Rep. Smith Co-Authors Bi-Partisan Legislation to Help Sandy Victims Trapped in Govt Bureaucracy

Press Release

Earlier this week, Rep. Chris Smith (R-NJ) and Rep. Nydia Velázquez (D-NY) introduced the Equity for Disaster Victims Act, which is designed to provide relief to victims of Superstorm Sandy and reform the federal government's disaster relief programs to ensure fairness and flexibility.

"Following Sandy, victims acted in good faith to jumpstart the recovery process and begin rebuilding with SBA loans," said Smith, who represents areas in Monmouth and Ocean Counties that were devastated by the 2012 superstorm. "Those who accepted SBA loans have since found themselves ineligible for further relief though various grant programs--a circumstance they were never informed of during the loan process."

"There is a fundamental difference between a loan with interest and a grant--it is commonsense. Those who accept SBA loans should not be precluded from future assistance merely because such assistance is not yet available," continued Smith."States should have the flexibility to award victims grants that will pay down the balance on the loan, and my legislation will give them that authority."

The Disaster Victims Equity Act would allow homeowners, small businesses, and nonprofits that accepted Small Business Administration (SBA) loans following Hurricane Sandy to receive U.S. Department of Housing and Urban Development (HUD) grants and use them to repay the principal and any interest accrued on the loan. It would also make this provision permanent to assist victims of future natural disasters.

"Just because a business owner or homeowner secures a disaster loan from the SBA, they shouldn't be denied additional assistance in the form of a grant," said Velázquez. "This approach leaves disaster victims in the cold and hampers the recovery process. I'm proud to join with my colleague, Rep. Smith, in working to address this longstanding problem in the law."

"Moving forward, this would allow disaster victims with immediate needs to apply for SBA loan assistance with the knowledge that it will not automatically preclude them from future relief," said Smith. "This issue arose over ten years ago in the aftermath of Hurricane Katrina and has yet to be resolved--we cannot continue to ignore it."

In November 2011, HUD issued a Notice declaring that SBA disaster loans and Community Development Block Grant Disaster Recovery (CDBG-DR) grants are considered duplicative assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

While HUD provided guidance in July 2013 allowing CDBG-DR grantees to offer assistance to Sandy victims who did not apply for SBA loans or who previously declined such loans, these measured in no way assist those who accepted SBA loans with no knowledge of the potential consequences.

Last July, Smith testified before the House Committee on Small Business and urged SBA and HUD to provide an equitable and fair solution. He told the committee of the Armstrong family in Manasquan, New Jersey who applied for and received an SBA home disaster loan after their home was destroyed by Sandy.

After liquidating their retirement accounts and incurring a significant tax penalty as a result, the family applied for further assistance and relief through New Jersey's Reconstruction, Rehabilitation, Elevation, and Mitigation (RREM) Program. The family was subsequently shocked to learn of their ineligibility for a grant award due entirely to their previous acceptance of the SBA loan--a condition of which they were never informed of during the loan process.

Smith testified after sending a letter to SBA and HUD urgently requesting further guidance which would HUD grantees to provide grant awards to Sandy victims who previously accepted SBA loans--at least for the purposes of paying down that loan. He also requested that the matter be referred to the SBA's Office of Inspector General (OIG) for further review.

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