Pit Stops on The Road Of Life

MY START WITH SBA

I joined the National Bank Examiners in June, 1968, fresh out of King’s College with a B. S. in Accounting. I’d been an avid pinochle player for four years in the dorms and my slightly-above-average 2.29 GPA reflected that slothfulness.  The “Big 8” accounting firms wanted no part of me but I wasted some of their recruiters’ time anyway.  Ultimately, I chose a Federal career and it seemed like a wise move at the time.  Retiring at 55 with 30 year’s service, good sick and annual leave, job security---all that appealed to me.

I chose to work out of our Philadelphia office and I readily found the on-the-job training to be very interesting.  However, upon graduation, I’d lost my draft deferment. By December, “Uncle” wanted to make cannon fodder of me in Vietnam.  I joined the Navy and, in a tour of a little over two years, never left the East Coast.  I wrecked my back carrying heavy stuff and the Navy removed a disc from my back on my 24th birthday, August 17, 1970.  It took eight more months of rehab before they sent me home.  I was discharged on May 4, 1971.

I returned to the examiners who had held my position open but I made a fateful choice.  I had tired of the Philly area and they acceded to my request to transfer to the Wilkes-Barre office.  I took an apartment on New Alexander Street in South Wilkes-Barre and got back on the job.  At this point I ran into a tide of resentment.  I ran into several other young examiners who had managed, in one way or another, to avoid the draft and stay on the job.  With the extra two years’ experience, they were much more knowledgeable than I.  I’d forgotten a great deal of what I’d learned in my prior six months of training.  Banks around the area were merging. That meant less work to do around home and, therefore, more time on the road.  It was clear that I was an impediment.  For every day that I got assigned a job near home they had to go on the road.  When I did go  with them, my presence wasn’t welcome, for I didn’t belong to their “old boys’ club.”  Rather than go out drinking with them, I’d spend my motel evenings in my room, reading or watching TV.

It took the other examiners a little over a year to execute their plan to get rid of me.  Overtly, they bedeviled me by ordering all sorts of products to be sent by mail to my apartment.  I initially sought out the Postal Inspectors but they declined to get involved if I couldn’t suggest whose handwriting was on the order slips.  At the same time, the senior examiners were reporting to HQ that I was dumb, that I spent too much time talking to the tellers, and that I’d never be a satisfactory full-fledged examiner.  By June of 1972,  they had convinced HQ that I needed a lot of retraining but, before they could order me back to the “trainee list”, Hurricane Agnes intervened.  I didn’t realize it at the time, but Agnes was the second-best thing that had happened in my young life—second only to having won the Sordoni Scholarship to attend King’s.

Agnes was, up to that time, the greatest disaster to strike the US, with respect to both the area it affected and the dollars’ worth of damage inflicted.  The U. S. Small Business Administration (SBA), which the handled Federal Disaster Loan Program, was in a fix. In February, 1972, an earthen dam belonging to the Pittston Coal Company had collapsed in Buffalo Creek, WV.  In May, Rapid City, SD suffered extensive flooding.  When Agnes came along in June, SBA simply didn’t have enough disaster troops left to handle her.  The decision was made to borrow employees from other Federal agencies.  “Who knows a lot about loan making?  Why, bank examiners do !” I was assigned to the Wilkes-Barre SBA disaster office for a six-week shift.

I was assigned to recommend approval on home loans and I took to the job like the proverbial duck to water.  Rather than the sometimes-boring task of poring over bank records, here I got to meet with flood victims.  I interacted with them as I screened in their applications and then saw their thankful relief as they walked out weeks later with their loan proceeds checks.  It was nice to go to the same office every day and not have to go out on the road for a week at a time.  The overtime was a BIG plus and, with my first couple of paychecks, I ran out and paid off my student loans.  Still flush with cash, I began my lifelong investing career by buying 100 shares of PP&L through Bache and Company a block from our office.

Roughly four weeks into my planned six-week stint at SBA, I got the call from the examiners’  HQ.  I was to cut short my stay with SBA and return for more training.  I was at a career crossroads.  I dreaded going back to where I was clearly not wanted.  On the other hand, SBA was in the process of approving what would turn out to be 20,000 home loans in the Wyoming Valley. Surely, they’d have to set up a servicing office to handle them for the next 30 years.  I spoke to the SBA Branch Manager and pointed out that, as a vet with a service-connected disability, I had plenty of Civil Service status. I would certainly qualify for a permanent position.  Pleased with my work to date, he readily agreed to hire me on as a temporary employee and to speak on my behalf when funding came through for the permanent office.  I called the examiners’ HQ back and told them bluntly “I AIN’T coming back !! I’m staying here where I’m wanted !!”  I mailed back my ID card and some other documents and I never heard from them again.

I spent the rest of the summer living with my Dad, for apartments were extremely hard to find anywhere near the flood zone.  Sometime during that span, my old neighbor Gerry Missal, who had sheltered me for five days during the flood, came to my rescue again.  I ran into him at K-Mart, I think, and he told me about some new apartments in Wilkes-Barre Township.  Their construction wouldn’t be complete until September but he had put down a deposit to hold one for him and Sylvia.  He put down another deposit on my behalf and I paid him back the next day at his father’s house.

1972 was a presidential election year as well as a time for the entire House of Representatives to stand for election.  In such years, Federal benefits are often extended to make the incumbents look good.  Given the scope of Agnes and the preceding disasters in the Spring, by July Congress passed and President Nixon signed what became known as the “Agnes forgiveness clause.”  Loans were made with a 1% interest rate, and best of all, the first $5,000 did not need to be repaid and were, essentially, grants.  SBA set up two loan processing offices in Wilkes-Barre, both on South Main Street.  Although I knew quite a bit about business loans from having examined how banks made them, I chose to work on home loans in the office just a block from Public Square  We loan officers quickly learned SBA’s rules.  The purpose of the loans was to restore flood victims back to, as close as possible, their pre-flood condition, but not better than that.  Loans of less than $10,000 needed no collateral.  In many cases, entire homes or apartments had been washed away and there was simply no way our loss verifiers could be absolutely sure what had been lost.  The verifiers met with area contractors and learned the going rates in our area. Rebuilding reconstruction costs were figured on a so much-per-square-foot basis.  Personal property allowances were set on various bases such as $500 per person for clothing, $1,000 per room for furniture, etc. 

The “Agnes forgiveness clause” legislation, as I recall, didn’t spell out exactly how it was to be interpreted, so SBA came up with its own workable definition.  We decided that it would be one $5,000 forgiveness per married couple, single person, or business. If a man lost his home and his proprietorship business, he could get two separate loans but only one would have the full forgiveness.  A two-person business partnership loan could get $5,000 but such was considered to be $2,500 for each partner.  Each partner could get another $2,500 forgiven if he happened to also need a home loan.  Corporations did not have the $5,000 divided amongst its stockholders. 

On home loans, we were often confronted with considerable calculations for the forgiveness.  We’d encounter a situation where a parent had died before (sometimes YEARS before the flood) but the heirs hadn’t then ever actually titled the homestead in just one or two names.  We were charged with making loans to only the precise owners that owned it as of June 23, 1972 for it was truly only they who had suffered the loss. It became necessary for sometimes five siblings to co-sign.  In a few cases, one reluctant sibling would refuse to sign and the property never did get rebuilt.  In the case of the five signing the loan papers, it was determined that each could be said to be receiving 1/5 of a forgiveness, or $1,000.  Should that sibling also have damage to their own house, they’d be afforded another $4,000 forgiveness on their own individual loan.

Another situation arose a few times: a parent had given their child, as a wedding present, a lot neighboring the homestead.  The child and their spouse then built a home on that gift lot.  Later on, the young couple decided to add a utility shed in the backyard but found that they didn’t have quite enough room for it on the gift lot.  “No problem”, the in-law said, “put it across the line on my property.”  That situation worked out fine until Agnes and SBA came along.  We insisted that any money to replace the shed had to be loaned to the actual June 23, 1972 owner, the in-law.  Absent the real owner’s signature on the note and the accompanying mortgage, SBA couldn’t take as collateral the shed and the land it sat on.  We ran into in-laws who were elderly, wanted nothing to do with a loan, and refused to sign.  We’d offer a reasonable compromise:  “Look, we HAVE to have you on the loan but there’s nothing saying you can’t have the children on there as co-makers.  You can work a deal with them; you join in but they will have to make the payments.”  I saw even that compromise turned down more than once.  The result was that the shed didn’t get replaced with SBA funds.  Our best advice was “Next time, deed over to them a sliver of land on which to place their shed.”

As a flood victim myself, I was entitled to apply for an SBA loan and I did so.  I was totally honest about it and spent considerable time figuring out what to claim.  My apartment building still stood, so the loss verifier would have no problem seeing that my second-floor apartment had seen only a foot of water.  I applied for and received $500.  I properly recused myself from working on my own loan and another loan officer processed it.  I did get a look at my file and was amused at the loss verifier’s report.  He had been totally stumped at my minimal $500 claim.  Apparently, all the second-floor neighbors in other buildings in the complex had lost, you guessed it, $5,000 !!  Golly, just the same amount as the maximum forgiveness !!  I was the only one who had told the truth.

My apartment in Cedar Village, Wilkes-Barre Township, was finished as scheduled in September and I held an apartment-warming party for my friends and colleagues.  I was primarily a Michelob drinker. I didn’t know what else the others might want so I went whole hog covering every possibility I could think of.  I bought beer, wine, rum, vodka, and gin plus some martini and piña colada mixes.  I stocked tomato juice, orange juice, olives, limes, Gibson onions, Coke and 7-Up.  About 20 people showed up and had a good time.  Despite all my preparations, I had to make a run to the grocery for more soda !! I never was more than a social drinker and now, some 34 years later, I’m diabetic and haven’t touched a drop of alcohol in over eleven years.  I STILL have those bottles of booze !!  They rest on the mantle above my fireplace and I expect they’re still potable.  Alcohol can’t spoil, can it?

Like most flood victims, I had initially gone to a “one-stop” center to apply for whatever benefits were available. The Salvation Army was handing out clothing vouchers and the Red Cross had cleaning supplies but I didn’t need those.  I had signed up only with HUD for help with housing.  HUD eventually set up massive trailer parks around the area. In the alternative, they would pay something like 75% of the rent if one were lucky enough to find an apartment.  Since I had found one with the help of my neighbor, Gerry Missal, I would just send in my rent receipt and get back a HUD check.  I felt a little guilty about taking this help.  Here I was, fully employed, with the overtime bringing in more money than I’d made pre-flood.  HUD, however, asked no questions about income.  Their sole criterion was that if you were a flood victim, you were eligible.  I shrugged, said “What the heck ?”, and took the money.  In December, I got a call from HUD: they had a trailer for me !! A crooked person would have accepted the trailer and rented it out for a profit while, at the same time, taking the rent-reimbursement checks.  Ever the honest government employee, I told them how they were already aiding me and I turned down the trailer.

My work as a Loan Officer (L\O) involved chiefly reviewing loan applications and the loss verifier’s reports, applying the forgiveness factor, calculating the loans terms, and then passing them on to my supervisor for final approval.  With a 30-year maturity available and a 1% interest rate , we declined very few applications. When we did, it was usually because the loss could not be verified.  Applicants had listed a contact phone number at the place where they’d ended up living post-flood.  Sometimes an owner-occupied dwelling had washed away and the loss verifier met no neighbors who could confirm the applicant’s residency.  In that case, we L\O’s would make the call.  Generally, the applicant would bring in a copy of their deed to prove ownership and the loan would then be approved. 

Denials were more frequent on renter applications for, life being what it is, renters move more often than homeowners do.  Often the loss verifier could find no neighbors who knew the applicant.  In these cases, residency was proven with either a copy of their lease or a sworn statement from the landlord whose deed we had seen.  From time to time, a denied applicant couldn’t be reached by phone and got a denial letter instead.  They would come storming into our office looking for someone to chew on.  For whatever reason, be it my even temperament (LOL) or good looks, I was designated as the “Reconsideration Loan Officer” to handle them.  They would calm down when I explained that all they needed was an affidavit from their landlord and they’d leave.  They usually returned with one in a day or two.

Over time, I began to notice that quite a few denied renters all had lived at one particular address in South Wilkes-Barre.  I didn’t know the place and, offhandedly, remarked to my supervisor that it must have been quite a large apartment complex like the one where I had lived.  I became somewhat familiar with the landlord’s name, Tattersall, and I think I may have met him once when he brought in his deed.  His notarized statements were boilerplate “I hereby certify that XXX rented from me at ________.”  The sameness wasn’t unusual in that his entire complex must have been wiped out.

Our staff consisted of just two SBA permanent personnel (the branch manager and the lead attorney), many temporary L\O’s and loss verifiers with prior disaster experience, and a hoard of local hires like myself.  It wasn’t unusual for us locals to spot applications from people we knew.   Lew Thomas was a fellow  local hire about 6 years older than me. I’d heard of him, Doc Thomas’ son from Lake Silkworth but, otherwise, didn’t know him at all.  Lew worked in our Unsecured Closing section where no legal documents like mortgages were needed.  Borrowers needed only to sign a Note and walk out with their check.  Lew was somewhat handicapped (he limped severely) and seemed to have a drinking problem that was evident on his breath.  I didn’t have much confidence in his professionalism and doubted that he even asked for identification from borrowers.  I had worked a few days in Unsecured Closing when they were shorthanded and had found several men coming in with girlfriends who’d forge the man’s wife’s name on the Note.  I took Lew to be no more than an less-than-reliable oaf that SBA had hired under some “Help the Handicapped” mandate.

In retrospect, had I not been so overworked, I WOULD have smelled a rat when Lew would saunter by my desk and ask about applications I was working on.  “Oh, I know that guy”, he’d say, “give the poor fellow a break.”  Lew knew how much we could allow under the various categories of personal property and would cajole me to permit the maximum even when the items made little sense.  I would just shoo him away with a “I’ll do whatever is legal” and then would proceed normally.  I failed to notice that a great majority of applications in which he expressed an interest were denials from Tattersall’s property in South Wilkes-Barre. 

In the Fall of 1973, Lew’s scheme became evident when I testified in Federal Court in Scranton.  He’d been in cahoots with Tattersall. At a Lake Silkworth bar, Lew would gather assorted low-life cronies who hadn’t been touched by Agnes and help them fill out fraudulent loan applications.  All supposedly had rented from Tattersall and their losses pretty much mirrored the allowable amounts.  Every claim was for the maximum $5,000 forgiveness—crooks couldn’t be bothered with repaying an actual loan.  A few slipped through the cracks and got approved on the first go-‘round by L\O’s other than me.  The ones that got denied were quickly supported by Tattersall’s false affidavits. I imagine that, when the scheme was revealed, the FBI probably investigated ME as well, for ‘twas I who approved the former denials !!!! If they did, I never got wind of it and only found out when I got a subpoena to testify in a criminal case.

As crooked schemes go, Lew’s wasn’t too shabby in the planning but it failed miserably in the execution. The crony would sign the Note, Lew would hand him the check, and they would walk together into a bank branch in the same building as our office.  A teller had figured that Lew, who’d she’d seen many times on his way to the coffee shop, was an SBA employee.  She took notice that the borrower would cash his $5,000 check at her window and then hand some of it to Lew on their way out !!  What she saw was him getting his 10% cut of the action.   She told her Branch Manager, he told the SBA Branch Manager, and the FBI swooped in.  The results of one trial will be reported in my next chapter.

SBA’s loan-making lasted through the Winter of 1972-73 and gradually slacked off.  Local temp hires were being let go as the work petered out but I survived until the last.  I like to think it was because I’d done such a good job but I also owed quite a bit to the Branch Manager who’d hired me as a temp.  He, after all, realized that I had given up a career position to stay with SBA.  In early May, 1973, he actually seemed kind of embarrassed to tell me that the funding for the permanent loan-servicing office wasn’t coming through as quickly as planned and that he had to let me go.  I was ahead of the game to the extent that I had, over the past eleven months, amassed quite a tidy sum from all the overtime but, still, where would I go from here?  I moped about for only about a day when a brilliant idea hit me.  “Aren’t they having floods along the Mississippi now?”, I asked the Branch Manager.  “Maybe I could go out there and do the same job I’ve been doing here.”  He got on the phone with his Central Office and soon got back to me.  “Yep”, he announced, “can you report to Springfield, Illinois in a few days ?”  So began the next phase of my SBA career.  See my next chapter, which is titled “Disaster Bum.”

 

Ronald E. Hontz

33 Whitcraft Lane

Shrewsbury PA 17361

(717) 235-5791

cell phone (717) 309-1402

e-mail: Sweetvalleykid@gmail.com

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