- May 1, 2018
I will be sharing the Bureaucracy in two parts.
- Delivery Sequences
- Delivery Promises made per sequence
The first part, Delivery sequences is something you just will not know about if this is your first disaster. No books are printed in schools that would have given you a heads up to what is about to happen in your life when it comes to Disaster Recovery.
The uniformity requirement set forth in Section 312 of the Stafford Act is located in FEMA regulation 44 C.F.R. 206.191. As shown in Figure 1, 44 C.F.R. 206.191 provides procedural guidance to ensure uniformity in preventing duplication of benefits. 44 C.F.R. 206.191 establishes a delivery sequence of disaster assistance provided by federal agencies and organizations.
- Volunteer Agencies Emergency Assistance & Insurance Hazard and flood insurance
- Housing Assistance Pursuant to Section 408 of the Stafford Act. FEMA Home Repair and Replacement
- Small Business Administration and Farmers Home Administration Disaster loans
- FEMA Individuals and Households Program and Other Needs Assistance Pursuant to Section 408 of the Stafford Act.
- Other Federal, state and local government funds
- Volunteer Agencies "Additional Assistance Programs.
According to FEMA the delivery sequence after a declared disaster starts with your local volunteer not for profit groups stepping in to help with immediate needs. Then FEMA will offer to assist you with housing, while doing this they will encourage you by almost demanding that you apply for an SBA Loan which is 3rd in our delivery sequence.
It's at this point you need to really do some number crunching.
If you apply for SBA Loans which is what FEMA requests that you do and you qualify for the loan they will expect you to take the loan. It's going to count against you if you do take the loan and it will count against you for the complete loan amount not just what you draw down. You could at this point really do the number crunching.
- Can you with the SBA Loan completely repair your home without any additional funds, loans, grants?
- Can you afford to make the SBA Loan payments for the length of the loan?
- You are aware of the Federal Rules that do not allow you to collect any other grant money down in delivery sequence to pay off your SBA Loan or to use for additional rebuilding projects.
- You agree to the SBA that all future insurance payments and any additional grant money will be collected by the SBA Loan program and may or may not be used to pay down the SBA loan.
Understand that your rebuild funds could be completely exhausted at this point, if you applied for FEMA for Temporary Housing then applied to SBA for a loan and then returned to FEMA for Individuals and Households Program grant money to repair your home you are just about finished with the money collection process.
The Caveat here is whether or not you have insurance to cover your Disaster.
Let's say you are paying for Flood insurance through the NFIP (National Flood Insurance Program) and your disaster was a flood.
If you do have insurance to cover your disaster, in this case a flood, and you choose to take the SBA Loan you will be signing over your flood insurance settlement to the SBA so they can apply this money toward your loan.
In most places the delivery sequence rules seem to say you can not take federal money to pay off federal money. But in the case of your insurance SBA takes the path that their is always an exception to the rule. In fact, SBA has been known to collect HUD CDBG-DR grant funds to pay down applicants SBA loans.
At this time it is not clear if SBA will take your HUD CDBG-DR funds or not. They have argued to the Office of Inspector General U.S. Department of Housing and Urban Development that what they are doing is saving American taxpayers millions. But the HUD OIG is actually saying they are collecting money, grant money down the delivery sequence which is none of their concern.
Turns out that if you take a SBA Loan the SBA office out of Texas has a computer network setup that can monitor nearly all funds from federal agencies that may be heading your way and redirect them to the SBA loan you have to act as a payment.
This is good if you need help paying your SBA Loan off. But if you need additional funds this is bad.
So what do you do?
If you have insurance and the SBA tells you in writing or verbally that they are going to take your insurance money then why not simply decline the loan and save yourself the percentage payment and possible issues with other grants later down the delivery sequence. Be sure to decline in writing. But if you need to rebuild this week, then take the SBA Loan so you can save yourself a few months of waiting, but you may have closed the doors for any other loan or grant.
If you do not have insurance and you qualify for SBA you have a tougher choice. Will adding a monthly payment for 15 to 30 years on your finances make your household total month expenses out of reach? If you can afford it and I mean you have calculated what it costs to go on vacation, be sick, take a random day off, be laid off, retire, etc. You have to be sure you know just what this SBA Loan will do to your life if you didn't have it before.
Even more important, if you have a mortgage, can you handle the added expense of a second mortgage by using the SBA Loan?
You really need to know what your long term financial plans are and you need a long range budget workbook.
We have seen so many people enter into the world of debt by adding simply $350 SBA Loan payments to their monthly expenses. It's not everyone that lives below 40% of their total expenses. It's very important that you do not take more than 60% of your total wages for long term loan payments. That's your home, car, boat, RV, camp, etc. Don't go broke over a disaster.
Next is every tougher, you don't have flood insurance, you don't qualify for a SBA Loan and you lost everything that you own. You take the FEMA $33,300 (max) Individual and Households Program money and you spend it on what you feel is best.
Maybe you purchase a new car, that is a very bad move but you are stuck, you can't find anything affordable and all this money is your bank account just screaming for you to spend it. DON'T SPEND YOUR IHP ON A VEHICLE!!!
So many people that did not have insurance and did not have SBA did just that, they spent money that was to be used on their home on a vehicle and then when Delivery Sequence 5 rolls around they are going to be asking you what you did with the home repair money. Don't say you purchased a new vehicle. Just don't say anything because they will know by just looking at your home.
Speaking of looking at your home, once you reach the grant funds at Delivery Sequence 5 you will be needing to prove you did spend your money on your home and that you were very wise with your spending and you didn't spend any grant money on appliances and that includes your TV. You will be held accountable for every dollar the FEMA IHP Grant program gave you.
You have to estimate your home repairs using the cheapest possible labor and the cheapest material you can find. I mean you can't justify to HUD that you replaced your marble floors with marble floors, they are going to give you $1.50 per sqft of flooring credit and that is it. If you had all wood walls and spent $33,300.00 FEMA IHP grant money on those walls your HUD grant CDBG-DR people are going to say you are only getting credit for cheap 1/2 inch drywall so you owe the rest of the money before we can give you more.
That's correct, you will need to pay the difference between what you thought were good repair prices and what your Office of Community Development thinks is a good repair price. I can assure you the two numbers will not match.
For Insured homeowners, your repair estimates are going to be for replacement value or average value. Your HUD CDBG-DR estimates are going to be based on the total number of applicants and the total amount of grant funds. If you have the needed funds you may be getting average repair estimates. If you are long on the funding numbers you are going to be using economy repair estimates. In either case, I an assure you that your repairs will not match their estimates on the best days.
Your contractors will be looking to make back on your and your disaster, most of them I should say. Those that are keeping their prices the same as before the disaster will be so booked you're going to be waiting for a long time. So it's up to you, find that contractor fast or be good with your money while you wait.
To determine or to give yourself a good estimate of what economy grade repairs are download the Xactimate Estimate Economy Grade that I have provided. This was published in the Louisiana Office of Community Development Restore LA Homeowners Manual version 3.x if you need the PDF version I've attached a copy of that as well.
I've posted a link to the May 2017 prices that economy grade labor and materials pay for.
Resources to help you budget and to determine if you can afford additional loan debt.
================TAKE A BREAK, YOU NEED IT===========================
Do you remember the very first thing you heard when you arrived at your home after your disaster?
I do, it was, "Do you need Gas or Water" and it was yelled from a guy in a truck loaded up offering fuel and water to anyone in the area that came back. I yelled back, "Yes" and had 5 gallons of fuel for the generator that night.
Do you remember the first volunteer group that arrived? I had the American Red Cross offer the first plate of food just after the fuel arrived. The two retirees said they took off the day the water started flooding down here. He as on the road I believe on the 14th of August 2016 from Ohio and we were on the property the 15th.
In the beginning you were not worried about the Bureaucracy you would soon be neck deep in. You saw people offering food, water, fuel and even some offering cleaning supplies, boots, gloves, and more. Your head was not in the "Disaster Relief" mode, not at that time.
You had your first official out of area Volunteer group collecting data from you and the area neighbors. They offered you a $100 gift card after you shared with them information you would have given to them freely. You didn't really know who they were, but they seemed like people you could trust at the time.
You were inundated with people that first week after the disaster. Some offering help, some offering paid services, others looking to listen to your stories and others that just didn't seem to have a role but came knocking at your door to see how you were doing.
You for the first time became trusting of everything. Not 100% trusting because you still had those looters to run off so you kept your eye on everyone and everything. But you overall started to drop your guard and allowed even federal workers the opportunity to talk with you.
Now you are in what I call, "Disaster Wonderment".
You know you should feel badly about your situation and you do but outwardly you are not showing it enough.
You are given information about FEMA and what they can do for you. You were one of the lucky ones and had a RV, Trailer or 2nd floor that didn't flood or wasn't knocked out of commission by the disaster. You don't need to find shelter or find a place to live. But you're told about the money FEMA will offer you and give you to help you with your rents. Sounds great now, we are talking some money, like 3 months rent. You think about it, wonder if the generator will last, if the small appliances you have survived and if you really want to live next or in your disaster zone.
You take the offer and sign up with FEMA the first Federal Agency that is offering you real cash for your troubles.
What is it about 20/20 hindsight that we always enjoy the most? Sharing our 20/20 hindsight.
In hindsight I should have accepted the renters money and asked only for help with my vehicles, you see we had 5 vehicles destroyed by the flood here in Louisiana August 2016. Only one had full coverage insurance. The one most important was our one ton work vehicle, it was flooded and no were in the books did it offer us money for replacing the engine and transmission. In fact we were told almost what you would call a lie on how we needed to apply to FEMA to be reviewed to receive vehicle repair grants.
I say "almost a lie" because I read later that one vehicle per household was all FEMA was going to help you with anyway. 5 vehicles for 5 working inhabitants doesn't come to mind with FEMA.
The bureaucratic process was as follows:
- Sign up with FEMA
- Request Renters Assistance or Sheltering / housing assistance.
Once you signed up with FEMA you were then told over and over to be illegible for vehicle grants and other items you may need money you need to apply to the SBA for a line of credit or a loan.
This is where 20/20 hindsight comes in to play for you. Remember, you were told FEMA could help with your vehicles, you were not told how many vehicles FEMA would help with and now I think it's one but if you had insurance on that vehicle then the number is Zero. I could be wrong, but I do recall hearing one vehicle not 2 or more even if you had more than one person working that lived in the household.
So what do you do now, follow FEMA and apply at the SBA to see if you can get a loan?
Yes, that's just what disaster victims do time and time again. Every storm the same old lines. Now that you applied for your SBA Loan they are going to ask you once they have your insurance information or your collateral list they are going to offer you money for your home repairs and for your vehicles and contents. All sounds great doesn't it. You listen to every word, you note they told you that you will be signing over any insurance money you have coming and any other grants or federal back loans. You really don't hear all that because you just want to start rebuilding.
But then it hits you after you go home, they offered you a low interest loan (1.65%) secured on your NFIP Flood Insurance and the value of your home. They also told you that all other grants or insurance money paid within 3 years will be used to pay down your SBA Loan.
What that did for me was send up red flags. I'm getting insurance money, why would I pay any interest on a loan?
I asked the SBA people that question and they told me, "If you want your money faster." Oh, I get it, short term low interest rates and the government, thank you but I have so much cleaning up to do I bet my flood insurance money will arrive before I'm finished getting all the mud out of the walls.
So we have FEMA as our first "Bureaucratic Agency".
I would be skipping SBA and going directly to Volunteers and HUD but because we were sucked in with the dreams FEMA gave us and we applied to SBA we now had to either accept the money or decline it.
We declined it, but not officially, we just let the loan offer expire and didn't sign or take a dime.
In 20/20 hindsight I should have wrote a letter using the word "DECLINED" in the body and head of the message.
I found later, laws, rules, guidance offered to HUD will disqualify you if you don't have proof you declined the loan. But then again, 20/20 hindsight with HUD you will not get the grant money they talk about with any good credit history head of household member. But I digress... Back to SBA.