 45. ENHANCED LENDING AUTHORITY FOR PRIVATE LENDERS.

  ``(a) Program Authorized.--The Administrator may, and during a period 
specified in subsection (b) shall, carry out a program under which the 
Administrator permits banks and other financial institutions to 
process, approve, close, and service disaster loans under section 7(b) 
for a fee not to exceed 2 percent of the total loan amount.
  ``(b) Periods During Which Program Is Required.--The program under 
subsection (a) is required to be carried out during the following 
periods:
          ``(1) Any period of an incident of national significance (as 
        declared by the President or his designee).
          ``(2) Any period during which the average time for the 
        Administration to approve disaster loans in response to any 
        single disaster is 30 days or more.
  ``(c) Exclusion of Lenders.--If the number or rate of defaults on 
loans processed, approved, and closed by a lender under the program 
under subsection (a) are inordinate, as determined by the 
Administrator, the Administrator may do any one or more of the 
following:
          ``(1) Exclude the lender from participating in the program 
        under subsection (a).
          ``(2) Exclude the lender from participating in the Preferred 
        Lenders Program under section 7(a)(2)(C)(ii).
  ``(d) Factor in Preferred Lenders Program.--In determining whether a 
lender is to be certified or recertified to participate in the 
Preferred Lenders Program under section 7(a)(2)(C)(ii), the 
Administrator may consider as a factor the following:
          ``(1) The loans processed, approved, and closed by the lender 
        under the program under subsection (a).
          ``(2) The participation or non-participation of the lender in 
        the program under subsection (a).''.

SEC. 209. DISASTER PROCESSING REDUNDANCY.

  The Small Business Act is amended by inserting after section 45 (as 
added by section 208) the following:

``SEC. 46. DISASTER PROCESSING REDUNDANCY.

  ``(a) In General.--The Administrator shall ensure that the 
Administration has in place a facility for disaster loan processing 
that, whenever the Administration's primary facility for disaster loan 
processing becomes unavailable, is able to take over all disaster loan 
processing from that primary facility within 2 days.
  ``(b) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section such sums as may be 
necessary.''.

SEC. 210. GRANT PROGRAM.

   Section 7(b) of the Small Business Act (15 U.S.C. 636(b)) is amended 
by inserting immediately after paragraph (3) the following:
          ``(4) Grants to disaster-affected small businesses.--
                  ``(A) In general.--The Administrator may make a grant 
                of up to $100,000 to a small business concern that--
                          ``(i) was located in a designated disaster 
                        area affected by disaster declaration 10176, 
                        10177, 10178, 10179, 10180, 10181, 10203, 
                        10204, 10205, 10206, 10222, or 10233, and was 
                        located in a county or parish that, as a result 
                        of Hurricanes Katrina, Rita, or Wilma of 2005, 
                        experienced a loss of at least 100 housing 
                        units, experienced a loss of at least 1 percent 
                        of available housing stock, and required 
                        Federal infrastructure assistance of a least 
                        $200,000;
                          ``(ii) submits to the Administrator a 
                        certification by the owner of the concern of 
                        intent to reestablish the concern in the same 
                        county or parish in which the business was 
                        originally located, or in any other county or 
                        parish described in clause (i);
                          ``(iii) has applied for, and was rejected 
                        for, a conventional disaster assistance loan 
                        under section 7(b); and
                          ``(iv) was in existence for at least 2 years 
                        before the date on which the applicable 
                        disaster declaration was made.
                  ``(B) Priority.--In making grants under this 
                paragraph, the Administrator shall give priority to a 
                small business concern that the Administrator 
                determines is economically viable but unable to meet 
                short-term financial obligations.
                  ``(C) Definition.--In this paragraph, the term 
                `disaster-affected area' means an area that has been 
                designated by the Administrator as a disaster area.
                  ``(D) Authorization of appropriations.--There are 
                authorized to be appropriated for grants under this 
                paragraph such funds as may be necessary.''.

SEC. 211. WAIVER OF PROHIBITION ON DUPLICATION OF CERTAIN BENEFITS.

  Section 7(b) of the Small Business Act (15 U.S.C. 636(b)) is amended 
by inserting immediately after paragraph (4) (as added by section 210) 
the following:
          ``(5) Waiver of prohibition on duplication of certain 
        benefits.--For any disaster victim under disaster declaration 
        10176, 10177, 10178, 10179, 10180, 10181, 10203, 10204, 10205, 
        10206, 10222, or 10223, in providing assistance under paragraph 
        (1) or (2), the Administrator may waive, in whole or in part, 
        the prohibition on the duplication of benefits, including 
        whether damage or destruction has been compensated for by, 
        credit is available from, activities are reimbursable through, 
        or funds have been made available from any other source.''.

SEC. 212. INCREASE LEGISLATIVE LIMIT.

  Section 7(b)(3)(E) of the Small Business Act (15 U.S.C. 636(b)(3)(E)) 
is amended by striking ``$1,500,000'' and inserting ``$3,000,000'' both 
places such term appears.

SEC. 213. NET EARNINGS CLAUSES PROHIBITED.

  Section 7 of the Small Business Act is amended in subsection (f) by 
adding after paragraph (4) (as added by section 207) the following:
          ``(5) Net earnings clauses prohibited.--In making loans under 
        section 7(b), the Administrator shall not require the borrower 
        to pay any non-amortized amount for the first 5 years after 
        repayment begins.''.

SEC. 214. ECONOMIC INJURY DISASTER LOANS TO NONPROFITS.

  (a) In General.--Section 7 of the Small Business Act (15 U.S.C. 636) 
is amended in subsection (b)(2)--
          (1) in the matter preceding subparagraph (A)--
                  (A) by inserting after ``small business concern'' the 
                following: ``, private nonprofit organization,''; and
                  (B) by inserting after ``the concern'' the following: 
                ``, organization,''; and
          (2) in subparagraph (D) by inserting after ``small business 
        concerns'' the following: ``, private nonprofit 
        organizations,''.
  (b) Conforming Amendment.--Such section is further amended in 
subsection (c)(5)(C) by inserting after ``business'' the following: ``, 
organization,''.

SEC. 215. APPLICANTS THAT WILL CONSTITUTE A MAJOR SOURCE OF EMPLOYMENT 
                    DUE TO CHANGED ECONOMIC CIRCUMSTANCES.

  Section 7(b)(3)(E) of the Small Business Act (15 U.S.C. 636(b)(3)(E)) 
is amended by inserting after ``constitutes'' the following: ``, or 
will due to changed economic circumstances constitute,''.

SEC. 216. PRELIMINARY APPLICATION PROCESS FOR ASSISTANCE FOR SMALL 
                    BUSINESS CONCERNS WITH ESSENTIAL EMPLOYEES ORDERED 
                    TO SERVE ON ACTIVE DUTY IN THE ARMED FORCES.

  Section 7(b)(3) of the Small Business Act (15 U.S.C. 636(b)(3)) is 
amended--
          (1) in subparagraph (C)--
                  (A) by striking ``90 days'' and inserting ``1 year''; 
                and
                  (B) by adding at the end the following: ``The 
                Administrator may, when appropriate (as determined by 
                the Administrator), waive the ending date specified in 
                the preceding sentence and provide a later ending 
                date.''; and
          (2) by adding at the end the following new subparagraph:
          ``(G) The Administrator shall establish a process under which 
        a small business concern described in subparagraph (B) may file 
        a preliminary application for assistance under this paragraph, 
        accompanied by supporting documentation, before the date on 
        which the essential employee is ordered to active duty. The 
        Administrator may not actively consider such an application or 
        provide assistance to the small business concern based on such 
        an application until the date on which the essential employee 
        is ordered to active duty.''.

SEC. 217. ECONOMIC INJURY DISASTER LOANS IN CASES OF ICE STORMS AND 
                    BLIZZARDS.

  Section 3(k)(2) of the Small Business Act (15 U.S.C. 632(k)(2)) is 
amended--
          (1) in subparagraph (A) by striking ``and'';
          (2) in subparagraph (B) by striking the period at the end and 
        inserting ``; and''; and
          (3) by adding at the end the following:
          ``(C) ice storms and blizzards.''.

SEC. 218. ECONOMIC INJURY DISASTER LOANS FOR BUSINESSES AFFECTED BY 
                    LACK OF SNOWFALL.

  (a) In General.--Section 3(k)(2) of the Small Business Act (15 U.S.C. 
632(k)(2)), as amended by section 217, is further amended--
          (1) in subparagraph (B) by striking ``and'' at the end;
          (2) in subparagraph (C) by striking the period at the end and 
        inserting ``; and''; and
          (3) by adding at the end the following:
          ``(D) lack of snowfall.''.
  (b) Conforming Amendment.--Section 7(b)(2) of the Small Business Act 
(15 U.S.C. 636(b)(2)) is amended in the matter preceding subparagraph 
(A) by inserting after ``(including drought'' the following: ``or lack 
of snowfall''.

                          TITLE III--OVERSIGHT

SEC. 301. REPORTS ON DISASTER ASSISTANCE.

  The Small Business Act is amended by inserting after section 46 (as 
added by section 209) the following:

``SEC. 47. REPORTS ON DISASTER ASSISTANCE.

  ``(a) Annual Report Required.--Not later than 45 days after the end 
of a fiscal year, the Administrator shall submit to the Committee on 
Small Business of the Senate and the Committee on Small Business of the 
House of Representatives a report on the disaster assistance operations 
of the Administration for that fiscal year. The report shall--
          ``(1) specify the number of Administration personnel involved 
        in such operations;
          ``(2) describe any material changes to those operations, such 
        as changes to technologies used or to personnel 
        responsibilities;
          ``(3) describe and assess the effectiveness of the 
        Administration in responding to disasters during that fiscal 
        year, including a description of the number and amounts of 
        loans made for damage and for economic injury; and
          ``(4) describe the plans of the Administration for preparing 
        to respond to disasters during the next fiscal year.
  ``(b) Incidents of National Significance.--During the period of an 
incident of national significance (as declared by the President or his 
designee), the Administrator shall, on a monthly basis, submit to the 
committees specified in subsection (a) a report on the disaster 
assistance operations of the Administration with respect to that 
incident of national significance. The report shall specify--
          ``(1) the number of applications distributed;
          ``(2) the number of applications received;
          ``(3) the average time for the Administration to approve or 
        disapprove an application;
          ``(4) the amount of disaster loans approved;
          ``(5) the average time for initial disbursement of loan 
        proceeds; and
          ``(6) the amount of disaster loan proceeds disbursed.''.

                        II. Purpose and Summary

    The purpose of the Relief for Entrepreneurs: Coordination 
of Objectives and Values for Effective Recovery (RECOVER) Act 
of 2007 is to address specific and identified problems in the 
Small Business Administration's (SBA) disaster assistance 
program. Most notably, the bill is intended to ensure that the 
SBA performs comprehensive, risk-based, disaster planning on an 
annual basis and that the agency has mechanisms in place to 
maintain its disaster readiness over the long-term. The act 
provides the agency with a variety of tools to improve the 
disaster planning process, including the reorganization of the 
agency's Office of Disaster Assistance, a requirement that the 
agency engage in an annual disaster simulation exercise, and 
requirements that the agency formalize plans to address the 
need for additional space and employees in the event of a major 
disaster.
    The act will also enhance the SBA's disaster loan program 
by improving the manner in which disaster loans are processed, 
approved, and disbursed, and by providing the agency with 
additional financial assistance tools that are intended to 
better fit the various needs of small businesses following a 
disaster. The bill will establish a bridge financing program to 
provide small businesses with emergency, small-dollar financing 
within 36 hours following a disaster. This program will provide 
vital funds to disaster victims during the 21 day target 
approval timeframe for conventional disaster loans. These 
immediate disaster assistance loans will be limited in amount 
and will be contingent upon the applicant applying for, and 
meeting basic eligibility standards for a conventional disaster 
loan. These factors are intended to limit the federal 
government's risk exposure under this program.
    H.R. 1361 also establishes an Enhanced Lending Authority 
for Preferred Lenders Program that is intended to enable the 
SBA to enlist the resources of private lenders to process, 
approve, disburse, and service loans during incidents of 
national significance. This program may be implemented whenever 
the administrator sees fit or in two specific situations when 
the administration is most likely to need the additional loan 
processing, approval, and disbursement capacity that the 
private sector can provide. The Enhanced Lending Authority for 
Preferred Lenders Program loans are intended to carry the same 
favorable interest and repayment terms as conventional disaster 
loans administered under Section 7(b) of the Small Business 
Act.
    The bill also creates a small grant program to assist the 
most severely affected small businesses damaged by Hurricanes 
Katrina, Rita, and Wilma. To ensure that grant assistance only 
goes to the neediest small businesses and is only used to spur 
redevelopment in communities where market forces have failed, 
the program will only be applicable under very limited 
circumstances. In order to receive a grant, a small business 
must have been located in those communities most severely 
damaged by Hurricanes Katrina, Rita, and Wilma, must have been 
in existence at least two years prior to the disaster, must 
have been rejected for a conventional SBA loan, must have 
remained economically viable following the disaster, and have 
certified that they will reopen their business in one of the 
affected communities. Only a small number of businesses are 
expected to meet all of these requirements, and the program is 
intended to be administered at the discretion of the 
Administrator.
    To enable the SBA to be more responsive to the needs of 
individual disaster victims, H.R. 1361 provides the 
administrator with authority to waive the prohibition on 
duplication of benefits stemming from state administered grant 
assistance programs. This provision will enable the SBA to 
assist those victims that were negatively impacted by 
deficiencies in the loan processing and disbursement process. 
These waivers will be available at the discretion of the 
Administrator of the SBA.
    The bill also streamlines the SBA's loan processing and 
disbursement process and makes them more responsive to the 
needs of borrowers. The SBA will be required to develop, 
implement, and maintain a centralized system to track all 
communication written, verbal, and electronic, between disaster 
assistance applicants and agency employees. The SBA will also 
be required to provide follow-up information to disaster 
assistance applicants as their application moves through vital 
stages of the processing, approval, and disbursement process. 
The Act is intended to improve the way the SBA disburses 
approved assistance to victims by setting a minimum amount that 
must be disbursed in each disbursement stage unless the 
applicant requests a lesser amount.
    Finally, a reporting requirement will ensure that members 
of Congress are adequately informed about all aspects of the 
SBA's disaster assistance and disaster planning programs so 
that they may provide the SBA with the support they need to 
fulfill their vital mission following a disaster.

                III. Background and Need for Legislation

    It has been estimated that over 40 percent of business fail 
to recover following a disaster. By some measures, over 60 
percent of businesses will fail completely after a disaster. In 
many cases, these businesses fail simply because they lack the 
financial resources necessary to restart their enterprises. The 
SBA's disaster loan program was implemented for the purpose of 
providing timely financial assistance in the form of low 
interest loans and working capital for businesses and 
homeowners devastated by a disaster. The SBA's disaster loans 
have become the primary form of federal assistance for the 
repair and rebuilding of non-farm, private sector disaster 
losses.
    In the wake of the 2005 Gulf Coast Hurricanes (these were 
Hurricane Katrina, Hurricane Rita, and Hurricane Wilma), many 
applicants for SBA disaster assistance were frustrated with the 
agency's response--both in terms of the complexity of the 
process and the seemingly ambiguous reasons that they were 
rejected for receiving assistance. Many business and home 
owners found their loan applications mired in an agency backlog 
that has taken over a year to process and without a well-
informed, centralized point contact within the agency. Those 
that were approved for assistance often waited months to 
receive any funds, far past the point when financial assistance 
could have been of any use. In many cases, individuals simply 
avoided the SBA, believing that the disaster assistance program 
was more of a hindrance than a help.
    After Hurricane Katrina, the backlog for both loss 
verification and application processing ballooned, reaching a 
peak of 204,000 total applications in December 2005. According 
to the Government Accountability Office (GAO), the average wait 
time, not including the time for loan closing, was 74 days, 
while the agency's goal was 21 days. In addition to delays, 
business owners faced severe bureaucratic impediments, in which 
applications were misplaced or lost, phone calls were not 
returned, and contradictory information was provided. This 
often meant that critical repairs had to be postponed or 
delayed indefinitely, further impairing local firms. Even 
worse, many small businesses had to close completely due their 
inability to secure immediate financial assistance. As of 
January 22, 2007, the SBA was still processing 231 loan 
applications from the 2005 Gulf Coast Hurricanes.
    As of January 22, 2007 the SBA approved only 38 percent of 
the loan applications that it processed for the 2005 Gulf Coast 
hurricanes. By comparison, this is significantly fewer than the 
60 percent of applications that the federal government approved 
in response to Hurricane Andrew in 1992.
    In addition to the lengthy loan approval process, the SBA 
experienced significantly delayed loan disbursements to 
approved applicants. As of May 27, 2006, nine months after the 
2005 Gulf Coast hurricanes, the SBA had disbursed only $1.4 
billion, or 14 percent, of the $9.7 billion in loan dollars 
that had been approved for disaster assistance. As of this same 
date, about 73,000 approved loans had not been fully disbursed 
to disaster victims. By the SBA's own measure, only 55 percent 
of approved loans received an initial disbursement within 5 
days of loan closing, compared to the agency's goal of 
disbursing 95 percent of loans in that same timeframe. As of 
January 2007, the agency still had over 40,000 loans totaling 
nearly $6 billion in undisbursed funds.
    Prior to the 2005 Gulf Coast hurricanes, the SBA's Office 
of Disaster Assistance had a staff of approximately 800 
individuals, including approximately 400 permanent staff and 
400 temporary staff. In the immediate aftermath of the 2005 
Gulf Coast hurricanes, the SBA had to urgently hire more than 
3,500 staff. The agency was challenged in not only ensuring 
that it had adequate numbers of staff, but also in ensuring 
that these individuals had appropriate training and 
supervision. In some cases, the SBA was forced used staff who 
recently had been hired themselves to train and supervise newly 
hired staff.
    A leading factor in the SBA's poor response to the 2005 
Gulf Coast Hurricanes, was the agency's lack of a 
comprehensive, centralized disaster plan that integrated the 
results of disaster simulations and catastrophe models. 
Typically, higher officials within the agency are responsible 
for ensuring that this type of disaster planning occurs. 
Instead, the agency delegated logistical planning to local 
agency officials, reasoning that these individuals were in the 
best position to estimate the agency's needs. The SBA believed 
that centralized planning would yield limited results. Although 
SBA headquarters encouraged field offices to establish written 
disaster plans, however, field offices were not required to do 
so.
    What limited disaster planning the SBA did perform was 
based upon the agency's experience in previous disasters, none 
of which approached the magnitude of the 2005 Gulf Coast 
hurricanes. The SBA based its information technology processing 
requirements primarily upon the agency's experience in the 
Northridge earthquake of 1994. This approach, however, failed 
to contemplate the possibility of more severe disaster, 
information that could have been garnered using disaster 
simulations and catastrophe models. Consequently, the SBA was 
unprepared for the logistical problems that occurred following 
the 2005 Gulf Coast hurricanes.
    In January 2005, the SBA began using its new Disaster 
Credit Management System (DCMS) to process loan applications 
for all new disaster declarations. DCMS was intended to improve 
the quality and timeliness of the SBA's disaster loan process 
and enhance its overall response to disasters. Following the 
2005 Gulf Coast hurricanes, however, DCMS experienced system 
outages and slow response times that impeded the agency's 
ability to provide timely disaster assistance. In planning for 
DCMS, the SBA estimated the necessary system capacity based 
upon the volume of applications received in previous disasters. 
No previous disaster, however, reached the magnitude of the 
2005 Gulf Coast Hurricanes. As a result, DCMS lacked the 
necessary user capacity, which restricted the number of staff 
that could access the system and process the large volume of 
applications in a timely manner.
    Additionally, the SBA lacked adequate technical support to 
implement the DCMS system. Most notably, the SBA failed to 
follow federal procurement policies to verify if the DCMS 
contractor provided the agency with the correct computer 
hardware specified in its contract. Had the SBA done so, it 
would have discovered that the contractor had, in fact, 
provided the agency with the incorrect hardware. Consequently, 
DCMS experienced system outages and was incapable of operating 
at peak capacity to support the necessary number of users.
    The SBA also failed to completely stress test DCMS prior to 
its implementation. Such testing would have ensured that the 
system could operate at maximum capacity and would have given 
the agency the opportunity to identify and correct problems 
prior to the 2005 Gulf Coast hurricanes.
    In advance of the hurricanes, there were several steps that 
the SBA could have taken to help ensure the availability of 
trained and experienced staff. The agency could have cross-
trained agency staff not normally involved in disaster 
assistance to provide backup support. Alternately, the agency 
could have maintained the status of a reserve of potential 
temporary employees trained in the agency's disaster policies 
and systems.
    Additionally, the SBA had not effectively planned for the 
office space requirements that would be necessary in a disaster 
the size of the 2005 Gulf Coast hurricanes. The SBA did not 
have an established plan to acquire additional space that would 
be necessary to accommodate the more than 2,000 employees that 
were hired for the agency's primary loan processing center in 
Ft. Worth, Texas. Instead, the agency was forced to contract 
with the GSA on an ad hoc basis to secure sufficient office 
space in an effort to locate additional space for the newly 
hired staff. Even so, the newly acquired space was not 
adequately configured to serve as a disaster loan processing 
center and the SBA still lacked sufficient capacity to process 
the rapidly growing backlog of disaster loan applications.
    The SBA's customer service center in Buffalo, New York 
lacked sufficient space in order to expand during an emergency 
and lacked a contingency plan to guide its efforts in 
identifying space to accommodate an expanded workforce if a 
major disaster occurred. As a result, the agency again had to 
work with the GSA on an ad hoc basis to secure sufficient space 
for its telecommunications function.
    The SBA lacked adequate vendor service and support for its 
telecommunications system in Buffalo. Only one vendor in the 
Buffalo region could service the type of phone system that the 
agency uses and the phone system was not designed to interface 
with other key agency systems, which affected the center's 
operations.
    Following the 2005 Gulf Coast Hurricanes, the SBA failed to 
take advantage of the benefits of coordinating with other 
Federal agencies operating major disaster redevelopment 
programs, including FEMA, HUD and USDA. These agencies had 
established disaster programs for providing assistance to small 
businesses and farmers to restart their businesses and repair 
physical structures.
    The lack of cross-agency coordination was most evident in 
the SBA's lack of coordination with the Federal Emergency 
Management Agency (FEMA). These two agencies were required to 
work together because the SBA's disaster loan program also 
served as a screening mechanism for FEMA's disaster grants. 
Applicants for FEMA grant assistance could only have their 
applications considered after they applied for and were 
rejected for SBA assistance. As a result, delays in the SBA's 
loan processing system were directly translated into delays for 
FEMA disaster assistance. In the wake of the 2005 Gulf Coast 
hurricanes, FEMA referred 2.4 million people to the SBA's 
disaster assistance program who were patently ineligible for 
SBA assistance. This greatly increased the volume of referrals 
to the SBA and was likely a contributing factor in the delays 
for SBA disaster assistance.
    The SBA failed to pursue coordination efforts with local 
entities, particularly city, state, and parish officials. These 
relationships could have helped to promote the redevelopment of 
infrastructure required for small businesses and would have 
helped the agency in effectively distributing timely and 
accurate information to Hurricane victims. Instead, the agency 
operated largely in isolation, limiting its ability to build 
goodwill and working relationships among local authorities.
    A limited survey of Gulf Coast hurricane victims who filed 
SBA disaster loan applications revealed that more than half 
were not aware of the agency's disaster assistance program 
prior to the 2005 Gulf Coast hurricanes. Additionally, agency 
officials reported that the public tends to confuse the SBA's 
disaster assistance programs with those of FEMA. To overcome 
the public's preconceived notions concerning the SBA's disaster 
assistance program, the agency employed various means to 
provide information and assistance regarding disaster recovery 
loan assistance. The agency mobilized its staff members to 
speak at organized events and advertised its disaster loan 
programs in a variety of media. Despite these efforts, however, 
the SBA's outreach efforts were lacking in several respects.
    In previous disasters, SBA officials had an informal policy 
of contacting individuals who did not return disaster 
assistance loan applications. This practice provides the agency 
with another opportunity to explain the SBA disaster assistance 
loan program and correct public misconceptions. While this 
practice is not mandatory, the SBA had previously attempted to 
contact 100 percent of all individuals who did not file loan 
applications. Following the 2005 Gulf Coast hurricanes, the SBA 
mailed 2.2 million applications and received over 400,000 
completed applications. Of the 1.8 million individuals who did 
not submit loan applications, only 800,000 received follow-up 
calls.
    In part, the SBA could not make such a large volume of 
follow-up phone calls because they lacked the staff resources 
that this outreach practice required. This problem could have 
been resolved with more robust disaster planning and greater 
support in the budget reauthorization process.

                              IV. Hearings

    In the 110th Congress, the Committee on Small Business held 
a hearing on the SBA's disaster assistance program and its 
response to the 2005 Gulf Coast Hurricanes on February 14, 
2007. The Committee subsequently held a hearing on H.R. 1361, 
the Relief for Entrepreneurs: Coordination of Objectives and 
Values for Effective Recovery (RECOVER) Act of 2007 on March 8, 
2007.

                       V. Committee Consideration

    The Committee on Small Business met in open session on 
March 15, 2007, and ordered H.R. 1361 reported to the House, as 
amended, by a record vote.

                          VI. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Ms. Velazquez to report the bill, as amended, to the 
House with a favorable recommendation was AGREED to by a record 
vote of 17 ayes and 9 nays, as follows:


    The following amendments were considered and disposed of by 
a record vote. The names of Members voting for and against 
follow:
    An amendment by Mr. Chabot, No. 015, to strike the grant 
program in section 210 from H.R. 1361 was NOT AGREED TO by a 
record vote of 10 ayes and 17 nays. Record vote follows:


    An amendment by Mr. Chabot, No. 016, to strike the waiver 
of duplication of benefits provision in section 211 from H.R. 
1361 was NOT AGREED TO by a record vote of 7 ayes and 14 nays. 
Record vote follows:


    An amendment by Mr. Michaud, No. 007, on Economic Injury 
Disaster Loans for businesses affected by lack of snowfall, was 
AGREED TO by a record vote of 14 ayes and 11 nays. Record vote 
follows:


    The Committee considered the following other amendments:
    A manager's amendment by Ms. Velazquez, No. 022, was AGREED 
TO by a voice vote.
    An amendment by Mr. Chabot, No. 017, striking provisions 
requiring the SBA to report to Congress during incidents of 
national significance, was NOT AGREED TO by a voice vote.
    An amendment by Mr. Braley, No. 008, on Economic Injury 
Disaster Loans for businesses in case of ice storms and 
blizzards, was AGREED TO by a voice vote.

             VII. Section-by-Section Analysis of H.R. 1361


Sec. 101  Comprehensive Disaster Response Plan

    This provision will require the SBA to develop, implement, 
and maintain a comprehensive written disaster response plan. 
The plan should include a risk-based assessment of the various 
types of disasters likely to occur in each of the agency's 10 
districts. Each assessment should include an analysis of the 
SBA's needs for an effective response to each disaster 
scenario, with emphasis on meeting demand for information 
technology, telecommunications, human resources, and office 
space needs. Additionally, the comprehensive plan should 
include appropriate guidelines for coordination with other 
federal agencies as well as with State and local authorities to 
effectively respond to each disaster and best utilize agency 
resources.
    In developing the comprehensive plan, the Committee 
believes that the SBA should integrate the results of disaster 
simulation exercises and catastrophe modeling programs to 
generate its disaster risk assessments and estimate the demand 
on agency resources.
    The Committee does not intend for the comprehensive 
disaster response plan to be a static document, but believes 
that the risks and disaster assessments should be revised on an 
annual basis and whenever the agency experiences an incident of 
national significance as that term is defined in H.R. 1361. 
Additionally, the agency must include a report on the status of 
the disaster plan, highlighting any changes and developments 
from previous years in its annual report to Congress as 
required by H.R. 1361.

Sec. 102  Annual Disaster Simulation Exercise

    This provision will require the SBA to undertake at least 
one agency-wide disaster simulation exercise each fiscal year 
that includes, at a minimum, the participation of not less than 
half of the agency's disaster reserve corps. Additionally, the 
annual disaster simulation exercise should includes stress-
testing of the agency's vital information technology and 
telecommunications systems.
    The Committee intends for the stress-testing element to 
include testing various aspects of DCMS and the call support 
systems, including the core application functions and 
additional components such as loss verification and scanning. 
This stress-testing should simulate an increased number of 
concurrent users to determine whether the complete system, 
operating at maximum capacity will meet the agency's needs for 
effective and accurate operations in a major disaster.
    The Committee intends that the annual disaster simulation 
exercise will be based upon the most serious disaster scenarios 
that the agency has identified in the comprehensive disaster 
plan and will adjust annually in the disaster scenario and the 
geographic region where it is performed.

Sec. 103  Disaster Reserve Corps

    This provision will require the SBA to maintain a disaster 
reserve corps of 1,000 individuals who receive annual training, 
and, to the greatest extent practicable, are cross-trained to 
perform more than one function relating to disaster response.
    The Committee believes that by requiring that no more than 
30 percent of the reserve corps staff come from any one of the 
SBA's ten regions, the risk that the reserve corps could be 
impacted by a disaster may be mitigated. The Committee does not 
believe that this requirement will adversely affect the 
agency's recruiting efforts, as the SBA can recruit reserve 
corps staff from nine of its other regions in the event that it 
reaches the 30 percent cap in one region. Additionally, the 
Committee believes that any costs associated with this 
requirement will be outweighed by the benefit of having a 
nationally dispersed reserve corps staff that is less exposed 
to geographic risks and better able to respond to disasters in 
their region.

Sec. 104  Plans To Secure Additional Space

    This provision will require the SBA to develop long-term 
plans to secure additional space to accommodate an expanded 
workforce in times of disaster.

Sec. 105  Coordination of Disaster Assistance Programs With FEMA

    This provision will require the SBA to establish uniform 
guidelines in consultation with the director of the Federal 
Emergency Management Agency to provide for the coordination of 
their assistance programs. Specifically, the SBA must establish 
regulations to ensure that applications for disaster assistance 
are submitted to the appropriate agency as quickly as possible.
    The Committee intends for these regulations to remedy 
problems caused by the SBA's disaster loan program being used 
as a screening mechanism for FEMA's disaster grants. 
Additionally, the Committee intends for these regulations to 
eliminate the need for the SBA to first consider disaster loan 
applications from victims who are patently ineligible for SBA 
assistance as a precondition to consideration for FEMA 
assistance.

Sec. 106  Associated Administrator for Disaster Assistance

    This provision will require the SBA to create a new 
position within the agency, the Associate Administrator for 
Disaster Assistance, appointed by the President, who will be 
responsible overseeing the agency's entire disaster response 
function, including, but not limited to, disaster planning, 
administering financial assistance, and coordinating with other 
federal, state, and local authorities. The Committee intends 
that this individual should have substantial expertise in the 
field of disaster readiness and emergency response and should 
have proven management ability. The Committee believes that the 
creation of a high-level administration official dedicated to 
disaster planning will be vital to ensuring that the agency 
maintains its disaster readiness over the long-term and will 
assist the SBA in developing and implementing its disaster 
response plan.
    Two Director positions will also be established and will 
report directly to the Associate Administrator. A Director of 
Disaster Planning will be established to develop and implement 
the SBA's disaster readiness plan, including the agency's 
annual disaster simulation exercise. A Director of Disaster 
Lending will be established to direct the agency's 7(b) 
disaster loan program and administer the financial assistance 
programs created under H.R. 1361. The Committee intends that 
neither the establishment of the Director of Disaster Planning 
nor the establishment of the Director of Disaster Lending 
should directly result in a net increase in the number of SBA 
full-time employees. Additionally, the Committee intends that 
both the Director of Disaster Planning and the Director of 
Disaster Lending should be appointed by the Administrator from 
among individuals within the agency and that both directors 
should have experience in working with the programs that they 
will be appointed to oversee.

Sec. 201  Incident of National Significance

    This provision will permit the SBA's disaster assistance 
program to respond to an Incident of National Significance as 
declared by the President or his designee. Additionally, this 
provision will be made retroactive to enable businesses 
affected by the 2005 Gulf Coast Hurricanes to apply for and 
receive a disaster mitigation loan as provided by Section 
7(b)(1)(A) of the Small Business Act.

Sec. 202  Information Tracking and Follow-up System

    This provision will require the SBA develop, implement, and 
maintain a centralized information system to track all 
communications (written, e-mail, and phone) between disaster 
victims and SBA personnel concerning the status of their 
application. At a minimum, this system must record the method 
of communication, the date of the communication, the identity 
of the SBA employee involved in the communication, and a 
summary of the subject matter of the communication. This 
provision will also require the SBA to provide follow-up 
communications to disaster victims as their disaster loan 
proceeds through critical stages of the origination, approval, 
and disbursement process.
    The Committee intends for this section to help the SBA 
remedy its deficiencies in effectively tracking and providing 
accurate information on disaster loan applications. The 
Committee also believes that this disaster tracking system will 
eliminate the need for SBA personnel to receive loan 
application status updates from applicants.

Sec. 203  Immediate Disaster Assistance Program

    This provision directs the SBA to establish a program to 
make immediate short-term loans to small businesses damaged in 
a disaster. The Immediate Disaster Assistance Program will be 
administered through private sector lenders, however, and will 
carry an 85 percent guaranty on amounts up to $25,000. For this 
reason, loans under this program must be contingent upon the 
business applying for and meeting basic criteria for a 
subsequent SBA disaster loan, and the outstanding loan balance 
must be repaid with the proceeds of the conventional SBA loan.
    The Committee intends for this program to function as a 
bridge financing program for small businesses that are awaiting 
approval and disbursement of funds under the SBA's conventional 
disaster loan program. The immediate disaster assistance 
program is intended to provide disaster victims with emergency, 
small-dollar financing within 36 hours following a disaster 
pending the victim's receipt of a conventional disaster loan. 
This contrasts with the SBA's current loan program which has a 
target approval timeframe of 21 days and is intended to provide 
the disaster victim with long-term, low-interest assistance.
    To ensure that costs associated with this program are kept 
low, the Committee has drawn the Immediate Disaster Assistance 
Program with a limited and narrow scope. For this reason, the 
guaranty is limited to 85 percent on amounts up to $25,000. 
Additionally, loans will be contingent upon the applicant 
applying for, and meeting basic eligibility standards for a 
conventional disaster loan, which is then used to pay the 
balance of the immediate disaster assistance loan. These two 
factors alone will limit the federal government's risk exposure 
under this program. Because these are intended to be short-
term, small-dollar loans, the additional costs for borrowers 
should be marginal.

Sec. 204  Increased Deferment Period

    This provision will provide the SBA with authority to 
provide disaster victims with an option of receiving a four 
year deferment period for disaster loans. The Committee 
believes that this provision will provide disaster victims with 
additional time they need to rebuild their homes and businesses 
and reestablish their income before beginning repayment of 
their SBA disaster loan. Additionally, because the four year 
deferment is made at the discretion of the Administrator, and 
because interest will continue to accrue during the deferment 
period, the Committee believes that this provision will have 
little or no cost.

Sec. 205  Revised Repayment Terms

    This provision requires the SBA to impose a minimum 
deferment period of twelve months and mandates that the 
repayment period begin from the date that the final loan 
disbursement is made. Additionally, this provision requires 
that repayment amounts be based solely on funds that have 
actually been disbursed.
    The Committee intends for this provision to provide 
disaster victims with more equitable repayment terms that are 
more responsive to their needs immediately following a 
disaster. Additionally, because the interest continues to 
accrue during the mandatory twelve month deferment period, the 
Committee believes that this provision will have little or no 
cost.

Sec. 206  Revised Disbursement Process

    This provision will require that approved funds for SBA 
disaster loans be disbursed upon a schedule with increased 
minimum disbursement levels to better meet the needs of 
disaster victims. The Committee believes that this provision 
will enable the SBA to remedy problems in disbursing approved 
loan amounts in adequate amounts to meet disaster victims' 
needs in a timely manner. The Committee does not intend for 
this provision to preclude the SBA from making full 
disbursements in situations where it feels full disbursements 
are appropriate. The Committee only intends that this provision 
set minimum amounts that must be disbursed at each stage. The 
Committee also does not intend that the minimum disbursement 
amounts be controlling in situations where the borrower 
actually desires lesser amounts be disbursed in each stage.
    The Committee believes that by maintaining a disbursement 
schedule with stages and by leaving the disbursement schedule 
for loans in excess of $500,000 at the discretion of the SBA, 
the risk of increased losses will be limited.

Sec. 207  Revised Collateral Requirements

    This provision will revise the collateral requirements so 
that business owners are not required to pledge their homes for 
business loans less than $100,000. The Committee believes that 
this provision will encourage more small businesses to seek 
disaster loans without apprehension that their home will be 
placed at risk as they attempt to rebuild their businesses 
following a disaster. Additionally, the Committee believes that 
this provision is consistent with the SBA's current practice of 
making loans based upon an individual's ability to repay and 
income.

Sec. 208  Enhanced Lending Authority for Preferred Lenders

    This provision will create a program that permits Preferred 
SBA lenders to originate, process, approve, and service 
disaster loans for a small fee. This program may be initiated 
at the discretion of the Administrator, during incidents of 
national significance, and whenever the SBA's average time for 
disaster loan approvals in any single disaster runs longer than 
30 days. This provision will also permit the Administrator to 
suspend, revoke, or condition a lender's PLP status in the 
event that the loans they make experience an inordinate number 
of defaults.
    The SBA does not object to the creation of this program, 
but would like flexibility in deciding when the program must be 
implemented. As an initial observation, Section 208 is 
currently structured to provide the Administrator with 
discretion to implement the private lender program when he sees 
fit. Section 208 simply requires that the Administrator also 
implement the program in two specific situations when the 
Administration is most likely to need the additional loan 
processing, approval, and disbursement capacity that the 
private sector can provide. These situations are unlikely to 
occur frequently.

Sec. 209  Disaster Processing Redundancy

    This provision will require the SBA to maintain a backup 
disaster processing operation in a separate geographic location 
from the primary processing operation. The backup facility must 
be capable of taking over all disaster loan processing from the 
SBA's primary facility within two days following a disaster 
that renders the primary facility inoperable. The Committee 
intends for this provision to mitigate the risk associated with 
the SBA's current practice of maintaining a single disaster 
processing facility.

Sec. 210  Grant Program

    This provision will provide the SBA with authority to offer 
grants of up to $100,000 for the businesses that were most 
severely affected by the 2005 Gulf Coast Hurricanes. The 
Committee believes that this program will fill the need for 
financial assistance for small businesses that is currently not 
being met by any federally administered assistance program. The 
Committee does not intend for the grant program to carry 
forward to future disasters. The Committee intends that the 
grant program will be a one time program for small businesses 
impacted by Hurricanes Katrina, Rita, or Wilma.
    To limit the costs associated with this program, the 
Committee has limited the scope of the program by imposing very 
strict requirements for eligibility. Only small businesses 
located in qualifying counties and parishes will be eligible 
for grant assistance. These qualifying counties and parishes 
are those that experienced a loss of at least 100 housing 
units, that experienced a loss of at least 1% of housing stock, 
and that required Federal infrastructure assistance of at least 
$200,000. The Committee intends for these limitations to 
restrict the availability of grant assistance to only those 
communities that were severely impacted by Hurricanes Katrina, 
Rita, or Wilma. Additionally, a small business must also 
certify that it will reestablish its business in a qualifying 
county or parish. A small business must also have been in 
existence at least two years prior to the disaster and must 
have applied for and been rejected for a conventional SBA 
disaster loan. The Committee also intends for grant assistance 
to go to small businesses that are economically viable, as 
determined by the Administrator. The Committee believes that 
only a small number of businesses will meet all of these 
requirements to qualify for a grant. Finally, the Committee 
only intends for grant assistance to be provided in situations 
where the Administrator feels it is appropriate, and has thus 
provided the Administrator with discretion over whether the 
grant program will be implemented.

Sec. 211  Waiver of Prohibition on Duplication of Certain Benefits

    This provision will permit the Administrator to waive the 
prohibition on duplication of benefits for any victim of 
Hurricanes Katrina, Rita, or Wilma. In situations where an 
individual was not fully compensated for damage to their home 
through SBA loans in combination with other forms of 
assistance, insurance, or legal settlement, the Committee 
believes that the SBA should not require that the other form of 
compensation be used to repay the SBA disaster loan. 
Additionally, in situations where disaster victims have been 
negatively affected by delays in the SBA's loan processing or 
disbursement process, the Committee believes that the SBA 
should have flexibility to waive the prohibition on duplication 
of benefits if it will help victims to recover and rebuild.
    The Committee intends for this provision to provide the SBA 
with authority to remedy problems associated with the Louisiana 
Road Home grant assistance program for homeowners. The 
Committee does not intend for this provision to carry forward 
to other disasters. It will be limited solely to Hurricanes 
Katrina, Rita, or Wilma. Additionally, the Committee only 
intends for waivers to be provided in situations where the 
Administrator feels it is appropriate, and has thus provided 
the Administrator with discretion to decide when a waiver will 
be applied.

Sec. 212  Increase Legislative Limit

    This provision will increase the legislative limit on 
disaster loans from $1.5 million to $3 million. The Committee 
believes that this increase will enable the SBA to make loans 
that are more responsive to disaster victims that require 
higher levels of funding to recover and rebuild.

Sec. 213  Net Earnings Clause Prohibited

    This provision will preclude the imposition of annual 
``Supplemental Payment'' terms on loans in excess of $1 million 
during the first five years of repayment. The Committee 
believes that this provision will benefit capital-intensive 
small businesses that earn high profits, but require these 
funds for reinvestment in the business to remain profitable. 
The Committee does not intend for this provision to completely 
prohibit the SBA from imposing a net earnings clause, it simply 
precludes imposing these terms within the first five years of 
loan repayment.

Sec. 214  Economic Injury Disaster Loans to Non-Profits

    This provision will permit private nonprofit organizations 
to qualify for disaster assistance.

Sec. 215  Applicants That Will Constitute a Major Source of Employment 
        Due to Changed Economic Circumstances

    This provision will permit small businesses that were not a 
major source of employment prior to the disaster, but which 
subsequently are a major source of employment following the 
disaster to qualify for disaster loans beyond the current 
statutory limit. The Committee intends that this provision will 
enable the SBA to administer the disaster loan program with 
reference to the borrower's circumstances relative to the local 
area's economic conditions when the loan application is made.

Sec. 301  Annual Report on Disaster Assistance

    This provision will require the SBA to submit to Congress a 
report on the Disaster assistance program performance during 
the previous fiscal year. This report will cover changes in 
staffing, technology, and a review of challenges encountered 
and overall results. Additionally, during an incident of 
national significance, the SBA must make monthly reports to 
Congress with basic information on their disaster response.
    During incidents of national significance, the Committee 
does not intend for the SBA to provide information beyond what 
is readily available through current data tracking systems like 
DCMS. The Committee does not believe that the SBA should divert 
vital agency resources for the purpose of reporting to Congress 
during incidents of national significance.

            VIII. Congressional Budget Office Cost Estimate

                                                    March 29, 2007.
Hon. Nydia M. Velazquez,
Chairwoman, Committee on Small Business,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1361, the RECOVER 
Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Daniel 
Hoople.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 1361--RECOVER Act

    Summary: H.R. 1361 would make various changes to existing 
and future loans made by the Small Business Administration 
(SBA) in response to a disaster. Those changes would increase 
the cost of assistance that SBA will provide after future 
disasters, and also would increase the cost of certain loans 
SBA has already made or obligated. In addition, the bill would: 
increase the maximum loan that can be made for certain 
categories of individuals and businesses for hazard mitigation 
purposes; authorize SBA to guarantee disaster bridge loans to 
businesses; establish a program to authorize certain types of 
private lenders to process, approve, disburse, and service SBA 
disaster loans; and create a grant program for small businesses 
affected by the 2005 Gulf Coast hurricanes. Moreover, the bill 
would expand the Economic Injury Disaster Loan (EIDL) program 
to include private, nonprofit organizations.
    One provision of the bill would increase direct spending. 
Section 211 would grant SBA the discretion to partially or 
fully waive the requirement that borrowers prepay disaster 
loans upon receipt of other funds that are considered to be a 
duplication of the benefits provided by the SBA disaster loan. 
This provision would apply to borrowers in areas affected by 
Hurricanes Katrina, Rita, and Wilma. Based on information from 
SBA, CBO estimates that authorizing SBA to waive the 
duplication of benefits requirement would increase the subsidy 
rate for outstanding disaster loans by about 2 percentage 
points, at an estimated cost of $215 million over the 2007-2009 
period. That cost would be incurred without enactment of any 
subsequent legislation.
    In addition, CBO estimates that implementing other 
provisions of H.R. 1361 would cost $347 million over the 2008-
2012 period, subject to the appropriation of the necessary 
funds.
    H.R. 1361 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the bill is shown in the following table. 
The budgetary impact of this legislation falls within budget 
function 450 (community and regional development).

----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                                 -----------------------------------------------
                                                                   2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Elimination of Prohibition on Duplication:
    Estimated Authorization Level...............................     215       0       0       0       0       0
    Estimated Outlays...........................................     140      45      30       0       0       0

                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Changes to Future SBA Disaster Loans:
    Estimated Authorization Level...............................       0      28      29      29      30      30
    Estimated Outlays...........................................       0      14      25      29      29      30
Grants to Disaster-Affected Small Businesses:
    Estimated Authorization Level...............................       0     180       0       0       0       0
    Estimated Outlays...........................................       0      72      72      36       0       0
Economic Injury Disaster Loans to Private:
    Estimated Authorization Level...............................       0       3       3       3       3       3
    Estimated Outlays...........................................       0       2       3       3       3       3
Other Provisions Affecting SBA:
    Estimated Authorization Level...............................       0       6       6       6       6       6
    Estimated Outlays...........................................       0       4       5       5       6       6
    Total Proposed Changes--Subject to:
        Estimated Authorization Level...........................       0     217      38      38      39      39
        Estimated Outlays.......................................       0      92     105      73      38      39
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted before the end of fiscal year 2007, that 
the amounts authorized by the bill will be appropriated for 
each year, and that spending will follow historical patterns 
for current and similar programs.
    The Federal Credit Reform Act (FCRA) of 1990 requires an 
appropriation of the estimated subsidy costs and administrative 
costs associated with loan guarantee and direct loan program 
operations. The subsidy cost is the estimated long-term cost to 
the government of a direct loan or a loan guarantee, calculated 
on a net-present-value basis, excluding administrative costs. 
Administrative costs, calculated on a cash basis, include 
activities related to making, servicing and liquidating loans, 
as well as overseeing the performance of lenders.
    The budgetary impact of the bill's modifications to SBA's 
credit programs is measured in terms of projected subsidy 
costs. H.R. 1361 does not specify an explicit authorization 
level for either the subsidy or the administrative costs for 
the amendments it would make to SBA's disaster loan program or 
for the new direct loan and loan guarantee programs authorized 
by the bill; CBO estimated those amounts using historical 
information about the operation of SBA's disaster loan program.

Direct spending

    Section 211 would grant SBA the discretion to partially or 
fully waive the requirement that borrowers prepay disaster 
loans upon receipt of other funds (for example, grants or 
insurance payments) that are considered to be a duplication of 
the benefits provided by the loan. This provision would apply 
to loans made to areas of Texas, Louisiana, Mississippi, 
Alabama, and Florida affected by Hurricanes Katrina, Rita, and 
Wilma.
    Under procedures specified in the Federal Credit Reform Act 
for recording the cost of direct federal loans, the 
Administration now estimates that the subsidy rate is about 20 
percent for disaster loans made in fiscal year 2006 and 18 
percent for loans made in fiscal year 2007. As of March 2007, 
SBA had approved about $5.4 billion in disaster loans to 
individuals and businesses affected by the 2005 Gulf Coast 
hurricanes. CBO estimates that loan disbursements will reach 
about $7 billion by the end of fiscal year 2007 and close to 
$11 billion through 2009. Under current law, the expected 
subsidy cost to the federal government of those disaster loans 
made through fiscal year 2009 is about $1.9 billion. Based on 
information from SBA, CBO estimates that eliminating the 
prohibition on the duplication of benefits would increase the 
subsidy rate by about 2 percentage points, at an estimated cost 
of $215 million over the 2007-2009 period, largely because the 
loans would remain outstanding for longer periods of time.
    Under FCRA, the budgetary cost of legislative modifications 
to existing loans is recorded on the budget in the same year 
that the legislation making the modification is enacted. Thus, 
for the $7 billion in loans expected to be disbursed by the end 
of fiscal year 2007, CBO estimates that this provision would 
cost $140 million in 2007. As approved loans continue to be 
disbursed through 2009, the additional costs of those loans 
would be recorded in the federal budget upon disbursement. As a 
result, CBO estimates that enacting H.R. 1361 will increase 
direct spending by $215 million over the 2007-2009 period. 
Enacting H.R. 1361 would affect direct spending because that 
cost would be incurred without enactment of subsequent 
legislation.

Spending subject to appropriation

    CBO estimates that the costs of implementing H.R. 1361 that 
are subject to appropriation action would total $347 million 
over the 2008-2012 period, assuming appropriation of the 
necessary amounts.
    Disaster Mitigation Loans. Section 201 would authorize SBA 
to make or guarantee loans for disaster mitigation up to a 
maximum of 20 percent of the assessed damage to a home or 
business. Currently, SBA offers direct loans for such purposes 
up to a maximum of 20 percent of the approved disaster loan. In 
some cases, SBA will make a disaster loan for less than the 
assessed damage due to factors such as reimbursements from 
other sources. Thus, H.R. 1361 would increase the maximum 
amount of a disaster mitigation loan by 20 percent of the 
difference between assessed damages and the approved loan 
amount. The bill would apply this increase to loans made to 
small businesses and private, nonprofit organizations in the 
areas of Texas, Louisiana, Mississippi, Alabama and Florida 
affected by Hurricanes Katrina, Rita, and Wilma, as well as to 
all future mitigation loans. The demand for such loans tends to 
be relatively small, and CBO estimates that implementing this 
provision would have a negligible effect on the federal budget 
over the next five years.
    Immediate Disaster Assistance Program. Section 203 would 
establish an Immediate Disaster Assistance Program. Under the 
program, SBA would guarantee 85 percent of private loans, up to 
$25,000, made to businesses following a disaster. Once an 
application is received, SBA would be required to approve or 
disapprove such a loan guarantee within 36 hours. Upon approval 
of a traditional disaster loan for a business borrower, any 
amount guaranteed under the proposed Immediate Disaster 
Assistance Program would be immediately repaid. Such a program 
to ``bridge'' the time period between the need for a loan and 
the availability of a traditional disaster loan would be 
similar to one already operated by SBA for certain nondisaster 
loans. Based on information from the agency, CBO expects that 
demand for SBA loans would not be significantly altered under 
such new authority, although additional risk would be incurred 
for borrowers that receive loan guarantees and are later denied 
a traditional disaster loan. Because that is not likely to 
occur often, CBO estimates that this program would have a 
negligible cost over the next five years.
    Changes to Future SBA Disaster Loans. Section 205 would 
require SBA to lengthen the time period during which borrowers 
may defer repayment of disaster loans to a minimum of 12 months 
after final loan disbursement. Furthermore, the bill would 
require that repayment calculations be based solely upon the 
disbursed amount of the loan. Currently, SBA grants a minimum 
deferment period of five months following loan approval and 
calculates repayment based on the approved amount of the loan. 
Based on information from SBA, CBO expects that the deferment 
period for most disaster loans would increase to about 18 
months under the bill and that the revised repayment 
calculation would extend the total repayment period for a small 
number of loans. CBO estimates that implementing these 
provisions of H.R. 1361 would increase the future subsidy cost 
of disaster loans by about 3 percentage points. For this 
estimate, CBO assumed that the demand for SBA disaster loans 
over the next five years would average about $1 billion per 
year. On that basis, we estimate that implementing this 
provision would cost $14 million in 2008 and $127 million over 
the 2008-2012 period. Such costs would be subject to 
appropriation action.
    Section 207 would prohibit SBA from requiring a borrower to 
use his or her home as collateral for a business disaster loan 
of less than or equal to $100,000. Current law prohibits the 
collateral requirement for loans that are less than $10,000. 
For loans above this threshold, SBA prefers (but does not 
require) the use of a borrower's home as collateral. As such, 
CBO expects that this provision would not increase the number 
of loans approved by SBA, but that it could affect the recovery 
rates on any future loans that go into default. SBA does not 
consider the value of a home as collateral when estimating the 
subsidy rate for business disaster loans. Therefore, CBO 
expects that this provision would have a minor impact on the 
subsidy cost of such loans.
    Enhanced Lending Authority for Private Lenders. Section 208 
would direct SBA to establish a program whereby certain private 
lenders would be permitted to process, approve, close, and 
service disaster loans. This program could be implemented at 
any time at the discretion of the SBA, but would be required 
when a disaster of national significance occurs or when the 
average approval period for disaster loans exceeds 30 days. For 
this work, SBA would pay participating private lenders a 
servicing fee of up to two percent of the total loan amount 
approved by the private lenders.
    CBO expects that such a program would be used infrequently 
following rare catastrophic events. The existence of the 
Disaster Reserve Corps that would be authorized by this bill 
would lessen the need to use private lenders. Assuming minimal 
differences in the default rates and administrative expenses of 
loans made by private lenders and those made by SBA, CBO 
estimates that implementing this provision would have a 
negligible effect on the federal budget. It is possible, 
however, that having private lenders approve, disburse, close, 
and service direct federal loans could change--perhaps 
significantly--the subsidy rate for future disaster loans. 
There is no precedent for this type of private-sector 
involvement in issuing federal loans, and CBO has no basis for 
judging whether and how subsidy rates would change as a result 
of this provision.
    Grants to Disaster-Affected Small Businesses. Section 210 
would establish a grant program for small businesses in certain 
areas of Texas, Louisiana, Mississippi, Alabama, and Florida 
affected by Hurricanes Katrina, Rita, and Wilma. Eligible small 
businesses include those that were denied traditional disaster 
loans and are determined to have long-term economic viability. 
The maximum amount of such grants would be $100,000, and they 
would be awarded upon the condition that the business be 
reestablished in the disaster-affected region. As of March 
2007, about 18,000 businesses were rejected for traditional 
disaster loans in the applicable regions. Because they did not 
receive loans, CBO expects few businesses could be considered 
viable. Assuming 10 percent of those applicants met the 
eligibility criteria specified in the bill and were awarded the 
full grant value, CBO estimates that implementing this 
provision would cost $72 million in 2008 and $180 million over 
the 2008-2012 period, assuming appropriation of the necessary 
funds.
    Disaster Loans to Private Nonprofit Organizations. Section 
214 would expand SBA's Economic Injury Disaster Loans (EIDL) 
program to include private, nonprofit organizations. Under 
current law, the EIDL program makes direct loans to small 
businesses and small agricultural cooperatives that have 
suffered a substantial loss in business revenue as a result of 
a disaster. Based on the historical volume of physical disaster 
loans made to nonprofits and of EIDLs made to small businesses, 
CBO estimates that implementing this provision would cost $2 
million in 2008 and $14 million over the 2008-2012 period for 
the subsidy and administrative cost of making additional loans.
    Other Provisions. Based on information from SBA, CBO 
estimates that implementing other provisions of H.R. 1361 would 
require appropriations totaling $30 million over the next five 
years. That amount includes:
         $15 million to maintain a Disaster Reserve 
        Corps of 1,000 individuals, including training and an 
        annual simulation exercise;
         $10 million to ensure that a backup loan-
        processing facility could become operational within 2 
        days of a primary facility becoming unavailable; and
         $5 million to create separate Directors of 
        Disaster Assistance and Planning, including additional 
        support staff.
    Those estimates are based on information from SBA regarding 
costs of existing or similar programs. Based on historical 
spending patterns, CBO estimates that fully funding those 
activities would cost $4 million in 2008 and $26 million over 
the next five years, assuming appropriation of the necessary 
amounts.
    Intergovernmental and private sector impact: H.R. 1361 
contains no intergovernmental or private-sector mandates, as 
defined in UMRA, and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal Costs: Daniel Hoople; Impact 
on State, Local, and Tribal Governments: Melissa Merrell; 
Impact on the Private Sector: Craig Cammarata.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                    IX. Committee Estimate of Costs

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 1362. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

                         X. Oversight Findings

    In accordance with clause (2)(b)(1) of rule X of the Rules 
of the House of Representatives, the oversight findings and 
recommendations of the Committee on Small Business with respect 
to the subject matter contained in H.R. 1361 are incorporated 
into the descriptive portions of this report.

               XI. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8, clause 18, of the 
Constitution of the United States.

                 XII. Compliance With Public Law 104-4

    H.R. 1361 contains no unfunded mandates.

                 XIII. Congressional Accountability Act

    H.R. 1361 does not relate to the terms and conditions of 
employment or access to public services or accommodations with 
the meaning of section 102(b)(3) of P.L. 104-1.

               XIV. Federal Advisory Committee Statement

    This legislation does not establish or authorize the 
establishment of any new advisory committees.

                      XV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 1361 does not 
contain any congressional earmarks, limited tax benefits, or 
limited tariff benefits as defined in clause 9(d), 9(e), or 
9(f) of rule XXI.

                 XVI. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 1361 includes a number of provisions designed update 
and improve the Small Business Administration's ability to plan 
and respond effectively to large scale disasters. H.R. 1361 
will also improve the agency's ability to provide disaster 
assistance that is more responsive to the needs of disaster 
victims.

      XVII. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                           SMALL BUSINESS ACT




           *       *       *       *       *       *       *
  Sec. 3. (a)  * * *

           *       *       *       *       *       *       *

  (k)(1)  * * *
  (2) For purposes of section 7(b)(2), the term ``disaster'' 
includes--
          (A) drought; [and]
          (B) below average water levels in the Great Lakes, or 
        on any body of water in the United States that supports 
        commerce by small business concerns[.];
          (C) ice storms and blizzards; and
          (D) lack of snowfall.

           *       *       *       *       *       *       *

  Sec. 7. (a) Loans to Small Business Concerns; Allowable 
Purposes; Qualified Business; Restrictions and Limitations.--
The Administration is empowered to the extent and in such 
amounts as provided in advance in appropriation Acts to make 
loans for plant acquisition, construction, conversion, or 
expansion, including the acquisition of land, material, 
supplies, equipment, and working capital, and to make loans to 
any qualified small business concern, including those owned by 
qualified Indian tribes, for purposes of this Act. Such 
financings may be made either directly or in cooperation with 
banks or other financial institutions through agreements to 
participate on an immediate or deferred (guaranteed) basis. 
These powers shall be subject, however, to the following 
restrictions, limitations, and provisions:
          (1) * * *

           *       *       *       *       *       *       *

  (b) Except as to agricultural enterprises as defined in 
section 18(b)(1) of this Act, the, Administration also is 
empowered to the extent and in such amounts as provided in 
advance in appropriation Acts--
          (1) * * *
          (2) to make sure loans (either directly or in 
        cooperation with banks or other lending institutions 
        through agreements to participate on an immediate or 
        deferred (guaranteed) basis) as the Administration may 
        determine to be necessary or appropriate to any small 
        business concern, private nonprofit organization, or 
        small agricultural cooperative located in an area 
        affected by a disaster, (including drought or lack of 
        snowfall), with respect to both farm-related and 
        nonfarm-related small business concerns, if the 
        Administration determines that the concern, 
        organization, or the cooperative has suffered a 
        substantial economic injury as a result of such 
        disaster and if such disaster constitutes--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (D) if no disaster declaration has been 
                issued pursuant to subparagraph (A), (B), or 
                (C), the Governor of a State in which a 
                disaster has occurred may certify to the Small 
                Business Administration that small business 
                concerns, private nonprofit organizations, or 
                small agricultural cooperatives (1) have 
                suffered economic injury as a result of such 
                disaster, and (2) are in need of financial 
                assistance which is not available on reasonable 
                terms in the disaster stricken area. Not later 
                than 30 days after the date of receipt of such 
                certification by a Governor of a State, the 
                Administration shall respond in writing to that 
                Governor on its determination and the reasons 
                therefore, and may then make such loans as 
                would have been available under this paragraph 
                if a disaster declaration had been issued[.]; 
                and
                  (E) an incident of national significance, as 
                declared by the President or his designee, in 
                which case assistance under this paragraph may 
                be provided, subject to the other applicable 
                requirements of this paragraph, to a private 
                nonprofit organization (as that term is defined 
                in section 29(a)(2)) that is located in an area 
                affected by the incident of national 
                significance.
        Provided, That no loan or guarantee shall be extended 
        pursuant to this paragraph (2) unless the 
        Administration finds that the applicant is not able to 
        obtain credit elsewhere.
          (3)(A) * * *

           *       *       *       *       *       *       *

          (C) A small business concern described in 
        subparagraph (B) shall be eligible to apply for 
        assistance under this paragraph during the period 
        beginning on the date on which the essential employee 
        is ordered to active duty and ending on the date that 
        is [90 days] 1 year after the date on which such 
        essential employee is discharged or released from 
        active duty. The Administrator may, when appropriate 
        (as determined by the Administrator), waive the ending 
        date specified in the preceding sentence and provide a 
        later ending date.

           *       *       *       *       *       *       *

          (E) No loan may be made under this paragraph, either 
        directly or in cooperation with banks or other lending 
        institutions through agreements to participate on an 
        immediate or deferred basis, if the total amount 
        outstanding and committed to the borrower under this 
        subsection would exceed [$1,500,000] $3,000,000, unless 
        such applicant constitutes, or will due to changed 
        economic circumstances constitute, a major source of 
        employment in its surrounding area, as determined by 
        the Administration, in which case the Administration, 
        in its discretion, may waive the [$1,500,000] 
        $3,000,000 limitation.

           *       *       *       *       *       *       *

          (G) The Administrator shall establish a process under 
        which a small business concern described in 
        subparagraph (B) may file a preliminary application for 
        assistance under this paragraph, accompanied by 
        supporting documentation, before the date on which the 
        essential employee is ordered to active duty. The 
        Administrator may not actively consider such an 
        application or provide assistance to the small business 
        concern based on such an application until the date on 
        which the essential employee is ordered to active duty.
          (4) Grants to disaster-affected small businesses.--
                  (A) In general.--The Administrator may make a 
                grant of up to $100,000 to a small business 
                concern that--
                          (i) was located in a designated 
                        disaster area affected by disaster 
                        declaration 10176, 10177, 10178, 10179, 
                        10180, 10181, 10203, 10204, 10205, 
                        10206, 10222, or 10233, and was located 
                        in a county or parish that, as a result 
                        of Hurricanes Katrina, Rita, or Wilma 
                        of 2005, experienced a loss of at least 
                        100 housing units, experienced a loss 
                        of at least 1 percent of available 
                        housing stock, and required Federal 
                        infrastructure assistance of a least 
                        $200,000;
                          (ii) submits to the Administrator a 
                        certification by the owner of the 
                        concern of intent to reestablish the 
                        concern in the same county or parish in 
                        which the business was originally 
                        located, or in any other county or 
                        parish described in clause (i);
                          (iii) has applied for, and was 
                        rejected for, a conventional disaster 
                        assistance loan under section 7(b); and
                          (iv) was in existence for at least 2 
                        years before the date on which the 
                        applicable disaster declaration was 
                        made.
                  (B) Priority.--In making grants under this 
                paragraph, the Administrator shall give 
                priority to a small business concern that the 
                Administrator determines is economically viable 
                but unable to meet short-term financial 
                obligations.
                  (C) Definition.--In this paragraph, the term 
                ``disaster-affected area'' means an area that 
                has been designated by the Administrator as a 
                disaster area.
                  (D) Authorization of appropriations.--There 
                are authorized to be appropriated for grants 
                under this paragraph such funds as may be 
                necessary.
          (5) Waiver of prohibition on duplication of certain 
        benefits.--For any disaster victim under disaster 
        declaration 10176, 10177, 10178, 10179, 10180, 10181, 
        10203, 10204, 10205, 10206, 10222, or 10223, in 
        providing assistance under paragraph (1) or (2), the 
        Administrator may waive, in whole or in part, the 
        prohibition on the duplication of benefits, including 
        whether damage or destruction has been compensated for 
        by, credit is available from, activities are 
        reimbursable through, or funds have been made available 
        from any other source.
  (c)(1) * * *

           *       *       *       *       *       *       *

          (5) Notwithstanding the provisions of any other law, 
        the interest rate on the Federal share of any loan made 
        under subsection (b)(1) and (b)(2) on account of a 
        disaster commencing on or after October 1, 1982, shall 
        be--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) in the case of a business, organization, 
                or other concern, including agricultural 
                cooperatives, unable to obtain credit 
                elsewhere, not to exceed 4 per centum per 
                annum;

           *       *       *       *       *       *       *

  (e) Disaster Mitigation Loans.--
          (1) Authority.--The Administrator may make or 
        guarantee a mitigation loan to a small business concern 
        that receives a loan under section 7(b)(1)(A) for the 
        damage or destruction, by reason of an incident of 
        national significance (as declared by the President or 
        his designee), of property owned by the small business 
        concern.
          (2) Amount of loan.--The amount of a loan under 
        paragraph (1) shall not exceed 20 percent of the total 
        amount of the cost of the damage or destruction 
        referred to in paragraph (1). The total amount shall be 
        calculated without regard for any costs for which the 
        small business concern is reimbursed under any 
        insurance policy or otherwise.
  (f) Additional Requirements for 7(b) Loans.--
          (1) Increased deferment authorized.--
                  (A) In general.--In making loans under 
                section 7(b), the Administrator may provide, to 
                the person receiving the loan, an option to 
                defer repayment on the loan.
                  (B) Period.--A deferment under subparagraph 
                (A) may not exceed 4 years.
          (2) Revised repayment terms.--In making loans under 
        section 7(b), the Administrator--
                  (A) shall not require repayment to be made 
                until 12 months after the date on which the 
                final disbursement of approved amounts is made; 
                and
                  (B) shall calculate the amount of repayment 
                based solely on the amounts disbursed.
          (3) Revised disbursement process.--In making loans 
        under section 7(b), the Administrator shall disburse 
        the loan amounts in stages as follows:
                  (A) Loans up to $150,000.--If the total 
                amount approved is less than or equal to 
                $150,000--
                          (i) the first disbursement shall 
                        consist of 40 percent of the total loan 
                        amount, or a lesser percentage of the 
                        total loan amount if the Administrator 
                        and the borrower agree on such a lesser 
                        percentage;
                          (ii) the second disbursement shall 
                        consist of 50 percent of the amounts 
                        that remain after the first 
                        disbursement, and shall be made when 
                        the borrower has produced satisfactory 
                        receipts to demonstrate the proper use 
                        of the first half of the first 
                        disbursement; and
                          (iii) the third disbursement shall 
                        consist of the amounts that remain 
                        after the preceding disbursements, and 
                        shall be made when the borrower has 
                        produced satisfactory receipts to 
                        demonstrate the proper use of the first 
                        disbursement and the first half of the 
                        second disbursement.
                  (B) Loans from $150,000 to $500,000.--If the 
                total amount approved is more than $150,000 but 
                less than or equal to $500,000--
                          (i) the first disbursement shall 
                        consist of 20 percent of the total loan 
                        amount, or a lesser percentage if the 
                        Administrator and the borrower agree on 
                        such a lesser percentage;
                          (ii) the second disbursement shall 
                        consist of 30 percent of the total loan 
                        amount remaining after the first 
                        disbursement, and shall be made when 
                        the borrower has produced satisfactory 
                        receipts to demonstrate the proper use 
                        of the first half of the first 
                        disbursement;
                          (iii) the third disbursement shall 
                        consist of 25 percent of the total loan 
                        amount remaining after the first and 
                        second disbursements, and shall be made 
                        when the borrower has produced 
                        satisfactory receipts to demonstrate 
                        the proper use of the first 
                        disbursement and the first half of the 
                        second disbursement; and
                          (iv) the fourth disbursement shall 
                        consist of the amounts that remain 
                        after the preceding disbursements, and 
                        shall be made when the borrower has 
                        produced satisfactory receipts to 
                        demonstrate the proper use of the first 
                        and second disbursements and the first 
                        half of the third disbursement.
                  (C) Loans greater than $500,000.--If the 
                total amount approved is more than $500,000--
                          (i) the first disbursement shall 
                        consist of at least $100,000, or a 
                        lesser amount if the Administrator and 
                        the borrower agree on such a lesser 
                        amount; and
                          (ii) the number of disbursements 
                        after the first, and the amount of each 
                        such disbursement, shall be in the 
                        discretion of the Administrator, but 
                        the amount of each such disbursement 
                        shall be not less than $100,000.
          (4) Revised collateral requirements.--In making a 
        business loan under section 7(b), the total approved 
        amount of which is less than or equal to $100,000, the 
        Administrator shall not require the borrower to use the 
        borrower's home as collateral.
          (5) Net earnings clauses prohibited.--In making loans 
        under section 7(b), the Administrator shall not require 
        the borrower to pay any non-amortized amount for the 
        first 5 years after repayment begins.

           *       *       *       *       *       *       *


SEC. 37. COMPREHENSIVE DISASTER RESPONSE PLAN.

  (a) Plan Required.--The Administrator shall develop, 
implement, and maintain a comprehensive written disaster 
response plan. The plan shall include the following:
          (1) For each region of the Administration, a 
        description of the disasters most likely to occur in 
        that region.
          (2) For each disaster described under paragraph (1)--
                  (A) an assessment of the disaster;
                  (B) an assessment of the demand for 
                Administration assistance most likely to occur 
                in response to the disaster;
                  (C) an assessment of the needs of the 
                Administration, with respect to such resources 
                as information technology, telecommunications, 
                human resources, and office space, to meet the 
                demand referred to in subparagraph (B); and
                  (D) guidelines pursuant to which the 
                Administration will coordinate with other 
                Federal agencies and with State and local 
                authorities to best respond to the demand 
                referred to in subparagraph (B) and to best use 
                the resources referred to in that subparagraph.
  (b) Completion; Revision.--The first plan required by 
subsection (a) shall be completed not later than 180 days after 
the date of the enactment of this section. Thereafter, the 
Administrator shall update the plan on an annual basis and 
following any incident of national significance (as declared by 
the President or his designee).
  (c) Knowledge Required.--The Administrator shall carry out 
subsections (a) and (b) through an individual with substantial 
knowledge in the field of disaster readiness and emergency 
response.
  (d) Report.--The Administrator shall include a report on the 
plan whenever the Administrator submits the report required by 
section 47(a).

SEC. 38. ANNUAL DISASTER SIMULATION EXERCISE.

  (a) Exercise Required.--The Administrator shall conduct a 
disaster simulation exercise at least once each fiscal year. 
The exercise shall include the participation of, at a minimum, 
not less than half of the individuals in the disaster reserve 
corps and shall test, at maximum capacity, all of the 
information technology and telecommunications systems of the 
Administration that are vital to the activities of the 
Administration during such a disaster.
  (b) Report.--The Administrator shall include a report on the 
disaster simulation exercise whenever the Administration 
submits the report required by section 47(a).

SEC. 39. DISASTER RESERVE CORPS.

  (a) Corps Required.--The Administrator shall maintain within 
the Administration a disaster reserve corps, the purpose of 
which is to perform the functions of the Administration related 
to disaster response. The corps shall consist of at least 1,000 
individuals, each of whom--
          (1) does not ordinarily have the duties of a full-
        time officer or employee of the Administration; but
          (2) is able to assume duties related to disaster 
        response when the Administrator so requires.
  (b) Training.--The Administrator shall ensure that each 
individual in the corps receives training each year in one or 
more functions relating to disaster response. To the maximum 
extent practicable, the function in which an individual is 
trained in one year shall be different from the function in 
which the individual was trained in prior years.
  (c) Geographic Distribution.--The Administrator shall ensure 
that not more than 30 percent of the individuals in the corps 
reside in any one region of the Administration.
  (d) Report.--The Administrator shall include a report on the 
corps whenever the Administration submits the report required 
by section 47(a).

SEC. 40. PLANS TO SECURE ADDITIONAL OFFICE SPACE.

  (a) Plans Required.--The Administrator shall develop long-
term plans to secure additional office space to accommodate an 
expanded workforce in times of disaster.
  (b) Report.--The Administrator shall include a report on the 
plans whenever the Administration submits the report required 
by section 47(a).

SEC. 41. COORDINATION OF DISASTER ASSISTANCE PROGRAMS WITH FEMA.

  (a) Coordination Required.--The Administrator shall ensure 
that the disaster assistance programs of the Administration are 
coordinated, to the maximum extent practicable, with the 
disaster assistance programs of the Federal Emergency 
Management Agency.
  (b) Regulations Required.--The Administrator, in consultation 
with the Director of the Federal Emergency Management Agency, 
shall establish regulations to ensure that each application for 
disaster assistance is submitted as quickly as practicable to 
the Administration or directed to the appropriate agency under 
the circumstances.
  (c) Completion; Revision.--The initial regulations shall be 
completed not later than 270 days after the date of the 
enactment of this section. Thereafter, the regulations shall be 
revised on an annual basis.
  (d) Report.--The Administrator shall include a report on the 
regulations whenever the Administration submits the report 
required by section 47(a).

SEC. 42. ASSOCIATE ADMINISTRATOR FOR DISASTER ASSISTANCE.

  (a) In General.--There is established in the Administration 
an Associate Administrator for Disaster Assistance, appointed 
by the President by and with the advice and consent of the 
Senate, from among individuals who have--
          (1) proven management ability; and
          (2) substantial knowledge in the field of disaster 
        readiness and emergency response.
  (b) Director of Disaster Planning.--
          (1) Appointment.--There is established in the 
        Administration a Director for Disaster Planning, 
        appointed by the Administrator from among the personnel 
        of the Administration.
          (2) Duties.--Subject to the authority, direction, and 
        control of the Associate Administrator for Disaster 
        Assistance, the Director shall--
                  (A) develop and implement the 
                Administration's plans for responding to 
                disasters; and
                  (B) direct the Administration's training 
                exercises with respect to disasters.
          (3) Coordination.--In carrying out the duties under 
        paragraph (2), the Director shall coordinate with--
                  (A) the Associate Administrator for the 
                Office of Disaster Assistance of the 
                Administration;
                  (B) the Director of the Federal Emergency 
                Management Agency; and
                  (C) other Federal, State, and local disaster 
                planning offices, as necessary.
  (c) Director of Disaster Lending.--
          (1) Appointment.--There is established in the 
        Administration a Director for Disaster Lending, 
        appointed by the Administrator from among the personnel 
        of the Administration.
          (2) Duties.--Subject to the authority, direction, and 
        control of the Associate Administrator for Disaster 
        Assistance, the Director shall direct all aspects of 
        the disaster lending program under section 7(b).
  (d) Resources.--The Administrator shall ensure that the 
Associate Administrator for Disaster Assistance, the Director 
of Disaster Planning, and the Director of Disaster Lending have 
adequate resources to carry out the duties under this section.

SEC. 43. INFORMATION TRACKING AND FOLLOW-UP SYSTEM FOR DISASTER 
                    ASSISTANCE.

  (a) System Required.--The Administrator shall develop, 
implement, and maintain a centralized information system to 
track communications between personnel of the Administration 
and applicants for disaster assistance. The system shall ensure 
that whenever an applicant for disaster assistance communicates 
with such personnel on a matter relating to the application, 
the following information is recorded:
          (1) The method of communication.
          (2) The date of communication.
          (3) The identity of the personnel.
          (4) A summary of the subject matter of the 
        communication.
  (b) Follow-up Required.--The Administrator shall ensure that 
an applicant for disaster assistance receives, by telephone, 
mail, or electronic mail, follow-up communications from the 
Administration at all critical stages of the application 
process, including the following:
          (1) When the Administration determines that 
        additional information or documentation is required to 
        process the application.
          (2) When the Administration determines whether to 
        approve or deny the loan.
          (3) When the primary contact person managing the loan 
        application has changed.

SEC. 44. IMMEDIATE DISASTER ASSISTANCE PROGRAM.

  (a) Program Required.--The Administrator shall carry out a 
program, to be known as the Immediate Disaster Assistance 
program, under which the Administration participates on a 
deferred (guaranteed) basis in 85 percent of the balance of the 
financing outstanding at the time of disbursement of the loan 
if such balance is less than or equal to $25,000 for businesses 
affected by a disaster.
  (b) Eligibility Requirement.--To receive a loan guaranteed 
under subsection (a), the applicant must also apply for, and 
meet basic eligibility standards for, a loan under section 
7(b).
  (c) Use of Proceeds.--A person who receives a loan under 
section 7(b) must use the proceeds of that loan to repay all 
loans guaranteed under subsection (a), if any, before using the 
proceeds for any other purpose.
  (d) Approval or Disapproval.--The Administrator shall ensure 
that each applicant for a loan under the program receives a 
decision approving or disapproving of the application within 36 
hours after the Administration receives the application.

SEC. 45. ENHANCED LENDING AUTHORITY FOR PRIVATE LENDERS.

  (a) Program Authorized.--The Administrator may, and during a 
period specified in subsection (b) shall, carry out a program 
under which the Administrator permits banks and other financial 
institutions to process, approve, close, and service disaster 
loans under section 7(b) for a fee not to exceed 2 percent of 
the total loan amount.
  (b) Periods During Which Program Is Required.--The program 
under subsection (a) is required to be carried out during the 
following periods:
          (1) Any period of an incident of national 
        significance (as declared by the President or his 
        designee).
          (2) Any period during which the average time for the 
        Administration to approve disaster loans in response to 
        any single disaster is 30 days or more.
  (c) Exclusion of Lenders.--If the number or rate of defaults 
on loans processed, approved, and closed by a lender under the 
program under subsection (a) are inordinate, as determined by 
the Administrator, the Administrator may do any one or more of 
the following:
          (1) Exclude the lender from participating in the 
        program under subsection (a).
          (2) Exclude the lender from participating in the 
        Preferred Lenders Program under section 7(a)(2)(C)(ii).
  (d) Factor in Preferred Lenders Program.--In determining 
whether a lender is to be certified or recertified to 
participate in the Preferred Lenders Program under section 
7(a)(2)(C)(ii), the Administrator may consider as a factor the 
following:
          (1) The loans processed, approved, and closed by the 
        lender under the program under subsection (a).
          (2) The participation or non-participation of the 
        lender in the program under subsection (a).

SEC. 46. DISASTER PROCESSING REDUNDANCY.

  (a) In General.--The Administrator shall ensure that the 
Administration has in place a facility for disaster loan 
processing that, whenever the Administration's primary facility 
for disaster loan processing becomes unavailable, is able to 
take over all disaster loan processing from that primary 
facility within 2 days.
  (b) Authorization of Appropriations.--There are authorized to 
be appropriated to carry out this section such sums as may be 
necessary.

SEC. 47. REPORTS ON DISASTER ASSISTANCE.

  (a) Annual Report Required.--Not later than 45 days after the 
end of a fiscal year, the Administrator shall submit to the 
Committee on Small Business of the Senate and the Committee on 
Small Business of the House of Representatives a report on the 
disaster assistance operations of the Administration for that 
fiscal year. The report shall--
          (1) specify the number of Administration personnel 
        involved in such operations;
          (2) describe any material changes to those 
        operations, such as changes to technologies used or to 
        personnel responsibilities;
          (3) describe and assess the effectiveness of the 
        Administration in responding to disasters during that 
        fiscal year, including a description of the number and 
        amounts of loans made for damage and for economic 
        injury; and
          (4) describe the plans of the Administration for 
        preparing to respond to disasters during the next 
        fiscal year.
  (b) Incidents of National Significance.--During the period of 
an incident of national significance (as declared by the 
President or his designee), the Administrator shall, on a 
monthly basis, submit to the committees specified in subsection 
(a) a report on the disaster assistance operations of the 
Administration with respect to that incident of national 
significance. The report shall specify--
          (1) the number of applications distributed;
          (2) the number of applications received;
          (3) the average time for the Administration to 
        approve or disapprove an application;
          (4) the amount of disaster loans approved;
          (5) the average time for initial disbursement of loan 
        proceeds; and
          (6) the amount of disaster loan proceeds disbursed.
  Sec. [37.] 99. All laws and parts of laws inconsistent with 
this Act are hereby repealed to the extent of such 
inconsistency.