The goal is to award as few homeowners grants to reconstruct a new home as possible. It's not actually a written goal but state employees stay up late at night thinking of ways to make homeowners ineligible for grant funding.
And I stay up late finding ways to push back and make the state offer you a grant based on fair policy practices.
One of the major grant award issues we had and still have since the 2016 floods is the inclusion of the Duplication of Benefits insurance when Insurance was used to pay the first lien holder (mortgage holder) after the home was declared a total loss.
The grant calculation the state uses does not calculate when homeowners' insurance is used by the mortgage lender to pay off the mortgage because the lender feels their is a risk of default and that there is no value in the home.
The state calculates the insurance payment as a positive toward your rebuilding but doesn't subtract it if it's used as a forced mortgage payoff. This was reported to the state in 2019 and fell on deaf ears.
Now the state has increased the amount and still doesn't apply the forced mortgage payoff. Yet another way to make it nearly impossible for a homeowner with what would typically be condemned to be awarded a grant because of the amount of damage.
The state uses the figure $157.25 to calculate the value of building you a new home and uses that value to determine if your home will receive a federal grant to reconstruct.
Let's look at the math for a minute.
Your home, 1,500 spare feet of home that you paid off 10 years ago and are retired today. The value of your home maybe roughly $118 depending on the appraisal comparatives.
Your market value of your home may be roughly $177,000.
Your home is most likely slab on grade and 2x4 construction. If you were to build the home on grade today it would be roughly $141.60 per square foot. Building a new home typically costs more than your market value so let's just work with the $141.60 figure.
The state adds the cost of elevation which you may or may not have to do but they require elevation of at least 3 feet and don't actually have any individual price for this type of elevation but do mention it's on driven piers which are simply long telephone poles driven into the ground and you have your posts to build a wood foundation on top of.
This cost for piers may actually be the difference between $15.65 per square foot of home.
You'll have to actually have 80% estimated damages of your homes total cost to rebuild using the states Restore Homeowners Program math.
$157.25 = $125.80 per square foot of damage.
Your home, valued at $177,000 (using my numbers) would have to have an Xactimate economy grade generated damage estimate of $141,600. That is a very difficult estimate to reach using your actual numbers. Now using the states math.
$188,700 in Xactimate economy grade damage estimate would have to be provided. You actually have to have more damage to your home than it would take to reconstruct your home as it is. The math once again is made to not allow you access to funding.
Let's add the older issue of a forced mortgage payoff when your lender took your insurance money.
Your Duplication of Benefits would basically reduce the estimated grant dollar for dollar.
Let's say your damage estimate is $188,700 and you had $150,000 in insurance with a $150,000 mortgage payment. Then your lender takes the insurance to buy down your mortgage because your home is a total loss. Now you have a grant award with a DOB for insurance that makes it actually more like your grant award is $188,700 - $150,000 = $38,700. The Restore Program would then tell you to get the grant you have to show completed work in the amount of your DOB, in this case it would be $150,000.
But you never received the $150,000 because the first party lien holder took it from you. They may have talked to you about it but honestly they are never going to let you have the insurance money if the home has to be demolished. They would lose their investment security at that point when you still have a mortgage. You then have to appeal to the state for the amount of the DOB and the fact that you were not in control of your insurance money.
Ok, so what can a homeowner do if you're at 70% or even 51% damaged and you know it would be healthier and safer to build a new home. You have to follow the FEMA policy guidelines for Substantial Damage Estimates, and you'll then have to talk to your local permitting office.
I Substantial Damage Estimate (SDE) filed by your city or parish can be used to win a grant award to reconstruct your home at a lower damage estimate amount.
To be listed as Substantially Damaged or Condemned you must show 51% of damages based on the pre-disaster market value of the home. This math then would allow you full access to the Restore construction grant.
Read more about SDE math and policies here.
It's up to you and the amount of effort you want to put into getting a grant to help recover after a storm. The state if you haven't noticed how they communicate has it in writing they don't need to worry if you ever recover. They claim they have given you all the information to find a path for recovery. Remember, your congressional representatives lobby for the money in your name then create projects that are paid for by these same grants when you don't take them or when state policies block you from accessing them. In short, it's a cash cow for states and Louisiana is one big cow for federal tax dollar disaster assistance grants.