In the aftermath of a natural disaster like the tornado that ripped through Moore, Okla., this week, the Small Business Administration fills an unexpected function: home lender.
Due to politics surrounding the formation of the SBA in 1953, the agency has long been charged with making federal disaster loans to homeowners as well as businesses. The loans, which are capped at $200,000 to repair or rebuild damaged homes, and up to an additional $40,000 to cover personal property, are a good deal for borrowers. Earlier this week, SBA spokeswoman Carol Chastang told me that about 90 percent of SBA disaster home loans carry interest rates of 1.875 percent.
How much home lending does the SBA actually do? In Moore, it will probably be a lot. I asked Chastang to pull data for tornadoes that devastated the Oklahoma City suburb in 1999 and 2003, and the records indicate that agency underwriters are likely to be busy in the months to come. (Those affected by this week’s devastation have until July 19 to apply for loans to repair physical damage.)
On May 3, 1999, 74 tornadoes touched down in Oklahoma and Kansas, including one that carried winds up to 200 miles per hour through Moore. According to the National Severe Storm Laboratory, that tornado damaged or destroyed nearly 8,000 homes and caused more than $1.5 billion in damages.
Here’s how SBA disaster loan approvals for Oklahoma tornadoes on May 3-4 of 1999 broke down: 1,493 home loans for $67.3 million, 158 business loans for $8.9 million.
SBA disaster loans following a series of Oklahoma tornadoes in May 2003 followed similar lines: 270 home loans for $10.7 million, 24 business loans for $1.7 million.
As for the tornado that leveled much of Moore this week, catastrophe-modeling firm AIR Worldwide has estimated the total replacement value of properties in the tornado’s path at between $2.2 billion and $6.4 billion. Oklahoma City Mayor Mick Cornett, meanwhile, says between 12,000 and 13,000 homes were damaged or destroyed by the storm.