[StBernard] Baker Plan in Flux

[Westley Annis]

Jer., 

You have to remember the intentions of the bill.  First, it is not meant to
make anyone whole.  The simple reality is that Congress is not going to give
up the money for that.  Second, it is to give people a boost.  Different
people will get a different depending on their circumstances.

In your example, the house is paid for and the owner has $50,000 cash in his
pocket from insurance.  Here the devil would be in the details.  Do you take
the equity position ($100,000), calculate the 60% offer and back out the
insurance for an offer of $10,000?  Or, do you take the equity, back out the
insurance, then calculate the 60% offer for $30,000?

In my Person C example, the first method works out to - $20,000.  Not going
to happen.  Second method works out to $12,000 originally calculated.
Person C will, with almost certainty, tell the LRC to disappear.

Congress is good for making lots of tests and rules, so besides using my two
original ideas for those who had mortgages, they could add a third for those
without a mortgage, which would calculate the offer using the second method
above.

The Baker Plan is not for everyone and Rep. Baker knew that from the start.
That's why it has always had the provision that you could tell the LRC to go
away.  

All we can do is push to express our views and hope something that will help
as many as possible passes.

Westley

-----Original Message-----


Well, Westley, you took the high road and the low road, but:

What happens to a man of say, 60, who has paid off the mortgage, has the
$100,000 home pre-Katrina, and has a partial-insurance, say, $50,000? (or
half covered). Does he get $60,000 minus the $50,000 he got from the
insurance company or $10,000?

How is $60,000 total of his $100,000 debt-free home going to get him a home,
so that he's made WHOLE again? He might be disabled or on a fixed income and
not likely to be afford a mortage of $40-65 grand (or even get a loan/SBA
loan, whatever? Does he fall through the cracks? Even though $10,000 extra
to some people who are needing an extra $10 grand might seem a blessing,
it's falling way short of the "in-between C+/D- scenario you exampled...

-------------------------------------------
My take on insurance proceeds and the Baker Plan.

The argument for subtracting any insurance proceeds is that those with
insurance will receive compensation twice. Once from the insurance company
and then from the LRC.

I believe this is coming up for one of two reasons:
 (a) Some believe that only rich had all the insurance they needed and they
shouldn't be rewarded for having insurance. 
 (b) Some are trying to find anyway at all possible to limit the amount of
money that will need to be spent.

There is no arguing with the (b) types.  Think of Councilman Lynn Dean, he
would probably fit this category.

The (a) types are looking at it from a very narrow point of view and
although I understand it, I don't agree with it. I believe it comes from
flawed reasoning.

Let's look at two examples:
Person C has a house valued at $100,000 pre Katrina with $80,000 on his
mortgage with $80,000 insurance coverage.  He gets his insurance check and
pays off the mortgage company.  With the original 60% rule, he should get an
offer for $60,000 which he would most likely accept.

With the insurance back out, he would only get an offer of $12,000.  He's
not going to accept that in a million years.  It may take five years, in
which he would have to pay maybe $200 in property taxes a year (property
will probably no longer qualify for homestead exemption) for a total of
$1,000.  I'm guessing, in five years he should be able to get an offer for
$25,000 for his lot.  It's worth sitting on the lot for the possible return.

Person D has a house valued at $100,000 pre Katrina with $80,000 on his
mortgage and no insurance.  He get's an offer for $12,000 which is accepted
since it has a "real" value of $92,000 when you factor in he no longer has
to worry about the $80,000 mortgage.  The LRC negotiates with the mortgage
company and settles the $80,000 mortgage for $48,000 (60%).  The LRC has now
spent $60,000 on this house, which is the same amount it would have spent on
Person C's house.  The difference is only whether the LRC had to deal with
the owner and the bank or just the owner.

In this case, if the owner had insurance, the only winner is the bank.  I
will say, when Rep. Baker first thought of this plan, I think he only had
Person D in mind, but I could be wrong.

What is a compromise? I'm really not sure.  I thought I had a couple of
ideas, but when I ran the numbers it didn't make sense.

I'm not saying it's fair or not, since that seems to be like beauty, all in
the eye of the beholder, but I think the simple truth may end up that those
who had insurance will see some type of reduction on the offer they receive.
The test will be to see how big of a reduction.  Maybe it could be worked
out where they only reduce because of insurance by 50%.

Now that I think about it, for those with insurance, they could be asked if
they wanted to be treated as the owner or the bank.  If owner, they get 60%
of equity.  If bank, they get 60% of their mortgage balance pre Katrina.  In
Person D's case, he could choose between $12,000 or $48,000.  I know I would
probably accept the $48,000 offer.

Westley