Hurricane Grant Program in MS Concerns Servicers
Over 10,000 Mississippians have signed up for federal grants to rebuild their homes that were destroyed or damaged by Hurricane Katrina last August and the first checks may be cut in June.
After a long process, Mississippi finally has access to $3.4 billion in Community Development Block Grants that Congress appropriated in December.
"We have fully executed a grant agreement with Mississippi," a Department of Housing and Urban Development spokesman said.
The Mississippi Development Authority has been taking applications since April 17 and the agency would like to award the first Katrina homeowner grants of up to $150,000 next month.
Meanwhile, the vast majority of lenders and servicers in Mississippi have signed up to participate in the program and helped their borrowers in executing the assistance agreements.
However, industry groups are concerned that the homeowners receiving the grants are under no obligation to rebuild their homes. And lenders don't want to be left with damaged collateral.
"We understand that some would prefer to have a escrow-type system," MDA spokesman Scott Hamilton said.
However, the state does not want to dictate "what's best for each individual" or force them to rebuild in the same spot if they don't feel safe living there, he explained.
"It is designed to be a homeowner assistance program, not a mortgage company bailout program," he said.
But he stressed that the mortgage companies have been very helpful. "And we appreciate it."
Lenders also wanted HUD to impose a rebuilding requirement before signing off on the Mississippi plan. But the department insists Congress wants the states to devise their own housing assistance plans.
"We do not have the statutory authority to do that," HUD spokesman Brian Sullivan said.
In Louisiana, the state is getting closer to receiving $6.2 billion in CDBG funds. The legislature has approved the state's housing assistance plan and Gov. Kathleen Blanco has sent the plan to HUD for final approval.
At the same time, discussions are underway to address lender participation in the "Road Home" housing program, according to a spokeswoman with the Louisiana Recovery Authority.
"They have not yet established the details of their plan," said Paul Leonard, vice president of housing policy for the Financial Services Roundtable.
However, lenders are hopeful that Louisiana officials will include safeguards and ensure the funds go toward rebuilding and repairs.
"Encouraging an escrow account would be ideal," Mr. Leonard said. But lenders would also like to "see language in the grant that says the purpose of the funding is to repair and rebuild the property whenever possible," he added.
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