Rep Smith’s Bill Would Forgive Sandy Loans and Stop Claw-backs of RREM Grants

Congressman Chris Smith and Monmouth County Sheriff Shaun Golden prepare to survey Hurricane Sandy damage. November, 2012. Smith’s new legislation would assist citizens and towns still recovering from Sandy while also dealing with the COVID-19 crisis.

Legislation introduced on Friday by Congressman Chris Smith and co-sponsored by Congressman Jeff Van Drew would provide a major assist to citizens and municipalities still recovering from Superstorm Sandy as they now deal with the COVID-19 crisis as well.

The Equity for Disaster Victims Act of 2020 mandates the forgiveness of certain Community Disaster Loans (CDL) secured by NJ municipalities from the Federal Emergency Management Agency (FEMA) to help with Sandy recovery. It also addresses the lingering “duplication of benefit” problem by removing Small Business Administration (SBA) loans as a disqualifier for people who sought and/or received federal money via Homeowner Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) grants to help them recover in the wake of Sandy.

Smith is pressing leaders in both parties in Congress to to add his bill to the next coronavirus relief package as a way to expedite financial relief due to those still suffering from Superstorm Sandy and other disasters.

“These two Sandy-era programs should be fixed so that our towns and residents—many now out of work—can focus on the crisis at hand,” said Smith. “As the second highest impact area for coronavirus, we need to meet the demands going forward. Instead of pressuring our towns, the federal government needs to accept responsibility for its past mistakes and work with us to address the future.”

The bill would fully forgive the CDL loans towns took when devastated by Sandy. Recently, FEMA has pressed municipalities to start repaying the loans despite the clear and original expectation that the loans could be repaid slowly, overtime and probably forgiven.

“As originally assured, the payments on the old Community Disaster Loans should be fully waived and fully forgiven,” Smith said. “Now is not the time to pressure our communities and demand difficult payments.”

Smith’s bill will also correct a major flaw in the federal assistance programs from the Sandy era.

In the immediate aftermath of Sandy, New Jersey residents were urged to apply for SBA loans and to quickly start rebuilding their homes with the assurance from government officials that the loans would not preclude them from receiving yet to be authorized grants.

Those assurances turned out to be lies, as residents who received both loans and grants were later determined to have received a “duplication of benefits” and were expected to pay back both the loans and the grants under claw-back provisions.

Smith’s new law includes a provision to amend existing law and clarify that an SBA loan is not a “duplication of benefit” or a reason to disqualify a grant applicant, provided that all federal assistance is used toward a loss suffered in a major disaster or emergency.

“The faulty ‘duplication of benefit’ policy was partially abolished in 2018,” Smith said. “My bill will make it clear that the regulations established in 2018 also apply to disasters dating to 2011, including Superstorm Sandy, thereby short-circuiting any federal effort to take back or ‘clawback’ grants given to people who had already received an SBA loan.

Smith said the bill should also potentially help those who were denied a grant during the application process because of a previous SBA loan, in light of reports that the state RREM program still has money.

“If the money is there, our people who applied for a grant and were initially rejected because of the loan should be first in line,” Smith said. “First and foremost, we must eliminate the bias in federal policy and then work together to provide funds for those who were wrongly denied.