[StBernard] Finally! Lump Sums

[Westley Annis]

By David Hammer 
Staff writer 
Louisiana received final federal approval Monday to pay all Road Home grant
recipients, even those with outstanding mortgage debts, in lump sums
transferred directly to their bank accounts. 

Every Road Home applicant who closes on or after Wednesday will get to
collect the full amount of their award in an electronic transfer, said
officials from the Louisiana Recovery Authority, the appointed agency that
created the Road Home program, and the Office of Community Development,
which oversees the distribution of the $7.5 billion in federal aid for
homeowners. 

The state is still trying to work out with mortgage lenders how to get
lump-sum payments to approximately 5,700 homeowners without mortgages, who
have already held closings for payments in installments. 

The announcement comes after weeks of negotiations with federal housing
officials and lending institutions about how the state could alter its
original system of paying homeowners in controlled installments tied to
completion of repair work. Federal officials called the deal "tentative"
because they are still working out details on how to account for elevation
grants - awards of up to $30,000 specifically intended to cover the costs of
raising a home, not compensate for a previous loss.

The federal Department of Housing and Urban Development told shocked state
officials on March 16 that their way of disbursing the awards made the Road
Home a federally financed repair program, and not the compensation program
HUD had originally approved. A repair program would trigger costly and
time-consuming environmental and labor law reviews on each rebuilding
project, something Gov. Kathleen Blanco's administration had wanted to
avoid. 

The state quickly changed to lump-sum payments for homeowners without
mortgages, but the process was not so easy for changing payouts for the
approximately 80 percent of Louisiana's storm-damaged residences that have
mortgages. 

That's because the state had already signed pacts with lending institutions
so the mortgage companies wouldn't force grant recipients use their awards
to make late mortgage payments. When the state announced last week that it
was seeking lump-sum payments for all recipients, abandoning the installment
requirements, the previous agreements were negated. It remained unclear
Monday whether the state had instituted new safeguards to protect lenders'
investments, and if the state could do anything to guard against banks and
other creditors making a claim on grant recipients Road Home proceeds. 

Walter Leger, housing chairman for the Louisiana Recovery Authority, the
appointed board that created the Road Home program, advised homeowners to
work closely with their lenders and encouraged them to keep getting their
money in installments tied to repair work, if possible. 

"We believe that establishing a voluntary disbursement account with their
lender would be a good way for homeowners to guard against creditors and
fraudulent contractors," Leger said. 

With the announced policy change, Attorney General Charles Foti said people
need to be on greater guard against fraudulent contractors who might try to
take advantage of the fact that homeowners will now be receiving grants
directly. 

"To date we have received more than 2,100 contractor fraud complaints," Foti
said. "As more people are able to make repairs, and more people have money
to spend, the unfortunate side effect could be more unscrupulous people
trying to take advantage of them." 
Another fear about switching to direct lump-sum grant payments is that
homeowners would use the money for other purposes and leave their homes
unfixed. The LRA will work with the State Legislature and local governments
to avoid that by making sure anti-blight laws are thoroughly enforced, Leger
said. 

David Hammer can be reached at dhammer at timespicayune.com or (504) 826-3322.