Ms. Mills will be a great SBA Adminstartor. The first item on her agenda should be the relationship between Small Business and the current crisis of Foreclosures and Unemployment.

Under normal circumstances, small business owners are generally optimistic about our future. Today, the situation is different. As an analogy, we take an annual physical exam, even though we feel fine. However, the Blood Test usually identifies whether we are ill or healthy. Recently, the National Association for the Self-Employed (NASE) ran a survey which I created to diagnose the small business involvement in ALT-A and Option ARMs mortgages. The results were astounding.

You will note that these are the most “TOXIC” mortgages that will be RESETING in 2009 through 2012. The main problem is that 80-90% elected to make the “minimum” payments on these mortgages, thereby allowing the principle to grow and bring them into negative amortization whereby the principle was more than the original mortgage. The problem with RESET or RECAST is that now, these borowers must pay off the principle in the remaining term of the mortgage. No matter what the interest rate is modified to, the monthly payment will SKYROCKET to unsustainable amounts.

It is a tragedy when an individual borrower defaults on the mortgage and loses his/her home. The tragedy is magnified when the borrower is a small business owner, employing from 1 to 10 employees. The loss of jobs related to mortgage defaults and the resulting business failures will further weaken our economy and prolong the recession.

Job retention is as important as job creation. The small business owners are at great risk for their survival, as they must contend with personal and business debt, the recession, and the continuing forces of small business failure which have been exacerbated by the credit crunch and financial crisis. The economic downturn will dramatically increase the rate of small business failure and job losses.

I am a Professor of Accounting and Taxation at Kean University School of Business in Union, NJ.
On 4/16/08, I testified before Senator John F. Kerry’s US Senate Committee on Small Business and Entrepreneurship. I have researched the Foreclosure Crisis, and believe that you may find the following interesting as it relates to the PAY OPTION ARMs piece.

I authored a survey of small business owners which was run by the Association for the Self-Employed (NASE) which determined the involvement of the small business community in these TOXIC Mortgages that are about to RESET in the 2nd Wave of Foreclosures due in 2009.. NASE issued a Press Release on 11/21/08. The survey appears on their website at http://www.nase.org

Many fail to realize that there are millions of self-employed micro-businesses, who employ from 1-10 employees, that are holding these mortgages that are going to reset in 2009 through 2012. These borrowers are Prime and Near-Prime borrowers who hold ALT-A, Option ARMs, Interest-Only mortgages. There are $1 Trillion ALT-As, and $500-600 Billion Option ARMs.

So, here we have a major problem… These millions of small business owners will lose their homes, their business may fail, and their employees will go job-less. Obviously, the recession will exacerbate these problems. Although President-Elect Obama is stressing the need to create 3 million new jobs, we must understand that “JOB RETENTION IS AS IMPORTANT AS JOB CREATION”.

According to this survey, it is estimated that 3,709,800 small business owners hold Alt-A and other toxic mortgages, and 1,279,800 are already delinquent as they have missed one to three or more monthly mortgage payments at mid-November, before the expected Resets that are scheduled to begin in 4th Quarter 2008 through 2012.

Conclusion

Small business is the job creation engine of our economy. Proactive efforts must be taken to provide small business owners with immediate and specific financial guidance, combined with other measures, to avoid default on mortgages and other debts in this critical and challenging financial crisis.

Thank you,

Samuel D. Bornstein
Professor of Accounting & Taxation
Kean University, School of Business, Union, NJ bornsteinsong@aol.com

732-493-4799

I'm more worried about what Obama means for small businesses.  He touted small busineses quite a bit when during the campaign (as did McCain obviously).  He promised to act when it came to illegal diversion of government contracts that are supposed to be allocated to small businesses.  After being elected, his administration removed this promise from their website.

http://americansmallbusinessleague.blogspot.com/2008/12/obama-will-allow-fortune-500-firms-to.html

Apparently the American Small Business League is not happy with the Mills pick and a bill they say Obama is preparing ...

http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/12-23-2008/0004946277&EDATE=

Perhaps you should go ahead and interview them ...

Here is an economic plan that Ms. Mills as the SBA administrator can support which can be implemented on January 21, 2009. The problem is that President-Elect Obama and the transitional team does not know it exist because I am not in the inner circle with contacts or have the President-Elect's ear. However, you as the reader(s) can be the judge. If you determine that the attached plan can jump start our economy, let me know, tell your neighbors, your friends, family members, the media and especially your congressman or congresswoman that this is a plan of action that should be given immediated consideration. I have attached a letter sent to Shaun Donovan, Secretary of HUD designee as to the results this plan will produce.



December 17, 2008  



RE:  Solutions for the Housing & Job Crisis by using small businesses to jump start the economy, which can take effect on January 21, 2009  



Dear Shaun Donovan,



I have made several attempts to contact members of congress, the senate and the new administration’s transitional team regarding solutions for the housing and job crisis but to no avail. I write to you with hopes that we can discuss this bold plan that has been created which will require federal assistance.  I also write to you with hopes that you will champion this cause so that we may implement this plan in time to prepare for the second wave of foreclosures projected for 2009 – 2010.  



I have been in business since September 1981 in the areas of Real Estate, Finance, Taxes and Business Strategy along with possessing a legal background. I consistently deal with the stress and anxiety of the average American to find real, tangible, solutions. I believe that my many years of service as an expert in these areas, can be transformed into an effective initiative to tackle our current housing and employment challenges.



Below, please find an outline of the above mentioned plan as it relates to a national solution that will improve our uncertain economy. I am confident that this plan can be that “single solution or magic bullet” that Chairman Sheila Bair of the FDIC did not believe existed.



This proposal can be developed to take effect as of January 21, 2009 and will produce a comprehensive and effective business model that will:



Stop & Prevent Foreclosure:



Establish eligibility of loan modification within 72 hours after a complete application has been submitted


Establish a safeguard procedure that will prevent the homeowner from re-defaulting on their loan modification agreement




Stabilize Property Values:



Retention of homeownership in order to prevent declining sale value


Reduce inventory of foreclosed properties where homeowners are in possession or retain title of ownership




Stimulate New Investments:



Develop Partnership Investments for new businesses or expansion of businesses


Integrate partnership with financial institutions that received a part of the 700 billon dollar bailout or any new stimulus legislation to be enacted


New tax structure to create incentives for high income earners above $250,000 per year.  These participants will contribute to the program which will create capital, job creation and business growth, without a tax increase




Create Job Growth:



The program will match employers with employees who are enrolled


Current unemployed applicants will enroll into the program to qualify for employment first by the prospective employer who is a member of the partnership structure of this business model


The job placement program projects a minimum employment growth of 100,000 new jobs per month, 30 days after the implementation of this program




Create Educational Opportunities:



Cost associated with an unemployed applicants requiring training for employment opportunities in emerging industries will be paid by this program


Employers who are members shall have the option of receiving tax credits or matching funds if unemployed applicant is hired and requires additional education or training to pursue a career in an emerging industry


Finance, income tax and credit counseling will be required for all who enroll in this program




Create Accountability:



Each applicant and or transaction performed under this business model will be tracked and all information will be retained for accurate reporting, research, analysis and for auditing purposes




Restore Consumer Confidence:



Upon enrolling into this new program, each applicant will be issued an assigned card to be used with all purchases from merchants that are members under this new business model.  The applicant will be entitled to a ten to twenty percent discount for each transaction when using the assigned card




This proposal has been developed to serve as a fast-track program to create the business model the government can use for the 21st century economy that will ride on the innovation of the internet.   Please contact me as soon as possible.



Respectfully,



Allen Shay  



For questions regarding this outline, please contact:  



Allen B. Shay 202 S. Lake Ave Suite 260 Pasadena, CA 91101



626-584-0499 (Phone) (Email)



COPYRIGHT © 2008




Shay & Associates
202 S. Lake Avenue Suite 260
Pasadena, California  91101
(Tel)   626.584.0499
(Fax)  626.584.0703

Make it a Productive Day!

Once again SBA becomes a dumping ground for losers.  Her career was to destroy businesses for profit!

>>The main problem is that 80-90% elected to make the “minimum” payments on these mortgages, thereby allowing the principle to grow and bring them into negative amortization whereby the principle was more than the original mortgage. <<
_____

Professor: although you seem learned, I have difficulty in crediting someone who cannot distinguish "principle" from "principal" in a lending context.

Shawn,
Obviously a mispunch. Don't throw out the baby with the bathwater. The message should not be trivialized.

I am very much hopeful and optimistic that this will work. Atleast thanks for thinking ahead of the brick walls now in place.
My hopes and expectations are high for my country.
I am a veterans who is not getting what I deserve from my country as a DISABLED VETERAN.
May be now our country will give us much as we gave it!
God Bless America.

It would be a surprise if Karen Brown could even get agreement on the definition "small business" let alone get the SBA to help it.

It would be a surprise if Karen Brown could even get agreement on the definition "small business" let alone get the SBA to help it.

Congratulations to Karen Brown and the Obama Administration on a good choice for the SBA.  We look forward to working with the SBA on rebuilding the economy.  Patrick J. Tracy, Senior Vice President-SBA, Omni National Bank, 678-244-6356

Who is Karen Brown?

I HOPE MS/ MILLS LOOKS INTO HOW THE LAST ADMINSTRATION ROLLED UP MOST OF THE SBA CONTRACTS AND GAVE THEM TO BIG BUSINESSES, AND HELPED THE UNEMPLOYMENT RISE.

SBA Lenders are now burdened with SBA-guaranteed notes which cannot be sold; even though the SBA is "full faith and credit of the US".  

The Federal Reserve should be the lender of last resort for purchase of SBA-guaranteed notes. The purchase price should be 100% of the par value for performing loans. The Federal Reseve could provide this important liquidity immediately.

The Lender (bank) should be able to repurchase the SBA-guaranteed note at anytime without penalty. The secondary market should be the secondary source for purchase of SBA-guaranteed notes. The secondary market was an excellent source of liquidity for SBA-guaranteed notes until the recent financial crisis.

The current situation is dire. Please note: SBA lenders are quitting the program; SBA-guaranteed loans are unmarketable to the secondary market; SBA-guaranteed loans held by the FDIC-insured banks now require a 20% reserve requirement; SBA loans are declining at an accelerating rate; SBA lending officers are being terminated as SBA lending programs are dismantled; and SBA guaranty repairs are taking place on claims paid out years ago. Small businesses and their banks need action and ideas from our political leadership. I look forward to a strengthened SBA.

A small 2 year old bussiness has the need to hire more
and grow even more.
However the cost of doing business and medical for the employes make it impossible. financial help to this business would create more jobs and grow to even
more jobs.Can you tell me why ther is no help for this business to create more jobs?

The SBA is poised to take on a more active role in the small business environment due to improvements in liquidity of SBA-guaranteed notes, reduced SBA fees and added SBA staff.  But the proposed limitation of $250,000 on goodwill in a SBA loan will be a killer.  Please urge the SBA to reconsider this ill-advised proposal.  Thank you.  

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