Texas Department of Housing and Community Affairs

1. Texas Department of Housing and Community Affairs Disaster Recovery Division

3. SESSION 5: IMPLEMENTING OUR PLAN – TDHCA CHALLENGES TO GETTING FUNDS OUT QUICKLY

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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.

19. 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