New Jersey Department of Banking and Insurance

COHEN ASKS DOBI TO CREATE SUBPRIME MORTGAGE FORECLOSURE HOTLINE

Toll-Free Number Would Direct Callers to Organizations Providing Mortgage Refinancing Counseling

(ROSELLE) – Assembly Deputy Speaker Neil M. Cohen today called for a state-run, toll-free telephone hotline to be established that would offer counseling and advice to New Jersey homeowners facing home mortgage foreclosure due to the continuing collapse of the nation’s subprime lending market.

Loans intended for those affected by 9/11 went for general businesses with no tie to disaster

Contact: Jason Springer
Phone: 856-232-6700

(Turnersville, NJ)- Assemblymen Paul Moriarty and David Mayer joined State Senator Fred Madden today calling for the New Jersey Department of Banking and Insurance to conduct an investigation into the issuance of loans distributed through the United States Small Business Administration's Supplemental Terrorist Activity Relief (STAR) loan program. This request follows a report of an audit released by the Small Business Administration's Inspector General which found that 85 percent of the loans were given to businesses that were not eligible or their eligibility could not be determined.

In New Jersey, 123 businesses received these low interest guaranteed loans totaling over $83 million.

The STAR loan program was established by Congress in January 2002 to provide working capital to the nation's small business community as a result of the widespread economic downturn caused by the terrorist attacks of September 11, 2001. The one year program was operated through the Federal Small Business Administration (SBA) main loan guarantee program and the loans were made by participating banks.

A recently released federal audit from the STAR loan program showed that businesses nationwide ranging from donut franchises to motels received more than $3.6 billion meant to help companies recover from the Sept. 11 attacks. The audit showed that at least one NJ business received over $700,000 for land purchase and improvements on its property even though the borrower stated that they were not adversely affected by the terrorist attacks. The report also cited numerous cases of loans handed out to businesses far from the fallout near Ground Zero including beauty and tanning salons, furniture companies, and janitorial services.

"It is outrageous that this loan program meant to support businesses harmed by the horrific terrorist attacks would be abused for general financial support," said Moriarty. "We must look into this program and ensure that people who deserved the loans to rebuild their businesses actually received them. If money went to businesses that should not have been eligible, it should be returned."

In a letter sent to the Acting Commissioner of the NJ Department of Banking and Insurance, the 4th District Legislators called for an investigation into the banks that participated in the program and loans given to NJ businesses through this program that should not have been eligible. A review of these loan practices will help make sure that programs like this cannot be abused again. The legislators also sent a request to the Small Business Administration requesting information regarding the STAR loan program.

"New Jersey is one of the hardest hit states from September 11 and now we find that money dedicated to help was used for non 9/11 related matters," said Mayer. "That is why we are calling on the Department of Banking and Insurance to conduct an investigation into the process of loans in NJ and to develop regulations to prevent this from happening in the future."

"We have seen reports showing that businesses received loans that were not affected by the attacks when there are families in NJ that directly had their lives changed on that fateful day," said Madden. "I am appalled at the apparent abuse of this program and hope this investigation will shed some light on the situation."

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