Cash evaporates while flood victims wait for government decisions

Sent: Monday, August 18, 2008 12:54 PM
Subject: waiting for buyout--sound familiar?
Cash evaporates while flood victims wait for government decisions
By JASON CLAYWORTH • jclayworth@dmreg.com • August 18, 2008
Flood victims are wasting money - some say millions of dollars - on mortgages and repairs because of the inability of federal and Iowa government officials to act quickly in disaster mitigation, some residents and a few elected officials say.Nancy Deason, for example, is making $462-a-month mortgage payments on a Cedar Rapids home she knows she'll never live in again. Her neighbor, Eugene Lewis, is repairing his home but says it's possible the house ultimately will be sold in an acquisition program and, along with his recent repairs, be taken to the dump.

Meanwhile, Kathy Taylor doesn't know whether she should sink an estimated $50,000 into her badly damaged home, knowing that the repairs will have been futile if she agrees to be part of a buyout.The situations differ slightly but have one thing in common: The homeowners are frustrated with the government's inability to act quickly, because it's costing them money - big money."I don't think it's fair. I think the city better make some fast decisions," said Deason, 75, who is left with roughly $300 a month from her Social Security check after she pays the mortgage on her uninhabitable home.
Taylor, whose family is now living in an apartment half the size of her home, described it as a second round of victimization."I was numb for a while," Taylor said. "You can't even get your mind around what has happened, but sometimes now I get really angry."It's a waiting game that many flood victims can't win.Government buyout programs in Iowa could take 18 months or longer to complete, and many families won't know for roughly a year whether their home qualifies for acquisition.
In the meantime, people like Deason are on the hook for continued tax and mortgage payments, even if they can't live in their homes. Others, like Lewis, are using government assistance programs to help pay for repairs to homes that may not even be standing two years from now.They are left with tough choices, such as deciding whether to make repairs, even just enough to live in their homes temporarily. If they can't afford to juggle the costs and have to wait for the government to act, some must consider whether they should abandon the homes and let banks take them in foreclosures.
Estimates of the total amount of money potentially wasted are not available and nearly impossible to calculate. Some of the costs are not paid by government programs, and it is still unknown how many homes will become part of city or county acquisition programs, said Luis Fernandez, an information officer for the Federal Emergency Management Agency.But housing advocates such as Pam Carmichael, head of an Iowa group known as Home Inc., say the losses are likely in the millions of dollars and are debilitating for hundreds of families.
"From everything I've gotten from the flood task force, I would say it's in the millions," said Carmichael, a member of the Rebuild Iowa Commission's Housing Task Force.Jim Davis, co-chairman of the task force, noted the absence of estimates but said the number is unquestionably significant. "I don't know for certain if it's in the millions, but I know it's a tremendous burden on families," he said.The first time banks are likely to see flood-related mortgage defaults showing up on quarterly reports is about Sept. 30, said Rod Reed, financial bureau chief for the Iowa Division of Banking.
However, there are already indications that hundreds of families face predicaments similar to Deason's.Wells Fargo; Bank of America, which includes Countrywide's home loans division; and Citibank held a news conference in Iowa last week to publicize that each has an emergency hot line for its customers who were affected by floods. A Wells Fargo representative, for example, said the company was already working with at least 140 mortgage customers in the state and had made about 800 loans on homes in the 100- and 500-year flood plains.
The companies are working to help customers delay payments. But customers ultimately are still responsible for making the payments, said Bob Brammer, a spokesman for the Iowa attorney general's office.While the companies did not place dollar amounts on their loans, Brammer said he thought Carmichael's estimate of homeowner losses in the millions "feels right.""I haven't penciled around on it, but it feels right to me, particularly if there are hundreds of homes," Brammer said.
There is little hope that buyouts will happen in less than a year, Cedar Rapids and state officials said.Cedar Rapids doesn't have the money available to offer buyouts to home-owners without the federal government's assistance, which typically pays at least 75 percent. Therefore, the city must abide by federal guidelines, said Mayor Kay Halloran.The federal Hazard Mitigation Grant Program is a lengthy process, largely because of guidelines for determining whether flood-damaged homes are eligible and completion of detailed benefit and cost analyses.Most of the guidelines are in place to make sure taxpayer money is targeted at the most likely areas to be hit again by floods, said Bret Voorhees, a spokesman for the Iowa Homeland Security and Emergency Management Division.
Click here to read the federal Hazard Mitigation Grant Program FAQ
Federal and state officials have frequently reminded people this year that their assistance is not to be viewed as an insurance policy but rather as emergency help during some of the initial periods after a disaster. Likewise, the mitigation program is not focused on making families financially whole. Its focus is preventing or lessening damages during likely future floods.
Federal and state officials continue to inspect home damage and update estimates. Preliminary estimates used by Gov. Chet Culver's staff showed more than 22,000 homes or apartments with flood damage. The estimates came from a combination of numbers from FEMA, the Small Business Administration and state damage assessments.Rep. Mary Mascher, a Democrat from Iowa City, said lawmakers will do what they can to speed assistance and answers to families.
"Right now, the way it is, if they have to put all that money back into (a home) and then they're going to demolish it anyway, that's going to be a stupid use of dollars and expensive," Mascher said.Des Moines officials last month approved nine homes as eligible for a voluntary acquisition program using money from Neighborhood Finance Corp., a nonprofit group. Without the nonprofit group's help, the process could have taken 18 months or longer with no guarantee of winning federal assistance, city officials said.
Halloran, Cedar Rapids' mayor, said until her city knows more details from federal mitigation officials, it is nearly impossible for local officials to recommend what families should do. She acknowledged that some families are probably wasting money because of the lack of immediate answers about their futures."Living with the lack of knowledge is a hard thing for us, too," Halloran said. "We'd much rather have answers and be able to proceed, but without the information available, we're sort of up against the wall ourselves."