SBA admits mistakes in processing disaster loans

WASHINGTON — The government on Friday acknowledged problems in processing disaster loans after the Gulf Coast hurricanes in 2005, including loan approvals without proper paperwork and inadequacies in how damages are assessed.

The administrator of the Small Business Administration, Steven Preston, said about 10,000 approved loans lacked proper documents on the borrowers’ collateral. In some cases, the documents hadn’t been filed with local authorities or checks and forms had mistakes.

“The bottom line is that in the gush of work flow that happened, there were 10,000 loans in place where they weren’t properly recorded,” Preston said.

He said the SBA has been working to correct the problem since the fall and should resolve the remaining 1,700 cases in the next few months.

“As a federal agency that has to be very concerned about fiscal responsibility, that is not an acceptable situation to be,” he said.

Preston briefed reporters of problems ahead of an upcoming series of inspector general reports that could be released in the coming weeks.

Glenn Harris, counsel to the inspector general, said he could not discuss the reports’ findings.

Harris said the inspector general’s office has submitted draft reports to the agency on the disaster program. “We’re waiting on a response,” he said.

Preston said the SBA is also reviewing how property was assessed to ensure people received the right amount of money for damages. In addition, the agency is looking into whether loan officers pushed to get loans canceled, he said.

“There is some indication and some concern that we had people in the process along the way that may have been heavy-handed with our borrowers,” Preston said.

Among other problems Preston cited were weaknesses in how credit checks were performed. He said the agency accelerated decisions based on credit scores.

The SBA has approved 160,283 disaster loans for the Gulf Coast hurricanes.