Feds drop clawbacks of Sandy rebuilding dollars

Sandy homeowners got some good news from the federal government, one that could mean more money for their bottom line.

The U.S. Department of Housing and Urban Development officially announced that it has decided to forgive up to $20,000 in new insurance money per homeowner that overlaps with rebuilding grants.

"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," said Roy Wright, FEMA’s deputy associate administrator for insurance and mitigation, in a statement.

As a result of that action, the Federal Emergency Management Agency pushed back the deadline to request a Sandy Claims Review to Oct. 15. Before issuing the last-minute extension, FEMA wanted some assurances that giving homeowners more time to to sign up for a second look at their superstorm Sandy flood insurance claims would actually persuade some skeptics to enroll.

That bar was met when HUD announced the major policy change on how it will treat newly released insurance money and that money's relationship to rebuilding grants, such as New Jersey's RREM program.

That question — would homeowners have to pay back any grant money once they received an insurance payout from the claims review? — has been hanging over the Sandy Claims Review and has taken on much of the blame for the low enrollment. Only 20,200 policyholders, out of 142,000 that received letters urging them to apply, had signed up as of last week.

Homeowners who receive more than $20,000 may still be able to keep it and their Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) grant, provided they can prove that all of it is necessary to their rebuilding or elevation project..

“These families have suffered enough and shouldn’t be further victimized through no fault of their own,” said Harriet Tregoning, HUD’s 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.”

Three out of four payments from the claims review are under that $20,000 threshold, according to HUD. If someone receives more than $20,000 through the claims review they will have a chance to demonstrate that the payment is being used to rebuild and shouldn't be recaptured, the release says.

Fear of RREM awards being clawed back survived even after New Jersey said publicly that it would not pursue any insurance funds that would have reduced a RREM grant award. The federal government, which ultimately sets the rules, had not weighed in until now.

When asked by the Asbury Park Press whether or not HUD's announcement changes anything, New Jersey Department of Community Affairs spokeswoman Lisa Ryan said "Our position remains the same."

The news of HUD's shift and the deadline's extension was first broadcast Tuesday night by U.S. Sen. Robert Menendez's office.

"We still have a lot of work to do before we are fully recovered, but tonight is a good night for those still struggling to rebuild," Menendez said in a statement.

FEMA signaled in March that it intended to develop a process by which as many as 142,000 homeowners in the Sandy-damaged zone, including up to 74,000 in New Jersey, could have their flood claims looked at again.

Homeowners had long lamented what they believed to be lowball insurance payouts after Sandy.Revelations of dubious practices by engineering firms retained by flood insurance companies drew national attention to their complaints and pushed the review into reality.

FEMA opened the process on May 18 and then later set Sept. 15 as a deadline for opting-in. As the cut-off approached, relatively few policyholders had signed up and advocates and lawmakers at all levels of government had begun pushing FEMA for an extension. However, FEMA gave no public indication that a postponement was forthcoming as the clocked ticked down.

The call center closed at 9 p.m. — shortly after word of a deal had broke — and the deadline for online submissions had been 11:59 p.m. Tuesday.

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