Schumer, Gillibrand Announce HUD to Provide Additional Flexibility to Sandy-Victims Who Declined Gov’t Loans Immediately After Superstorm Sandy; Senators Pushed for Rule Change to Allow for Maximum Sandy-Aid
HUD Policy Required Amount of Approved Loans, Including Those Not Accepted, Be Deducted From Potential Grant Amount Provided To Homeowners; Senators Urged HUD to Change Policy So SBA Loans Not Accepted by Homeowners Do Not Reduce Eligibility for Grants
U.S. Senators Charles E. Schumer and Kirsten E. Gillibrand today announced that, after their push, the U.S. Department of Housing and Urban Development (HUD) will issue new guidelines providing more flexibility for Sandy-victims who turned down Small Business Administration (SBA) loans in the aftermath of Superstorm Sandy. Many victims rejected these loans because they couldn’t afford to take on more debt, or because the terms were less generous than initially expected. HUD’s initial “duplication of benefits” policy negatively impacted these victims by requiring that Community Development Block Grant (CDBG) assistance be reduced by the amount of any approved SBA loans – whether homeowners accepted the loans or not.
CDBG funding, which comes in the form of a grant, not a loan, is intended to supplement other available resources (including insurance), and cover only “unmet need.” In determining the amount of “unmet need,” HUD regulations said that any SBA loans for which a homeowner is approved are counted against the unmet need. Schumer and Gillibrand had made the case that these regulations did not take into account the individual circumstances of homeowners who may not be able to afford to take on more debt.
Schumer and Gillibrand today announced that, after their push, HUD will issue additional guidance permitting grantees of CDBG assistance – New York State and New York City – more flexibility in determining whether applicants who have been offered SBA assistance but turned it down will have their eligibility for CDBG reduced. HUD will also clarify that homeowners are not required to accept SBA loans as a prerequisite to receiving CDBG funding.
“It’s good news for cash-strapped Sandy victims that HUD is revising their policy that penalizes homeowners who simply couldn’t afford to take on any more debt, and who therefore prudently declined SBA loan offers. We need to maximize the support that hammered homeowners receive and this change paves the way for that to happen. The devil is in the details and HUD should make the upcoming changes as expansive as possible,” said Schumer.
“This is a common sense rule change so that homeowners and families devastated by Superstorm Sandy are not unfairly punished for turning down SBA loans in order to avoid falling further into debt,” said Senator Gillibrand. “It is critical that HUD issue guidelines that will allow thousands of storm victims to receive desperately needed aid.”
Under current law, “duplication of benefits” is not permitted in connection with the provision of supplemental disaster assistance such as CDBG. HUD regulations provide that CDBG disaster assistance is supplemental in nature, and designed to cover “unmet needs”, i.e., needs not otherwise covered by insurance, Federal Emergency Management Agency (FEMA) Individual Assistance or any approved SBA disaster loans. Under these HUD regulations, approved SBA loans count as a benefit that is “reasonably available” to the homeowner regardless of whether or not the homeowner actually accepts the loan, and are therefore deducted from the calculation of “unmet need”.
In May, Schumer made a personal call to HUD Secretary Donovan, and Senator Gillibrand followed with a letter. The Senators highlighted the negative impact of this policy, in particular because so many homeowners were initially encouraged to apply for SBA loans.
Schumer and Gillibrand originally made the case that many Sandy-victims who were offered an SBA loan turned it down because they did not think they could take on any more debt. Schumer and Gillibrand explained that offered loans, if not accepted, should not count as a benefit that would limit the amount of CDBG a homeowner can receive.
Schumer and Gillibrand today announced that HUD will issue additional guidance on the intersection of SBA and CDBG assistance. According to the letter, HUD will not require applicants who have applied for and been offered SBA assistance to accept the SBA assistance as a prerequisite to receiving CDBG assistance. In instances where applicants received an offer of SBA assistance but turned it down, and are now seeking CDBG assistance, HUD’s new guidance: will provide grantees (ie, New York State and New York City) additional flexibility to issue CDBG disaster aid based on individual circumstances, provided that the grantees make the most effective use of their CDBG resources and meet the statutory directive that funds be used for “necessary” recovery costs. Grantees must properly size the CDBG assistance offered to any applicant in this circumstance but may use multiple approaches to size the assistance and may vary the approach for individuals and businesses. Grantees must be able to demonstrate that the amount of CDBG assistance is necessary.
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