Bankers in the Gulf Coast region are pleased the Small Business Administration has decided to let them process and close disaster-relief loans, but some said they will keep pushing for a larger role in hopes of a faster recovery for the area.
Overwhelmed by demand for disaster loans in states hard hit by hurricanes Katrina and Rita, the SBA put out a request for proposal last week seeking banks and other lenders that could help it process disaster-relief loan applications. It was an unprecedented request by the agency, which partners with banks in most of its lending programs but works alone in disaster-relief lending.
The agency said it would select a number of financial institutions to process loans and to recommend whether they should be approved or not. But it also said it would retain decision-making authority and that its own officials would review every loan bankers process.
Bankers said the process would be quicker and more effective if they had the final say, adding that they are better at making credit decisions anyway.
“Our ultimate goal is to let banks have delegated decision-making authority,” said Guy T. Williams, the chairman and chief executive officer of the $665 million-asset Gulf Coast Bank and Trust in New Orleans. “It makes the most sense. The private sector has always done a better job of lending than the government.”
“We echo what … [Mr. Williams] is saying,” said McKinley W. Deaver, the executive director of the Mississippi Bankers Association. “I’m somewhat disappointed that the loans have to go back to SBA.”
An SBA spokesman did not return calls, but James Ballentine, the American Bankers Association’s director of community development, said the SBA would need congressional approval to delegate its decision-making authority over disaster-relief loans, something that could take weeks or months to obtain.
Mr. Williams said that getting congressional approval for delegated decision-making authority might not be too difficult. He noted that prominent Democratic lawmakers and the Bush administration support the idea.
“I’m not sure that needing legislation is an obstacle,” he said.
But even after expressing disappointment with the SBA’s proposal, Mr. Williams said his bank would submit a bid for the disaster-relief processing work. He and other bankers were scheduled to meet Friday with the SBA to learn more about the application process.
Though the SBA has processed more than 245,000 hurricane-related disaster-relief loans on its own, it has about 136,000 more in its pipeline and it expects to receive tens of thousands of new applications before the March 11 filing deadline.
Banks interested in participating in the disaster-relief effort in the Gulf Coast region must submit bids to the SBA by March 15.
Companies that win contracts would get 75 to 150 loans a day to process. They would have seven business days to process home loans and 14 for commercial loans, and would get a fee for each loan processed. The contracts, expected to be awarded at the end of March, are for one year and would give banks a maximum of 15,000 home and business loans to process.
Both Mr. Williams and Mr. Deaver said banks would make little money from the work. Their incentive is speeding the region’s recovery and getting homeowners and businesses back on their feet.
Borrowers, lenders, and lawmakers have complained the SBA has taken far too long to process loans and cut checks in the wake of the hurricanes.
