SMALL BUSINESS ADMINISTRATION Office of the Chief Operating Officer – Disaster Assistance Support AGENCY: The U.S. Small Business Administration ACTION: Request for Information SUMMARY: The purpose of this Request for Information (RFI) is to solicit input from interested parties on how the private sector can best support the delivery of SBA’s Disaster Assistance (a) within its current operational framework, and/or (b) within a guaranteed lending framework. The goal of this RFI is to generate policy discussions about the potential role and capability of the private sector to deliver disaster assistance to homeowners, renters and businesses in the United States. BACKGROUND: In the late summer and fall of 2005, Hurricanes Katrina, Rita, and Wilma destroyed portions of Florida, Alabama, Louisiana, Mississippi, and Texas. These hurricanes wreaked devastation on home and business owners and collectively represent the worst natural disasters in the history of the United States of America. The magnitude of these disasters caused more home and business owners to apply for disaster loans from SBA’s Office of Disaster Assistance (ODA) than any previous disaster. It is estimated that over 400,000 home and business owners will apply. The Small Business Act authorizes the SBA to make loans to eligible victims of declared disasters. The ODA plans, directs, and administers the SBA’s responsibilities under the Act. The mission of the ODA is to help people recover from disasters and rebuild their lives by providing affordable, timely and accessible financial assistance to homeowners, renters, businesses of all sizes and nonprofit organizations. Further details that describe the SBA’s operating procedures for the delivery of its disaster assistance can be found in the attached appendix. Generally, the SBA is committed to providing a decision to a disaster applicant within 21 business days upon receipt of their application. In the past, the SBA has proven capable of meeting this commitment. However, Hurricanes Katrina, Rita, and Wilma pushed the capabilities of SBA’s program far beyond normal limits. Due to the unprecedented nature of these disasters, average time to process 85% of all applications (the current SBA performance output measure) has exceeded the averages of previous years. As a result, the SBA is soliciting input from interested parties on how the private sector can best support the delivery of SBA’s Disaster Assistance. The goal is to initiate policy discussions about the potential role and capability of the private sector to deliver disaster assistance to disaster victims in the United States. GENERAL MODELS: There are two general models for processing applications. The first is the current model where the Federal government makes direct loans. The second model allows the Federal government to guarantee loans issued by banks and other lending institutions. Both models are authorized by Section 7(b) of the Small Business Act. AREAS OF COMMENTS: In our preparation for future disasters, the SBA seeks ideas and options for complementing our existing resources. Specifically, the Agency seeks comments on implementing one or both of the two models described above. The response should specifically address the following needs of the Federal government: 1) The ability to process and close an extremely high volume of applications (e.g. 400,000+), potentially in multiple disparate geographic locations or across a large region of the country. 2) The ability to process 85% of applications within 21 days. 3) The ability to process applications in a cost effective manner. While the Agency does not expect the response to provide a specific proposal for delivering services, it should include a discussion of estimated costs of a new or complementary system. DATES AND ADDRESSES: Responses should be submitted to SBA, Office of the Chief Operating Officer (COO), on or before 5:00 pm EST on May 2, 2006 Electronic Reponses are preferred and should be addressed to:
[email protected] . Include COO RFI Responses in the subject line. Non-electronic responses will also be accepted. Please send to: Office of the COO U.S. Small Business Administration 409 3rd Street, SW Washington DC 20416 DISCLAIMER: This RFI is issued solely for information and planning purposes and does not constitute a solicitation. All information received in response to this RFI that is marked Proprietary will be handled accordingly. Responses to the RFI will not be returned. In accordance with FAR 15.202(e), responses to this notice are not an offer and cannot be accepted by the Government to form a binding contract. Respondents are solely responsible for all expenses associated with responding to this RFI. Appendix A When disasters such as hurricanes, floods, tornadoes, or earthquakes strike, federal, state, and local government agencies coordinate to provide assistance to disaster victims. The SBA, through its Disaster Loan Program, is part of this concerted effort. In the event of a disaster, SBA, the Federal Emergency Management Agency (FEMA), and other government agencies join together to conduct a preliminary damage assessment to estimate the physical damage of the disaster on the affected region. Among other criteria, if there is extensive physical damage, the governor of the affected state can request that the President declare that a major disaster or emergency situation exists, in which case federal assistance is made available to disaster victims, and FEMA takes the lead in coordinating response and recovery efforts. The presidential disaster declaration specifies the area that is eligible for federal assistance, referred to as the “immediate” disaster area in this report. In the immediate area of the disaster, homeowners, renters, nonprofit organizations, and nonfarm businesses of all sizes are eligible to apply for SBA loans for the repair and replacement of uninsured physically damaged property. In addition, SBA provides certain loans to disaster victims in the counties adjacent to the immediate area; we refer to these counties as the “contiguous” disaster area. In both the immediate and contiguous areas of the disaster, small businesses with no credit available elsewhere are eligible to apply for loans to cover economic losses. Once a declaration has been made, officials from one of SBA’s Field Operations Centers (Atlanta or Sacramento)--arrive at the disaster site to begin making preparations to assist disaster victims at the Disaster Recovery Centers--and begin meeting with victims to explain the disaster loan process, issue loan applications, and, if requested, assist victims in completing applications. Most applications are issued by the Mail Out Center located in the Processing and Disbursement Center in Forth Worth, Texas as a result of referrals from FEMA. The SBA follows a series of steps involved in accepting, reviewing, approving or declining, and disbursing disaster loans. SBA provides loans to households and businesses without credit available elsewhere at a maximum rate of 4 percent and up to a 30-year term. For households or businesses with credit available elsewhere, SBA provides loans at a maximum rate of 8 percent and, for homes up to 30 years and businesses up to a 3-year term. There are six general disaster loan processing steps. First, state and federal officials conduct a preliminary damage assessment to estimate the extent of the disaster and its impact on individuals and public facilities. SBA participates in the damage assessment when the damages include homes and businesses. Second, The President, USDA or SBA makes a disaster declaration. Third, SBA establishes a field presence; SBA employees meet with disaster victims, explain the loan process, and issue applications at the Disaster Recovery Centers; SBA screens the submitted applications for completeness and to make sure all necessary documents are provided. Fourth, physical loan applications accepted for processing are forwarded to loss verifiers who conduct on-site inspections of the damaged property to estimate the cost of restoring the property to pre-disaster condition. Fifth, once the application arrives at the SBA Processing and Disbursement Center, staff review the application, examining such issues as eligibility, duplication of benefits, credit history, personal history, tax returns, history on other SBA loans, and the history on other federal debt; the applicant’s losses or and where applicable calculating economic injury; the loan officer determines whether the applicant has satisfactory credit and the ability to repay the loan; the legal department determines whether there are any legal or regulatory restrictions on receiving a disaster loan; if the applicant meets SBA’s underwriting criteria, then the loan is approved, using the amount of verified losses as the basis for the loan amount; closing documents are prepared and mailed to the applicant. Sixth, applicants are required to obtain insurance; hazard insurance is required before disbursement over $10,000 for physical loans and over $5,000 for economic injury loans; flood insurance is required for properties located in Special Flood Hazard areas before any disbursement can be made; maximum initial disbursement without collateral is physical loans $10,000, economic injury loans $5,000; initial disbursement with collateral, preferably the applicant’s home $25,000; total disbursements with proof of ownership of the damaged property is physical loans and economic injury loans $25,000; total disbursement with proof of title insurance is physical loans and economic injury loans $250,000. Business loans are available up to $1.5 million, loans for physical damage to homes are available up to $200,000, and loans for the repair or replacement of personal property is available up to $40,000.