A University of Iowa study finds a significant number of homeowners who qualify for low-interest government loans to rebuild after a disaster choose not to apply, or they reject the loan after they’re approved. Finance Professor Cameron Ellis, in the U-I’s Tippie College of Business, says they’ve done extensive research on people’s post-disaster borrowing habits dating back nearly 20 years, and the loans are an excellent opportunity.
The study looked at loan activity following every natural disaster between 2005 and 2018, including the 2008 Iowa floods, hurricanes like Katrina and Harvey, Superstorm Sandy, and numerous western wildfires. Ellis says some people just have an aversion to going into debt, especially when the federal government is involved.
The administrator of the U-S Small Business Administration was in Iowa recently to visit the town of Greenfield, which was hit by a major tornado in May. Part of the trip was dedicated to educating people about the S-B-A’s loan programs to help businesses, homeowners and renters rebuild after a disaster. The U-I study found about 25-percent of people who qualified for such loans rejected them, or didn’t bother to apply. Ellis says some people get jumpy over interest rates, when they shouldn’t be.
Ellis says more than one-million households -did- apply for loans during the period the U-I studied, and more than 12-billion dollars was dispersed to more than 285,000 approved households. Ultimately, Ellis says fewer participants puts more financial pressure on homeowners and slows the pace of disaster recovery for individuals and the community.
