SBA saga
This is an incident that sapped my energy, but it turned out ok. You can see my frustration pretty clearly in the emails.
P.D.
A number of people have been given bad information by the SBA recently. Here is the scenario.
Their house is damaged. When the insurance settlement comes in, the bank takes the check and uses the money to pay down the mortgage. Now, the home owner has no money to do rehab. They go to the Small Business Administration (SBA), who has a program to help home-owners rehab their houses after a disaster (don’t ask me why it is the SBA, I don’t know). The SBA has not been giving them loans (or giving them very small loans) because the home owner received an insurance settlement. The catch is that the home owner can not use the insurance money because the bank used it to pay down the mortgage. The official SBA policy is that this money should not count against the potential loan. The people at SBA keep telling home owners that they need “a demand letter” from the bank to prove that they can not use the money. A demand letter is the wrong thing to ask for. Really, the SBA policy says they need proof that the bank used the money to pay down the mortgage. It does not specify what type of proof. Here’s where the story gets interesting.
So we had a public meeting and this came up. The public explained the problem and the SBA boss explained the correct policy. I grabbed the SBA section boss after the meeting and asked if I could send him an email saying, “Here is what I heard at the meeting. Is this the correct policy,” and he could respond. Then, we or the County could hand out the email so people will have proof of the real SBA policy. Here is the series of emails about this. I changed names, that is it. The emails get more interesting as they go down.
From me to the SBA section chief…
Joe,
Thanks for coming to the meeting today. I wanted to confirm that SBA loan officers have some flexibility when it comes to the documentation required to prove that banks demanded that insurance payments be used for paying down the principal. Demand letters are not necessarily required. A letter explaining the policy of the bank or even the phone number of a bank officer who can explain the policy can suffice.
Please let me know if my understanding is correct.
Thank you
From the section chief to the local head…
Tom,
Can you deal with this.
Joe
From the local head to me…
Your question concerns the SBA disaster loan program and should have been directed to my staff rather than to Joe, the SBA District Director for Mississippi. SBA's disaster program is delivered by a separate organization from our District Offices, which handle the regular small business programs.
As I indicated in the meeting in Jefferson Davis County, if a mortgage holder has required a policy holder to use an insurance settlement to pay off or to pay down the balance of an outstanding mortgage, SBA must have evidence of that mandatory use of the insurance proceeds. That evidence may be in the form of a letter or other written documentation, or it may be in the form of a telephone conversation between the mortgage holder and SBA (which we will document in our file). This is necessary so that SBA can treat the insurance recovery as unavailable for making repairs. Otherwise we must, by law, deduct the insurance recovery from the amount of the loss to arrive at the amount eligible for an SBA disaster loan.
Please note that a demand letter is usually a different matter, and should not be confused with documentation that a mortgage holder exercised their right to require that insurance proceeds must be applied to the mortgage balance.
General policy statements from mortgage holders are generally not sufficient, because they don't say what requirement was applied in each specific case. Instead, we need documentation of what was done in each case rather than a statement about a lender's general approach. That's because lender's often treat individual cases differently, based on the facts and circumstances involved.
Having clarified that, I need to ask that neither you nor any other third party attempt to address this matter. Only trained SBA staff should be communicating about technical aspects of our program. Discussions on this subject can quickly become complex, and in many cases there are other factors that enter into the picture.
From me to the local head…
Thanks
Are you ok with me handing out a copy of the email if people have questions? I will be happy not to interpret beyond what you wrote.
From the local head to the me…
Why are people addressing this question to you instead of to the SBA staff in the DRCs (Disaster Recovery Center)?
I'd prefer that if they ask SBA questions, on this or any other matter, that you simply refer them to the SBA staff in all of the DRCs.
From me to the local head…
Ug!
People ask everyone everything. We usually try to have information on hand to give out. I DON'T answer questions about the SBA, besides to point them to the DRC or hand out your flyer.
My plan with your email was to give it to the County Development Office because they said they were having problems with people getting bad information. I thought this would help set everyone straight. If someone walks in and says, "The SBA guy said we need a demand letter..." they could hand out this and say, "Go back to your SBA guy and tell them you don't need a demand letter."
Is this OK?
From the local head to me…
Communicating with other organizations, such as the County Development Office, is the job of our public information officers. They will take care of this need.
From me to the local head (with the chief copied on the email)
Tom,
After the meeting last week, I told Joe that I thought it would be helpful to have an email so the County could hand out that stated the policy. I thought this would be helpful because people had been told bad information by their SBA contact. (No offense intended. I am sure most SBA officers do an excellent job, but it was clear after the meeting that many people were being told the wrong information.) I proposed to Joe that I would write an email saying, "Here is what I heard at the meeting, is that correct?" And if it was, he could respond affirmatively and then the County would have something to help people that were given bad information by SBA officials. That is where this whole thing came from.
I am not sure why you are acting so hostile towards me when I was just trying to help! I saw a spot where County residents were in a bind, and saw what I thought was a solution.
At this point I am sorry I got involved. As a foot note, I hope your correspondence with the public is more polite than your correspondence with other federal employees.
From the local head to me…
I am certainly not seeking to be hostile. I'm just asking that non-SBA disaster employees not get into these technical issues. From long experience, we have learned that well meaning people can create a lot of confusion when trying to help. You indicated a need to follow up with the County Development Office, and that suggestion is helpful. Our staff is in the process of doing just that.
I strongly disagree with your conclusion that SBA staff have given out bad information. I can find no evidence of that, and I have looked into the matter extensively. One person at the meeting was going to get me the names of specific individuals who thought they had a problem on this matter, and I gave him my e-mail address for that purpose. I have received no such information. I suspect that some people didn't understand what they were told, and further that some lenders have misstated what SBA is looking for. We have taken steps to ask our staff to take extra steps to be clear on this matter, as it is apparent that there was a lot of unfortunate confusion.
I appreciate that you are seeking to be helpful. Bringing a matter of confusion to our attention is helpful. Suggesting who needs clarification is helpful. But seeking to act on our behalf is counterproductive. Only trained SBA disaster staff should address the sometimes technical and complex aspects of our program.
From the Section Chief to the local boss…
I'm not sure I understand this. We are being told daily that the 1-800 number is telling homeowners that they MUST have written statement from their banks when the banks is keeping their insurance fund and paying off the loans. I don't think it is necessary to give names. Clearly not all disaster staff is on up on technical knowledge and appear to be the source of this confusion.
[Note: I assume the boss was referring to the people that he met at the meeting that I referred to earlier, i am not sure. P.D]
Progress
A few days later we received a letter explaining the policy, which I delivered to the County!
From the County to me
Hi xxx,
Thanks so much this has been a real problem. I have already made a significant distribution of the information and will continue to do so. Again much thanks from all of us.
Dave
Jefferson Davis County
P.D.
A number of people have been given bad information by the SBA recently. Here is the scenario.
Their house is damaged. When the insurance settlement comes in, the bank takes the check and uses the money to pay down the mortgage. Now, the home owner has no money to do rehab. They go to the Small Business Administration (SBA), who has a program to help home-owners rehab their houses after a disaster (don’t ask me why it is the SBA, I don’t know). The SBA has not been giving them loans (or giving them very small loans) because the home owner received an insurance settlement. The catch is that the home owner can not use the insurance money because the bank used it to pay down the mortgage. The official SBA policy is that this money should not count against the potential loan. The people at SBA keep telling home owners that they need “a demand letter” from the bank to prove that they can not use the money. A demand letter is the wrong thing to ask for. Really, the SBA policy says they need proof that the bank used the money to pay down the mortgage. It does not specify what type of proof. Here’s where the story gets interesting.
So we had a public meeting and this came up. The public explained the problem and the SBA boss explained the correct policy. I grabbed the SBA section boss after the meeting and asked if I could send him an email saying, “Here is what I heard at the meeting. Is this the correct policy,” and he could respond. Then, we or the County could hand out the email so people will have proof of the real SBA policy. Here is the series of emails about this. I changed names, that is it. The emails get more interesting as they go down.
From me to the SBA section chief…
Joe,
Thanks for coming to the meeting today. I wanted to confirm that SBA loan officers have some flexibility when it comes to the documentation required to prove that banks demanded that insurance payments be used for paying down the principal. Demand letters are not necessarily required. A letter explaining the policy of the bank or even the phone number of a bank officer who can explain the policy can suffice.
Please let me know if my understanding is correct.
Thank you
From the section chief to the local head…
Tom,
Can you deal with this.
Joe
From the local head to me…
Your question concerns the SBA disaster loan program and should have been directed to my staff rather than to Joe, the SBA District Director for Mississippi. SBA's disaster program is delivered by a separate organization from our District Offices, which handle the regular small business programs.
As I indicated in the meeting in Jefferson Davis County, if a mortgage holder has required a policy holder to use an insurance settlement to pay off or to pay down the balance of an outstanding mortgage, SBA must have evidence of that mandatory use of the insurance proceeds. That evidence may be in the form of a letter or other written documentation, or it may be in the form of a telephone conversation between the mortgage holder and SBA (which we will document in our file). This is necessary so that SBA can treat the insurance recovery as unavailable for making repairs. Otherwise we must, by law, deduct the insurance recovery from the amount of the loss to arrive at the amount eligible for an SBA disaster loan.
Please note that a demand letter is usually a different matter, and should not be confused with documentation that a mortgage holder exercised their right to require that insurance proceeds must be applied to the mortgage balance.
General policy statements from mortgage holders are generally not sufficient, because they don't say what requirement was applied in each specific case. Instead, we need documentation of what was done in each case rather than a statement about a lender's general approach. That's because lender's often treat individual cases differently, based on the facts and circumstances involved.
Having clarified that, I need to ask that neither you nor any other third party attempt to address this matter. Only trained SBA staff should be communicating about technical aspects of our program. Discussions on this subject can quickly become complex, and in many cases there are other factors that enter into the picture.
From me to the local head…
Thanks
Are you ok with me handing out a copy of the email if people have questions? I will be happy not to interpret beyond what you wrote.
From the local head to the me…
Why are people addressing this question to you instead of to the SBA staff in the DRCs (Disaster Recovery Center)?
I'd prefer that if they ask SBA questions, on this or any other matter, that you simply refer them to the SBA staff in all of the DRCs.
From me to the local head…
Ug!
People ask everyone everything. We usually try to have information on hand to give out. I DON'T answer questions about the SBA, besides to point them to the DRC or hand out your flyer.
My plan with your email was to give it to the County Development Office because they said they were having problems with people getting bad information. I thought this would help set everyone straight. If someone walks in and says, "The SBA guy said we need a demand letter..." they could hand out this and say, "Go back to your SBA guy and tell them you don't need a demand letter."
Is this OK?
From the local head to me…
Communicating with other organizations, such as the County Development Office, is the job of our public information officers. They will take care of this need.
From me to the local head (with the chief copied on the email)
Tom,
After the meeting last week, I told Joe that I thought it would be helpful to have an email so the County could hand out that stated the policy. I thought this would be helpful because people had been told bad information by their SBA contact. (No offense intended. I am sure most SBA officers do an excellent job, but it was clear after the meeting that many people were being told the wrong information.) I proposed to Joe that I would write an email saying, "Here is what I heard at the meeting, is that correct?" And if it was, he could respond affirmatively and then the County would have something to help people that were given bad information by SBA officials. That is where this whole thing came from.
I am not sure why you are acting so hostile towards me when I was just trying to help! I saw a spot where County residents were in a bind, and saw what I thought was a solution.
At this point I am sorry I got involved. As a foot note, I hope your correspondence with the public is more polite than your correspondence with other federal employees.
From the local head to me…
I am certainly not seeking to be hostile. I'm just asking that non-SBA disaster employees not get into these technical issues. From long experience, we have learned that well meaning people can create a lot of confusion when trying to help. You indicated a need to follow up with the County Development Office, and that suggestion is helpful. Our staff is in the process of doing just that.
I strongly disagree with your conclusion that SBA staff have given out bad information. I can find no evidence of that, and I have looked into the matter extensively. One person at the meeting was going to get me the names of specific individuals who thought they had a problem on this matter, and I gave him my e-mail address for that purpose. I have received no such information. I suspect that some people didn't understand what they were told, and further that some lenders have misstated what SBA is looking for. We have taken steps to ask our staff to take extra steps to be clear on this matter, as it is apparent that there was a lot of unfortunate confusion.
I appreciate that you are seeking to be helpful. Bringing a matter of confusion to our attention is helpful. Suggesting who needs clarification is helpful. But seeking to act on our behalf is counterproductive. Only trained SBA disaster staff should address the sometimes technical and complex aspects of our program.
From the Section Chief to the local boss…
I'm not sure I understand this. We are being told daily that the 1-800 number is telling homeowners that they MUST have written statement from their banks when the banks is keeping their insurance fund and paying off the loans. I don't think it is necessary to give names. Clearly not all disaster staff is on up on technical knowledge and appear to be the source of this confusion.
[Note: I assume the boss was referring to the people that he met at the meeting that I referred to earlier, i am not sure. P.D]
Progress
A few days later we received a letter explaining the policy, which I delivered to the County!
From the County to me
Hi xxx,
Thanks so much this has been a real problem. I have already made a significant distribution of the information and will continue to do so. Again much thanks from all of us.
Dave
Jefferson Davis County
posted by JNA | 4:23 PM
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