2TRILL4TV

'This is going to happen again'
The SBA is once again setting up disaster recovery centers along the Gulf Coast, although the oil spill effort will likely be overshadowed by the hurricanes' economic toll. While BP is responsible for the financial impact caused by the spill, the SBA is helping people while they wait for the corporate assistance.

"This is going to happen again — tomorrow — if there's another Katrina," Martin said. "They didn't fix enough for it not to happen."

Images of New Orleanians trapped inside the Superdome without food and water, or desperately waiting on rooftops for help, haunted Americans in September 2005. Police officers walked off the job, looters ransacked downtown shops, and critics scolded the Bush administration for being too slow to respond.

Meanwhile, a different kind of chaos was unfolding inside the SBA.

A new computer system that was supposed to speed and simplify the loan process crashed time and again, resulting in massive delays. But that wasn't the only problem.

"There were lots of people sitting around not doing anything with thousands of applications pouring in everyday," said Brad Durtschi, a former SBA loan officer who now works for FEMA.

In the years leading up to the storms, the agency's staff had been cut. When Katrina hit, followed by Rita about three weeks later, SBA had only 880 employees to process hundreds of thousands of loan applications, including 190 loan officers working at the Fort Worth center.

SBA scrambled to hire several thousand additional staffers, many to work in Texas, where loan applications filed in dozens of makeshift disaster recovery centers along the Gulf Coast were sent for processing. The new loan officers — many from the private sector, with no loan processing experience — were rushed into service and expected to navigate a complex set of rules and regulations.

It was bedlam, Durtschi said.

The loan applications piled up, and the phones rang and rang. People wanted to know if their application had been approved, and when they would receive money to help reopen their business or rebuild their home. At one point, officers were told by supervisors not to answer phones because the questions were taking up too much time, former loan officers and supervisors told the AP.

'Crying and begging'
By December 2005, the system was gridlocked. Hundreds of thousands of applications were sitting in computer queues awaiting processing. And the phone calls turned from inquisitive to frustrated to angry.

"People called in everyday crying and begging," Martin said. "We were forced to do things that were wrong."

With congressional pressure mounting to turn loans around more quickly, the agency began using new methods to clear the backlog that had little to do with helping people get loans, former loan officers and supervisors said.

Supervisors would reject applications if a single sheet of paper or signature was out of place. In the first four months following Katrina and Rita, the agency rejected more loans than it approved, according to an AP analysis. Loan officers were required to process up to twice as many applications per day. When one landed on their desk, a loan officer had to try three times within 24 hours to reach the potential borrower by telephone. If they didn't, the loan was either declined or indefinitely shelved.

If shelved, the loan application was effectively canceled and a letter was generated saying the applicant had 60 days to reapply. But many times, the loan officers, under pressure to reach quotas, would call only once or not at all, then withdraw or decline the application, the former loan workers said.

Overwhelmed employees
They and their supervisors described computer queues clogged with tens of thousands of loan applications, and of overwhelmed employees being told to put efficiency above all else and callously dismiss the pleas of desperate people.

"People were homeless, living in their cars," said Young, now a bank loan officer. "People were running out of rental assistance. They didn't have a place to go. They had worn out their favors with their families. And they needed to move on. And they would call and ask: 'Could you please do anything you can to help us?'"

"I couldn't sleep," he said. "I knew it wasn't right."

Said Durtschi: "We had no compassion for these people. To our supervisors, it was all about production and we hurt a lot of people along the way."

A 2007 report from the SBA's Office of the Inspector General, which performs independent reviews and audits of the agency, criticized SBA for canceling pending approved loans without warning.

During one period in 2006, the report said, the agency's Buffalo, N.Y., call center terminated 7,752 pending loans without notifying borrowers in advance. In many cases, the investigators found, no call had ever been made to the applicant to begin final processing.

If a loan officer did manage to reach a borrower, the applicant was given 48 hours to fax documents to bring the loan to the closing phase. Often, the borrower didn't have all the paperwork readily available.

"Maybe you need a deed and it's at the courthouse, but the courthouse is under water. The documentation is destroyed," said Young, the former SBA loan officer. "Or maybe you need payroll stubs, and that information is gone. Now you're told you have 48 hours to get it. That's even if we reach you by phone. We have your old phone number. Sometimes we call, sometimes we don't."

When borrowers requested additional time, the agency was unyielding, Young said.

"We never budged," he said. "It was a manufactured deadline that put undue stress on people."

"At the end of the 48 hours, you're wiped out from our queue," he said. "You didn't exist."

'We weren't there to help'
When a borrower did find the critical documents and fax them to Fort Worth, the paperwork would often get lost. The office had only a few fax machines to handle the crush. Receipt of the documentation was assured only if a loan officer waited by the machine to snag the papers.

Bazile remembers faxing 50- to 70-page packets two or three times before someone at the processing center would acknowledge receipt.

"How could something like that get lost?" she wondered. "It was a constant frustration." Plus, the documents contained personal information, such as Social Security and bank account numbers.

Martin recalled once arguing unsuccessfully with her supervisor in favor of approving a loan for a small business owner and being told: "Don't think about it. Move on."

"They were ruthless, absolutely ruthless," Martin said of her bosses. "We weren't there to help the public."

Cash prizes
Those same supervisors often conducted contests with cash prizes to reward loan officers who cleared the most applications, usually by rejecting as many as possible. One supervisor told the AP she won $100 for exceeding production quotas.

"I would hear loan officers laughing about the loans they turned down," Young said. "The same people kept winning."

In recent weeks, the AP found more than two dozen of the same supervisors still working in the Fort Worth office. But all of the current supervisors reached by the AP declined to comment, saying the agency prohibited them from talking.

Others recall that productivity was the mantra at staff meetings. At one, a supervisor explained to loan officers how to get people off the phone. Use an egg timer, he said. When it goes off, hang up.

"Your performance was measured on the number of files you closed," said Bill Russell, a former loan officer and certified public accountant. "It wasn't long until people discovered that to meet the quota, the easiest thing to do was just to deny the loan."

One supervisor who spoke to the AP on condition of anonymity out of fear she would lose her job said that on weekends fellow supervisors and other managers would order pizza and just empty the queue of applications.

The extra sessions were called "Signoff Sunday," she said. "It was all about getting these loans out of the system to make it appear like we were clearing up the backlog and helping people. But we weren't helping people. What we were doing was saving our own jobs."

SBA's Rivera questioned whether supervisors pushed loans through without review.

"Obviously when you have 4,250 employees, you're going to have some disgruntled employees," he said.