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Texas Department of Housing and Community Affairs. Disaster Recovery Division. SESSION 5: IMPLEMENTING OUR PLAN – TDHCA CHALLENGES TO GETTING FUNDS OUT QUICKLY. CDBG Disaster Program Challenges. Program Challenges Staffing and building an unprecedented program Duplication of Benefits

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Texas department of housing and community affairs

Texas Department of Housing and Community Affairs

Disaster Recovery Division


Texas department of housing and community affairs

SESSION 5:

IMPLEMENTING OUR PLAN –

TDHCA CHALLENGES TO GETTING FUNDS OUT QUICKLY


Texas department of housing and community affairs

CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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


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CDBG Disaster Program Challenges

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.


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CDBG Disaster Program Challenges

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


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