Under the Disaster Assistance Program, loans are made available
to individuals and businesses at favorable terms and conditions
for uninsured losses of real and personal property damaged by
natural disasters such as tornadoes, floods, hurricanes and
earthquakes. The inspection team examined three disaster
assistance programs and found that from October 1, 1987, through
December 31, 1991, economic injury loans had the highest
delinquency rate at 10 percent, physical disaster business loans
had the next highest at 7.9 percent, and home loans had the
lowest at 6.5 percent. Based on our review of a limited sample
of economic injury loans, we found loans made to borrowers who,
in our estimation, were unable to repay and loans made for higher
amounts than appropriate. The required underwriting review by
supervisory loan officers had not detected these errors. The
inspection also reviewed loss verification procedures and the
Agency's capability for detecting fraud in loan applications.
[To obtain a copy of this report, contact the Office of Inspector General at 202-205-6580, or email the office at OIG@sba.gov]
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* Updated: 2/4/98