Out of money? Four options for stuck Sandy families

It's a scenario that a lot of Sandy survivors can relate to: a home ruined, a paltry flood insurance payment and insufficient government grants and loans.

Like many, William and Cheryl Braden and their two teenagers were forced to move in with family as they pondered how they could possibly afford to have their home — and lives — put back together.

Fast-forward to early 2015 and their Sandy-induced housing nightmare is now behind the Bradens, thanks to a little-used renovation loan.

"It's everything that we wanted it to be," Cheryl Braden said of their new home. "It's bigger than it was before and its brand new. Yeah, I would say it's our dream house."

As thousands of Jersey Shore residents continue or begin the rebuilding process, they are discovering that their desire to get back home is only exceeded by the costs of doing so.

With that in mind, here are some lesser-known options for Sandy victims — set the Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) program and SBA loans aside for a minute — who find themselves short of necessary funds.

1. 203(k) Rehab loans

Though not designed specifically for disaster survivors, the 203(k) loan is uniquely suited to these situations.

"That’s the first thing we go to," said Christina Tello, lead housing recovery specialist at the Affordable Housing Alliance, which offers free guidance to homeowners in crisis.

Traditional financing doors can be closed to people who lost their home, which is usually a family's most valuable asset and best source of collateral.

"In those circumstances people aren’t getting in line to loan you money," said Braden, who applied for the loan in January 2014 and was able to begin drawing funds three months later.

That's not a deal-breaker for a 203(k) loan, according to Jeff Onofrio, director of Renovation Lending at AnnieMac Home Mortgage.

"203(k) allows you to borrow off of future value," he said. "So the house may be in disrepair, or not fully finished, and (the loan) allows you to borrow off what it's going to be worth when it's completed."

The rebuilding costs are then rolled into the mortgage.

Every year about 750 New Jersey homeowners use the 203(k) to pay for home construction, according to figures provided by the U.S. Department of Housing and Urban Development, which backs these financial instruments. Despite Sandy, those numbers haven't fluctuated much.

As with any HUD-sponsored loan, you have to be mindful of how you use the loan money with disaster grants.

A HUD spokesman told the Press that it is permissible to use the 203(k) loan in concert with a RREM grant so long as the homeowner isn't using the grant money to pay for something that has already been repaired using the loan proceeds.

2. National Flood Insurance Program claims review

RREM and SBA loans were always intended to supplement flood insurance, not replace it. But after Sandy, many homeowners began to complain that their flood insurance payments were well below what they were expecting. These purported underpayments threw the whole funding mix off.

In response to a burgeoning scandal, the Federal Emergency Management Agency, which underwrites nearly all residential flood insurance in America, pledged in March to take another look at any Sandy claim that might have been underpaid and to make it right, even if that means paying tens of thousands of dollars more to each of these short-changed homeowners.

Homeowners could begin enrolling in the review process in May but fewer than 15,000 policyholders — or about one in 10 Sandy claims — have even taken the first step, as of the end of last month. The deadline to sign up is September 15.

3. The NJ HomeSaver program

This program, which was rolled out to push back against a continuing foreclosure epidemic in New Jersey, offers up to $50,000 in financial assistance to help households refinance or modify their mortgage.

Not just anybody can qualify for HomeSaver assistance. The program is meant to help people who owe more than their home is worth, who are facing a rate increase, or who have suffered a financial hardship.

The Press checked with the New Jersey Department of Community Affairs and confirmed that if the fallout from Sandy has threatened someone's ability to afford their home that would qualify as a financial hardship — just like any other of life's difficulties, such as job loss or expensive medical emergency, that might be more readily identified with the program.

To be clear, NJ HomeSaver money cannot be used to pay for construction, but a Press investigation earlier this year revealed that hundreds of Sandy affected homes in Monmouth and Ocean counties had entered into foreclosure last year.

The Rental Assistance Program is another option for Sandy victims who need help with housing costs.

4. Walk away

This might be the hardest option to consider, but a responsible rebuilding plan shouldn't involve a homeowner taking on more debt than they can afford, or than what the finished product will be worth. Maybe it's time to cut your losses and walk away.

"One of the great things about owning a home is that you have an investment, and this real estate investment is earning equity, but if you owe more on (the house) than what it's worth then you've lost the benefit of that investment," said Kim Cole, education outreach coordinator at Navicore Solutions, a nonprofit credit counseling service.

Russ Zimmer: 732-557-5748, razimmer@app.com