The U.S. Department of Housing and Urban Development (HUD) announced that it would not seek the repayment of Sandy grant funds that duplicate homeowners’ revised insurance payments up to $20,000 as a result of the National Flood Insurance Program (NFIP) review process.
In addition, the Federal Emergency Management Agency (FEMA) agreed to extend the deadline to file for NFIP reviews by 30 days, until Oct. 30, after a chorus of elected officials and advocacy organizations requested extensions.
“[The extension] was done in light of the HUD decision not to recoup funds that duplicate benefits up to $20,000,” Rafael Lemaitre, director of FEMA external affairs, said. “We hope this encourages more people to enter the claims review process.”
So far, according to FEMA statistics, 14,000 people have engaged in the NFIP insurance review process. The average proposed revision to successful claimants’ insurance payouts is $15,000, Lemaitre said, though that number will change as more reviews are completed.
“We’re hoping that this eliminates the last obstacle,” he said.
FEMA instituted the insurance review process after allegations of fraud and low payments plagued the NFIP. However, the reviews came with an unexpected twist: Sandy grants to homeowners are based, in part, on the amount of their flood insurance payouts. If those payouts are revised upward due to the review and it causes what is known as a “duplication of benefits,” the federal Stafford Act requires that the state agency disbursing the funds recoup the difference.
The state Department of Community Affairs (DCA) and FEMA committed to not recoup duplicative funds in August, but HUD officials were less certain, stating that it might not be legal to do so. Now, HUD has changed its tune, stating the Stafford Act also gives HUD Secretary Julian Castro the authority to use his discretion when pursuing the funds would not be in the federal government’s interest.
“These families have suffered enough and shouldn’t be further victimized through no fault of their own,” said Harriet Tregoning, HUD principal deputy assistant secretary for community planning and development. “We have a larger responsibility to facilitate recovery, not to hinder it just because these families didn’t receive sufficient flood insurance payments.”
Eric Nedelkoff, executive director of the Monmouth County Long Term Recovery Group, said in an interview the changes represent “great progress” for homeowners still recovering from superstorm Sandy.
“This is definitely something we’ve been asking for,” Nedelkoff said. “Now we’ll do our best along with our partners to disseminate this information and get a few more people to sign up [for the NFIP reviews].”
To date, three out of four NFIP claimants received less than $20,000 in additional compensation from FEMA, according to federal officials, meaning that if there were a duplication of benefits, those homeowners would not be on the hook to repay the difference.
“We are hopeful that HUD’s action to provide relief to the vast majority of those who are concerned about potential duplicative benefits will encourage even more policyholders who may have been initially reluctant to enter the process to do so,” Roy Wright, FEMA Deputy Associate Administrator for Insurance and Mitigation, said in a statement. However, Nedelkoff did question how duplicative benefits above HUD’s $20,000 limit would be handled.
According to a HUD spokesperson, the grantees, in this case the state DCA, would be responsible for recouping those funds if a federal analysis determined there was indeed duplication. But DCA officials have said they would not seek to recapture any grant money.
“If a policyholder is in the [Rehabilitation, Reconstruction, Elevation and Mitigation (RREM)] Program and ends up receiving additional flood insurance proceeds, DCA will not recapture any portion of the policyholder’s RREM grant that may be a duplication of benefits as result of additional flood insurance proceeds received through either a FEMA insurance claim review or a legal settlement with FEMA,” Lisa Ryan, public information officer for the DCA, said.
However, according to the HUD spokesperson, the state would still be required to repay duplication to the federal government, “regardless of the source, so long as it was not a federal source.”
In addition, the spokesperson said that homeowners who do receive more than $20,000 in revised insurance payments would have the opportunity to demonstrate the money was used for “legitimate recovery purposes” and therefore does not constitute a duplication of benefits at all.