Audit Report 15-13: Hurricane Sandy Expedited Loan Processes

In the wake of Hurricane Sandy, the Small Business Administration (SBA or Agency) implemented two expedited loan processes: the Sandy Alternative Processing Pilot (SAPP), which streamlined the home loan process, and a modified Phase II method for processing economic injury disaster loans (EIDL).  Both of these processes were intended to address a backlog of loan applications in the wake of Hurricane Sandy.  This audit’s objectives were to determine whether these procedures reduced SAPP home loan and EIDL processing times while mitigating the risks of loan default, and to ensure SBA complied with the processes.

The Office of Inspector General (OIG) found that the Agency’s home loan expedited process, SAPP, slightly reduced loan application processing time by loan officers and mitigated loan default risk.  However, the expedited EIDL method for business loans did not result in any time savings.  Neither of the expedited methods reduced the overall time from application acceptance to initial loan disbursement.  OIG also found that the SAPP memo lacked specific guidance on how to address complex loan situations.  This led to SBA loan officers needing to deviate from SAPP procedures in order to more accurately determine applicants’ actual income and debt obligations.  Furthermore, SBA incorrectly implemented the modified Phase II EIDL procedures in 15 loan applications, resulting in incorrect loan amounts. This was due primarily to insufficient training for loan officers.

If another disaster occurs with a similar magnitude to Hurricane Sandy, the Agency could encounter similar challenges processing loans correctly and efficiently unless proper measures are timely implemented to address these deficiencies.

OIG made four recommendations.  The Agency has implemented one recommendation already, and plans to implement the remaining three.