SBA Acts to Remedy Quake Ghost Towns : Relief: Officials will review disaster loan applications that were either denied or withdrawn.

Moving to clear up lingering problems from the Northridge earthquake, federal emergency officials said Tuesday that they will review 28,000 disaster loan applications that were denied or withdrawn and give top priority to loan requests from property owners within quake-damaged “ghost towns.”

The decision by the Small Business Administration to speed up ghost town loan applications is the latest step by federal officials to eliminate the 13 clusters of vacant, crime-plagued buildings that Los Angeles city officials have identified in the San Fernando Valley, Hollywood and the Mid-City areas.

James Lee Witt, Federal Emergency Management Agency director, has already promised to provide funding to board up openings, erect fences and hire private security guards to keep vagrants, scavengers and other trespassers out of empty buildings.

In announcing that the agency will also review 28,000 rejected or withdrawn loan applications, SBA Administrator Erskine Bowles noted that many of the requests had been processed by newly hired staff.

“I’m sure we turned down some loans that we should have made,” he said.

Witt and Bowles, who were in town to talk with local disaster officials about the status of the quake recovery, announced the new measures on loan applications during a Times Editorial Board meeting Tuesday.

Also attending was Art Agnos, regional administrator for the Department of Housing and Urban Development, who said there is still a $500-million gap that represents the difference between funding and needs identified by the city of Los Angeles.

“I think the federal government has been extraordinary on this case,” said Agnos, who was San Francisco mayor during the 1989 Loma Prieta quake.

Federal agencies have allocated $10 billion to the relief effort in Southern California.

Officials indicated that the new efforts to assist quake victims were prompted in part by Times reports, including one that found the SBA loan approval rate for the Northridge quake has been about 53%--lower than that for previous disasters, including the 1992 riots.

And FEMA officials also announced that the agency had begun sending out customer satisfaction surveys to more than 5,000 victims of natural disasters nationwide who applied for assistance, including 3,000 from the Northridge earthquake.

The questionnaire, which features a picture of President Clinton touring the Midwest during recent floods, asks disaster victims to rate FEMA’s performance, including whether they have received adequate assistance. The survey results will be released in August.

The SBA has loaned more than $2.4 billion to quake victims. Officials have said that many applicants were denied because the recession and defense industry cutbacks have left them in precarious financial condition.

“This is the first time we’ve ever undertaken something this massive,” Alfred Judd, SBA acting area director, said.

Judd said some of the applications that were denied or withdrawn will ultimately be approved. In such cases, the applicant would be contacted by the SBA, he added.

“I’ve seen some where we just blew the decision,” Judd said. “We just missed something.”

The review will cover business and home loan applicants who suffered more than $10,000 in damage--homeowners had to suffer some real property damage--and were denied loans because they could not prove they had the ability to repay. The review is expected to be complete in a month.

The review will cover only 17,000 of the estimated 73,000 quake victims who were denied SBA loans--many of them because they had bad credit and other problems in addition to lack of repayment ability, according to SBA officials. It will also include a review of about 11,000 applications that were withdrawn, many by victims frustrated over the long, complicated process, officials said.

Bowles also said the SBA was moving to reduce a backlog of pending applications--which was at 50,000 earlier this month. On Tuesday, about 25,000 quake victims were still awaiting decisions from the SBA.

Under the SBA disaster relief program, businesses can receive up to $1.5 million for economic injury or physical damage to their buildings, machinery, equipment and inventory. Major employers can receive more than $1.5 million.

Homeowners can qualify for low-interest loans of up to $200,000 for home repairs or for refinancing and up to $40,000 for replacement of personal property.

SBA officials say that applications have eased off to about 200 a day from a high of 3,800 a day in March. The application deadline is July 18.

In addressing the ghost towns, Witt and Bowles said the federal government is committed to helping the city tackle the problem that has plagued other disaster areas.

“We do not want to see a situation here like what they had in the aftermath of Hurricane Andrew,” said Witt, referring to the Florida disaster that claimed 40 lives and caused $30 billion in damage.

The higher priority status for ghost town loans means that applications submitted by June 15 will get an answer by July 7, Bowles said. Those applications filed after June 15 will get a decision within three weeks, he said. Owners who have filed incomplete applications will be called within seven working days and notified about the missing information, Bowles said.

Each of the 13 ghost towns identified by a city task force has an average of 10 buildings with a total of about 6,000 housing units. The vacant apartment buildings and condominiums have become havens for squatters and scavengers.

In many cases, the owners of such buildings have attempted to secure the structures with boards and fencing only to have trespassers tear the barriers down. In other cases, financially strapped owners have done nothing as they await a decision on their SBA loan applications.

The city’s task force on ghost towns last week recommended police sweeps of vacant buildings, to be followed by boarding up and patrolling by private security guards.

To pay for the security measures and loans to property owners, the task force identified about $240 million in local and federal money that was set aside for other uses. If Witt had not agreed to pay for the security measures, city officials had planned to pass the cost of the security measures on to the landowners.