1 Disaster Recovery Division Texas Department of Housing and Community Affairs

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3 SESSION 5: IMPLEMENTING OUR PLAN – TDHCA CHALLENGES TO GETTING FUNDS OUT QUICKLY

4 Program Challenges  Staffing and building an unprecedented program  Duplication of Benefits  Integrating floodplain requirements (not required under annual block grant program)  Responding to intense interest in program activities CDBG Disaster Program Challenges

5 Program Challenges – Staffing  State legislated caps on staff and budget  Round I originally designed to be integrated into existing TDHCA staffing structure  Round II necessitated creation of new Disaster Recovery Division  Anticipated that all housing under Round I will be done by Labor Day  Approx. 550 homes  All $503 million under Round I & II will be fully used within the next 2 ½ years CDBG Disaster Program Challenges

6 Program Challenges – Duplication of Benefits  Round I & II assistance amounts are lesser of the maximum program limits or the amount needed to repair/replace the house  Assistance amount is reduced by the DOB amount  If damage remains to be addressed after repairs have been made, the assistance equals the amount necessary to ensure livability standards are met  Damage and normal wear and tear are addressed CDBG Disaster Program Challenges

7 Program Challenges – Duplication of Benefits  HUD clarified that a “duplication of benefits” does not occur if a household used all funds from FEMA to make a home temporarily livable and CDBG funds will be used to reconstruct that housing unit  In such instances, assistance to the household is not reduced to cover the DOB  Project is eligible for the full amount necessary to repair/reconstruct that unit CDBG Disaster Program Challenges

8 Program Challenges – Duplication of Benefits  Deductions: Sources of funding that duplicates benefits are deducted from the assistance amount including the following primary sources:  FEMA  SBA  Insurance  Homeowner is required to disclose all sources and CDBG Administrators verify information provided  Referrals have been made to HUD OIG when appropriate CDBG Disaster Program Challenges

9 Program Challenges – Duplication of Benefits  Credits: Verified expenditures are credited back to homeowner if consistent with intended use of funds:  FEMA  Repair  Replacement  Permanent Housing Construction  Eligible uses identified by SBA and Insurance CDBG Disaster Program Challenges

10 Program Challenges – Duplication of Benefits Calculation Examples  Example 1: Maximum assistance is $65,000. The household received $10,000 from other funding sources. Determination made that $10,000 worth of repairs have been completed, but the house must be replaced. A replacement unit will cost $50,000. The household’s eligible assistance amount is $50,000.  Calculation:  Lesser of Max. Assist. or Damage:$50,000  Deductions: – $ 0  Assistance Level$50,000 CDBG Disaster Program Challenges

11 Program Challenges – Duplication of Benefits Calculation Examples  Example 2: Maximum assistance is $65,000. The household received $10,000 from other sources. Households has $50,000 in damage but cannot prove that any of the $10,000 was used to fix the home. The household’s eligible assistance amount is $40,000.  Calculation:  Lesser of Lesser of Max. Assist. or Damage:$50,000  Additional Deductions: – $10,000  Assistance Level$40,000 Gap Funding Needed: $10,000 CDBG Disaster Program Challenges

12 Program Challenges – Duplication of Benefits Calculation Examples  Example 3: Maximum assistance is $40,000 for rehab and $75,000 for reconstruction. The household received $5,2000 from FEMA for housing repair and replaced their roof for $3,200 ($2,000 DOB). The cost to address remaining damage is $60,000, exceeding the $40,000 rehab limit. The household is eligible to receive replacement housing that will actually cost $75,000, but must cover the $2,000 DOB amount.  Calculation:  Amount Needed:$75,000  Additional Deductions: – $ 2,000  Maximum Assistance$73,000 Gap Funding Needed: $2,000 CDBG Disaster Program Challenges

13 Program Challenges – Duplication of Benefits Calculation Examples  Example 5: The preliminary assistance calculation for a household resulted in approval of reconstruction assistance totaling $70,000. The household has been approved for an SBA loan totaling $25,000 but closed the loan before drawing any funds.  Calculation:  Amount Needed :$70,000  Additional Deductions: – $ 0  Assistance Level$70,000 CDBG Disaster Program Challenges

14 Housing Trust Fund (HTF) Disaster Recovery Gap Financing Program  The CDBG Disaster Recovery Program can provide CDBG funding necessary to rehabilitate or reconstruct a home unless the funding represents a duplication of benefits, which is prohibited.  Gap financing has been a major barrier to moving the program forward  Most households only received FEMA funding, and they used it to live on after the storm  Because Texas is administering a construction program, the household has to make up the difference between the amount needed to repair/replace the home and the DOB amount CDBG Disaster Program Challenges

15 HTF Disaster Recovery Gap Financing Program  TDHCA Governing Board set aside $1 million in HTF dollars in September 2007 for Round I  Unrestricted State of Texas General Revenue  Maximum per household award is $10,000  Average need per household is $3,200  Necessary for households to complete their recovery by covering the gap representing a duplication of benefits  Approximately 72% of households under Round I have accessed the program since it became available CDBG Disaster Program Challenges

16 HTF Disaster Recovery Gap Financing Program  DOB gap-financing for homes being repaired, replaced, or reconstructed under Round I  Allows families to take advantage of CDBG funding by ensuring full coverage of home repair, replacement, or reconstruction cost  0% loans and grants CDBG Disaster Program Challenges

17 Program Challenges – Duplication of Benefits  Gap financing is a major barrier to moving the Round II HAP/SPRP program forward  Looking into HTF, private loans, and other sources  If same as Round I, there will be over 3,000 households affected in Round II CDBG Disaster Program Challenges

18 Program Challenges – Duplication of Benefits  RECOMMENDATION TO HUD:  Rather than dollar-for-dollar reduction from SBA loans, clarify for all states that DOB equals the amount of interest savings from SBA’s below market interest rates.  Allow proof of expenditures for any eligible FEMA assistance category to “credit” against DOB. For example, if a household is provided $5,200 for home repairs, and can prove that they spent $8,000 on other eligible FEMA cost categories (such as personal property, medical, dental, etc.), no duplication of benefit.  Federal database of previous and current disaster funding for DOB checks. CDBG Disaster Program Challenges

19 Program Challenges – Floodplain  TDHCA originally planned to provide grants only  42 U.S.C. 5154a requires the maintenance of flood insurance on assisted properties, regardless of property transfer  For loans, evidence of coverage must be continued for the term of the loan  For grants, evidence coverage must be continued for the life of the property  Grantees are required to maintain a complete, up-to-date listing evidencing coverage  TDHCA opted to loan funds when assistance will be in the floodplain  3-year, zero percent interest, deferred forgivable loan CDBG Disaster Program Challenges