169. HUD Guidance June 20, 2019 authorizes and instructs in part state grantees to pay off all SBA disaster loans.

State of Louisiana is first state to be allowed by HUD to use HUD grant money to pay off SBA Disaster Loans for disasters between 2015 and 2017. (Other options are valid until 2021 and 2023)

The state of Louisiana has setup a 3 phase disbursement program.

Phase I: Declined and Undisbursed SBA Disaster Loans.

HUD Guidance June 20, 2019 updates HUD Guidance November 16, 2011 and clarifies that any person that applied for an SBA disaster loan but declined the loan or only took part of the loan will not be penalized by the duplication of benefits calculation for loan money not drawn or received.

The state of Louisiana references the Disaster Recovery Relief Act but HUD's Guidance on Declined SBA Loans comes from H.R.1892 - Bipartisan Budget Act of 2018 Senate Bill 2226 Sponsored by Senator Marco Rubio read into the H.R. 1892 by Senator John Kennedy, co-sponsored by Senator Bill Nelson, Senator Cornyn John and Senator Ted Cruz on S. 2226.

The state of Louisiana immediately adjusted the award calculations for over 1,168 households that were reported to have been penalized by declining the SBA Disaster Loan.

See reference materials:

Public Law 115-123 which now allows Americans in Disaster areas to refuse the SBA Disaster Loan application process as well as refusing the SBA Disaster loan itself without states holding the approved loan amount against the disaster victim. (See why not to use SBA Disaster Loans.)

The law allows you to not sign the loan closing documents even if you are instructed by your state Grantee as some states have been reported as doing. It was reported that Alaska instructed people to take the SBA loans or no other federal assistance would be provided.

Louisiana held out as long as it could before revising the method the state calculates SBA loans as a duplication of federal benefits.

Under Phase 1 the state addressed only those homeowners that did not require the state to submit an action plan for change. HUD simply instructed the state of Louisiana grantee under the control of the Governor of Louisiana to follow the Feb. 9, 2018 law signed by President Trump.

Our research found that the state penalized 1,158 homeowners and refused to correct the issue until HUD ordered the state to do so. The state was willing to allow 1,168 homeowners to be penalized and not receive federal disaster relief funds to rebuild after the floods because the households refused to take the SBA disaster loan. Even with risk of default the state leaders refused to allow any waivers to those that declined or had their SBA loans canceled by the SBA.

The final numbers provided by the state were, 1,168, which 863 declined the loans and 305 that signed the closing documents but didn't draw on the funds.

Our research article was published shortly after we discovered the state was unwilling to address the issue and restricted it's estimates to less than 105 total households with SBA hardships. Today we know differently what the state truly was planning, and that was not to award 1,168 families disaster recovery grants because they refused to add to their household debt burden by accepting an SBA disaster loan.

The State of Louisiana Office of the Governor and it's executive branch agency funded by federal tax dollars the Office of Community Development Disaster Recovery Unit was willing to allow

  • 172 Homeowners and families living at below 80% AMI to lose access to $5,744,232 in grants
  • 198 Homeowners and families making 80% to 120% AMI to lose $6,413,567 in grants
  • 798 Homeowners and families living in upper income limits of greater than 120% AMI to lose access to $26,502,908 of HUD Grant funds.

Will your state act as the state of Louisiana and look to penalize 1,168 homeowners for over $38,660,707.00 in grant funds?

The $38,660,707.00 may have had someone's fingers on it if HUD didn't provide this historical first in HUD Guidance instructing the state Grantees to follow a law signed by President Trump. We might have never seen these families recover from their disaster if it wasn't for HUD and the new Public Law 115-123.

Research Resource:

  1. HUD Guidance June 20, 2019
  2. HUD Guidance letter June 12, 2019
  3. State of Louisiana emails related to HUD Guidance
  4. State of Louisiana SBA DOB calculations
  5. Citizens proposal to correct the SBA DOB issue under public law 115-123
  6. Public Law 115-123


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