[StBernard] State, feds agree to give Road Home grants in lump sum

[Westley Annis]

State, feds agree to give Road Home grants in lump sum

By Bruce Alpert and Coleman Warner
Staff writers

WASHINGTON - Storm-damaged Louisiana homeowners should get their Road Home
money more quickly after state and federal officials reached tentative
agreement Tuesday on changes that will allow many homeowners to receive
grants in a lump sum instead of installments from a mandatory escrow
account.

LRA officials submitted language changing Road Home program rules and the
federal Department of Housing and Urban Development is expected to review
the changes quickly so as not to cause new delays in the release of grants,
said D. J. Nordquist, spokeswoman for the federal agency. 

HUD had notified Louisiana officials on Friday that requiring homeowners to
request phased disbursement from a mandatory escrow account as each stage of
construction is completed violates the agencies rules governing
"compensation" programs, which are intended to have few strings attached.
Louisiana officials flew to Washington for Tuesday's meeting, and the two
sides reached an agreement that satisfies the federal concerns just hours
before Gov. Kathleen Blanco announced she would not seek re-election. 

For months, activist groups such as the Citizens' Road Home Action Team and
Jeremiah Group in New Orleans have demanded more flexibility in how money
can be disbursed to grant recipients. News that homeowners will be allowed
the option to take a lump sum payment was applauded by beleaguered
homeowners such as Angelo Silvestri, 60, who has exhausted his savings
account trying to start repairs on in Gentilly home and objects to Road Home
rules that have withheld his grant. 

"I felt like I did when I used to go to school and my momma used to tie up
my change in a hankerchief," said Silvistri, who went to a grant closing
Feb. 28 and is waiting for his $111,650 grant. "I can handle my money. I'm a
big boy now." 
Despite the new lump sum option, the proposed rule changes will, for
homeowners with outstanding mortgages, turn use of Road Home grant monies
into a matter for negotiation between the owner and the lender. State
officials said they want mortgage companies to allow homeowners to use their
Road Home grants solely for rebuilding, should they so desire, but have not
yet secured agreements from financial institutions to not pressure award
recipients into applying the money to mortgage debts, said Louisiana
Recovery Authority member Walter Leger. 

"That question is not resolved," he said. 

While there have been reports of some mortgage companies pressuring
borrowers to apply insurance proceeds to pay off or reduce their mortgages,
it has not been a major issue. Most lenders have worked with homeowners who
want to rebuild by advancing them enough money to start construction and
then releasing more funds after an inspector checks to be certain the work
is getting done. 

Homeowners without outstanding mortgages would be allowed to use the
compensation money as they see fit, but they could still opt for some sort
of a gradual disbursement process of their choosing, Leger said. While the
Road Home program would still require that a home remain owner-occupied for
three years, there would be no explicit requirement that all of the money go
toward rebuilding, state and federal officials said. 

"That's a personal decision, it's not a federal issue," Nordquist said. 

Gov. Blanco and her Office of Community Development, which oversees the $7.5
billion Road Home program for homeowners, had no immediate comment. Blanco's
office deferred comment to LRA officials. Officials with ICF International,
the firm hired to administer the mammoth relief program, said they would
await new instructions from the state. 

"We're just continuing to do what we've been doing," said ICF International
spokeswoman Carol Hector-Harris. "We take our instructions from them." 

Andy Kopplin, the LRA's executive director, said he hopes to resolve how the
changes will be implemented as early as Wednesday. 

Since HUD surprised Louisiana officials Friday by raising objections to how
the money is being disbursed, some homeowners have canceled their scheduled
Road Home closings, hoping to get a better deal by waiting, Kopplin said. 

But he said the state intends to make changes in the program retroactive so
that many of those who have closed, or are scheduled for a closing, will be
eligible to get their Road Home grants all at once, rather than in
installments. 

An exception, Leger said, are people who have legal entanglements with
mortgage companies or banks. In those cases, the homeowner and the lender
would have to work out details of how quickly money is disbursed, and how it
could be spent. 

LRA officials will try to secure a new commitment from lenders to not try to
force homeowners to use grant proceeds on mortgage debts. It's unclear that
mortgage companies would have the legal authority to force payment of the
entire mortgage balance, except in cases of the loan being in default.
Still, some banks could resort to pressuring homeowners to use all or part
of an award to pay down a mortgage debt, or they could make an argument that
the grant amounts to "miscellaneous proceeds" that they have a claim to,
Kopplin said. State officials want to avoid such disputes, he said. 

Silvestri, who is disabled and has turned to relatives and friends to buy
necessities, owns his home outright but is waiting for grant proceeds to be
disbursed by an out-of-state bank. 

He said bank officials notified him this week that they did not yet have his
grant in hand from the Road Home program and, once it is received, it will
take five to seven working days to send him a "welcome package" with more
documents to fill out. Silvestri said he was told that, after the bank
receives those documents, they expected to send him the first installment of
the money - in another five to seven working days. 

The homeowner, who is staying in a FEMA trailer in front of his home, is
furious about the continued wait and now is excited at the prospect of
receiving the entire grant at once, without more scrutiny as to how he uses
it. But he also was leery of counting on an outcome that still is subject to
bureaucratic negotiations. 

For Orleans Juvenile Court Judge David Bell, who weeks ago went to closing
on a $150,000 Road Home grant - the maximum allowed under the program - the
prospect of a lump disbursement is looking attractive, especially now that
he is quarreling with a mortgage company that is holding his grant money in
an escrow account. 

Bell, 36, who is staying in LaPlace, has finished much of the renovation
work on his eastern New Orleans home, using insurance proceeds and personal
savings. But he said the mortgage company is balking at releasing his Road
Home money because Bell coordinated repairs to the building, and isn't a
licensed general contractor. 

Months ago, Bell believed that requiring escrow accounts and partial
payments while repairs were done were wise on the state's part. "My feeling
now is every individual knows what's best for them and their family," he
said. "They should just release the money." 

The judge struck a bitter chord about his wait for the promised Road Home
help. 

"By the time they finish these negotiations, the city will be damn-near
empty," he said. "At some point, we have to figure out when we want to be
treated just like regular people, not like we're fraud-driven thieves."

Bruce Alpert can be reached at balpert at timespicayune.com or at (202)
383-7861; Coleman Warner can be reached at cwarner at timespicayune.com or at
(504) 826-3311.