[StBernard] Baker Plan in Flux

[Westley Annis]

Westley,

This is a little long, but I don't respond often so here it is:

I thought I might give you another perspective on the Baker Bill.  I support

the bill, but think the insurance proceeds should be subtracted first.

The bill is supposed to help those who did not have flood insurance (because

insurance was not necessarily indicated for their area maybe) escape 
financial ruin while allowing the mortgage companies some return on their 
investments.  The mortgage companies do not want damaged properties that 
they cannot sell to recoup their losses.  The value of 60% is good.  I am 
worried about the wording of not less than 60% and no more than 60%.  That 
indicates to me that some homeowners might get more than 60%.  No one should

make money on the deal.  Buying into the Baker bill should be a last resort.

  The plan can not finance everyone who wants to make a few bucks, nor 
should it.

For example, consider a home worth $300,000 with a mortgage of $200,000.  
Insurance proceeds of $200,000 pays off the mortgage.  The property owner 
now has no mortgage and can get a much smaller loan to rebuild the house- 
which is what we need for St. Bernard to thrive, people returning.

If the Baker Bill doesn't take into account the insurance, the owner could 
sell for $180,000 and make $80,000 off the deal and leaves the parish with 
no reinvestment here.  The bill was not meant for this type of individual in

my opinion.  Meanwhile, the administrators of the Baker plan now have a 
property to redevelop or sell at a possible loss.  Since the prgram can't 
fund every property, this scenario might use limited resources for a 
homeowner who did not really need it.

If the Baker Bill subtracts the proceeds, leaving only $100,000 of equity 
and a buyout of only $60,000, the owner would probably not sell to the plan 
for because of a perceived loss (of course, you never know what a person 
will do unless you walk in their shoes).  Or, the owner might put a for sale

sign up and sell directly to gain more money from an interested party or 
rebuild for less than the original mortgage, thus allowing a property to be 
rebuilt in St. Bernard without putting a burden or getting interference from

the government.

Another scenario I have been hearing (although less often) is that some had 
more insurance than the property was worth pre-Katrina.  For example, in a 
"no-flood zone", the coverage usually is offered in $50,000 increments 
because the NFIP doesn't anticipate having to actually pay out a claim for 
these low-risk properties.  So if you had a home worth $160,000 pre-Katrina 
(lot value included) and carried $200,000 of insurance or more.  (Yes, you 
can pull out a $250,000 flood insurance in these no-flood zones for only 
about $30 more a year than the $200,000 policy--what a deal in this case if 
you did.)  If you get a total loss payout-- as some companies, including 
State Farm, did for many with minimal questions as to the actual value to 
rebuild as they were trying to expedite and "fast track" these claims for 
the customer-- you have already made $40,000 on the property courtesy of the

federal government.  Add to that the homeowners claim payout--if you were 
lucky enough to get a few dollars.  Keep in mind that you could bulldoze the

property--courtesy of the government again and just keep the lot until the 
value increases or, you could sell to the Baker Plan if insurance proceeds 
were not subtracted and get an additional $96,000 and walk away with barely 
a second glance at St. Bernard.  Was the plan really meant to play out this 
way for this scenario?????

An argument I have heard is that it isn't fair to subtract the insurance 
proceeds as it "penalizes" the people who had flood insurance.  If you had 
enough flood insurance proceeds- this plan is NOT meant for you.  If the 
statistic I heard of only 10% of the homes in St. Bernard having flood 
insurance is correct, my response is quit complaining and show some 
compassion for the rest of the parish who were not as fortunate to have the 
foresight to get flood insurance.

My hope is that the bill passes with insurance proceeds deducted accordingly

to make it the most equitable.  No plan can be perfect for all.  However, 
this plan might get a number of people out of a tight financial spot.  
Considering what we have all personally lost, it seems criminal to get 
something more out of the Baker plan than was originally intended.

By the way, in case you were wondering, I did have flood insurance.  No, 
unfortunately I did not have State Farm--I had to itemize and justify all of

my contents in a ridiculous spreadsheet for my claim.  And yes, I really do 
know several people that fall in these categories.

I hope this gives you more food for thought on the issue as my opinion is 
likely to stir some individuals to respond.

Thanks for all your work on the website and your constant supply of info and

opinions.

KM