July 31, 2013
BATON ROUGE - The U.S. Department of Housing and Urban Development has approved the state’s new policies, including construction financing assistance, for Road Home grantees who have attempted to rebuild, but for reasons beyond their control, have been unable to fulfill the requirements of their Road Home agreement of returning and reoccupying their home.
Option 1 recipients within the Road Home program chose to take a grant to rebuild or repair their storm-damaged home and agreed to reoccupy that home. Option 2 recipients chose to sell their damaged home back to the state then purchase and occupy another home within Louisiana. Road Home grantees have three years from the time of their closing to comply with their covenant or grant agreement. As that three-year period reaches its end, homeowners are asked to report back to the program whether they have fulfilled their obligation. If they have, homeowners are considered in compliance and their grant is closed; if they have not, they are required to repay their grant amount to the state.
The approved Action Plan Amendments address Option 1 or Option 2 recipients who have faced circumstances beyond their control, causing them to be out of compliance and to possibly owe funds back to the state.
“Now that these Action Plan Amendments have been approved, our Road Home staff has additional tools to help homeowners to finish their homes and bring them into compliance,” said Pat Forbes, executive director of the Louisiana Office of Community Development.
Beginning August 26, letters will be going out from the Road Home program to all homeowners who are currently not in compliance with their Road Home grant agreement or covenant.
“When a homeowner gets a letter, they should complete the compliance questionnaire and send it in to have their file closed out. If they are not yet compliant, the best thing they can do is call the Road Home at 1-888-762-3252 or attend one of the many outreach events we’re having over the next couple of months,” said Forbes.
“In either case, our staff can work with the homeowners to determine if they qualify for any of these additional tools and what their best path to compliance will be. The important thing is for the homeowner to touch base with the program staff.”
Re-evaluation of Benefits
Action Plan Amendment 58 applies to either homeowners who owe money back to the program or Option 1 or Option 2 Road Home recipients who closed on their grant but have not fulfilled the terms of their grant agreement due to circumstances beyond their control.
Circumstances recipients have encountered include:
- Contractor or builder fraud;
- Involuntary forced mortgage payoff;
- Theft or vandalism;
- Damage from a subsequent event – such as another hurricane or a fire – prior to completion of repairs; or
- Installation of contaminated drywall.
If a homeowner can show required documentation that such a circumstance has occurred, then the sum of money lost from that incident – e.g. contractor fraud – can be subtracted from the total amount the homeowner owes back to the state.
Construction Financing Assistance
Action Plan Amendment 59 provides additional assistance to qualified Option 1 grantees in the form of a Loan Principal Repayment Grant, which will be applied to the principal of a construction or rehabilitation loan. The loan will be used to complete home repairs so the homeowner can reoccupy the home, fulfill his or her Road Home covenant and become compliant within the program. In accordance with HUD’s guidance, homeowners must complete repairs within 90 days of the closing of their loan.
The state Office of Community Development’s Disaster Recovery Unit has been working closely with non-profits and participating lenders to streamline the applicant referral process and implement the proposed construction loans.
Qualified participants must have an approved re-evaluation of their grant amount in accordance with APA 58. The amount lost by the homeowner, as determined through APA 58, will be subtracted from the original grant amount received, which will produce the maximum amount in LPRG assistance that could be available to a qualified applicant. Loans will only be made to cover the difference between the total repair cost and the LPRG.
LPRG recipients must be able to assume the debt to repair their home and qualify for a construction loan according to the underwriting standards of the lender. All properties being repaired with LPRG assistance must have the appropriate environmental clearance, which will be conducted and paid for by the program, not from the LPRG.
The LPRG will substantially reduce the risk to the lenders, enabling them to make larger loans to homeowners and approve some homeowners who may not otherwise qualify under normal market criteria.
The assistance will also reduce the amount of the homeowner’s loan payments. In some cases, the LPRG may provide sufficient funding to complete the recovery without a commercial loan. For those participants, funds will be administered through a construction monitoring process and disbursed as the work is completed.
All LPRG recipients will be included in the case management process, which will ensure that they are aware of all resources available to them, as well as their compliance responsibilities. Case management resources offered will include counseling, legal services, construction management and assistance applying for the construction loan tied to the LPRG.
Grant recipients potentially eligible for the LPRG will be identified through program correspondence, self-identification, program monitoring and compliance procedures, local code enforcement and interaction with non-profit organizations. As interested applicants are identified, they will be assigned to a case manager who will verify eligibility and assist the applicant through the loan application and qualification process.
Clarification on the Use of Elevation Funds
Action Plan Amendment 60 allows for the reclassification of Road Home Elevation award amounts that have been used for home repair and reconstruction to be considered part of the applicant’s compensation award.
The cost to elevate homes has increased substantially since the Road Home program began disbursing Elevation Incentive awards, and many homeowners did not have enough funds to complete the basic repairs needed to reoccupy their homes. As a result, some grantees used the elevation funds to complete their home repair or reconstruction.
Under APA 60, the amount of elevation funds used for home repairs will be subtracted from the amount the homeowner owes back to the state. Only Road Home participants who received Elevation Incentive grants and are not yet compliant with their elevation agreement will be eligible to have the costs considered for reclassification. Homeowners must provide documentation demonstrating that the elevation funds were used for valid home repairs or construction after their Road Home grant and other compensation, such as an insurance payment, were spent on repairs to the damaged structure.
HUD’s approval stipulates that the state must identify all compliant and non-compliant households within one year.
The Disaster Recovery Unit within the Office of Community Development is dedicated to helping Louisiana's citizens recover from hurricanes Katrina, Rita, Gustav and Ike. As the state's central point for hurricane recovery, the OCD-DRU manages the most extensive rebuilding effort in American history, working closely with local, state and federal partners to ensure that Louisiana recovers safer, smarter and stronger than before.