2013-05-10 / Front Page

Schumer Moves On Flood Insurance And Grants

Grant Fairness
By Kevin Boyle

On April 5th, The Wave ran its second in a series of special editorials on its front page and drew attention to the Community Development Block Grants (CDBG).

In that editorial The Wave informed readers that some money would be coming to help homeowners rebuild or even elevate their homes by way of these grants. But, readers were warned, there were built-in hurdles in the process.

The guidelines to get grant money are established by a federal agency, the Department of Housing and Urban Development (HUD). Many homeowners will soon learn that the actions of two other federal agencies – FEMA and the Small Business Administration (SBA) – will effectively prevent them from getting grants.

Routinely, FEMA instructed people whose homes were damaged to apply for an SBA loan. A lot of people did as they were told.

And then a lot of people found out that it was a waste of time. Homeowners who had good credit or not much debt were offered rates no better than a bank. A lot of people said thanks, but no thanks, and turned down the loan. Others were approved for the loan but decided they had enough debt already and therefore declined the SBA offer.

Therein lies the issue. HUD considers the SBA offer a benefit and counts the amount offered against any potential grant money.

Here’s an example: A homeowner needs $100,000 to fix his home. If FEMA gave $30,000 and the SBA loan offer was for $70,000, that counts as $100,000. In such a case, there is little chance any CDBG grant would be offered.

Take two people in similar situations (similar income, similar damage). The people who ignored FEMA and did not apply for the SBA loan are more likely to get grant money from the CDBG. As a city official told us, “Bad behavior is being rewarded.”

Of course, some argue it’s not “bad behavior” but smart behavior. If you were smart enough to ignore FEMA and dismiss the SBA, you’re more likely to be rewarded.

But for those who followed FEMA and are now being told the SBA loan numbers are being held against you, well, Senator Charles Schumer seems to have noticed.

According to Schumer’s office, the Senator called HUD Secretary Shaun Donovan and made the case that the HUD rules were unfair and should be changed. In a press release, Schumer said the SBA loan “should not count as a benefit that limits the amount of CDBG a homeowner receives when the homeowner declined to accept that loan for legitimate reasons.” Schumer went on to say, “This policy will punish these homeowners and HUD should do everything in it power to make sure these individuals are eligible for additional federal assistance.” According to the release, Schumer’s plea is under consideration and, so far, HUD has not released money to the City for the grants.

In order for the City to receive federal funds under CDBG it was required to submit a plan to HUD about how the monies would be spent. HUD has approved the State plan (which gets a separate pool of money from HUD) but has not yet approved the City’s plan.

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