insurance
Highlights
- The SBA offers low-interest loans to homeowners and renters.
- Loans pay to repair damaged homes and fix or replace damaged possessions.
- Primary residences are covered, but not vacation and second homes.
For homeowners and renters adversely affected by Superstorm Sandy, there may be help from a surprising place: the U.S. Small Business Administration. While the SBA may be best known for helping entrepreneurs launch small businesses, the agency also offers streamlined, low-interest loans designed to help homeowners and renters get back on their feet after a natural disaster such as Sandy. "The purpose of the program is to help repair or replace property to its pre-disaster condition as quickly as possible," says SBA spokeswoman Carol Chastang. In the initial aftermath of Sandy, the SBA has issued more than 134,000 loan applications to homeowners, renters and businesses. Businesses can apply for a similar but separate program. But according to Chastang, the number of applications for SBA disaster loans is likely to grow higher as the Northeast begins the slow process of rebuilding from one of the region's most destructive storms.
"One thing to keep in mind is that we're still very much at the beginning of this process," Chastang says. "One week after the storm, and the region is still a disaster area, which can make it difficult to get damage assessments."
Qualifying
To qualify for SBA disaster loans, homeowners and renters need to live in a county that has received a presidential disaster declaration and where individual disaster aid is offered. Parts of Connecticut, New Jersey and New York have received federal disaster declarations in the wake of Sandy.
Renters and homeowners can file claims for their primary residence, but second homes and vacation homes aren't eligible under the SBA disaster loan program, although those properties may be eligible for relief under the SBA's business loan program.
Homeowners may borrow up to $200,000 to repair disaster-related damage to their homes. Renters and homeowners may borrow up to $40,000 to repair or replace personal property (such as furniture, appliances, etc.) lost or damaged as a result of the storm. Both renters and homeowners are prohibited from using the money to improve their property beyond pre-disaster conditions. However, homeowners may be able to borrow?an additional 20 percent to make?improvements that lessen the risk of property damage in the future.
The primary criterion for issuing the loan is the homeowner's ability to repay. Typically, that means the SBA will consider the applicant's income statement, says Chastang.
Terms
In most cases, qualified homeowners and renters will be able to borrow SBA money at a 1.688 percent interest rate. Homeowners who have substantial means and are easily able to repair their property on their own are still eligible for a loan, but they may be offered the loan at 3.375 percent, Chastang says. "The vast majority of qualified applicants will get the lower rate," she says.
The term, or length, of the loan is determined case by case, depending on ability to pay, and it can be up to 30 years.
What about insurance?
While many people living in Superstorm Sandy's path doubtless had some level of insurance that may cover their losses, Chastang says it's still a good idea to begin the SBA loan process if you think you qualify.
"A lot of people think that it'll just be taken care of through their insurance," Chastang says. "But in the case of a major disaster, insurance companies tend to get overloaded, and it can take a long time for those checks to arrive."
If the homeowner or renter does collect on an insurance claim, that money is used to offset all or a portion of the loan amount.
Applying
While paperwork may be the last thing on the mind of a displaced homeowner or renter, Chastang says the SBA disaster loan application is designed to be as quick and streamlined as possible.
"It's a four-page application that covers a lot of basic information, and there's an additional form that authorizes the SBA to check (Internal Revenue Service) tax returns to verify income," says Chastang.
Down the road, homeowners will have to show title to the property, but according to Chastang, it's understood that in the immediate aftermath of a disaster, many homeowners won't have access to those documents.
Right now, Chastang says the typical application takes about 10 days to close and another five days before the check arrives. But in many cases, the process moves much faster.
Homeowners and renters can apply online at the SBA website or call (800) 659-2955. They can also email for information by writing to DisasterCustomerService@sba.gov.
Investigate other programs
While the SBA can help a number of homeowners and renters hurt by Superstorm Sandy, Chastang stresses that it's important to investigate all programs and to register.
"These programs are designed for specific situations, so it's possible that if you don't qualify for one form of relief, you may qualify for another," says Chastang.
To help people make the most of the disaster programs available to them, Chastang recommends they register at DisasterAssistance.gov, which is a clearinghouse for all federal agencies and programs.
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