[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                       IMPLEMENTATION OF THE ROAD
                        HOME PROGRAM FOUR YEARS
                        AFTER HURRICANE KATRINA
=======================================================================

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            AUGUST 20, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-70

                 HOUSE COMMITTEE ON FINANCIAL SERVICES






                  U.S. GOVERNMENT PRINTING OFFICE
530250 PDF                WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001








                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
ED PERLMUTTER, Colorado              BILL POSEY, Florida
JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
JACKIE SPEIER, California            LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
           Subcommittee on Housing and Community Opportunity

                 MAXINE WATERS, California, Chairwoman

NYDIA M. VELAZQUEZ, New York         SHELLEY MOORE CAPITO, West 
STEPHEN F. LYNCH, Massachusetts          Virginia
EMANUEL CLEAVER, Missouri            THADDEUS G. McCOTTER, Michigan
AL GREEN, Texas                      JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri              GARY G. MILLER, California
KEITH ELLISON, Minnesota             RANDY NEUGEBAUER, Texas
JOE DONNELLY, Indiana                WALTER B. JONES, Jr., North 
MICHAEL E. CAPUANO, Massachusetts        Carolina
PAUL E. KANJORSKI, Pennsylvania      ADAM PUTNAM, Florida
LUIS V. GUTIERREZ, Illinois          KENNY MARCHANT, Texas
STEVE DRIEHAUS, Ohio                 LYNN JENKINS, Kansas
MARY JO KILROY, Ohio                 CHRISTOPHER LEE, New York
JIM HIMES, Connecticut
DAN MAFFEI, New York












                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    August 20, 2009..............................................     1
Appendix:
    August 20, 2009..............................................    63

                               WITNESSES
                       Thursday, August 20, 2009

Baker, Shari, on behalf of Lillie Baker, resident, Pontchartrain 
  Park, New Orleans, Louisiana...................................    49
Colangelo, Matthew, Director, Economic Justice Group, NAACP Legal 
  Defense and Educational Fund...................................    48
Croom-Fontenot, Mary, Executive Director, All Congregations 
  Together.......................................................    46
Duval-Diop, Dominique, Senior Associate, PolicyLink..............    43
Finger, Davida, Clinical Professor, New Orleans College of Law, 
  Loyola University..............................................    44
Franklin, Mildred, resident, Pontchartrain Park, New Orleans, 
  Louisiana......................................................    51
Oney, Christopher J., Executive Vice President, Hammerman & 
  Gainer, Inc....................................................    39
Plyer, Allison, Deputy Director, Greater New Orleans Nonprofit 
  Knowledge Works................................................    41
Rainwater, Paul, Executive Director, Louisiana Recovery Authority     9
Sathe, Ommeed, Director of Real Estate Strategy, New Orleans 
  Redevelopment Authority (NORA).................................    12
Tombar, Frederick, Senior Advisor for Disaster Recovery, U.S. 
  Department of Housing and Urban Development....................     8

                                APPENDIX

Prepared statements:
    Baker, Lillie................................................    64
    Colangelo, Matthew...........................................    66
    Franklin, Mildred............................................    70
    Oney, Christopher J..........................................    73
    Plyer, Allison...............................................    79
    Rainwater, Paul..............................................    85
    Sathe, Ommeed................................................    92
    Tombar, Frederick............................................    97

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of Melanie Ehrlich, Founder of Citizens' 
      Road Home Action Team (CHAT)...............................   101

 
                       IMPLEMENTATION OF THE ROAD
                        HOME PROGRAM FOUR YEARS
                        AFTER HURRICANE KATRINA

                              ----------                              


                       Thursday, August 20, 2009

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 1:25 p.m., in 
the Lawless Memorial Chapel, Dillard University, 2601 Gentilly, 
New Orleans, Louisiana, Hon. Maxine Waters [chairwoman of the 
subcommittee] presiding.
    Members present: Representatives Waters, Cleaver, and 
Green.
    Also present: Representative Cao.
    Chairwoman Waters. This field hearing of the Subcommittee 
on Housing and Community Opportunity will come to order.
    Good afternoon, ladies and gentlemen. First, I would like 
to thank President Marvalene Hughes for allowing us to use 
Dillard's facilities one more time.
    President Hughes, again, I am very thankful for the 
opportunity to be here with you and I would like to let you 
know how appreciative I am for your generosity. Whenever we 
have called on you, you have not hesitated. And to be here at 
this beautiful facility is certainly delightful and wonderful. 
And I would like to ask you to just say a few words to our 
audience here today.
    Ms. Hughes. Thank you so very much.
    I want to start, first of all, by saying to the Honorable 
Chairwoman Maxine Waters, welcome back home.
    Chairwoman Waters. Thank you.
    Ms. Hughes. And I want you to know that it is so 
fascinating that this campus has totally adopted you. So any 
time you want to use this building, it is here for you. This 
building is different than it was the last time and it is fully 
restored and operable, so we are very proud of that.
    I also would like to acknowledge the Honorable Al Green 
from Texas, who is, incidentally, a native New Orleanian. So 
welcome home to you.
    To the Honorable Emanuel Cleaver, we are happy to have you 
here, and I am pleased to announce that your son, who graduated 
from here a couple of years ago, is very successful in 
Hollywood. He is the kind of alumni that we are proud to have.
    And of course, our new Representative who has been so 
active with Dillard University is Representative Cao.
    The cause for being here is a very important cause and I 
know that this audience is pleased that you have come back to 
do the tasks that are so important ahead of us.
    This is the third time that this committee has convened 
here. You were here twice in 2007 when things were much more 
devastated and the recovery efforts and the renewal efforts 
were all very, very challenging. We at Dillard University have 
almost finished. We even have two new buildings under 
construction now and those buildings will be LEED certified 
buildings.
    We are hopeful, of course, that the Corps of Engineers, 
FEMA, and the insurance industry will realize the severity of 
our need to recover and that by 2011, we will be absolutely 
completely finished.
    I want you to make yourselves at home, let us know what you 
need. And I know that this audience joins me in welcoming you 
to bring us up-to-date on the latest issues and efforts that 
you are experiencing and can promise to us.
    Dillard University is in a very special year. We are 
celebrating our 140th birthday and it was that important effort 
that caused us to know that we were absolutely going to restore 
the university. Our efforts continue. We depend on you to 
support us and we want to remain partners with you in 
everything that you are doing in Washington that relates to us 
in higher education.
    Thanks for being here to each of you.
    Chairwoman Waters. Thank you so very much, President 
Hughes. Again, we are very pleased to be here and we see the 
progress and the work that has been done. And again, this 
building has been beautifully restored and we drove around the 
campus a little bit this morning as I was coming in, and you 
have done a wonderful job.
    Even though we do not really applaud in these hearings, I 
always break the rules. Would you give President Hughes a big 
round of applause?
    [applause]
    Chairwoman Waters. Thank you so very much.
    I would also like to thank our Representatives from 
Congress who are here with us today. I have been explaining to 
some that many of the Members of Congress are traveling all 
over the world. We have CODELs that are in Afghanistan, we have 
CODELs in Africa, we have CODELs in Central America. But we 
have some Members who decided that they were going to spend 
time in their districts and important time on some domestic 
issues.
    The next two gentlemen that I am going to introduce serve 
on the Financial Services Committee where I serve, but they 
also serve on the Subcommittee on Housing and Community 
Opportunity, which I chair, and which is holding this hearing 
today. They decided that they would break from their districts 
to be here because New Orleans deserves our presence. As 
President Hughes has said, we have been here several times 
trying to make sure that we understood what was happening with 
the Federal funds that have been sent to this district, trying 
to make sure that the people were being supported in every way 
possible. But they came back again today, because they thought 
it was so important to be here on the fourth anniversary of 
Hurricane Katrina, to follow up. Not to have just come early 
on, not to have just come to say that we were in support, but 
to come to say we are following up to make sure that we are 
doing everything possible to be of assistance to the people of 
New Orleans.
    With that, I would like you to welcome Congressman Cleaver 
all the way here from Missouri, Congressman Emanuel Cleaver; 
and Congressman Al Green from Texas, who is here with us today. 
Mr. Green and Mr. Cleaver have been consistent supporters of 
the Gulf Coast and its recovery. They both attended, again, the 
field hearings that we had here in 2007 and have been tireless 
advocates for this region. And I am delighted that they are 
here today.
    We are joined also today by the Representative of this 
community, Representative Cao, who represents this district. 
Without objection, Mr. Cao will be considered a member of the 
subcommittee for the duration of this hearing, so that he too 
can participate in ways that will help us to extract the 
information that we need so that we will know what we must do.
    I further believe that several members of the Louisiana 
State Legislature and the New Orleans City Council may be 
present in the audience today. We welcome them and we thank you 
for attending.
    Today's hearing will focus on the implementation of the 
Road Home Program 4 years after Hurricane Katrina. Tomorrow, we 
will reconvene to hear testimony about the status of the 
redevelopment of the ``Big Four'' public housing developments. 
As I mentioned earlier, my subcommittee was initially here 2 
years ago for its first field hearing. At that time, I was 
concerned about the lack of progress in rebuilding the City, 
including its affordable housing supply. I was especially 
concerned about the slow pace of the roll out of the Road Home 
Program.
    While the program picked up its pace, I am now concerned 
about its processes and the amounts homeowners have received. 
Funded at $10.5 billion in Federal Community Development Block 
Grant funds, the Road Home Program is the largest direct run 
program to assist homeowners following a natural disaster in 
our Nation's history. The main purpose of the Road Home Program 
is to provide homeowners with funding up to $150,000 to repair 
or rebuild damaged homes. Homeowners can also receive Road Home 
funds to either relocate to a new property or to sell their 
damaged property to the State of Louisiana.
    However, the majority of complaints that I hear about the 
program are brought by homeowners who do not want to sell or 
move. They simply want to fix up their home and live here. In 
many cases, these homeowners have lived in their homes and 
neighborhoods for decades. They have strong ties to their 
communities and do not want to live anyplace else. 
Unfortunately, because some of these homeowners have received 
less than they need to make repairs, their ability to 
rehabilitate their homes and stay in their neighborhoods is at 
risk.
    In fact, just this morning, I met with a group of 
homeowners in the Pontchartrain Park area who are having 
problems with the program. These residents shared with me their 
experiences with the Road Home Program. Their stories are 
similar to many homeowners in the City. The residents I met 
with this morning have been ripped off sometimes by 
unscrupulous contractors. They have followed difficult program 
rules, including title clearance. They have heard nothing back 
from Road Home. They have filed multiple appeals and 4 years 
after Katrina, they are still no closer to rebuilding their 
homes. This is especially frustrating given that the program is 
expected to have a surplus.
    I am also concerned about disparities in grant awards that 
may exist between low-income and minority homeowners. The Road 
Home distribution formula provided homeowners the lesser of 
either the amount of damage less any insurance or pre-storm 
value less any insurance. As a result, homes with low pre-
Katrina values received less funding. Unfortunately, many of 
these homeowners were low income or minorities. For example, 
according to one estimate, residents in the Lower Ninth Ward 
had an average shortfall of about $75,000 where residents in 
Lakeview had an average shortfall of $44,000.
    Housing is critical to our national economic recovery and I 
believe that it is critical to the recovery of the Gulf Coast 
in general and the City of New Orleans in particular. The Road 
Home Program is an important part of that recovery.
    However, if it does not work for homeowners, then we all 
need to be prepared to discuss how the program can be improved 
so that it fulfills its mission and truly puts homeowners on 
the road back to their homes.
    I look forward to hearing the witnesses' views on this very 
important program and now I would like to recognize Mr. Cleaver 
first for his opening statement.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Let me just speak on a personal level because I think it 
may in fact represent what I have heard thus far today at the 
listening session over at the Southern University of New 
Orleans. As the President mentioned, my son graduated from 
Dillard University a couple of years ago. Actually he was here 
when Katrina hit and managed to spend the night in a Wal-Mart 
parking lot before getting out of the City and making it to 
Houston to stay with his aunt. Dillard did a good job. My son 
was offered a full scholarship to go to LSU to get an MFA, but 
made a decision after Katrina, that he would rather go to 
California, which is what he did. He now resides in my 
colleague, Ms. Waters' district in Los Angeles.
    But it was the decisionmaking that I want to talk about. 
After coming back from Missouri to New Orleans, going back to 
the apartment where he was living, visiting the campus, looking 
at the area with which he was most familiar, he made a decision 
that he did not think that it would be in his best interest to 
stay here, in spite of the fact that the movie industry was 
trying to crank up a high level movie manufacturing center here 
in New Orleans. But he said to me, that is not going to work 
because nobody is trying to rehab New Orleans and so it is 
going to lead the movie industry to begin to back away from New 
Orleans. I do not know whether that has happened or not, all I 
know is that he backed away.
    So I can understand clearly people who left New Orleans, 
went to Houston, went to Atlanta, went to Chicago--I think 
Chicago took more residents than any other city outside of the 
south--and who have made decisions, after looking at what was 
going on, not to come back.
    Now I think all three levels of government can do better. 
The road home has been filled with road blocks and so a lot of 
people cannot come back home because it is difficult to climb 
over the mountains on the road. And in some places, I think 
either bureaucrats or government officials dug holes in the 
road and even when we attempted to pave over the holes, when we 
leave they dig some new holes. So I think there is a lot of 
work to be done, at all three levels--Federal, State, and the 
municipal level. And I think that it is important for you to 
express to us the kinds of opinions that I do not think anybody 
is going to be inhibited, that we can use to continue to fight.
    The good news is that we serve with the Chair--who, if you 
know anything about her, is relentless and is not ever going to 
back away. And so here in the heat of August, we are in New 
Orleans because of her commitment and her willingness to go to 
bat for the people of New Orleans who deserve the best, because 
the road back is not representative of the Big Easy.
    Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you so very much, Mr. Cleaver.
    Mr. Green.
    Mr. Green. Thank you, Madam Chairwoman.
    I also would like to thank and compliment Dr. Hughes. She 
is a stately, courtly, and gracious lady who is also brilliant, 
and we appreciate you sharing your brilliance with us.
    I would like to echo some of what Congressman Cleaver has 
called to our attention. And I would especially like to call to 
the attention of all present that Louisiana, and New Orleans in 
particular, is on the radar of the Congress of the United 
States of America because the Honorable Maxine Waters has 
caused it to focus on New Orleans. And if anyone deserves an 
expression of appreciation for hard work done on behalf of 
everyone, including the least, the last, and the lost, it is 
the Honorable Maxine Waters. And I think we ought to give her 
that expression of appreciation.
    [applause]
    Mr. Green. She has clearly been a friend. And the beautiful 
thing about having her as your friend is that she brings her 
friends with her. When she calls, there is no question as to 
what the answer will be. If it is New Orleans today, then Al 
will be in New Orleans today, and I come gladly. Not because I 
am a Charity baby, by the way. I was born in Charity Hospital 
and I am proud of it. But I come because I understand that our 
chairwoman is going to do everything within her power to make 
sure that the road home brings everybody home. And in a 
metaphorical sense, the road home is not bringing everybody 
home.
    As Congressman Cleaver indicated, it has some potholes in 
it. But we fix potholes in the Congress of the United States of 
America, and we would be honored to fix some of these potholes 
and help you.
    It also has some hazards. Hazard insurance, as I understand 
it, is a real problem--hard to come by and hard to maintain 
once you get it. But hazard insurance is a problem, that is a 
hazard in this road home.
    It also has, as I understand it, some detours along the 
way. It seems that you had a management company that did fairly 
well. They are no longer managing, but they were properly 
compensated, as I understand it--or maybe I should said fairly 
compensated. I do not think anybody argues that they were not 
fairly compensated.
    And finally, it has some tolls along the way. It seems to 
take a greater toll on some more than others. It seems to be 
costing some more to get home than others.
    I am here because I believe in making sure that every 
person is treated properly and that everybody has an 
opportunity to have a similar experience that will lead each 
and every one back home. About 10,000 people from Louisiana and 
this area of Vietnamese ancestry came to Houston, Texas, and 
many of them still desire to come home. I represent a 
constituency that is as diverse as any in the country: 36 
percent African-American; 31 percent Latino; 21 percent Anglo; 
and 12 percent Asian. My Asian constituents are concerned. I 
have received anecdotal evidence that language has become a 
problem in helping them to return home. I am here to represent 
all of my constituents and that includes everyone in this room, 
because we are Congresspersons for the United States of 
America, U.S. Congresspersons. That means that when I vote, I 
vote for everyone in this room, and I assure you, I want to 
make sure that everyone has an opportunity to come home who 
wants to come home and then have a place to call home when they 
get here.
    Madam Chairwoman, I thank you, and I thank Representative 
Cao, I believe this is his district. I thank you and I thank 
Representative Cleaver as well. Thank you.
    Chairwoman Waters. Thank you, Mr. Green.
    At this time, I am going to call on the Representative for 
this district. When we were here before, there was a different 
Representative. When we learned that we were coming here, we 
extended an invitation to your Representative because that is 
the protocol that should be followed. We should come to a 
Representative's district and allow them the opportunity to 
participate. He responded immediately and he is here today and 
I will call on him for his opening statement. Mr. Cao, thank 
you very much.
    Mr. Cao. Thank you, very much, Madam Chairwoman, for 
hosting this very important field hearing. And I would like to 
thank my distinguished colleagues in the House, Al Green and 
Emanuel Cleaver, for also coming here. I and the other 
officials who represent the people of this district are 
grateful that the committee has renewed its interest in the 
recovery of New Orleans and seeing that its citizens receive 
fair treatment as the City's housing stock is rebuilt. My hope 
is that this interest and the work that stems from this hearing 
will go beyond a once-per-Congress event to a sustained 
dialogue on the issues and solutions.
    In just 9 days, the City of New Orleans will mark the 
fourth anniversary of Hurricane Katrina. Once again, this 
community will take stock of what has and has not been done to 
restore the City. As their Representative in Congress, it is 
now my task to work towards bringing them home to a city 
prepared to house them.
    When Katrina hit, entire sections of the City were 
destroyed. No one has ever seen a disaster of this magnitude on 
U.S. soil. No local, State, or Federal Government entity was 
ready for what happened. At that time, there did not exist in 
our national psychology a framework for rebuilding every aspect 
of a city. How does one rebuild an entire city and get 
mentally, physically, and financially fatigued residents to 
come home? Do we focus on jobs first, housing, schools or 
stores? In August of 2005, no one had the answers to these 
questions. Today, we are still in the process of finding the 
answers.
    One of the key outstanding issues left for us to resolve is 
solving the City's housing problem. Thousands of people were 
displaced after the storm and many still are. With roughly 40 
percent of the City's housing stock abandoned or blighted, 
there are still areas which need to be repopulated. One of the 
solutions we have worked on to address rehousing residents was 
the Road Home Program.
    While the Road Home Program has undergone some changes and 
made significant progress in the last year, it still was a 
challenged program that left many homeowners unable to return 
home. We now need to work to resolve these final cases and 
bring these families back to Louisiana permanently.
    I know from working with the LRA and their staff that they 
are hard at work trying to correct some of the residual issues 
with the program and have made providing complete assistance to 
the affected families a priority. The State cannot accomplish 
this task without cooperation from the Federal and State 
Governments. As I and my counterparts in the Louisiana 
Congressional Delegation work with our colleagues in Washington 
to get more resources to the State, we need for the City to 
plan ways to effectively use those resources.
    In addition to working on Road Home, the City has yet to 
spend more than $200 million in long-term community recovery 
funds that the State has approved, but has remained relatively 
unspent by the City. The recovery of this great City depends on 
money being spent and I urge the City government to do so in an 
expedient manner.
    With that, again, I want to thank Chairwoman Waters for 
holding this very important hearing. I would like to thank my 
distinguished colleagues for being here. And lastly, I would 
like to thank President Hughes for providing us this facility 
to hold this very important hearing.
    With that, I would like to ask the chairwoman for leave to 
go to another event and I will be back right after the end of 
that event.
    Chairwoman Waters. Thank you very much.
    I am pleased to welcome our first distinguished panel. Our 
first witness will be Mr. Fred Tombar, III, Senior Advisor to 
the Secretary for Disaster Recovery, U.S. Department of Housing 
and Urban Development. Our second witness will be Mr. Paul 
Rainwater, executive director, Louisiana Recovery Authority. 
Our third witness will be Mr. Ommeed Sathe, director of real 
estate strategy, New Orleans Redevelopment Authority.
    And without objection, your written statements will be made 
a part of the record. You will now be recognized for a 5-minute 
summary of your testimony.
    Thank you very much. We will start with Mr. Tombar.

  STATEMENT OF FREDERICK TOMBAR, SENIOR ADVISOR FOR DISASTER 
   RECOVERY, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Tombar. Thank you, Congresswoman Waters, and members of 
the subcommittee for hearing my testimony today. As you said, 
my name is Fred Tombar, and I am a Senior Advisor to Secretary 
Donovan at HUD. More importantly, like Congressman Green, I am 
a Charity baby and a native of New Orleans. It is my honor to 
join with you today to discuss the implementation of the Road 
Home Program 4 years after Hurricanes Katrina and Rita.
    I first want to express HUD's commitment to the recovery 
and revitalization of New Orleans and the entire Gulf Coast--to 
ensuring that the resources that we have provided are used in a 
most effective way to help people move back into their homes 
and revitalize the entire region. That is a message that we 
sent within weeks of President Obama's inauguration, when HUD 
brought together partners from across the country to help 
provide Disaster Housing Assistance Program transitional rental 
assistance to more than 30,000 families. It is a message we 
have continued to send over the past 6 months and it is a 
message that Secretary Donovan and Deputy Secretary Ron Sims 
and many of our Assistant Secretaries will make clear when they 
are down here next week to mark the fourth anniversary of 
Hurricane Katrina.
    The storms of 2005 were deadly and costly to communities 
across the Gulf Coast, and particularly destructive here in 
Louisiana, causing the loss of lives, damage to businesses and 
public facilities, and devastation to homes.
    To address the devastation left in the wake of the 2005 
disasters, three supplemental appropriations providing HUD 
Community Development Block Grant, or CDBG, funds for Gulf 
Coast disaster recovery purposes were enacted. In December of 
2005, Louisiana received $6.2 billion in its first disaster 
supplemental appropriation. The following June, an additional 
$4.2 billion was appropriated for Louisiana; and in November of 
2007, a $3.0 billion third appropriation was specifically 
allocated to close the anticipated funding gap for the State of 
Louisiana's Road Home homeowners assistance program.
    The State has dedicated approximately $10 billion from its 
Hurricane Katrina CDBG disaster recovery appropriations for 
this Road Home homeowner assistance program.
    To assist the State of Louisiana in administering a 
recovery program of this size, HUD has implemented strong 
programmatic oversight and ongoing technical assistance 
measures, which are critical elements to ensure compliance. HUD 
staff conducts on-site management reviews twice a year to 
ensure that programs and related cross-cutting Federal 
requirements are carried out efficiently and effectively in 
compliance with applicable laws, regulations, and policies. 
Monitoring visits include an overall management review of the 
State, as well as provide on-site technical assistance in areas 
that are deemed high risk. The intended goal of monitoring and 
technical assistance is to assist our grantees like the State 
of Louisiana in improving their performance, developing and 
increasing capacity, and augmenting their management and 
technical skills.
    The magnitude of Louisiana's programs and the sensitive 
nature of expeditiously getting resources to the individual and 
to neighborhoods warrant careful monitoring and ongoing 
technical assistance. With the aid of the Department, Louisiana 
has been relatively successful in disbursing $8 billion with 
few findings. The Road Home Program has been heavily 
scrutinized as reflected in the State being audited over 52 
times since the first supplemental. HUD is committed to 
assisting Louisiana and all of its disaster grantees to 
effectively and efficiently manage the resources needed to 
recover and rebuild communities stronger after a disaster.
    Effectively administering a program as significant as the 
Road Home Program requires a great deal of coordination. As an 
immediate response to aid Louisiana and other disaster-affected 
States, HUD acknowledged the complexities of addressing a 
disaster of this magnitude and granted several waivers to allow 
programmatic dexterity.
    The Road Home Program specifically benefitted from the 
compensation waiver, which allowed the State to provide 
compensation to homeowners whose homes were damaged during the 
covered disasters and met approved program stipulations. The 
waiver also allowed the State to offer disaster recovery or 
mitigation incentives to promote housing development or 
resettlement in particular geographic areas. The compensation 
waiver made it possible to more quickly put resources in the 
hands of disaster-affected homeowners.
    HUD also granted a low- and moderate-income waiver that 
allowed the program to meet the recovery needs of the entire 
community affected by the 2005 disaster. But to be sure, this 
has been no easy process for homeowners and for families who 
lost their homes. As we speak, some families are still trying 
to work their way through the process of receiving compensation 
for their damaged homes.
    In conclusion, CDBG has assisted States and communities 
with disaster recovery, especially, long-term recovery. Over 
the last 4 years, we have seen many challenges that face our 
Federal-State partnership in quickly administering grant 
assistance to individuals and neighborhoods. We are dedicated 
to working through these challenges while ensuring the 
continued focus on both performance and accountability. Long-
term recovery and rebuilding after a disaster is a complex 
process that requires tough decisions at all levels as well as 
the ability to acquire additional capacity to carry them out.
    Thank you for the opportunity to appear before your 
subcommittee. This completes my testimony and I look forward to 
answering your questions.
    [The prepared statement of Mr. Tombar can be found on page 
97 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Rainwater.

  STATEMENT OF PAUL RAINWATER, EXECUTIVE DIRECTOR, LOUISIANA 
                       RECOVERY AUTHORITY

    Mr. Rainwater. Thank you, Congresswoman Waters, Congressman 
Cleaver, and Congressman Green, for being here.
    I work for Governor Jindal, and just as introduction, I 
have been involved in this disaster since the beginning. I was 
part of the evacuation team that helped evacuate the City. I 
have been involved with the Louisiana recovery under Governor 
Blanco. I worked for Senator Landrieu as her Legislative 
Director in 2007. She needed someone to help her through 
recovery issues. I gladly went to Washington and worked with 
her to get the last $3 billion. And Governor Jindal asked me to 
come down and run a consolidated recovery organization, one 
that would be focused on helping people get back in their 
homes. I served as the Governor's authorized representative to 
the Federal Emergency Management Agency in negotiations with 
helping Dillard University get rebuilt, as well as Secretary 
Napolitano just announced about Southern University's public 
assistance money it will receive. We have been involved in 
those negotiations as well. I want to thank you for the support 
that you have given us here in Louisiana. We appreciate it very 
much.
    As I go through some of the numbers and talk about the Road 
Home Program, I do it as a measure, because there is a lot of 
work to be done. I do not have all the answers. I have believed 
from the first day I took this job that we could not do it 
without our Federal partners and without the City in 
partnership. And Fred Tombar, who works with Secretary Donovan, 
and Secretary Donovan have been good partners, and we 
appreciate very much the Obama Administration and what they 
have done through Secretary Donovan; it has been a good 
partnership. And Fred and I talk quite often about trying to 
resolve some of the complicated issues that exist out there.
    The Road Home Program, although it has faced many trials 
and it struggled early on, has paid out $8 billion to 124,538 
Louisiana homeowners, including about $836 million for 
homeowners to elevate their homes.
    In New Orleans alone, the homeowners have received about 
$3.7 billion. And again, I throw those numbers out as a 
measure, not that--you know, it is what the program has done. 
As I said, we still have a lot of work to do.
    In January of 2008, when Governor Jindal came in and he 
asked me to take the program over, we wanted to do a couple of 
things. We wanted to look at how people were being treated and 
we wanted to hold the contractor accountable. There was no 
doubt that the contractor was compensated very well and had a 
very loose contract, a very loosely written contract with no 
performance measures at all. But we held the contractor 
accountable and ended up fining the contractor a little over $1 
million when I got there in 2008.
    We have paid over $2.2 billion since 2008 and when we re-
launched that elevation program I talked about earlier, one of 
the things we did is to remove the bureaucracy from the 
elevation program. We basically worked with HUD to come up with 
a simple formula that did not require any more paperwork and 
really got $828 million out in about 8 months to about 124,000 
homeowners to help them elevate their homes.
    Additionally, when it came time to renew the ICF contract, 
we did not renew that contract. We chose to go a different 
route. And what I did basically is break up the contract, 
unbundle it into four separate pieces. Before, ICF ran a Small 
Rental Program, the Piggyback Low Income Housing Tax Credit 
Program, the Road Home Program, and also managed the accounting 
of those files. We have broken it up into four different 
pieces. Hammerman & Gainer, Inc. is now a Road Home contractor, 
the largest minority contract in the history of the State of 
Louisiana, an IT contractor, who manages independently from the 
Road Home contractor. ACS has the Small Rental Program and a 
group called the Compass Group manages our piggyback program. 
CGI, the IT contractor, works independently and works for me, 
to go in and pull up electronic files to show me what is 
happening on the ground so that we can validate what is going 
on. Before, we did not have that opportunity. So I think by 
breaking it up into different pieces, unbundling it, the State 
has been much more responsible in the execution of the program.
    Many of the remaining applicants have either difficult 
title/power of attorney issues--we are in the process of 
putting an RFP out, a request for proposals, through Hammerman 
& Gainer, Inc., to provide additional legal services to those 
folks who are low- to moderate-income and cannot afford an 
attorney of their own.
    A recent analysis of the Road Home Program showed that Road 
Home had been instrumental in restoring homes in areas impacted 
by Katrina in the City of New Orleans. That is, 75 percent of 
its population, without the aid of the Road Home Program, could 
not have come back.
    That said, the same analysis pointed to 30 percent of the 
Road Home--that is, in Option 1, those who were going to 
rebuild or repair--did not have the money to do so.
    So we had an analysis done and it showed there is about a 
$1.6-$2.3 billion gap. In looking at that, many of those people 
are low- to moderate-income homeowners and do not have the 
resources to rebuild.
    Tuesday, I briefed the Governor; and yesterday, I talked to 
our Board of Directors in the Louisiana Recovery Authority. We 
did not have a meeting in July, so we had our meeting 
yesterday. And we made a decision to--there has been a lot of 
conversation about what surplus we might have. And I will tell 
you that in that third allocation, the $3 billion, 
Congresswoman, that you worked so hard to get for the State of 
Louisiana, along with Senator Landrieu, to make the Road Home 
Program whole, we made a decision that the surplus or any 
dollars we have left over we use to help Road Home applicants. 
We have made a decision to lift what is called the additional 
compensation grant cap of $50,000--we have decided to lift 
that, which will hopefully have a positive impact on about 
20,000 low- to moderate-income Road Home applicants. Hopefully 
we can get them an additional $30,000 for a total of about $600 
million. So we think by doing that, it is a smart decision, we 
will send an action plan to HUD in September. Part of that 
conversation happened up in D.C. in a meeting with Mayor Nagin 
and yourself and others and Senator Landrieu in a roundtable, 
having a study done at the beginning of August that showed us 
that gap. So we have come to that conclusion. We have always 
been committed to using the Road Home money that you sent us, 
that $3 billion that has tight language around it, on trying to 
help people get back in their homes.
    So while the proof is in the pudding, I have my staff 
working on an expedited plan to not force people to come back 
and do additional paperwork, provide additional documentation. 
We have worked very hard and I myself have signed waivers, 
personal waivers, for people who could not prove homeownership. 
I have signed waivers for people who could bring electrical 
bills to me, whatever they could bring to me to give me some 
proof that they had a homeownership, I was willing to do that 
and we will continue to do that. You have our commitment to do 
that.
    Not always perfect, I know that, but we have been to 
multiple outreach sessions. We did about 20 mobile outreach 
sessions last year and closed about 30,000 grants, very 
difficult grants where people were having difficulty because 
there is no doubt the contractor fast forwarded the easier 
grants early on in the program, left some low-income folks who 
could not afford to hire attorneys and other things in the back 
of the program. We picked that up, and we have worked very hard 
to complete those grant applications.
    We will continue to work closely with Congress and the 
Senate and Mr. Tombar and HUD to make sure that people are 
given to opportunity to return home.
    Thank you, Congresswoman.
    [The prepared statement of Mr. Rainwater can be found on 
page 85 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Am I pronouncing your name correctly? Please pronounce it 
for us.
    Mr. Sathe. Ommeed Sathe.
    Chairwoman Waters. Mr. Sathe, thank you very much.

 STATEMENT OF OMMEED SATHE, DIRECTOR OF REAL ESTATE STRATEGY, 
           NEW ORLEANS REDEVELOPMENT AUTHORITY (NORA)

    Mr. Sathe. Thank you for having us here today.
    I represent the New Orleans Redevelopment Authority, which 
has been tasked with a very specific part of the Road Home 
process. I think, Congresswoman, you mentioned the Option 2 and 
3 properties which were the ones that people sold back to the 
State.
    There are approximately 4,700 of those properties in 
Orleans Parish. NORA is the exclusive agent in charge of the 
disposition of those properties; 4,700 properties is 
undoubtedly an incredibly large sum of properties. I think we 
are competing to be the largest land bank in the entire 
country. However, it is a small piece of the puzzle and I think 
Mr. Rainwater and Mr. Tombar have talked a little bit about the 
Road Home 1, which very much matches what we are trying to do.
    If you look at the map I think I put on the first board 
over there, you will see that the properties we have are very 
spread out. The ones highlighted in yellow on that map are all 
the ones that we have been transferred ownership of.
    And so in devising our disposition strategy, you asked us 
to sort of come talk about what we are trying to do to 
redevelop these properties. We have three or four primary 
avenues we use to dispose of those properties.
    The first and an incredibly important program to our City 
Council was the Lot Next Door Program. That gives any homeowner 
with a homestead exemption the right of first refusal to 
purchase the property adjacent to them. They can use that 
property to expand their footprint. New Orleans is an old urban 
city, we have a lot of small lots, a lot of people who have 
been dying for off-street parking, a place to have the kids 
play. At the same time, it is also things they can rebuild for 
relatives, family members who are struggling to get back.
    It is an incredibly important program. To date, we have 
identified approximately 2,000 families who are eligible to 
participate. We have sent 1,200 letters to those families 
inviting them to purchase the property and have signed 300 
purchase agreements.
    We began that in March, when the properties became 
available for transfer. So until then, they were closing 
through the Road Home process and going through the various HUD 
environmental reviews. So these properties only became 
available for transfer in March of this year, and we have 
already signed 300 purchase agreements on those lots next door. 
We expect to do somewhere between 500 and 800.
    The second and incredibly important program for us are our 
Neighborhood Based Disposition Plans. New Orleans, as we all 
know, is a city of incredibly varied and diverse neighborhoods, 
all with different characteristics and desires. The City went 
through an extraordinary planning process and we have tried to 
ground that in the specific context of the properties we have. 
We have developed neighborhood development agreements for a 
variety of neighborhoods. We have already done 15, and we 
should cover the whole City by the end of the year.
    One of our hallmarks, and that is the one that you see in 
front of you right there, is the Pontchartrain Park 
neighborhood. There are approximately 120 what we call LLT 
properties in that neighborhood as well as approximately 400 
properties where people cannot rebuild on their own. They did 
not get enough money from the Road Home Program. A lot of our 
families were elderly and struggling to come back, and a lot of 
them were just mentally and physically exhausted.
    And so working with the neighborhood, they approached us 
and deeply wanted a master developer who would come in, be able 
to build a high-quality home on the properties we controlled as 
well as assist the families next door trying to rebuild as well 
as all the people struggling with ongoing gaps.
    We went out, we selected a national developer, SRP. They 
have done a tremendous job. We expect to break ground on the 
first houses in a few weeks. We are working closely with the 
State to have the properties demolished prior. It is a very 
important part of the program because we have to have them 
elevated. And for these old houses, it makes a lot more sense 
to elevate them, rebuild. They are going to have the latest 
energy efficiency features and we are working again with the 
State to find the resources to make these affordable.
    One of the central challenges we have in the recovery is 
that the cost of construction exceeds what many, many, many 
families can afford. And if that was not bad enough already, 
the cost of homeownership has skyrocketed since Katrina, it has 
gone up nearly 500 percent. What that means is that a family 
making less than 120 percent of AMI cannot afford new 
construction. And that is quite a heavy burden. Down here, it 
is about $70,000. Anyone making less than that is deeply 
struggling to afford housing. And so we are absolutely 
dependent on the support of the Federal Government and the 
State to find the resources to fill those gaps.
    We are working with the State on a soft second program for 
some of that. We are also working to try and get some of the 
elevation resources to reduce that cost. We are also looking to 
try to get some of the energy efficiency resources to resource 
that. Solving that gap is absolutely crucial to the rebuilding 
of this City. A lot of people have talked about wanting to 
rebuild smarter and safer. Without the resources, people are 
being driven to rehab in situations where that is a terrible 
idea.
    In terms of some of our other programs, we have also--you 
know, we have taken very different approaches in other 
neighborhoods. In Lakeview, which had a strong demand, they 
decided they did not want any developers. They said what we 
want is just to get single families to come back, we have 
plenty of demand. Give folks a shot who want to come here, live 
here, and raise their kids. We did a disposition program there 
that sold over 200 properties.
    To put these numbers in context, and I think it is helpful, 
in the typical year in New Orleans, you only do about 1,000 to 
1,200 single-family home sales a year in the entire private 
market. Between Pontchartrain Park, Lakeview, and our programs, 
we will have done over 1,000 this year alone.
    We have worked in almost every neighborhood. We have done 
projects in the Lower Ninth Ward working with groups like NINA 
and Make it Right to build back some of the most energy-
efficient houses in the country.
    Where are the impediments going forward, however? And that 
is what I would like to talk to you Congresspersons about. We 
are struggling with a couple of things.
    Demolition--we were recently denied a waiver from the EPA 
that would have allowed the City to continue with demolition in 
a rapid fashion. It is a peculiar choice, since they extended 
the waiver to St. Bernard Parish which is neighboring us. And 
we have had that waiver for the past 4 years. It is crucial in 
demolishing a lot of these Option 2 and 3 properties because 
after 4 years of being ungutted and sitting there in many 
cases, these homes need to come down so that they can be 
elevated and rebuilt in a sustainable fashion. That is one key 
thing we are struggling with.
    The second is construction costs.
    The third I think is a jack-o-lantern pattern of 
rehabilitation. If you look at these maps and you see our 
neighborhoods, you see beautiful houses next to houses 
struggling to rebuild. We have applied some assistance to try 
to help fill some of those gaps that Paul is going after and to 
do it in a way that brings people into a more sustainable 
solution and stops them from being ripped off by unethical 
contractors.
    [The prepared statement of Mr. Sathe can be found on page 
92 of the appendix.]
    Chairwoman Waters. Thank you very much. I notice that 
perhaps you did not all get an opportunity to finish your 
testimony. You can do some of that through the exchange you 
will have with us on questions. And I would like now to 
recognize myself for a few questions.
    First, let me ask you, Mr. Tombar, I know that this 
Administration is only 6 months into leading this country, and 
I appreciate the information that you shared with us about the 
oversight. Did you discover in your work that perhaps some 
parts of the Road Home Program had been originated in ways that 
created problems during the implementation and while you were 
doing oversight to make sure that they were doing what they 
said they would do. Was the program designed correctly in the 
first place to accomplish the goals it intended to accomplish?
    Mr. Tombar. That is a very good question; thank you for 
asking it.
    Let me say that one of the things that I did testify to is 
that this is an incredibly complex undertaking, as we all know. 
There never before has been a disaster of this magnitude, 
causing as much damage as was caused.
    The State of Louisiana, in the year before Hurricane 
Katrina, its overall CDBG allocation was in the millions, the 
tens of millions. And as I testified to, the overall 
allocations that they have dedicated to the Road Home Program 
is upwards of $10 billion. So there was a tremendous issue with 
capacity building, one.
    The second thing that I know personally was that there were 
ever-changing rules. The State--this is prior to Mr. 
Rainwater's involvement, but the State of Louisiana Recovery 
Authority was, quite frankly, I believe making the train as 
they were riding on it in many cases. And the rules changed 
constantly, making it difficult to communicate to homeowners 
exactly what it was that they should expect in the way of the 
application process and the program itself. But that was done 
because of the complexity, because of the challenge of trying 
to address so many of the issues that are out there.
    I will tell you, part of the challenge from a Federal 
perspective that we had was that the CDBG program is sort of 
like a square peg in a round hole. It is intended for long-term 
recovery, but it happens to be the most flexible tool, the most 
flexible program, that we have at the Department and, 
therefore, is used by the Congress often to help communities in 
their recovery.
    That flexibility limits the Federal Government's ability to 
actually determine how that money is used. There are broad, 
really broad, goals that are set up for the program. And as 
long as a grantee like the State of Louisiana in its program 
design meets those broad goals or demonstrates how its program 
could meet those broad goals, we are obligated to approve it. 
That is the Federal law and how the program operates.
    And so part of the challenge is, one, the complexity of the 
challenge in addressing the devastation of Hurricanes Katrina 
and Rita, quite frankly. And then two, the fact that this had 
not been done before, and there was rulemaking and policymaking 
as the program itself was being implemented.
    Chairwoman Waters. What is HUD's authority or role with 
CDBG in this instance in advising or determining in any way how 
any excess funds should be used?
    Mr. Tombar. The final $3 billion, that Paul testified to 
and I did as well, is strictly tied to the compensation grants 
for the Road Home Program. If in fact that money is not needed 
for that purpose, after the program is completed, the way that 
the legislation was written is that the money would be returned 
to the Treasury. I can say to you that Secretary Donovan and 
President Obama have absolutely no desire to see money returned 
to the Treasury when there are still ongoing needs here in the 
State of Louisiana. We have been in internal discussions about 
a legislative--working with Members of Congress on developing 
the legislative strategy, once it has been satisfied that there 
is a surplus, should there be a surplus, about redirecting 
those dollars to some other existing needs here in the State of 
Louisiana.
    Chairwoman Waters. Mr. Rainwater, the $3 billion or so 
surplus, let us not call it surplus, let us call it funds 
unexpended. As you have identified and I guess we talked about, 
you are talking about using that money to satisfy some of the 
unmet needs of Road Home of compensating in some way those 
people who fell through the cracks. Explain that one more time 
to us.
    Mr. Rainwater. Yes, Chairwoman Waters, if I could.
    The $3 billion, we have spent $1.5 billion of that, and we 
have $1.5 billion left.
    Chairwoman Waters. How much do you have left?
    Mr. Rainwater. $1.5 billion.
    Chairwoman Waters. 1.5 billion?
    Mr. Rainwater. Yes, ma'am. And we think we are going to 
spend half-a-billion on finishing out the more traditional Road 
Home Program. I hate to use the word traditional; nothing is 
traditional about it.
    Chairwoman Waters. Right.
    Mr. Rainwater. But going forward, we made some budget 
adjustments. Originally, we were going to take $600 million and 
use it to pay out individual mitigation measures for applicants 
at about $7,500 an applicant. But then we made a decision to go 
ahead and move that over to our Hazard Mitigation Grant Program 
because it made more sense, and we were seeing, you know, it 
takes awhile to get the information, but we were starting to 
see that gap. And so we said, let us go ahead and use the Road 
Home money for what it was intended, that is, to help people 
repair their homes.
    And so we think--we had an additional compensation grant 
program that had been set up back in--I was not part of the 
design, but as I understand historically back in 2007, to help 
low- to moderate-income applicants. And it was capped at 
$50,000. We have now made a decision to lift that cap, and we 
think just on the broad data that we have looked at, there are 
20,000 low- to moderate-income Road Home applicants that we can 
give around an average of $30,000. And so that is what we plan 
to do. And we think that will make a huge difference in their 
ability to rebuild their homes. If the gap is for Option 1 in 
New Orleans, for example, actually across the recovery area, 
about $600 million, that should do some of it.
    Now we have a $20 million pilot construction repair program 
that we are sending down to nonprofits across New Orleans and 
the area that we are just getting ready to execute. That should 
help repair some homes as well because you have folks with much 
smaller gaps.
    Chairwoman Waters. Let me try and understand.
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. On the low-income homeowners that you 
would like to try and help with these $30,000 subsidies in some 
way, are these people who may have applied for Road Home money 
who were homeowners, or these are not homeowners for the most 
part?
    Mr. Rainwater. These are homeowners.
    Chairwoman Waters. These are homeowners. They may have 
applied for Road Home assistance. They may or may not have 
gotten some assistance?
    Mr. Rainwater. Yes, in most cases, they would have most 
probably gotten something.
    Now we have been going back into our files to look at 
people who--and one of things I am doing right now, we have 
about 8,000 applicants that I am still holding onto, you know, 
that we are still trying to work through the proof of 
homeownership, title issues and so forth. We are going to 
continue that on through next year.
    Chairwoman Waters. I know, you are going to continue on 
with the traditional Road Home Program.
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. And you are going to try to go back and 
identify the low-income homeowners who may have applied, may 
have gotten $10,000 or $15,000, but certainly it did not go 
very far in rehabbing that home. And so you are going to look 
at how you can give some additional assistance, because their 
incomes are low--
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters.  --and 9 times out of 10, they cannot 
save the money or have the money by which to get these homes 
done; is that right?
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. And then the money to the nonprofits is 
more like a smaller program to do repairs of some kind, to help 
people who may not have had significant damage, but have some 
damage or may still have some needs left over after they have 
spent their Road Home money, etc., something like that?
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. Okay. Now you say there are about 8,000 
people who may be left in the Road Home Program, who need to be 
dealt with. These are people who filed considerably late, these 
are people who had complaints or they are on appeal. Something 
like that?
    Mr. Rainwater. Well, yes, ma'am, if I could just walk you 
through it really quick.
    We have about--early on in the program when I got here in 
January 2008, there was this program called dispute resolution 
that ICF was running, that basically there was no 
accountability. We got rid of that, pulled those out, put them 
into an automatic appeal. We created a two-tier appeal process, 
one at the contractor level and one at the State level.
    Before 2008, the contractor had the final say-so on the 
appeal and that just did not make a lot of sense to myself and 
to many others, as we looked through the issues. And right now, 
we have 490 appeals at the contractor level and about 60 at the 
State level. So we have worked through those, I think.
    But there are still obviously in that group of 8,000 
people, there are people who are having trouble, you know, with 
title succession issues. I mean I can give you example after 
example of folks who--
    Chairwoman Waters. Let me ask you, Mr. Rainwater, did you 
find that one of the problems--and Mr. Tombar, you may have 
found this in your overview in some way--did you find that 
there were problems with assessments? I hear a lot about that. 
I hear that people who had a home that was worth $150,000, got 
an assessment from Road Home for $70,000. What is that all 
about?
    Mr. Rainwater. That is about the formula and the way it was 
laid out. Basically if you were considered 51 percent over--it 
was a complicated formula that had to do with pre-storm value 
versus estimated cost of damage.
    Chairwoman Waters. Well, most people say that whatever that 
formula was, it was not right. Is there a need to correct that?
    [applause]
    Chairwoman Waters. And the reason I asked is if we are 
going to play with some of the $3 billion in some way--and this 
may be complicated. It is all complicated.
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. But if these places were underassessed, 
that really determined how much money they got in Road Home 
assistance, right?
    Mr. Rainwater. That was one--
    Chairwoman Waters. So if your max was $150,000 and you 
ended up receiving $75,000 because your home was assessed at a 
much lower rate, is there a need to fix that?
    Mr. Rainwater. That was one of the reasons I think they set 
up the additional compensation grant back in 2007, was to help 
the assessments, and parts of New Orleans were lower than other 
parts, like Lakeview. So that is one of things we are going 
back to do, not a re-evaluation, but just the automatic, you 
know, dollars to those folks who fit in the additional 
compensation category.
    Chairwoman Waters. So are you saying that you may look at 
this in a way that you say okay, a review of our records shows 
that 30,000 people may have been underassessed. We are going to 
give them a set amount of money. We cannot go back and do all 
the re-evaluation, but we are going to give everybody $20,000 
or something like that. Is that what you are talking about?
    Mr. Rainwater. Congresswoman, if I could, one of the 
challenges that we have is if I go back and start trying to re-
assess, we just recreate the problem.
    Chairwoman Waters. I get that.
    Mr. Rainwater. Yes, ma'am. And I have spoken with HUD 
about, you know, adjusting formulas, for example. I do not 
think at this point, what I have been told is that it is 
probably--the program was the program. What I need to do now is 
try to go back and reconcile as quickly and easily as I can 
some of those issues to try to get money to people.
    Chairwoman Waters. Okay, well, you know, this is very 
important. If that is on your radar, and it should be I think, 
and you recognize that and you have some money, and you can 
dedicate some of the billion or so to that; does it make good 
sense to do a flat amount of subsidy without having to jump 
through a lot of hoops? Because one of the things the people 
complain about is what they have been required to do, how their 
money, $150,000, has been reduced because of an SBA loan, 
because of insurance money they should have gotten, may have 
gotten, because of the underassessment, on and on and on.
    If they have simple proof, and you talked about simplifying 
that in some ways, show me that you own the house--if they can 
do that in a very simplified way, are you prepared to come up 
with a program that will subsidize all of those people who fall 
in that category a set amount?
    Mr. Rainwater. Yes, ma'am. And we can work with HUD to do 
that. We support that 100 percent, that's why we talked about--
    Chairwoman Waters. But HUD does not care.
    Mr. Rainwater. Yes, ma'am--no, ma'am, they do care, they do 
care.
    Chairwoman Waters. In this case, we will hold them to it. 
Ordinarily, we would say okay.
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. But--well, he did not quite say it that 
way, but what he said is, Congresswoman, you have rules. The 
public policy says that when you use Block Grant money, this is 
the only amount of oversight that we have. And HUD cannot write 
the exact rules for how you spend that money. That is what you 
told me, right?
    Mr. Tombar. Yes, ma'am.
    Chairwoman Waters. And so--just a moment. And so, having 
said that, and because the State made the determination about 
its Road Home Program and we agree, and we are sympathetic to 
the fact that this was difficult. I mean everybody recognizes 
it is the biggest disaster in the history of our country 
certainly and that it is complicated. And that even from the 
time you started, there were modifications and changes to 
accommodate the difficulty that you ran into to try and be 
fair.
    So now, we have one of those issues we are dealing with 
right now. There are a lot of others, but we are only dealing 
with one right now and that is the assessment issue. HUD will 
not interfere with how you correct that, will you, HUD?
    Mr. Tombar. Ma'am, if I could--
    Chairwoman Waters. No, just tell me.
    [laughter]
    Chairwoman Waters. You can speak for Secretary Donovan, he 
told me you could.
    Mr. Tombar. The language on the money that we are talking 
about--
    Chairwoman Waters. Yes.
    Mr. Tombar.  --as you know, was very tightly written.
    Chairwoman Waters. Yes.
    Mr. Tombar. I am not a lawyer, so I will not play a lawyer 
here, but I do want to say that because of how tightly the 
language was written, it really constricts in ways that the 
CDBG program normally does not. It really constricts the usage 
of that money.
    Chairwoman Waters. Mr. Green, Mr. Cleaver, what does it 
take for an amendment quickly when we get back in whatever is 
passing through our committee to fix it? Are you prepared to do 
that?
    Mr. Cleaver. Yes.
    Mr. Green. Yes.
    Chairwoman Waters. Let's fix it.
    Let me tell you, Mr. Rainwater--
    [applause]
    Chairwoman Waters.  --Mr. Rainwater, we expect that--we 
cannot tell you how much, we do not want another set of rules 
that will put people through a thousand hoops to correct the 
underassessment of their property.
    If we agree and you concur, and you said you did--do not 
change on me after we do this.
    Mr. Rainwater. Congresswoman, I will send money out faster 
than you can get back down here, I promise.
    Chairwoman Waters. You got it. That is exactly what we 
want. We want you, in the most simplified way, to get to me and 
Chairman Frank a letter of request for assistance to rectify 
the underassessment of properties considered under the Road 
Home bill so that you may, in the simplest way possible, 
compensate or make up for that difference or that gap that 
everybody agrees occurred.
    Now let me just say this. It may not be what everybody 
would want.
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. Or would like to have. But it is going 
to be something that is substantial enough that people will 
know that they have some money that can help move them along in 
either completing the repair of that property, or will get them 
much further than they are now.
    So I am not talking about what you did in Road Home where 
people could have gotten $150,000 and ended up with $1,000 or 
$2,000 or $12,000. We are not talking about that. We are 
talking about coming up with a number that would be somewhere--
well, I do not want to start talking about that number, I think 
it would be unfair to you. But do not bring me any $2,000, 
okay?
    Mr. Rainwater. Oh, no, ma'am.
    Chairwoman Waters. It is not going to work. It has to be 
substantial enough to make a difference in the lives of people 
who have been struggling with properties that have been 
underassessed. Okay?
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. Okay, I could go on with other things, 
but I have two colleagues who have come a long way. Mr. 
Cleaver, yu are recognized for as much time as you would like 
to take.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Mr. Tombar, do you and Mr. Rainwater communicate on a 
regular basis?
    Mr. Tombar. Yes, sir.
    Mr. Cleaver. So, HUD and the State. The Mayor is going to 
be here tomorrow, I think, but can we add the municipality as 
well?
    Mr. Rainwater. Congressman, if I could, Mayor Nagin and I 
text each other. I mean we are in contact with each other all 
the time, absolutely.
    Mr. Tombar. The Secretary brought me on--called me on the 
day that he was confirmed by the Congress, and asked me to come 
and join his staff specifically to work on disaster recovery. I 
have been in regular communication with folks not only in this 
State but also in Congressman Green's State of Texas and others 
that are recovering from disasters, to help out as much as 
possible.
    Mr. Cleaver. I am very pleased with Secretary Donovan, 
other than the fact that he looks like he is 16, but beyond 
that--
    Mr. Tombar. I have asked him what water he drinks, too.
    Mr. Cleaver. Yes. I am asking the question because 
apparently there are questions being raised about the 
inspections when homes are being readied for citizens to move 
in. People are complaining that sometimes the house is 
inspected by five different jurisdictions, including FEMA, but 
that, you know, you will have a HUD inspection, you have a City 
inspection, you have a FEMA inspection, you have a State 
inspection, vendors, major league baseball referees--I mean 
everybody is coming in to inspect.
    I am wondering why we cannot reduce the number of 
inspections so that people can be about the business of getting 
back into their homes. When I talked about people digging 
potholes in the road home, that is what I mean, when we are 
doing that kind of thing.
    I am a former mayor, and we had a problem with delays in 
inspections, so during my term, we established a one-stop-shop. 
There is no point in having 15 different departments inspecting 
one home. So can we not put some kind of system in place for a 
one-stop-shop so that it does not delay people getting back 
into their homes?
    Mr. Tombar. It is a very good question.
    Part of what the Obama Administration actually is doing is 
certainly trying to learn lessons from the past. And we think 
the experience in Hurricane Katrina is extremely instructive. 
And you are right that there have been issues with multiple 
inspections, those that are used for various Federal programs. 
As you mentioned, FEMA, the Small Business Administration, and 
the CDBG grantees, the State of Louisiana doing a third. And in 
many cases private insurance companies coming out and doing 
inspections.
    What we are looking to do at the Federal level is to 
consolidate those inspections under one agency. Quite frankly, 
what some of this will require is beyond just administrative 
coordination, some new authorities given to various Federal 
agencies to do some coordination, especially around the 
Stafford Act.
    Congressman Waters mentioned some of the complexity that 
the program has seen and things that have irritated people 
about amounts being taken into account from their insurance 
company and from FEMA and from other places. That is a clear 
requirement coming from the Stafford Act, against duplication 
of benefits. That is something that I must say that even in the 
exchange that was just had that would have to be dealt with, 
because that Stafford Act requirement is in no way--there is no 
way to get around it. It is a requirement that stands.
    And so while we might want to easily facilitate the 
additional compensation to homeowners and applicants under the 
program, it could be that the requirement under the Stafford 
Act, which supersedes everything in the disaster context, could 
get in the way of easily facilitating that.
    Chairwoman Waters. Will the gentleman yield for a moment?
    Mr. Cleaver. Yes, Madam Chairwoman.
    Chairwoman Waters. As you know, the Stafford Act is but an 
Act of Congress.
    Mr. Tombar. Yes, ma'am.
    Chairwoman Waters. We make the laws.
    Mr. Tombar. Yes, ma'am.
    Chairwoman Waters. And what we are talking about doing is 
amending, modifying or doing whatever is necessary to expedite 
the assistance to these homeowners so we can get these problems 
behind us. And that is what we are willing to do. We will have 
to, and our staff will have to take a look at everything of how 
we do it, but we are committed to doing that. So do not worry 
about the Stafford Act. It may end up the Cleaver Act or the 
Waters Act or the Green Act. But we are going to have to get it 
done. Okay?
    Mr. Tombar. I was not worried. I mentioned it only so that 
it would not be missed and that when in fact implementation 
came, if it were missed in the drafting of whatever legislation 
would provide the flexibility, did not want it to come back on 
us that we are being bureaucratic.
    Chairwoman Waters. I yield back.
    Mr. Cleaver. The Chair has already spoken.
    So you could probably give us--the two of you, maybe the 
three of you--information about what we need to do. If there is 
new authorizing legislation required and where, can we get that 
quickly?
    Mr. Rainwater. Congressman, I can give it to you this 
afternoon. I have a list of duplication of benefits and we have 
tons of issues that we have been fighting with for quite some 
time. Fred and the Secretary have only been in the job for a 
bit, and we have had numerous conversations about how--the 
Mayor and Fred and I have met with the Secretary a number of 
times and talked about the complexities of this and trying to 
get information to you so you can act. Because we know if you 
know the issues, that you will act, and you will make it 
simpler for us to work with some of these issues. So 
absolutely.
    Mr. Cleaver. Okay, thank you. That has almost justified a 
trip down here, but I want to go one other place.
    In addition to the inspection issue, we are told that there 
are some issues around zoning that some neighborhoods are 
balking at zoning changes because the prefab housing that is 
being placed in some areas are not consistent with the housing 
stock that remains, and so people are concerned about a 
reduction in property values.
    Are any of you familiar with that issue?
    Mr. Sathe. Quite honestly, Congressman, I do not think that 
is an issue of anyone at the table. It may be that is probably 
best raised with the Mayor in terms of the zoning code.
    Mr. Cleaver. Yes, I used to be mayor of a city larger than 
New Orleans, so I know how that goes.
    Mr. Tombar. I have heard the issue more closely tied to the 
neighboring State of Mississippi than in Louisiana, where that 
concern has come up.
    Mr. Cleaver. We had a listening session this morning and in 
hanging around, somebody came up and raised that issue with me. 
Which was a valuable session, incidentally, and so I wanted to, 
you know, make sure that if that is an issue, that we need to 
do whatever we need to do.
    I will mention that to Mayor Nagin.
    Madam Chairwoman, I yield back the balance of my time.
    Chairwoman Waters. Mr. Green.
    Mr. Green. Thank you, Madam Chairwoman.
    I would like to, for the record, associate myself with the 
comments of the Chair. I appreciate greatly her pearls of 
wisdom and I would only add that the people of Louisiana and 
New Orleans have suffered too long, they have waited too long, 
and it is really time for us to do everything that we can to 
get them back into their homes. It really is.
    [applause]
    Mr. Green. And because I am going to be terse and laconic, 
I am going to ask that you be pithy and concise, so that we can 
go through this as expeditiously as possible.
    In my former life, I was a judge and I have learned the 
value of the truth, the whole truth, and nothing but the truth. 
So let us move, if we can, to truth, because there is beauty in 
truth. You know the truth, it will set you free. So let us see 
if we can free a few souls today.
    Let us start with some intelligence that I have received. 
Is it true that home values in predominantly African-American 
neighborhoods tend to be lower than values in similar houses in 
predominantly white neighborhoods? Mr. Rainwater, you were here 
at the genesis of this and I suspect that you are the best 
person to help us get to Revelations. Is it true?
    Mr. Rainwater. Sir, I have only been here since 2008, 
January of 2008. I worked--
    Mr. Green. That is genesis for us.
    Mr. Rainwater. So I was not part of the design of the 
program, I will say that the additional--
    Mr. Green. May I ask you to do this, if you would, Mr. 
Rainwater--I love you and I am not trying to be overbearing--
    Mr. Rainwater. No, sir.
    Mr. Green.  --but this is important.
    Mr. Rainwater. Yes, sir.
    Mr. Green. Sometimes when people finish, I do not know 
whether they have said yes or no. So I am going to ask that you 
start with yes or no, and then we will get the explanation. So 
is it true that in African-American neighborhoods property 
values are valued less than similar properties in Anglo 
neighborhoods? Is this true?
    Mr. Rainwater. Yes, sir.
    Mr. Green. If this is true, is it true that African-
American homeowners are more likely to receive what is called 
the pre-storm value for their homes by virtue of the three 
different methodologies that you use to compute values--is it 
true that they are more likely to receive the pre-storm value 
as opposed to the actual cost to repair value?
    Mr. Rainwater. Most probably, I would suspect so.
    Mr. Green. If you would now, I have a record that I am 
building. Is this true?
    Mr. Rainwater. Yes, sir, I am sure it is.
    Mr. Green. Okay.
    Mr. Rainwater. I do not deny that.
    Mr. Green. It is true, it is true. I am building a record. 
But you and I know that it is true.
    Given that it is true, then it is more likely that African 
Americans who have homes that are similarly constructed to 
homes in other areas are going to receive less for their 
repairs than the persons who live in these other neighborhoods. 
That causes me some concern. That kind of invidious methodology 
needs to be corrected.
    You are in a unique position. It is my hope that you will 
give consideration to the truth, the undeniable truth that you 
and I absolutely agree on. Somehow that should be corrected.
    Now I am not going to ask more information, because you 
have already been sued because of this. There is a lawsuit 
against HUD, lawsuit against--I believe against--
    Mr. Rainwater. Against me for a program I did not design, 
but that is okay, Congressman.
    Mr. Green. Yes. Well, I do not want to get into your 
lawsuit and I hope you have a good lawyer. But what I really 
trust is that this will be resolved, not because of ethnicity, 
not because of race, but because it is just right to make sure 
that people who have homes that are similarly constructed 
receive similar amounts of money to repair their homes. 
Hurricanes do not discriminate and we should not discriminate 
once hurricanes have gone by.
    [applause]
    Mr. Green. Now I hate to ask you if it is true, but I have 
to. I am a lawyer and I do not know how to start sentences 
otherwise, so please forgive me.
    Is it true that the management company received a handsome 
amount of money for the work that it was supposed to do?
    Mr. Rainwater. There is no doubt about that.
    Mr. Green. What was that amount of money, please, sir?
    Mr. Rainwater. It was $897 million.
    Mr. Green. $897 million?
    Mr. Rainwater. Yes, sir. In a contract I did not sign, in a 
contract I accepted or was handed over to me. We basically held 
back about $11 million of that based off of audits that we have 
done and program requirements that were not met. Congressman, 
it is distasteful, I know that. But we did everything we could 
in 2008 when we took the contract over, to set benchmarks and 
to--
    Mr. Green. Well, let me ask you this. By the way, this is 
in no way a reflection upon you.
    Mr. Rainwater. I understand that, sir.
    Mr. Green. But again, there is beauty in truth.
    Mr. Rainwater. Yes, sir.
    Mr. Green. Did we, as has been done with you, did we 
consider litigation? Did we consider suing these people to get 
some of the taxpayers' money back?
    Mr. Rainwater. We are in the process of putting together a 
lawsuit now, Congressman. That is what we are doing right now, 
going back and looking at mistakes that the company made, not 
treating people fairly. And our lawyers, who are here today, 
have been in the process of reviewing that. That is why, as I 
mentioned earlier, I separated out the IT piece from the 
contract--
    Mr. Green. You did.
    Mr. Rainwater.  --so I could get the truth.
    Mr. Green. You did, and I salute you for doing it.
    Would you kindly, once the lawsuit has been filed, forward 
a copy to--if you will send it to me, I will make sure that it 
is available to committee members. And Madam Chairwoman, if 
there is a better way to do this, I will yield to your wisdom. 
But I would like to see a copy of the lawsuit. And my 
assumption is that your lawyer will be in a position to give us 
somewhat of a summary. I would be interested in seeing your 
summary--
    Mr. Rainwater. Yes, sir.
    Mr. Green.  --of the litigation.
    Finally, let us deal with something that is important to 
many thousands of people who have come to my district. I am 
concerned--and maybe this should be to Mr. Tombar--I am 
concerned about anecdotal evidence that I have received 
indicating that persons who do not speak English are not having 
enough information accorded them in a language that they do 
understand. Is it true or not true that you have your 
information printed in Vietnamese for the purpose of helping 
the 10,000 Vietnamese persons who relocated to Houston, many of 
whom live in my district? How have we dealt with the language 
barrier that can exist when we try to communicate with persons 
who speak a language other than English?
    Mr. Tombar. I am trying to clarify--is this information on 
the Road Home Program?
    Mr. Green. Yes, sir, on the Road Home Program; yes, sir.
    Mr. Tombar. I would have to defer to Mr. Rainwater.
    Mr. Green. Mr. Rainwater, we are back, here we are.
    Mr. Rainwater. Yes, sir. I do not have that information, 
Congressman. I know we have--
    Mr. Green. This lady is going to help you.
    Mr. Rainwater. We are required to translate; yes, sir. I 
have had staff who have gone to Houston and worked with folks 
over in Houston; so yes, sir, we have translators.
    Mr. Green. Do you have a person who is continually working 
in this process, a person that I can contact that I can have an 
opportunity to receive some empirical evidence from?
    Mr. Rainwater. Yes, sir.
    Mr. Green. I would like the name of this person.
    Mr. Rainwater. Yes, sir.
    Mr. Green. And I would like for you, if you can, to accord 
me this name--can you do this within a week, please?
    Mr. Rainwater. I can do it this afternoon, sir.
    Mr. Green. All right. I would like to have the name. And if 
you will do this, for fear that you may not get me, I hope that 
you will, if you will give it to a staff person, it will be 
given to me.
    I have other areas that I would like to visit with if there 
is another round or perhaps I will address my questions to 
someone else, but I do want you to know that this is serious 
business for us and we are going to do everything that we can 
as fast as we can, to make a difference.
    I thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much, Mr. Green.
    I will authorize another round for 2 minutes each for us to 
kind of wrap up any questions we might have for the witnesses 
who are before us.
    We did not spend much time on Mr. Sathe and we need to 
spend time on you.
    We did not spend much time, but you have an important 
responsibility, you have acquired the people's property. You 
acquired property from people who decided to leave the City, 
who decided they were too old and they just could not go 
through dealing with another crooked contractor, or decided 
that they were just going to give up owning a home and maybe 
going to an apartment. So you have all of this property. What 
are you going to do with this property?
    Mr. Sathe. Sure. We are going to do our best to get as much 
of it back into commerce as possible.
    Chairwoman Waters. What does that mean, back into commerce?
    Mr. Sathe. I think we talked about the two key initiatives. 
One, the Lot Next Door, so homeowners who--
    Chairwoman Waters. That is good. Let me repeat that, so 
that I understand it. The homeowner adjacent to acquired 
property will have the right of first refusal for the purchase 
of that property, is that right?
    Mr. Sathe. That is correct.
    Chairwoman Waters. And is that property to be purchased at 
what you would consider market rate or something different?
    Mr. Sathe. We have gone out of our way--under the 
regulations we are working under, it is current appraised value 
and it is current conditions, but what we do recognize is that 
one of the things we adjusted is that in all those 
neighborhoods that are storm damaged and where properties have 
to be elevated, it is the raw land value and nothing more. So 
we have reduced the cost down to the raw land value because we 
recognize that it would be unfair to charge someone for a home 
that on the one hand, FEMA was saying should be demolished or 
elevated and basically--
    Chairwoman Waters. So this property that can be bought by 
the adjacent homeowner can be purchased for the pure land value 
and not for the building or the property that is on there that 
has to be demolished, or any of that?
    Mr. Sathe. That is right. So long as it is outside the 
historic areas. So long as it is in the areas that require 
elevation.
    Chairwoman Waters. Okay.
    Mr. Sathe. Which is most of it.
    Chairwoman Waters. When the assessment was done and you 
purchased that house and that land, was there a determination 
about that land value that you paid that is different than what 
you are charging the new homeowner buyer for it?
    Mr. Sathe. We had nothing to do with the original 
acquisition, so I cannot speak to that.
    Chairwoman Waters. Oh, I see.
    Mr. Sathe. We had current appraisals done as of now.
    Chairwoman Waters. How do those appraisals compare with the 
appraisal that was used when you bought it from the person or 
the individual or whomever?
    Mr. Sathe. My sense is that in most cases, the property was 
bought with the structure on it, so it would have been bought 
at a considerably higher price than what we would be selling it 
at. I mean by orders of magnitude, I would imagine.
    Chairwoman Waters. Would you please supply to this 
committee a description of how you value the land--
    Mr. Sathe. Absolutely.
    Chairwoman Waters.  --that you are selling, that you now 
have in your portfolio.
    Okay, now while we are discussing in a big way how to 
rectify some of the mistakes that were made originally--and we 
talked about one today and I think we have a consensus that the 
assessment was not perhaps what it should be and there were 
other kinds of things that have to be straightened out. And we 
have so many unhappy homeowners who feel as if they were not 
compensated properly. And I have a bias about this, I do 
believe, as I have watched what was happening with the so-
called 150,000, that the mentality and the attitude was, do not 
give them the full amount, that somehow we have to work very 
hard to reduce this amount as much as we possibly can. I mean 
that is the feeling that I get.
    [applause]
    Chairwoman Waters. I do not know if that can be proven or 
not, but we know that there were mistakes and some things 
happened and I always flinch when I hear about the description 
of damage and how much people received, and I am going to ask 
somebody to tell me, give me a list of all of the ways by which 
you subtract from the $150,000. What are the ways by which you 
say you had an SBA loan, you did this, you had insurance for 
this amount, you were supposed--I would like a list of that, 
perhaps Mr. Rainwater can give that to me.
    But now I want to go someplace else. And the place that I 
want to go with you is this, if we are doing corrections in 
some way and if we are able to do what I would like to have us 
do, and that is amend law in whatever way we need to, in order 
to come up with some subsidies that are given to people who 
were underassessed, without having to go through a lot of other 
hoops. I am looking at what you can do with all this land that 
you have. Because in essence, while the people who sold you the 
land may have benefitted a little, many of them lost a lot. And 
particularly, the seniors who had bought those homes, improved 
on those homes, raised their children in those homes, and 
during the time that we had a bubble, those homes were worth a 
lot more than what you probably paid them for them.
    I am trying to figure out how you are going to give the 
people back some of their money that was lost in all of this 
complicated situation. I like the idea of first refusal for 
those who live nearby. Maybe first refusal should be looked at 
in a lot of other ways too. I do not know, but I want to start 
this conversation, I want to look at first refusal in terms of 
immediate family, I want to talk about how we can think about 
that. And I just want to put that on the table and I am going 
to think about it a lot more. I want to think about the 
difference in the cost of that land to buyers and I want to 
differentiate between individual buyers and commercial or big 
contractors.
    Mr. Sathe. Sure.
    Chairwoman Waters. Have you done that already?
    Mr. Sathe. Well, we have done something towards that extent 
which should make you very happy.
    Chairwoman Waters. Tell me what you did.
    Mr. Sathe. One of the programs we offer for folks buying it 
for expansion is that if they agree to take immediate action to 
fence and beautify--
    Chairwoman Waters. They cannot hear you, let us speak up a 
little bit louder.
    Mr. Sathe. Sorry. If they take immediate action to clean up 
the property, put a nice fence around it, plant it with some 
trees, we actually will reduce the value of the appraisal by up 
to $10,000.
    Chairwoman Waters. Hold it.
    Mr. Sathe. And in many cases, that makes the property--
    Chairwoman Waters. Hold it, hold it.
    Mr. Sathe.  --entirely free.
    Chairwoman Waters. Hold it, that is good. Did everybody 
hear that? Just a moment.
    This is a program that says if you clean up the property 
and maybe put a fence around it and maintain it, that you could 
have a $10,000 reduction on an already reduced amount of land.
    Mr. Sathe. We would give you a dollar-for-dollar credit for 
the money you spend on that.
    Chairwoman Waters. Does everybody know that? Has that been 
publicized?
    Audience. No, no.
    Mr. Sathe. Just to put it out there, it is on our 
properties that we control, which is the Option 2s and 3s. But 
yes, it is publicized when people come in on every appointment. 
They have an appointment, and we have case managers who walk 
them through it.
    Chairwoman Waters. How do you publicize it?
    Mr. Sathe. It is--basically we send a letter and there is a 
little information about the program. They are invited to call 
and come in for an appointment.
    Chairwoman Waters. No, no, no, no. You cannot be sending 
letters out for this because this should be for everybody who 
wants to buy.
    Mr. Sathe. What we do, Congresswoman, we--
    Chairwoman Waters. Yes.
    Mr. Sathe.  --actually have the universe of buyers.
    Chairwoman Waters. Okay.
    Mr. Sathe. So when we go to contact them--
    Chairwoman Waters. What is a universe of buyers?
    Mr. Sathe. Basically, there are 4,700 properties.
    Chairwoman Waters. Yes.
    Mr. Sathe. And of those, to be eligible for this program 
under the City Council ordinance, you need to have a homestead 
exemption. So 2,000 of the properties--we go to the tax records 
and say look, here is to the left, here is to the right.
    Chairwoman Waters. Okay, I get it. I don't want to keep--
    Mr. Sathe. So we--
    Chairwoman Waters. But this is for people who already own 
homes?
    Mr. Sathe. The person living in the home can acquire the 
property we own when it is next to them.
    Chairwoman Waters. We know about that.
    Mr. Sathe. Right.
    Chairwoman Waters. Are you tying this ability to maintain 
or clean up the property to that same program that is 
adjacent--
    Mr. Sathe. That is right.
    Chairwoman Waters. Okay, I like that, but I want to go past 
the possibility of buying the property by those who are 
adjacent. I like that but we have to publicize even more that 
those homeowners adjacent to that property can get another 
$10,000 deduction. That is what you are talking about.
    Mr. Sathe. Yes, and--
    Chairwoman Waters. Now in addition to that, I want to talk 
about Mr. Jones who is not an adjacent homeowner, but is 
somebody who said, you know, we have a lot of property around 
here for sale and my government is selling this property, I 
would like to buy this property. What kind of break can Mr. 
Jones get?
    Mr. Sathe. In terms of the main program that is being 
designed currently to assist people--you know, we can 
definitely go back to the drawing board for more of them, but 
the main one is actually on the back end. The State has been 
very generous to create a soft second program for first-time 
home buyers to provide them with up to $65,000 in assistance, 
to fill gaps between what they can get a mortgage for and what 
the property sells for. So the assistance is actually on the 
purchase at the home level as opposed to at the purchase of the 
land.
    And so generally, what we are trying to do with the land is 
in part--one of the challenges that I think people saw with the 
Road Home and with all the owner rehab is a lot of times people 
were struggling to rehab. And I think we have in many cases 
been able to identify excellent entities that are building the 
kind of housing that we want to see people get into, so it is 
energy efficient, properly elevated.
    Our Pontchartrain Park project, as you know, and you can 
see on the renderings in front of you, we are not putting them 
up on stilts, we are actually regrading the land. The project 
led by the Pontchartrain Park CDC, they are going out and 
reaching out to family members, they are investigating a 
reverse mortgage product to help people get into those houses. 
Because I think while there are a lot of people who would just 
love to do another fix it up or rehab job, there are a lot of 
folks who want to come in, buy a house they know is well built, 
cost controlled, properly manufactured, the latest and greatest 
in energy efficiency. And so I think we do believe that soft 
second for purchasers--now we would potentially love to come to 
you and talk to you about some of these surplus funds being 
used for expanding that soft second, expanding the eligibility 
because right now it is only for first-time home buyers. There 
are a lot of resources that could really--
    Chairwoman Waters. Please come and talk, because we are on 
the same track. And I heard about what you are doing in 
Pontchartrain Park, of course. I am very pleased about 
organizing effort there and SRP and what they are doing there. 
And I think we are going to be able to see the redevelopment, 
rehabilitation of a whole community if we can help get 
additional funds through the Road Home Program, so that people 
can participate. And I do not know what else goes with that, 
but I think you have another piece that may be helpful.
    Now one of the things we have to understand is this, that 
the City, the State, what have you, in acquiring these 
properties and helping people out who cannot rehab them or did 
not want to come back, what have you, you are not trying to 
make a profit, are you? So what you are interested in is 
facilitating the rehab, the building, the ownership--not 
necessarily losing money, but certainly not making money.
    Mr. Sathe. Absolutely.
    Chairwoman Waters. So you are not trying to sell these 
properties to make money?
    Mr. Sathe. We do not even get to keep the proceeds.
    Chairwoman Waters. What happens with the proceeds?
    Mr. Sathe. It is program income to HUD.
    Chairwoman Waters. Program income to HUD? HUD gets some of 
New Orleans' money?
    Mr. Rainwater. Congresswoman, can I please--
    Chairwoman Waters. Yes.
    Mr. Rainwater. What happens is it becomes program income, 
it gets put in an account for the City of New Orleans and NORA. 
That is what happens. NORA comes back, says that is what we 
want to do with that money. Once they spend it the second time, 
we are done with it. Whatever happens, happens. Those are the 
HUD rules. I am just--
    Chairwoman Waters. Wait just a minute, let me make sure 
that I understand this so my staff can get this down.
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. If you sell property and you make some 
money, it goes into another pot of money controlled by HUD?
    Mr. Rainwater. The State.
    Chairwoman Waters. The State?
    Mr. Rainwater. The State; yes, ma'am.
    Chairwoman Waters. And what do you do with that money?
    Mr. Rainwater. I hold it until they come up with a project 
they want to spend it on that is HUD-eligible. Once we clear 
that, then I am done with it. If they build another house, for 
example, and then sell that house, so we can create a revolving 
fund, then they keep the money after that.
    But I have to do that review one time, which is program 
income, and then we are done. So yes, ma'am, that money is set 
aside for the City of New Orleans, not for the State of 
Louisiana.
    Chairwoman Waters. For the City of New Orleans.
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. That money goes into a pot?
    Mr. Rainwater. Yes, ma'am.
    Chairwoman Waters. Is this the pot where Mr. Cao was 
talking about the City had $200 million or so? Is that the pot 
he was talking about?
    Mr. Rainwater. No, ma'am, that is separate. What 
Congressman Cao was talking about was $411 million of Long-Term 
Community Recovery Program money that the State allocated to 
the City of New Orleans. They obligated $200 million of that to 
certain projects, and they have another $200 million that they 
have not obligated as of yet.
    Chairwoman Waters. We will talk with the City officials 
about that.
    But I now want to talk about this pot that you just 
described and I want to make sure that it is being utilized in 
ways that will do several things; not only help new home buyers 
or whatever you want to do, but I am still also keyed and 
focused on the people who have gone through Road Home, who do 
not feel that they have been properly compensated.
    So I want to look at that money as another way to add to 
possibly the underassessment and maybe we can put this all into 
some kind of package, I do not know. But that is good 
information.
    Is there anything else you would like to share with me that 
perhaps we can help you with?
    Mr. Sathe. You know, I think the issue we did not get the 
chance to get to, which I know we are all fighting for on the 
same side, is the elevation issue. I think there have been some 
rules on the elevation program such that it was only available 
to the Option 1 families. It makes all the sense in the world 
to elevate our properties. I think people would think we were 
crazy not to elevate these properties.
    Chairwoman Waters. You are talking about elevating existing 
properties?
    Mr. Sathe. No, no, the ones, the 4,700 that we are--
    Chairwoman Waters. The new ones.
    Mr. Sathe. Yes. The FEMA funds that are supporting 
elevation, under some crazy regulation, I will let--you know, 
you guys know more about that than I do--are only available to 
Option 1 families, not available on these Option 2 and 3 
properties. And that puts us at a real disadvantage in being 
able to afford to elevate. If we could pay for that cost, all 
of that gets passed on to the end buyer.
    Chairwoman Waters. Would you please do as we are asking Mr. 
Rainwater to do and perhaps Mr. Tombar, is do your one page, 
two page descriptions, get them to us, talk with us, so we can 
see what we can do.
    And again, remember I am focused on trying to put behind us 
the inequality, the inefficiency of the implementation of the 
Road Home Program. And again, the fair opportunity and ability 
for people to own the land and to get it at prices that make 
good sense. And in addition to those homeowners who have right 
of first refusal on that land that is adjacent to them, other 
New Orleans residents who would be interested in acquiring 
property in ways that would be very, very efficient for them.
    Okay, thank you very much.
    Mr. Cleaver.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Let me first, before--I have one question, but before we go 
any further, I need to just compliment the people of this 
community. You know, we are sitting here talking about what 
could have made the road home a lot easier. And we talked about 
one group getting almost a billion dollars in consulting fees, 
a billion dollars. You know, you give me a billion dollars, I 
could set up an office at Church's Fried Chicken and you come 
back 2 years later and you can see some changes. But what I am 
so fascinated with is that if there is any group in the United 
States with the right to be angry, it would be those of you who 
live here, and yet nobody is screaming--
    [applause]
    Mr. Cleaver. Nobody is screaming, nobody has Hitler signs 
with mustaches, nobody, you know, is bringing guns in and 
talking about death panels. I mean, you have a right to be 
angry and yet, I wish we could show this tonight on CNN or Fox 
on how American citizens, who have been wronged, still act 
civil. And I appreciate it.
    [applause]
    Mr. Cleaver. Now, we approved just under--I cannot even 
remember how much would have come here, but the stimulus bill 
which provided--should have provided additional dollars to do a 
major project here, the NSP program in particular I think would 
be of some value. But most major cities got a doubling of the 
CDBG, whatever their annual allocation was, the State received 
additional CDBG dollars. I am wondering where the--I mean we 
supported the stabilization program because of the impact it 
would make. So I am wondering what impact has been made through 
the stimulus, the spending of stimulus dollars.
    Mr. Sathe. Congressman Cleaver, one of the great 
disappointments we share with you as well is that so little of 
the stimulus funds were provided directly for New Orleans. One 
of the decisions that the Administration made was not to have 
earmarks in the stimulus program and, therefore, for whatever 
reason, they deemed the recovery needs not only I think in our 
district, but the needs in Houston and Cedar Rapids, all across 
the country, as not worthy of a separate allocation in the 
stimulus program.
    The State has gotten its share, as other States have of the 
stimulus money, of course, but the primary program I think we 
are very interested in is the Neighborhood Stabilization Part 
2. The City of New Orleans got $1 million in version 1 out of--
    Mr. Cleaver. You hush.
    Mr. Sathe.  --out of a $4 billion pot, actually $1.8 or 
$1.9 million, I believe, from just the NSP program, out of a $4 
billion pot.
    The second round is competitive, it is supposed to be based 
on need as opposed to the scoring criteria. And we have put in 
an application for $80 million to assist the City of New 
Orleans with neighborhood stabilization. And quite frankly, we 
would have liked to have asked for a lot more, but the scoring 
criteria were very limited.
    As absurd as it may seem, and there are reasons for this, 
but to be eligible as a district, you either had to score very 
highly on foreclosure or vacancy. Well, our properties were 
foreclosed by Katrina, so a lot of our districts that are 
deeply struggling did not score highly on the foreclosure and 
the vacancy data they used was all pre-Katrina.
    Mr. Cleaver. Why were there not protests? The people need 
to be more upset than I thought when I started speaking. I mean 
we passed this mammoth spending bill, which would have been 
perfect for New Orleans and then you tell me that New Orleans 
did not get the money.
    Mr. Sathe. I mean it was not even a category in the bill.
    Mr. Cleaver. Neighborhood stabilization money, you got $1.5 
million?
    Mr. Sathe. 1.8 million, I think, we can give you the 
exact--
    Mr. Tombar. To be clear--
    Mr. Cleaver. Yes, I want to get some clarity.
    Mr. Tombar.  --he was talking about NSP-1.
    Mr. Cleaver. Yes.
    Mr. Tombar. And that was done under the previous 
Administration and was done on a formulaic basis. NSP-2 under 
the stimulus is a competition that is ongoing. And what he is 
testifying to is that there is an application, as there are 
many applications across the country, that are now into the 
Department being reviewed, determinations about awards under 
that NSP-2 dollars will be made in coming months, in the next 
couple of months.
    Mr. Cleaver. Okay. I am very familiar with it. What I am 
saying is NSP-1 was approved after Katrina and so that was a 
wrong there. And so special attention should be given to what 
we are going through now. And I do not know what other city--if 
we need to change regulations, I mean I think you are right if 
they are talking about foreclosures and where you have this 
technical deal, we need to fix that.
    Mr. Tombar. Under NSP-2, in fact there was a fix. Secretary 
Donovan was asked to review that issue and made a determination 
that properties that were impacted by disasters and blight 
caused because of a disaster would be eligible, which makes 
NORA's application eligible to the Department under NSP-2. So 
that is a change that Secretary Donovan--it was brought to his 
attention, he made a determination and actually increased the 
flexibility under the program so communities like New Orleans--
    Mr. Cleaver. So the application is in, there is an 
application currently. Do you know what the amount is?
    Mr. Sathe. $78.5 million.
    Mr. Cleaver. 78 million?
    Mr. Sathe. $78.5 million.
    Mr. Cleaver. Okay, that is more in line with what I think 
the people around this country would expect. That is probably 
not enough, but that is certainly better than what happened--in 
NSP-1, political decisions were made. I would not be surprised 
to learn that there were cities in Louisiana that received more 
money than New Orleans, even though this city would be larger. 
We found that to be true in Missouri and we eventually did a 
little study and found out that the amount of money that 
communities received depended in part on the way they voted. 
And I know people down here would not do that, but what I am 
trying to say is--
    [laughter]
    Mr. Cleaver.  --what I am trying to say is we have to be 
vigilant on NSP-2 because I think it is critically important. I 
am so pleased that we have a new Secretary who was willing to 
delve into this issue and make the changes.
    But I think we need to be concerned about it and involved 
with it and should some additional problems surface, I think 
you need to notify the Chair immediately if it is something 
that cannot be fixed internally with her, some of the 
regulatory inclusions cannot be changed unless we act. I think 
you need to notify the Chair immediately.
    Thank you. I yield back the balance of my time.
    Chairwoman Waters. Thank you very much. I will yield to 
myself for a minute here to say that Mr. Sathe, you talked 
about the need for demolition money, you know you can do 
demolition within NSP?
    Mr. Sathe. Yes.
    Chairwoman Waters. So I am hopeful that you get it.
    We have gone back and forth on NSP-1 and NSP-2 about 
formulas and about competition and all of that and we need to 
continue to work on that to make sure that we can have fairer 
allocations. The chairman and I are looking at the possibility 
of even more money in NSP, that we would get from the profits 
that we make off of the money we gave to the banks, as they pay 
it back. We have our sights on that money for a national 
housing trust fund and for money to further expand the 
opportunity for NSP and a few other things. So we will be 
working to make sure we try and fix the inequities in how that 
money is allocated.
    Mr. Green.
    Mr. Green. Thank you, Madam Chairwoman.
    I want to talk for just a moment about the Community 
Reinvestment Act. And I want to talk about the Community 
Reinvestment Act because we spent $30 billion to bail out Bear 
Stearns, $180 billion to bail out AIG, and had a $700 billion 
amount of money allocated to buy toxic assets and ended up 
spending billions of that to bail out banks.
    Here is my thought: If we can spend $30 billion on Bear 
Stearns, $180 billion on AIG and billions to bail out banks, it 
is time for banks to help us bail out people.
    [applause]
    Mr. Green. And the Community Reinvestment Act may be a 
vehicle, with some degree of encouragement, that banks may 
utilize to help in this endeavor.
    Madam Chairwoman, it has come to my attention by way of 
persons that I have had an opportunity to visit with, across 
the country I might add, in Florida, in Washington, D.C., and 
in Louisiana and other States, that some banks, at a time when 
CRA is most important, some banks are cutting back on their CRA 
departments. Some banks are moving to eliminate CRA departments 
and have one--a--CRA officer at a time when CRA could be of 
great benefit to people.
    So my question is this, can you envision a means by which 
CRA and banks through CRA could be in a position to help with 
this endeavor, given that it is time for them to start lending 
money and given that you need money and given that the Federal 
Government is doing its share--can you envision a means by 
which we can use the CRA and the banks' ability to invest in 
communities to help rehabilitate some of these communities? Mr. 
Rainwater, if you would, please, sir.
    Mr. Rainwater. Yes, Congressman, I think there is an 
opportunity there to work through the CRA and the banks. We 
have approached bankers to try to leverage some of those funds 
with what Ommeed is doing in the Louisiana Redevelopment 
Authority and what we are doing with Community Development 
Block Grant money, trying to push those dollars--you know, what 
we are trying to do is really create a neighborhood 
stabilization program and we do that through--I believe there 
is a way to do that.
    But part of our challenge has been getting to this point 
where we can have this conversation, you know, at the end, 
tail-end of the Road Home Program and begin to talk about how 
we work with the banks through the Community Reinvestment Act. 
I think there is a way to do that, sir, and I think we can 
leverage some of those dollars and create revolving funds that 
we have talked about. I think there is a way to do that 
absolutely.
    Mr. Green. What I would like for you to do, if you would, 
is once you get your plan together, if you would, let us know 
what the plan entails. I would like to chronicle the history of 
this as it develops because I literally sleep with one eye 
closed and the other on the CRA. I do. Because my fear is that 
many banks are going to start, in their downsizing process, to 
downsize the very department that we really need in this time 
of crisis. So I sleep with one eye on the CRA. And I would ask 
if you would let us know what this plan is, because there may 
be a means by which we can do something to help with this 
endeavor.
    Next point, and I will be very brief on this one. I was 
present when the chairwoman asked if there would be a one-for-
one replacement of properties that are demolished, housing 
projects that would be demolished. And my belief is that we 
were given an assurance that there would be a one-for-one 
replacement. Did not have to be on a given site, could be 
scattered, could be across the length and breadth of the area, 
but my belief, Madam Chairwoman, is that we got an affirmative 
answer that there would be one-for-one replacement.
    I went by the St. Bernard project on my way here and I can 
see where construction is taking place there. Obviously I do 
not have the number of projects from just looking, but will we 
end up at the end of the day with as many units as we had 
before Katrina hit New Orleans? And that would be Mr. Tombar, I 
believe. Will we have the same number of units or more than we 
had before the Hurricane hit?
    Mr. Tombar. At the St. Bernard site in particular, the 
answer is no. The plan that was put in place on each of the 
developments--and we are talking about the big four public 
housing redevelopments, which I know the chairwoman has a 
hearing tomorrow to focus specifically on that. At that site, 
the plan that was approved by the previous Administration is 
currently, as you said, being enacted and constructed based 
upon, does not have one-for-one replacement. There is, however, 
not far away from the St. Bernard development one other of the 
big four redevelopments, the Lafitte redevelopment, that does 
in fact--not on the footprint itself, but within the community, 
throughout the community, has a plan for one-for-one 
replacement.
    Mr. Green. Now if we can do this for this second location 
that you are talking about, that was unnamed, why can we not, 
notwithstanding the space in St. Bernard, and I can see why you 
might not want to have as much of a concentration--makes sense. 
But why can we not replace those some place else in the area as 
well? For me, it is not as important that they be in a given 
location as much as it is important that we do locate the one-
for-one replacement so that they are accessible to people who 
live in New Orleans.
    Mr. Tombar. Part of the challenge is that we inherited some 
of this and are trying to do the best we can to make lemonade 
out of some of the lemons that we were given. And I will tell 
you that you have worked with my boss and know that Secretary 
Donovan is the biggest advocate of affordable housing that this 
country has. I have known him for nearly 20 years and known him 
as an advocate for affordable housing. He has done great things 
in his native New York as Commissioner there, and is bringing 
that type of same commitment to the communities that he is 
responsible for around the country.
    We here in New Orleans are doing as much as we can using 
the resources that we have available to provide for as much in 
the way of affordable housing as possible. I will tell you 
though that in the hearing tomorrow, and Assistant Secretary 
Henriquez, as she comes to testify before this committee, will 
speak more intelligently about these issues. There is a 
challenge with replacing the number of units that are taken 
down in a traditional public housing development.
    Quite frankly, here in New Orleans, in both of our native 
city, there are developments that were built in the 1940's and 
1950's that simply are substandard by today's housing 
standards--the size of the units, the functionality of the 
units and what-not. And if we are to use, as is the challenge 
in many cities, and New Orleans is not unique in that way, use 
the same or similar footprint and give those families the same 
type of amenities, the same type of living standards that all 
of us who are not limited by income would enjoy, that in fact, 
it will require dedensitication. That is the sad reality, is 
that you cannot get as many units if you are trying to upgrade 
the type of quality standards that are in those units with the 
families that are there.
    Mr. Green. Well, I assure you that degentrification is 
something that I will salute. I think a good many people now 
understand that the density of population that we had in some 
places was just not healthy for having people become all they 
can and do all that they can do and be productive. So I 
appreciate this, this is why I said scattered in other areas. 
But in this area so that the people who--many of whom are in 
other places who want to come home, but their home was a part 
of the public housing and we want to make sure that they get an 
opportunity.
    Now let me comment on this. I want to agree with you about 
the Secretary. I have great respect for him, I really do. I 
appreciate him very much and I am looking forward to working 
with him on this and many other projects. As you know, he and I 
will be meeting. I got the consent of the chairwoman to meet 
with him and I will be meeting with him and I look forward to 
it. He is a good man and I think he has a tough job, but we are 
going to work together.
    Mr. Tombar. Great, thank you.
    Mr. Green. Madam Chairwoman, I will yield back.
    Chairwoman Waters. Thank you very much. Yes?
    Mr. Tombar. If I could, I would just comment on the banking 
question that came up. I am not an expert in banking, but there 
is one thing that I do know about the situation here that has 
impacted the recovery of New Orleans. Many folks did have their 
homes insured and the insurance, as is the case when you have a 
mortgage in place, the insurance proceeds are written both in 
the name of the homeowner and of the banking institution. And 
in many cases--this is anecdotal--I am aware that banks 
encouraged families in some cases and in some cases families on 
their own for whatever reason, chose to take the entire 
insurance proceeds and actually pay it towards mortgage 
balances. What that created was a situation where the family no 
longer had that debt associated with the home, but had a home 
that in fact still needed to be repaired, that resource was now 
gone. That resource, as we talked about, by the Stafford Act, 
is required to be taken into account when making a 
determination about grants that the family is eligible for 
under the Road Home Program. And so what happened was, because 
of the choice that the family made, encouraged by a bank or 
otherwise, their grant, overall grant, now was reduced by what 
may have been pretty substantial insurance proceeds that they 
have received. That stands in the way in some cases.
    What I know is that there are families who may be 
interested in now replacing the mortgage that they have paid 
off, to close the gap that the Road Home Program doesn't quite 
cover for them--replacing that. But because of what has 
happened in the last 18 to 20 months in the financial markets, 
the credit markets have tightened and it has made it incredibly 
difficult for people to even get those loans.
    One of the things that my boss and we are doing at the 
Department is trying to encourage and make flexible the FHA 
lending program so that more families could in fact avail 
themselves of financing, supported and of course backed by the 
Federal Government through the Federal Housing Administration.
    But it is indeed a challenge because of the tightening of 
the credit markets for some of these families who in fact did 
get insurance proceeds, used those insurance proceeds to 
satisfy a mortgage that they have, to actually get the 
financing that they need now to close the gap to finish the 
construction on their homes.
    Chairwoman Waters. All right, that is very good information 
and as we look at this whole thing, Mr. Rainwater, would you 
please take that into consideration also. And let me just say 
that the one-for-one is a commitment of Barney Frank, myself, 
and many of the members of our committee. And we know that 
there may be problems on the footprint, but of course, we are 
not opposed to having that one-for-one on scattered sites. And 
since we have all this land in New Orleans, we will just ask 
the State to give us some of that land so that we can make sure 
we have our one-for-one replacement. And guess what, one of the 
biggest costs of development is land acquisition. We just wrote 
down the cost of building those one-for-one replacements 
because we are going to take some of the State's land. Okay?
    [applause]
    Chairwoman Waters. The City's land.
    Thank you all so very much. You have been wonderfully 
cooperative, and we have learned an awful lot. We look forward 
to working with you. What we do not want to hear from you is, 
``I did not know that I should contact you,'' or ``I was 
waiting on somebody else to tell me.'' I expect to hear from 
you. Okay?
    Mr. Rainwater. Congresswoman, I have Charla's phone number.
    Chairwoman Waters. Thank you very much. Thank you all very 
much.
    We are going to call on our second panel. I am very pleased 
to welcome our distinguished second panel.
    I know we took a long time, but oftentimes, the people who 
have the responsibility get away with just making a statement 
and leaving. And so we had to do a little bit of asking more 
questions so that we could help to get to a point of resolution 
on some of these problems.
    Our first witness will be Mr. Christopher Oney, executive 
vice president, Hammerman & Gainer, Inc. Our second witness 
will be Ms. Allison Plyer, deputy director, Greater New Orleans 
Nonprofit Knowledge Works. Our third witness will be Ms. 
Dominique Duval-Diop, senior associate, PolicyLink. Our fourth 
witness will be Ms. Davida Finger, clinical professor, Loyola 
University College of Law, New Orleans. Our fifth witness will 
be Mr. Matthew Colangelo, director, Economic Justice Group, 
NAACP Legal Defense and Educational Fund. Our number six 
witness will be Ms. Mildred Franklin, resident, Eighth Ward, 
New Orleans, Louisiana. We also have Ms. Shari Baker, resident 
Pontchartrain Park, New Orleans, Louisiana. And we have added 
to that, Ms Mary Croom-Fontenot, executive director, All 
Congregations Together.
    Now I want to, first of all, thank you for your patience. I 
know that you have been sitting here a long time. But again, 
let me reiterate that we have heard some of the complaints and 
we had the value of getting some input over a period of time 
and additionally today. And we wanted to make sure that we 
grilled those who were before us who have responsibility for 
making decisions to create change, that we get as much out of 
them as we could this morning. And so again, thank you for your 
patience.
    We are going to start with our very first witness on our 
second panel, which will be Mr. Christopher--is it Oney?
    Mr. Oney. ``Oney.''
    Chairwoman Waters. Oney. Mr. Oney, thank you very much. 
Please start.

  STATEMENT OF CHRISTOPHER J. ONEY, EXECUTIVE VICE PRESIDENT, 
                    HAMMERMAN & GAINER, INC.

    Mr. Oney. Good afternoon, Representative Waters and 
subcommittee members. My name is Christopher Oney, and I am the 
executive vice president of Hammerman & Gainer. My 
responsibilities include--
    Chairwoman Waters. I do not think they can hear you in the 
back.
    Mr. Green. Pull the microphone closer if you would, sir.
    Mr. Oney. My responsibilities include corporate oversight 
for the Homeowner Assistance Program of Louisiana's Road Home 
Program.
    I am pleased to have been extended this opportunity to 
participate--
    Mr. Green. I am getting an indication that some people 
cannot hear. Would you pull it within almost a touching of your 
lips.
    Mr. Oney. Can you hear me now?
    Mr. Green. Yes, sir, I can hear you now. Good commercial.
    Mr. Oney. I am pleased to have been extended this 
opportunity to participate in the hearing and describing HGI's 
role in the implementation of the Homeowner Assistance Program.
    First, I would like to provide a brief history of Hammerman 
& Gainer. HGI was founded in 1929 and has grown to become the 
largest minority-owned third-party administrator in the 
country. Since inception, we have always worked with a strong 
commitment to customer service and an ability to work with a 
wide array of partners in providing tailored solutions to 
demanding issues.
    Headquartered in Lutcher, Louisiana, and with 12 office 
locations across country, HGI provides distinct services across 
multiple disciplines including property/casualty, third-party 
administration, healthcare administration, risk management, 
regulatory compliance, and emergency management.
    For the past 80 years, HGI has maintained its focus on 
working with customers to develop business solutions that are 
specific to our clients' requirements and add value through 
efficiencies, expertise, quality, service, and technology.
    The initial Road Home Program began in June 2006 for a 3-
year term and included several components: Homeowner 
Assistance; Small Rental; Hazard Mitigation; Piggyback; and IT 
Management. As the original program drew to a close, the State 
of Louisiana decided to issue separate contracts for each of 
the original Road Home component programs. HGI was awarded a 
24-month contract to continue and then close out the Homeowner 
Assistance Program.
    On March 30, 2009, HGI began the transition phase of the 
project. Originally slated for 90 days, the transition was 
completed in less than 30 days with HGI taking full operational 
control on April 20, 2009.
    These operational responsibilities include: resolving grant 
eligibility for 7660 homeowners who have yet to have a 
determination; reaching a final status for applications; 
processing additional disbursements based on appeal and grant 
review; providing compliance and monitoring services; and 
providing closeout functions for the program.
    Since taking operational responsibility, HGI has achieved 
the following: implemented process-improvement techniques, 
thereby reducing the time to move applicants through the 
program; processed over 1,500 applications to the closing 
company and disbursing funds to 968 applicants; identified over 
1,000 applications requiring additional information from 
applicants to move the file forward to closing; eliminated a 
backlog of approximately 400 appeals awaiting additional 
disbursement; achieved an error percentage of less than 1 
percent on a 100 percent State review of all files transmitted 
for closing; reduced an average call volume per day 
approximately 20 percent since transition; and identified a 
need for and provided a limited in-person appointment 
capability that to date has resulted in 400 applicants being 
served.
    While HGI's operational control has gotten off to a solid 
start, there are still obstacles facing homeowners as they 
attempt to complete this part of their journey. Approximately 
8,000 applicants are still awaiting eligibility determination 
and a potential award of funds. For these applicants, the 
largest single hurdle remains their inability to obtain and 
provide ownership and occupancy documentation for the damaged 
residence. For many of these applicants, they simply have 
difficulty in obtaining the legal services required to deal 
with a variety of inheritance issues.
    Other applicants are experiencing difficulty in addressing 
a lack of sufficient funding to complete either the 
rehabilitation or reconstruction of their damaged residence and 
dealing with a dramatic increase in insurance premiums. A 
direct result of these financial constraints is that the 
affected applicants are unable to comply with covenant 
requirements associated with the receipt of a program award.
    To assist applicants in obtaining legal services to resolve 
inheritance issues and other ownership-related issues, HGI has 
approval from the State to issue a request for a proposal to 
obtain a legal provider that will work directly with low- to 
moderate-income applicants to attempt to resolve these issues 
and move them forward through the process. The RFP will be 
released tomorrow, Friday, August 21, 2009.
    HGI has designed a due diligence process that allows us to 
communicate with applicants and identify documents required to 
move them forward through the process. If documentation cannot 
be obtained, the reasons for not being able to move a file 
forward are documented and shared with the State. This 
information can better help the State understand issues facing 
applicants and provide input into its decision-making process.
    The State has identified that groups of applicants share 
similar challenges as they attempt to move forward through the 
program. HGI has partnered with the State to provide limited 
outreach activities to assist applicants in meetings these 
challenges. As an example, HGI recently supported the State 
with educating and visiting with a group of applicants 
concerned about home evaluation and damage allowances.
    As HGI moves forward with administering the Homeowners 
Assistance Program, we are keenly aware of the importance of 
staying focused on assisting the remaining applicant population 
by processing the applicants as quickly, efficiently, and 
accurately as possible. HGI has and will continue to work 
closely with the State of Louisiana to develop solutions that 
meet the challenges of the program. We are committed to 
providing effective and professional assistance to all 
remaining applicants and properly closing out the Homeowner 
Assistance Program.
    [The prepared statement of Mr. Oney can be found on page 73 
of the appendix.]
    Chairwoman Waters. Thank you very much.
    We are going to move now to Ms. Plyer, is it? Thank you.

   STATEMENT OF ALLISON PLYER, DEPUTY DIRECTOR, GREATER NEW 
               ORLEANS NONPROFIT KNOWLEDGE WORKS

    Ms. Plyer. Madam Chairwoman and members of the 
subcommittee, thank you for the invitation to appear before you 
this afternoon. I am the deputy director of the Greater New 
Orleans Community Data Center, a product of Nonprofit Knowledge 
Works. Operating since 1997, the Data Center analyzes and 
disseminates data to help nonprofit and civic leaders work 
smarter and more strategically.
    The purpose of my testimony today is to provide an overview 
of the status of the Road Home Program, the recovery of greater 
New Orleans, and some of the challenges homeowners have 
encountered as they rebuild. This overview draws largely from 
the New Orleans Index that we publish in collaboration with the 
Brookings Institution, as well as a large array of other data 
sources and studies that we have been gathering since Katrina.
    I want to preface by saying that the Data Center is a 
neutral data intermediary. Our expertise does not extend to how 
law is written or how programs are designed. but I can present 
you with a solid set of facts about the Road Home program and 
New Orleans' recovery.
    According to HUD estimates, the 2005 storms damaged more 
than 515,000 homes in Louisiana, the majority were owner-
occupied, and of these, one-third were underinsured. The New 
Orleans metro area sustained the largest losses with 320,000 
damaged homes.
    Immediately after Katrina, housing costs rose sharply as 
demand exceeded supply. By 2006, fair market rents had risen 39 
percent and job vacancies soared, particularly in lower-wage 
occupations.
    Road Home provides grants for the uninsured losses of 
homeowners to repair their homes or relocate. The program began 
in June 2006, but got off to a slow start.
    Nonetheless, by the third anniversary of Katrina last year, 
the program had disbursed grants to the vast majority of the 
applicants expected to receive awards. And today, over 120,000 
grants, averaging $64,000, have been disbursed.
    Road Home recipients include 96,000 in the New Orleans 
metro area, 45,000 of these are in the City of New Orleans 
itself. And fully 90 percent are repairing their homes rather 
than selling to the State.
    By mid-2008, after the Road Home Program had distributed 
thousands of grants in the metro area, covering more than one-
quarter of all damaged homes, the market began to soften and in 
2009, rents fell for the first time since the storm.
    Four years after Katrina, the City has recovered 77 percent 
of the number of pre-Katrina households, a big jump from mid-
2006 when the Road Home Program began, at which time, less than 
half the population had returned.
    New Orleans families with children have struggled to 
return. When the Road Home Program began, the share of all 
households with children had dropped from 30 percent pre-
Katrina to only 18 percent, but rebounded somewhat to 20 
percent by 2007. In 2006, the African-American population of 
the City had decreased dramatically from 67 percent of the 
total pre-Katrina to 58 percent. Three years after Katrina, the 
African-American population of New Orleans has rebounded 
somewhat to 61 percent of the total.
    I would like to highlight three obstacles encountered by 
Road Home recipients in their attempts to rebuild: gaps in 
funding; contractor fraud; and inaccurate cost estimates. A 
PolicyLink study of Road Home data concluded that an astounding 
81 percent of recipients in New Orleans and 69 percent of those 
in other parishes who planned to rebuild did not have 
sufficient funds to cover repairs, even when taking into 
account insurance and Road Home grants. Because grant awards 
were based on pre-storm home values rather than total repair 
costs, the average gap between damage estimates and rebuilding 
funds was $36,000 statewide. Gaps were larger in lower-income 
and African-American neighborhoods. For example, in the Lower 
Ninth Ward, the average gap was $75,000, as you mentioned 
earlier.
    News reports abound about contractor fraud and a study by 
LSU, PolicyLink, and LouisianaRebuilds concluded that 9,000 
households were affected. In over 40 percent of the cases, the 
homeowner was unable to finish rebuilding. More than half of 
the incidents were reported, but in 41 percent of the cases, no 
action was taken by authorities. Only 1 percent of victimized 
homeowners successfully got their monies returned.
    Nonprofit groups working with homeowners also report that 
many recipients complain of a high-cost environment as one 
barrier to rebuilding. And although no post-Katrina studies 
have quantified this problem, extensive nationwide research by 
HUD indicates that estimating the cost of rehabbing structures 
is extremely difficult. Unforeseen circumstances such as 
termite damage behind walls can drive costs above initial 
estimates, sometimes by a factor of 100 percent, even when 
estimates are provided by experienced professionals.
    Inability to accurately budget for all rebuilding costs, 
gaps in funding, and contractor fraud are three obstacles 
frequently encountered by Road Home recipients. Nonetheless, 
the Road Home program has had a marked effect on the New 
Orleans area housing market and the ability of homeowners to 
return.
    Once again, we thank you for the opportunity to appear 
today. I would be pleased to answer any of your questions.
    [The prepared statement of Ms. Plyer can be found on page 
79 of the appendix.]
    Chairwoman Waters. Thank you very much.
    We will now move to Ms. Diop.

STATEMENT OF DOMINIQUE DUVAL-DIOP, SENIOR ASSOCIATE, POLICYLINK

    Ms. Duval-Diop. Thank you and good afternoon, Madam 
Chairwoman, and members of the subcommittee. My name is 
Dominique Duval-Diop and I am a senior associate with 
PolicyLink. I want to begin by thanking you for your continued 
vigilance in overseeing and monitoring the housing recovery 
programs of the State of Louisiana that were developed in the 
wake of the 2005 storms.
    PolicyLink is a national research and action institute 
working to advance social and economic equity, with offices in 
Oakland, New Orleans, New York, and Los Angeles. Since early 
2007, PolicyLink has invested significant resources in 
monitoring the development, implementation, progress, and 
impact of Louisiana's housing recovery programs. Throughout our 
work, we have partnered with State agencies such as the 
Louisiana Recovery Authority, and we have also helped to 
convene hundreds of nonprofits and faith-based groups who are 
working to recover their communities, both to inform our 
analyses and also to help in crafting policy recommendations to 
remedy gaps.
    Four years after Hurricanes Katrina and Rita, we have seen 
much progress but we have also witnessed the struggles of the 
poor, the disabled, and the elderly as they languish, unable to 
transcend their difficult situations. I highlight in particular 
the still-relevant findings of our 2008 report entitled, ``A 
Long Way Home,'' and the insight that we have gained over the 
years in my following answers to your questions regarding the 
status of the Road Home Program and the disparities in the 
distribution of funds to individuals and neighborhoods.
    You have heard from the State detailed figures about the 
current status of the Road Home Program. But what is important 
to reiterate is that while 82 percent of those eligible have 
received funds, and low-income families have received over half 
of these funds, significant challenges still remain for those 
who have received their grants and those who have yet to close. 
Our research found that the majority of homeowners choosing to 
rebuild did not have sufficient funds to fully recover. And we 
are repeating conversations that have been stated before. But I 
think it bears repeating.
    Furthermore, programmatic policies have had an impact on 
the equitable distribution of funding to low-income and to 
certain predominantly African-American neighborhoods in the 
City of New Orleans. Particularly by not taking into account 
damage estimates and instead using pre-storm home values to 
calculate grants, the Road Home Program grant formula caused 
major gaps for homeowners in low-income neighborhoods that had 
low pre-storm values that suffered high damage.
    A geographic pattern also emerged in terms of gap with the 
highest gaps being experienced in the most damaged parishes, 
including Orleans of course, St. Bernard and Cameron. Across 
the City of New Orleans, we have heard that again certain 
neighborhoods that are largely African American and some low-
income have experienced high gaps, including New Orleans East 
and the Lower Ninth Ward.
    And to further illustrate the geographic distribution of 
gaps, I refer you to the map that can be found on page 7 of my 
testimony. It shows a clear connection between high gaps facing 
residents in this area and the number of properties that still 
remain blighted and abandoned. It is a powerful way to show the 
actual progress or lack of progress on the ground and the 
impact of program policies on neighborhood rebuilding.
    What obstacles or challenges are most frequently 
encountered by homeowners using the program? Again, nonprofit 
groups that we have been working with and we have been 
discussing over the years and meeting with report that many 
recipients face insufficient rebuilding grants, contractor 
fraud, a high cost environment, inability to access additional 
credit, and title or succession challenges that delay or deny 
their additional funding for home repair.
    In the case of contractor fraud, as Allison quoted from our 
report, again, 9,000 people are estimated to have been the 
victim of fraud in the past 3 years.
    So in conclusion, people face huge gaps and there has also 
been a sustained lack of investment in the community 
infrastructure that has traditionally responded to disasters in 
the past. Recently, the State has allocated a modest amount of 
funding to nonprofits who have stepped up and responded after 
the storms, but $20 million being allocated a couple of months 
ago is too little too late and it is still insufficient vis-a-
vis the need. Nonprofit groups have really worked to leverage 
resources, leverage volunteers, leverage donations, and we need 
to allocate additional funds to complete this community 
infrastructure.
    Thank you for allowing me to testify.
    Chairwoman Waters. Thank you very much.
    Ms. Finger?

  STATEMENT OF DAVIDA FINGER, CLINICAL PROFESSOR, NEW ORLEANS 
               COLLEGE OF LAW, LOYOLA UNIVERSITY

    Ms. Finger. Congresswoman Waters and members of the 
subcommittee, thank you for inviting me to testify today. I am 
grateful for this conversation and hopeful that these hearings 
will help change policies to increase safe and affordable 
housing for all.
    I want to also thank the incredible advocates from Fair 
Housing Legal Services and community groups whom I talked with 
to prepare this testimony. Their concerns and the issues their 
clients face are reflected here and I appreciate their input.
    As an attorney with Loyola Law Clinic here in New Orleans 
doing post-disaster housing work, I have given direct 
assistance to many hundreds of Road Home homeowner applicants. 
My understanding of Road Home is drawn from the experience of 
my clients, regular people just trying to come home. While 
funds distributed are useful, on the whole, this program has 
contributed to the bundle of post-Katrina challenges, 
especially for low-income and vulnerable displaced people.
    For example, the ownership rules to qualify for Road Home 
were very burdensome. Families living in their homes for 
generations continue to struggle to pay for and complete title 
clearing procedures just to qualify. Our system should and can 
do better.
    You asked me to report on Road Home obstacles. I am going 
to describe specific program obstacles. I am going to get into 
some details because that is what is important to applicants.
    First obstacle--the design of the grant formula itself. 
Given property values and the way in which the program's grant 
formula utilized the pre-storm value, the program was 
discriminatory for African-American homeowners. If the Bobby 
Jindal Administration cannot fix that on its own, we really 
need your help. Pre-storm value should be taken out of the 
calculation, leaving the correct cost of damage as the basis of 
grants.
    Obstacles two and three--pre-storm value and estimated cost 
of damage. The program chooses the lower of these two 
calculations to find the grant. Both measures are problematic. 
Incorrect determinations about both go uncorrected on appeal. 
Low-income homeowners could not afford the independent 
appraisals to increase pre-storm value. Low-income homeowners 
could not afford the structural engineer's report to increase 
estimated cost of damage. On pre-storm value, even with an 
independent appraisal, the highest home value is not always 
used. For example, when a homeowner supplies a Louisiana 
certified appraisal and it comes back with a value of 20 
percent or greater than the Road Home's incorrect value, the 
program will not utilize the higher value. We have heard that 
this is because of a HUD rule. There is still the opportunity 
to change this and, Mr. Tombar, we request your assistance on 
this specifically. The highest credible value of a home should 
always be utilized. Actual repair costs should be the measure 
for determining cost of damage.
    Problem four--the additional compensation grants for low-
income people. This grant of up to $50,000 was available to 
homeowners who income qualified and who had a gap in their 
assistance. So not all low-income homeowners will qualify. They 
had to have a gap in assistance under the problematic program 
rules I just described.
    Low-income eligibility as determined by Road Home is a 
serious hurdle. The standard is governed by rules that have 
changed causing confusion and errors. Most notably, rather than 
considering a household's actual annual income, the program has 
used one elevated pay period and attributed that spike in 
periodic income as annualized income. This wrongly cuts off 
low-income homeowners. Annualized income should be utilized as 
the benchmark.
    Obstacles five and six--access to information and appeals. 
It has been very challenging to get individual file information 
and program policy information. Without this information, 
meaningful appeals could not occur. Appeals procedures 
themselves are broken. Basic best practices are missing. ICF 
reviewed its own decisions as the first tier of appeal. The 
second tier is reviewed by an unknown State panel. At no point 
does the appeals process include a hearing where the applicant 
can contest errors. There are no meaningful appeal guidelines 
to help applicants, nor are there standards that explain how 
documentation is evaluated and weighted in decision-making. All 
applicants should be given their full files with an explanation 
of the grant calculation. Because of serious systemic flaws, 
the appeals process should be reopened and independent review 
panels should make decisions.
    Recapture of funds--we heard some new information today 
about recapture of funds. The bottom line is that as a basic 
first step, all recapture rules must be well publicized. They 
currently are not. No fund recapture should ensue without due 
process hearings, hardship exceptions, waivers and, most 
importantly, opportunities for full leniency.
    I just want to add here that people's experience with 
FEMA's recoupment of post-hurricane grants was unbelievably 
difficult. It ruined lives. People who have lived through 
botched evacuations, the shelters, FEMA, and everything else 
cannot now endure the additional toll of Road Home's collection 
efforts, especially after those funds were used to rebuild 
homes.
    Turning to unspent Road Home funds, let me emphasize that 
there are no surplus funds to divert. While other important 
needs remain, including medical and infrastructure, these funds 
must be spent on unmet housing needs. For example, these funds 
should be used to correct all the program mistakes I just 
described, support the nonprofit community that is assisting 
Road Home applicants, and expand the additional compensation 
grants.
    I am glad to hear that this is in the works, but the devil 
is in the details, and we need to fix already existing 
problems. I have just a few more.
    Chairwoman Waters. I'm going to have to move on. Ms. 
Fontenot, I understand you have to leave right away. I am 
sorry, because we have so many, we are going to have to move 
and just kind of keep it to 5 minutes, but Ms. Fontenot is 
next. And we will exchange some information through the 
questioning process.

   STATEMENT OF MARY CROOM-FONTENOT, EXECUTIVE DIRECTOR, ALL 
                     CONGREGATIONS TOGETHER

    Ms. Croom-Fontenot. Thank you so much for your 
consideration. Madam Chairwoman and to the panel and your 
committee, we extend our sincere thanks to you for all that you 
are doing. I was asked somewhat late today to prepare a 
statement, so please bear with me.
    I would like to share with you all just a little 
information as to who we are. We are All Congregations 
Together, we are faith-based organizers who have worked in and 
across this City for over the last 19 years.
    We believe firmly in the right for every citizen to return 
should they choose to do so. And not only to return, but to be 
made whole, to be restored in this process, in this rebuilding 
process. We are the organization, the only organization that 
organized to march on the State Capitol in reference to the ICF 
and the Road Home process under a banner of ``big contracts, no 
benchmarks''. So Mr. Rainwater and those who came before him 
know our organization and know our work well.
    We also worked with Davida Finger and the Katrina Clinic 
around stopping a deadline which the Road Home worked to impose 
just last year, which would have excluded an estimated 14,000 
citizens from their right of appeal. So we have been monitoring 
this process, this Road Home process, for quite awhile.
    In addition, I am not only the director of ACT, but I am a 
survivor, and I am also an applicant who is undergoing the 
appeals process. And I can assure you, it is as insane as 
everyone has said here. I am extremely concerned, because being 
somewhat a healthy person, I am concerned about the very 
elderly and we are also concerned, as it was brought up, about 
those with language barriers.
    But let me bring up one more concern or one more area for 
concern, around literacy. We know that we had quite a 
substantial amount of our population who had challenges around 
literacy. We have learned in our intake process and serving 
that this too created barriers, the literacy piece, to citizens 
being able to successfully complete the application process. 
And so we are concerned about that as well.
    I have some comments in reference to the guests who were 
here previously, in reference to HUD. We are working presently 
on stopping the demolition of 77 units which are located at the 
Florida housing site. Why? Because we have gone in, we have 
inspected that site with professional eyes that know what they 
are looking at. We see it as HUD being really fiscally 
irresponsible. There is nothing wrong with that site when last 
we inspected it. So we have been working to stop the demolition 
of it in hopes that we would demonstrate at a time when our 
City and our State is so financially strapped, that we are as a 
city and a state being fiscally responsible. And I have 
petitioned Ms. Finger to assist me with that, the Katrina 
Clinic.
    The other comment I would like to make is in reference to 
NORA, who was here earlier. And I really do wish that they 
would have stayed. And I encourage that at the next session 
that they do stay to hear our side of it. In reference to NORA, 
NORA is working and building on a process that was created by 
ACT in the 1980's which it was called the expropriation process 
which called for any citizen who was living next door to a 
blighted or abandoned property to have first rights to that 
property, simply because they had been impacted by that 
property being there, blight, rodents, their lives had been 
impacted. And so in an effort to restore them, we worked to 
create what was called the expropriation process. They are now 
calling it the Lot Next Door. Our experience has been and is, 
and we have walked in, for lack of a better word, as secret 
shoppers, to explore that process. It is not working for the 
citizens of New Orleans. We are finding that developers have a 
much easier time acquiring property than the citizens who have 
been impacted do.
    Is my time up?
    Chairwoman Waters. One minute.
    Ms. Croom-Fontenot. Okay. In reference to the Road Home, 
the appeals process, we urge you to investigate the red ribbon 
file, which is where they send your appeals process after 
months of them not having contacted us. They put your file into 
the red ribbon file. And that file says that all of a sudden, 
you are at peace, and have no opposition to your grant process.
    That was my experience; my file was sent to the red ribbon 
file after having written them several times and not having 
heard from them.
    In closing, I ask that you work with us to ensure that 
every citizen is made whole with the $150,000 grant.
    Thank you so much.
    Chairwoman Waters. Thank you so very much. I thank you for 
accommodating us on short notice. It was based on the 
information you shared with us this morning.
    Mr. Colangelo.

  STATEMENT OF MATTHEW COLANGELO, DIRECTOR, ECONOMIC JUSTICE 
        GROUP, NAACP LEGAL DEFENSE AND EDUCATIONAL FUND

    Mr. Colangelo. Thank you very much, Chairwoman Waters and 
members of the subcommittee. I appreciate the opportunity to 
testify today on behalf of the NAACP Legal Defense and 
Educational Fund. I am an attorney and the director of the 
Economic Justice Group at LDF.
    There was something striking to me about the testimony from 
your first group of witnesses on your first panel. They 
mentioned a number of Federal laws that guide their judgment as 
they implement and decide what to do with the $13.41 billion, 
the Federal funds that Congress appropriated to Louisiana. They 
mentioned the 2005 and 2006 appropriations statutes, they 
mentioned the 2007 special supplemental law for additional Road 
Home funds, they mentioned the Stafford Act, they mentioned a 
number of other Acts. But not one of those witnesses mentioned 
the Civil Rights Act of 1968. And I found that omission 
striking. Unfortunately, I also found it unsurprising.
    The Civil Rights Act obviously includes as one part of it, 
Title 8, which prohibits discrimination in housing. Title 8 
prohibits not only discrimination that is intentional, but also 
actions that have the effect of excluding people from housing 
on the basis of their race.
    The Fair Housing Act also requires HUD and the Louisiana 
Recovery Authority to take steps that affirmatively promote 
fair housing, which is much more than a mere obligation not to 
actively discriminate. It requires active steps to break down 
barriers and eliminate disparities that exist in housing 
policies.
    As has been mentioned, the Road Home Program, that $11 
billion or nearly $11 billion, is the single largest housing 
recovery program in American history. Sadly for African-
American families, the reality of the Road Home Program has 
fallen far short of its promise due to a fundamental flaw in 
the program design. HUD and the LRA created and approved and 
are now implementing a recovery program that links housing 
assistance to the depressed values of black families' pre-
storm, segregated housing.
    Under the terms of the program, as has been mentioned 
during this hearing today, rebuilding grants are calculated 
based on the lower of two figures--the pre-storm market value 
of the home or the cost of storm damage to the home. Therefore, 
by definition, homeowners either receive enough assistance to 
rebuild or they do not receive enough assistance to rebuild. 
And unfortunately, this dichotomy between enough and not enough 
falls disproportionately and most heavily on African-American 
New Orleanians. This is because, as, Congressman Green, you so 
eloquently put on the record earlier today, it is undeniable 
that homes of similar quality, size, and construction happen to 
be valued less if they are located in a black neighborhood than 
if they are located in a white neighborhood. As a result, Road 
Home grants for African-American families are far more likely 
to be based on the depressed pre-storm value of their homes 
rather than on their cost of damage. And this leaves those 
families disproportionately burdened in their ability to return 
home and rebuild and restore their communities.
    This discriminatory disparity is the subject of a class 
action lawsuit that my office, the Legal Defense Fund, has 
filed on behalf of five African-American homeowners and two 
nonprofit housing organizations. We represent a class, a 
proposed class, of nearly 20,000 African Americans who are 
struggling to return to their homes in New Orleans because 
their Road Home grant awards were based upon the pre-storm 
value of their homes. Our lawsuit alleges that this disparity 
violates the Fair Housing Act of 1968 and the Housing and 
Community Development Act of 1974.
    The math is clear and the outcome is obvious. African-
American families in New Orleans are being short-changed. But 
rather than address this unfairness and treat all New Orleans 
homeowners equally, both HUD and the LRA have opposed making 
any changes to the Road Home Program.
    HUD has argued that it lacks the authority to impose fair 
housing conditions on CDBG recipients like the LRA after 
Federal funds have been disbursed. This position is contrary to 
the legal duty that Congress has imposed on HUD to 
affirmatively promote fair housing in its programs and to make 
sure that its grantees do not violate Civil Rights laws.
    The LRA has argued astonishingly that the Road Home Program 
is actually not even covered by the Fair Housing Act. This 
argument we think is frivolous and in enacting the 
appropriation statutes that funded the disaster recovery grant 
program, Congress, to its credit, refused to allow the waiver 
of fair housing and nondiscrimination requirements.
    Although some of these issues are now before the United 
States District Court in Washington, D.C., this subcommittee 
has its own oversight role over Federal fair housing programs. 
Congress devoted substantial funds to restoring New Orleans and 
other storm-damaged communities and now Congress must call on 
HUD and the LRA to distribute those funds fairly and in 
compliance with civil rights mandates.
    Regardless of what has happened in the past, the Obama 
Administration and the 111th Congress have a responsibility to 
ensure that our Nation's largest housing recovery program does 
not go down in history as a government-sponsored act of housing 
discrimination.
    I thank the subcommittee for this opportunity to testify 
and I look forward to your questions.
    [The prepared statement of Mr. Colangelo can be found on 
page 66 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Ms. Baker.

STATEMENT OF SHARI BAKER, ON BEHALF OF LILLIE BAKER, RESIDENT, 
           PONTCHARTRAIN PARK, NEW ORLEANS, LOUISIANA

    Ms. Baker. Good afternoon. Madam Chairwoman, and the 
distinguished members of the subcommittee, I am indeed thankful 
and grateful for the invitation and opportunity to be able to 
speak before you today on behalf of my mother, Lillie Baker. I 
am just going to read a letter that she prepared for you:
    ``My experience with the Road Home Program has been tedious 
at best. After Katrina, my husband, who was 82 at the time, and 
I, 77, were devastated. Everything we worked for was gone in a 
matter of minutes. We had lost everything. We had 10 feet of 
water in our home. We both were retired from the Plaquemine 
Parish School system after 40-plus years combined. He was a 
principal and I was a teacher at Phoenix High School. We had 
nine children, six boys, three girls, one is deceased. All 
memories were lost. We had nothing but the clothes on our back 
and the car we were riding in.
    ``One cannot understand the anger and despair that you feel 
when the media portrays you as a refugee in a country that you 
were born and raised in and paid taxes in for 65-plus years, 
and to be abandoned during the greatest natural disaster of all 
times.
    ``We filled out the application for the Road Home Program 
in August of 2006. This gave my husband and me something to 
hold onto. When you lose everything at one time and do not know 
where or how to start over, it is scary, especially for an 82- 
and 77-year-old on fixed incomes, and living with someone else 
in a city that is not your own.
    ``We received funds from FEMA in the amount of $23,370.41 
and $9,269.63 from Allstate Insurance. Unfortunately, we did 
not have flood insurance. Our expenses seemed greater now and 
we did not have anything. The funds we acquired were basically 
used for living expenses, since there was nothing to go back 
to.
    ``We received communication from the Road Home via letter 
dated December 22, 2006, stating that we were eligible for 
benefits. We chose Option 1 because we wanted to go back to 
what we had spent over half our lives building.
    ``We received $54,364.10 to rebuild our home. We tried to 
repair our home, but we were taken advantage of by so many 
contractors. I had to pay for my electrical work 3 times and it 
is still not right. Some of the outlets are not functioning. I 
got the Attorney General's office involved, but that did not do 
any good. My plumbing is the same way. Some of the pipes leak. 
My shower doors fell off the tracks. My air conditioning was 
not done correctly. My duct work, from what I understand, was 
not changed. My lights come on when they want to sometimes.
    ``It is a shame that people are so driven by money that 
they would take advantage of people at such a low point in 
their lives.
    ``We appealed the amount of money that was given to us, but 
to no avail. You can call the office every 5 minutes and speak 
to 5 different people and everybody is going to tell you 
something different. We also applied for the elevation grant 
and were told I had to open succession, which was done, and I 
still have not heard anything. I am being told it is in the 
legal department.
    ``I thought that the Road Home was going to help us regain 
some semblance of normalcy back into our lives, but it only 
created more stress at a time when stress was not what we 
needed. I am glad that my husband did live to see us get back 
into our home, even though it is still not right.
    ``Sincerely, Lillie Baker.''
    Just to touch on, if I may, comments that Mr. Rainwater 
said as far as the assessment of the property and how the money 
is being allocated. Because I have heard, and they said her 
estimated pre-storm value was $87,171, and the estimated damage 
to the home was $209,671.20. But she was only given $54,000. So 
if you do the math, there is no way, if it is $209,000 worth of 
damage, that $54,000 is going to correct the problem.
    And to what Mr. Sathe with NORA said, he made a comment 
about the soft second program being a way for people who are 
not next door to acquire some of the property, but the soft 
second mortgages are only given to people when they are buying 
a home that is already built, constructed, and has passed Code. 
So I do not know how he can say the soft second mortgages would 
be used to acquire some of these properties that are available 
now.
    [The prepared statement of Ms. Lillie Baker can be found on 
page 64 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Ms. Franklin.

 STATEMENT OF MILDRED FRANKLIN, RESIDENT, PONTCHARTRAIN PARK, 
                     NEW ORLEANS, LOUISIANA

    Ms. Franklin. Good afternoon, everyone.
    Chairwoman Waters. Good afternoon.
    Ms. Franklin. I am pleased to say as of today, my primary 
home is completed. I am living now in my primary home from 
Katrina and Rita that had 7 feet of water. I am in the home now 
as of yesterday.
    My primary home that was destroyed due to Katrina and Rita, 
the contractor did me a fraudulent situation for 7 months. But 
a contractor in 7 weeks completed the home where we could live 
in it. So thank you, the Lord, and you all for allowing Road 
Home to really work with me.
    But I had a problem with a donation that my father gave me 
due to my mother's death. This is where the problem is now and 
I will just give you the meat of this because my home is up and 
I cannot complain because I waited 2 years to even get into 
this primary home. It is not all done, but I am able to live in 
it now.
    Now the home that I am really concerned about is my donated 
home that my father gave me in 2007. I applied for the Road to 
Home for the small rental and after applying for the small 
rental, I could not really begin the work until the succession 
was done. I have done the succession and as of now, I am 
encountering problems rebuilding the family home that my father 
donated to me on Delachaise Street in the Garden District of 
New Orleans. He was 94 years old and he donated the property to 
my husband and I. I am waiting for the small rental program.
    I applied for the small rental program in 2007. I was 
initially told by the bank that I could not borrow the money, 
so therefore, I have to rely on the Road to Home to give me the 
money. I was denied the loan because of our income, we are on a 
fixed income. If I had borrowed the money, I would have had to 
pay the money back, so I am glad I did not get the loan, in 
effect.
    I qualified for the first clearing of the title, when I 
removed my deceased mother's name from the title and I had the 
succession done and it was fully cleared. But I was rejected 
because they claimed the succession was not clear, so I did it 
over. And they have all my paperwork, all my material, and I am 
just waiting for my award to be granted.
    The money did not arrive and they said they do not know 
exactly when I will get it. But I would call constantly and I 
completed the succession in December of 2008, I sent the 
documents to Road to Home but I never heard from them. In 
January of 2009, I received a Code Enforcement citation for 
Delachaise Street. The Code Enforcement levied a fine of $100 
to $500 a day if I did not get the repairs done to the home. We 
were cited several times and it required me to fix the house 
just to have enough to show that I was trying to improve the 
home, with the money that I had on hand. My lawyer and I did 
something to write off the Code Enforcement officials that we 
were trying to rebuild the home on Delachaise which was donated 
to me.
    I provided many things that I could use to defend myself in 
the hearing. We finally reached the hearing panel and they were 
sympathetic with my rebuilding delay but we will still have to 
reach the hearing that they could show me that I was sitting 
and waiting for them to do something. So there were 20 to 30 
other people in the neighborhood waiting for the Code 
Enforcement, like we were just a group of cattle sitting around 
and waiting doing whatever for hours just trying to get them to 
do our paperwork and everything. I paid another contractor to 
do some small repairs that they were asking me to do, but he 
took my money and he did not complete the work. Finally, the 
Broadmoor Civic Association donated paint and labor. We were 
able to come in and complete and went back for the hearing in 
May of 2009.
    On our way out the door, the Code Enforcement, I heard the 
panel warn us the next time you may be cited for having a 
vacant unit. However, we will not have the money to rebuild the 
interior of the house without a grant from the Road to Home. I 
last spoke to the Road to Home Program on August 6, 2009. A 
worker named Diane told me that the State has not released the 
money and it should be released between September and October 
of 2009. I sincerely hope that the money is released well 
before the Code Enforcement begins their sweep on unoccupied 
property.
    I would like for these improvements to be done to Road to 
Home for applicants who are applying for help through the Road 
to Home.
    In order for the Road to Home to be improved, they need 
more local administrators, so the people in New Orleans can 
work closely with their caseworkers who are handling the 
application.
    I would like for them to write us more and update our 
applications. Unless we call or we are going to sit on hold for 
a specific period of time, we will not know what is going on 
with our application.
    The Road to Home Small Rental Program needs to finish its 
work, do its best in the interest of the applicants, and let 
the renters of New Orleans return. Waiting on the funds is 
holding the people back from being able to rent their homes.
    [The prepared statement of Ms. Franklin can be found on 
page 70 of the appendix.]
    Chairwoman Waters. Thank you so very much, Ms. Franklin. I 
am going to yield to myself a few minutes here to engage our 
panelists a bit. Then I am going to turn it over to Mr. Cleaver 
and we are going to wrap it up after Mr. Green.
    Let me just say very quickly, if I may, that your testimony 
historically has been wonderful and you have confirmed 
everything that we thought we had learned about what is wrong 
with the implementation of the Road Home Program, and more, 
that we will act upon. What we have to do is act very quickly, 
because we cannot allow the Road Home Program to close out, as 
they are poised to do, with all of these issues still before 
us.
    Mr. Oney, I just wanted to--first of all, let me say I 
recognize that your company has taken over the implementation 
toward the end of the so-called Road Home Program and that a 
lot of the problems you are certainly not responsible for. I do 
not know what your contract is all about and exactly what it 
says, but I would expect that when you run into certain kinds 
of problems that are created for the citizens of the city that 
just does not make good sense in the way it is indicated they 
should be dealt with in the Road Home program, that you would 
raise this up as a problem.
    I see, based on your testimony, that you have a lot of 
people who need legal assistance, legal assistance in 
documenting the ownership of the property, is that right?
    Mr. Oney. Yes, ma'am.
    Chairwoman Waters. And I see that you have taken some steps 
to help with that. But this is a very difficult process, is 
that right?
    Mr. Oney. Yes, ma'am.
    Chairwoman Waters. And you have not really been able to 
provide that much help in making sure that people who have been 
living in property oftentimes for many years get the 
documentation that they need in order to get the help from Road 
Home; is that right?
    Mr. Oney. Yes, ma'am.
    Chairwoman Waters. All right, let me just say this to you. 
It was suggested to me some time ago that instead of denying 
people because of the lack of documentation on property that 
has been passed down perhaps, that perhaps we should be 
suggesting that there be a fund set aside and perhaps it can be 
done with some of the overage that we have or some of the $3 
billion or $2 billion or whatever it is that is still left. Set 
aside a fund to protect against lawsuits that would be in 
effect for a number of years, so that you can move forward with 
assistance to those who need documentation. That you perhaps 
could set up some kind of criteria--if you have been living in 
a home for a certain period of time and other things exist, I 
do not know what they all are, that they be covered and that 
everybody be covered by this fund in case somebody comes along 
10 years from now or 5 years from now to say that is my house, 
that is really not that person's house. So that we can 
expedite. If the fund was set aside to cover the liability, 
then that should take care of helping the people rather than 
not allowing them to be helped because they do not have the 
clear title or documentation.
    Would you respond to that?
    Mr. Oney. I think that that is a wonderful idea and we 
would be happy to administer it at the direction of--
    Chairwoman Waters. You have attorneys who are involved in 
your firm?
    Mr. Oney. Well, we are issuing an RFP for legal services 
and it will be released tomorrow, so New Orleans and Louisiana 
legal firms will be able to respond and we will end up 
contracting with one of those firms.
    Chairwoman Waters. So you do have some money for legal 
services?
    Mr. Oney. Yes.
    Chairwoman Waters. Would you factor into your RFP--if it 
has been released already, whether you can do an addendum or 
another one or however you do it--that the recovery program, 
the Road Home Program, set aside some money to guarantee 
against--to deal with lawsuits or whatever the liability may 
be, if in fact you move forward with assisting residents who 
fit a certain criteria. And that criteria should make good 
sense. If they have been living in this home for a certain 
period of time, if they have been paying the bills, they have 
been paying taxes or electric bills, what-have-you, set up a 
criteria, put the fund there to protect against the lawsuits, 
let the fund be responsible for the next 5 years, 6 years, 7 
years, I do not know how long. And if people have not made a 
claim on that property in that length of time, it is over.
    Can we do something like that?
    Mr. Oney. It is not currently part of our contract. We 
would be happy to do it at the direction of--
    Chairwoman Waters. Would you look at drawing something up 
and seeing if we cannot help get that into the implementation 
of the Road Home Program?
    Mr. Oney. Absolutely.
    Chairwoman Waters. I thank you very much.
    Let me just say, I thought I made myself some notes here, I 
am so bad at scribbling, I have the recommendations both I 
think from PolicyLink where you have documented and confirmed 
what we are hearing about contractor fraud, not enough money to 
rebuild, credit issues and foreclosures. Credit issues and 
foreclosures, we need to take a look at that. Increased 
financial vulnerability and all of the other things that you 
have identified here. You also talked about title issues, is 
that right?
    Ms. Duval-Diop. Right, yes.
    Chairwoman Waters. You heard what I am trying to suggest 
here. Does that make good sense to you?
    Ms. Duval-Diop. Legal issues are not my forte. I would 
defer that to Davida Finger.
    Chairwoman Waters. Okay, that's okay. That's all right.
    The contractor fraud issue has not been dealt with. That is 
part of the criminal justice system, we ought to bring some 
people to the bar of justice on this stuff. We need to talk 
with the justice system about what we are going to do about 
contractor fraud, just like Ms. Franklin was talking about. You 
know, people have been ripped off tremendously here and I do 
not hear anybody saying we indicted, we arrested, we put 
somebody out of business and we are going to take a strong look 
at what we can do.
    Mr. Green is a tough lawyer, he is tough. You hear him on 
these yes or no scenarios. And so I am going to ask you to 
particularly pay attention to that.
    The recommendations that you made, Ms. Finger, are very, 
very well written and very well put in a position where we can 
move forward on some of that. You took each one of your 
complaints about the Road Home Program and you clearly defined, 
similar to what was done with PolicyLink, what your 
recommendations are and what we should do and we will 
definitely take that back to Washington, the staff has all of 
that. We will act and move on that, some of which you 
identified which we did not have an opportunity to talk about 
today.
    You stopped me dead in my tracks, Mr. Colangelo, about the 
civil rights laws. You are absolutely correct and if what you 
have, the lawsuit, what you need is--not what you need, you are 
doing what you need to do. I do not know if this reaches class 
action status but I do know this, that class action 
possibilities were undermined in the previous Administration 
and we have not done anything about it. It just dawned on me 
that our Judiciary Committee under Mr. Conyers should revisit 
this so that we can get rid of the obstacles to filing class 
actions. And aside from that, if you will be in contact with us 
and let us know legally whether we can file an amicus curiae in 
support. I will be willing to do it and I would be willing to 
go to a tri-caucus that includes the Black Caucus, the Asian 
Caucus, the Latino Caucus, to see if we can file an amicus 
curiae in support of the lawsuit. If that makes good sense, you 
let me know. Okay?
    Mr. Colangelo. Absolutely, and thank you, Madam Chairwoman.
    Chairwoman Waters. You are absolutely welcome.
    Ms. Baker, thank you so very much for being here on behalf 
of your mother. One of the things we discovered as we did our 
listening session over in Pontchartrain Park area was that we 
have so many people who are trying to help their mothers and 
fathers, who are aged, who are being taken advantage of, who 
cannot traverse this terribly cumbersome system that has been 
placed before them. We recognize that as a problem and we 
definitely will do everything that we can to try and talk about 
the plight of seniors in this whole mess. Seniors have lost a 
lot and I am very disturbed by it and we will do everything 
that we can to pay attention.
    I do not want to lose the bit on renters either that you 
brought to our attention. Someone said just before I came in 
that nothing has been done for renters. So we have to take a 
look at that and see what can be done with existing funds or 
funds that are unexpended or responsibilities added to your 
contract for the Road Home Program, or additional monies that 
may have to be appropriated, to deal with that. We have 
situations that have been defined for us where people got some 
Road Home money and because they were displaced, they had 
nothing, they had to have some place to live and so they are 
using that money in order to just rent a place, have some place 
to live. They do not have that money to put toward 
rehabilitation or rehab of their home, which was not enough to 
begin with. And we have to look at that and see what we can do 
because they fall in that renter category now, or people who 
need some assistance.
    So based on your testimony, I have heard you loud and 
clearly and I have the testimony that you have made. I am 
committed to acting on it, as my colleagues who are here, and 
you can count on us to do it.
    And I thank you so very much. I must give time to Mr. 
Cleaver at this point.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Let me apologize. I had to step out and then ended up in 
the hallway engaged in another listening session, unscheduled, 
with people who came up to me and raised a number of issues and 
some of it was with some bone-chilling emotion.
    Professor Finger, I am curious about your testimony because 
it points out a part of the problems here, that the Road Home 
Program would not accept certified Louisiana appraisals if the 
appraisal was higher than 20 percent of the Road Home, even if 
the Road Home appraisal was wrong. Am I right about that?
    Ms. Finger. Generally yes, that is my understanding and 
that is part of the convoluted appeal process and ever-changing 
rules on how home valuation was made and substantive problems 
with how the pre-storm value itself was calculated. In other 
words, if there was a meaningful appeals process that could 
have cured an error in an erroneous pre-storm value, there 
could have been some remedy there, but there was not. The 
homeowner's last resort, if they learned of it, was to pay for 
their own independent Louisiana certified appraisal. And if 
that came back with that higher value--
    Mr. Cleaver. Twenty percent.
    Ms. Finger. Twenty percent or more is our best 
understanding. Then it simply was not counted.
    Notably, low-income homeowners who could not afford to pay 
for their own Louisiana certified appraisal did not even have 
that option even if they were lucky enough to learn about it.
    Mr. Cleaver. Let us go to the appeals process because that 
is--are you a football fan?
    Ms. Finger. I can be today.
    Mr. Cleaver. I mean, you cheer for the Saints, I am sure.
    Ms. Finger. Sure.
    Mr. Cleaver. We can still have a relationship even though I 
cheer for the Chiefs and our team is worse.
    But one of the--I am just curious whether or not as a fan 
of the Saints, you would support giving Clark Hunt who owns the 
Chiefs permission to appeal bad decisions or ask for a replay 
if the Chiefs are playing the Saints. But the only person who 
could file the appeal against the Chiefs would be the Chiefs' 
owner Lamar Hunt?
    Ms. Finger. I see where you are going and in an analogy to 
ICF, I would not think that would be a very equitable appeals 
process.
    Mr. Cleaver. For those of you who may not have caught on 
with the football analogy, it appears as if some of the 
companies would have--are the only ones who can participate in 
the appeals process.
    Ms. Finger. Right. In the world of best practices, the 
decision-maker should not be reviewing its own decision.
    Mr. Cleaver. The contractor--
    Ms. Finger. Right. Which is what happened and sadly, the 
decision-maker seems to have been paid for the bad decision and 
then paid again to review it.
    And, you know, in any system of appeals where we are 
looking at best practices, where we are looking at equitable 
results, where we are looking at trying to create a system that 
has uniform and understandable standards, that just does not 
make sense.
    Mr. Cleaver. Well, is there a written, a developed appeals 
process? I mean does anybody in here know, has anyone seen--
    Ms. Finger. I have seen many rules about appeals and like 
the other rules in this program, they have changed. As Mr. 
Rainwater described earlier this morning, there was initially 
something called dispute resolution that was very confusing for 
applicants and advocates. We thought that applications were 
going into appeal, but they were not. They went into some kind 
of dispute system. I truly cannot explain that. My 
understanding of Road Home is based on my experience going 
through this with clients and on behalf of clients, and it has 
been very difficult to understand.
    Mr. Cleaver. Sir, are you holding up an appeal?
    [document displayed by a member of the audience]
    Mr. Cleaver. I do not want to get in trouble with the 
chairwoman and nobody else should want to get in trouble with 
her either. But I am very much interested in this because I do 
not understand the appeals process.
    Mr. Holmes. That is my name, my address, my phone number. 
That is the appeal process.
    Mr. Cleaver. Just state your name for the record, but I--
    Mr. Holmes. My name is David J. Holmes, and I am a resident 
of Jefferson Parish.
    Mr. Cleaver. Thank you. The problem I have is I am very 
much interested in that but the rules--
    Mr. Holmes. I understand. I did not know anything about 
this meeting. Someone called me from Nashville, Tennessee, to 
tell me.
    Mr. Cleaver. I will visit with you as soon as this is over, 
because there are a lot of people who wanted to talk, but we 
are restricted to the panel.
    And maybe looking at whatever he has will clarify. I just 
do not understand what the appeal process is.
    Ms. Finger. It has been a convoluted process and one that 
is very difficult to understand. Applicants believed at many 
points in the program that they were engaged in appeals only to 
find out later that they were not.
    The substantive problems I described existed. Under the 
program's own rules, applicants should have had the opportunity 
to appeal before and after closing. People were under great 
financial pressure to close on a grant, any grant, even when 
they intended to appeal it. At that closing, they checked off, 
amongst the many forms they filled out, a box that said, 
``Intend to appeal.'' Many applicants thought that they 
perfected their appeal by checking that box, only to later 
learn that an appeal had never been filed. That amongst the 
many papers they signed was a form that says, ``I will file yet 
another written appeal within 90 days of this closing.'' So 
many applicants either did not know about that or did not 
understand that or were not able to do it within that time 
period, and were cut off from appeal that way.
    That is why my best recommendation, because of the systemic 
flaws of the appeal system, both procedural and substantive, is 
that the appeal system be opened up for applicants, but that it 
not just be opened up to the program as it existed with flawed 
rules, with broken policies, that applicants be given a copy of 
their file with an explanation of the grant, that formulas be 
redesigned to enable equity in this program and that appeals be 
opened up with those corrections.
    Our system can do better than this and where we know the 
program has failed and where we have the opportunity to fix it, 
we have to take that opportunity.
    Mr. Cleaver. All right, Ms. Franklin?
    Ms. Franklin. I have to leave. Do you have my phone number?
    Mr. Green. Would you move closer to the microphone, please, 
ma'am, Ms. Franklin? I cannot hear you.
    Ms. Franklin. I said, you have a telephone number on my 
paper that you have.
    Mr. Green. A little closer, please.
    Ms. Franklin. Do you have a telephone number on my 
testimony that I gave to the panel? My phone number, I would 
like to keep in contact with you all, please.
    Mr. Cleaver. Yes, we have your testimony.
    Ms. Franklin. Yes. Do you have my telephone number?
    Mr. Cleaver. Yes, ma'am, thank you.
    Ms. Franklin. Yes, I need to keep in touch with you all 
through Legal Aid.
    Mr. Cleaver. Thank you very much. We appreciate you coming.
    Ms. Franklin. Thank you so much.
    Mr. Cleaver. One final question and I will turn it over to 
my colleague.
    What do we need to do to clear up this appeals process or, 
frankly, to establish it?
    Ms. Duval-Diop. Thank you for allowing me to respond.
    Representative Waters committed to granting the State 
greater flexibility in terms of sending the--how to spend the 
remaining $3 billion, whatever amount remains. I really 
strongly urge that in granting that flexibility that Congress 
ensure that that the funds only get spent on the ongoing needs 
of Road Home applicants.
    You saw in the LRA testimony a range of between $1.6- to 
$2.3 billion in terms of gaps that are the result of low grants 
because of pre-storm values, issues with appeals and errors, 
etc., that Ms. Finger mentioned.
    Also, we have done, in our analysis that was done in 2008, 
we did an estimate of the amount of funds it would take to 
bring people up to their damage estimate or $150,000, whichever 
comes first, and our estimate was $1.7 billion.
    And so the community and the nonprofits and the community-
based groups, people like Davida, people like the Road Home 
applicants, they have the wisdom, they understand the problem, 
they talked about the issue, the need to address contractor 
fraud about 6 months into the life of the program. So 2\1/2\, 3 
years later, we see the issue of contractor fraud arising and 
nothing has been done, no infrastructure has been put in place 
to deal with it. Yet the community knew and had the wisdom and 
insight to understand that that would be a problem down the 
road.
    So what we strongly encourage is that in allowing for the 
greater flexibility and allowing for the State to use those 
funds, that we not only hear from the State about how to 
address these problems, but that we urge the State to work with 
the community-based groups and the nonprofits to devise 
solutions. Only working with people like Davida, people like 
other advocates, is I think the best way of coming up with real 
solutions to address the needs.
    Ms. Finger. You mentioned earlier, you complimented our 
community about the lack of evident anger in the room, and what 
I want to say is that people are exhausted. Almost every week, 
I hear from someone who is absolutely at the end of their rope, 
who cannot go on, who is struggling waiting on Road Home, so 
many open cases still, trying to figure out how to make ends 
meet.
    There is a lot of wisdom in this community and we also need 
serious oversight from policymakers who can help us improve 
these policies. We cannot let this program close knowing about 
the systemic flaws in the system, and allow it simply to trail 
off like that. We need your help in making sure that the funds 
get spent for most people who needed the money the most.
    Mr. Cleaver. That is exactly what we want to do. It would 
be helpful to me at least if you could send your 
recommendations on how we could put in place this oversight and 
actually provide homeowners with some rights. This is 
unbelievable. And then I think we can look to see if there is 
something that we can do legislatively. Because if there is, I 
can assure you that is the direction we are going to go.
    Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    I found the last line of dialogue quite intriguing. If I 
may paint a picture, it seems that the person appealing would 
announce, ``I am going to appeal this,'' and the person who was 
being complained against would say, ``But of course you may. 
And if you will go over next door, you can have your appeal 
heard.'' And then you walk out of the room and you go next door 
to have your appeal heard and, lo and behold, it is the same 
person that you just said you would like to complain against, 
he is sitting right there saying, ``Okay, come right up, you 
will be heard, let us have a fair trial, fair hearing.'' And 
proceeds to give you another opinion that I would think many 
people would conclude is tainted by the original decision. It 
just does not make sense, it really does not.
    We have a concept of due process in this country. That 
ought to afford a person the opportunity to be heard by some 
disinterested--interested in the sense only that it is a part 
of your duty--third body when disputes are promulgated. I find 
it shocking that such a process was in place. And this is what 
makes it even more invidious--lawyers worked on this--lawyers 
worked on this, people who were trained as students of 
jurisprudence worked on this. They knew what should have been 
done. And I find it remarkable that lawyers would allow such a 
process to be promulgated. It is shocking.
    Thank you for bringing this to light, Mr. Cleaver.
    Let me move to, if I may, what the chairwoman has assigned 
me to do and I would like to speak to Ms. Plyer, is that the 
way you pronounce your name, ma'am, Ms. Plyer?
    Ms. Plyer, in your testimony, the pages are not numbered, 
but let us say that it is the third page from the very last 
page. You indicate that only 1 percent of victimized homeowners 
successfully got their monies refunded. May I say this 
conversely, conversely am I to conclude that 99 percent of 
those who were victimized did not get their monies returned?
    Ms. Plyer. Well, PolicyLink did that study and I think that 
would be correct.
    Mr. Green. 99 percent.
    Ms. Plyer. Of those who responded to the survey.
    Mr. Green. Say again?
    Ms. Plyer. Of those who responded to the survey.
    Mr. Green. Yes, of those that responded to the survey.
    The Chair mentioned prosecutions. Have we had any 
prosecutions in this area, any at all? Has anybody been 
prosecuted?
    Ms. Duval-Diop. According to the results, I recall maybe 
one or two and the issue is that the process is flawed, the 
process of reporting fraud. Police stations say that it is not 
their jurisdiction or they provide barriers, they put up 
barriers to people reporting fraud. The district attorney sends 
them a letter and that is about it. There is a lack of staff, a 
lack of capacity.
    Recently in the State legislature, the penalties were 
strengthened and that was viewed as a way to deter fraud, but 
if we do not address the issue of allocating additional 
resources to prosecute and really take these cases beyond the 
simple reporting phase, then we will continue to waste State 
resources, Federal resources.
    Mr. Green. We will make some inquiries in terms of 
statistical information to give us some indication as to 
whether or not this has been vigorously delved into and whether 
prosecutions would have taken place.
    What I marvel at is how a welfare mother who receives money 
that should not have been received is prosecuted and many times 
jailed for much less money. If we can prosecute welfare 
mothers, we can prosecute people who take advantage of welfare 
mothers, we really can.
    Now I want to talk for just a moment to Ms. Plyer. Ms. 
Duval, is the last part of your name Diop?
    Ms. Duval-Diop. Yes, sir.
    Mr. Green. Okay, you and Ms. Finger, let us talk about 
these pre-storm values, and Mr. Colangelo.
    My suspicion is--well, without giving you my suspicions, do 
you all agree that the pre-storm values as recommended by--I 
have the testimony of Ms. Finger before me, on page 3, and she 
recommends that we should simply have pre-storm values taken 
out of the grant calculations. If you concur with her 
recommendation that moving forward we take this out. Ms. Plyer, 
would you give me your response--a simple yes or no would be 
sufficient.
    Ms. Plyer. Personally, I would say yes, we should take that 
out.
    Mr. Green. That was a yes, for the record. Ms. Duval-Diop?
    Ms. Duval-Diop. Can I give a little bit longer answer?
    Mr. Green. A little closer, please.
    Ms. Duval-Diop. Can I give a little bit longer answer?
    Mr. Green. After you say yes or no.
    Ms. Duval-Diop. Yes, but--
    Mr. Green. Okay.
    Ms. Duval-Diop.  --I understand that resources are limited 
and so I think we need to think creatively about how to address 
gaps that were caused by the formula and so we need to bring in 
additional resources to nonprofits that leverage other 
resources such as volunteers and donations, and that we need to 
target to the most vulnerable. There are people who really 
could cover with their own resources some of the gaps, and so--
    Mr. Green. I am with you. You are talking about the remedy 
now, right?
    Ms. Duval-Diop. Right. If you take out the pre-storm value, 
we are talking about affecting everybody, including those who 
are upper income, who do not really need the additional 
resources.
    Mr. Green. I understand. And I can see that it would impact 
everyone, but based upon the testimony that I have heard, the 
pre-storm values seem to disproportionately impact some. And 
the question is, if it has disproportionately impacted some and 
adversely impacted others, perhaps it is something that we need 
to take a look at extricating.
    Ms. Duval-Diop. Yes.
    Mr. Green. Ms. Finger, your thoughts on the pre-storm 
value.
    Ms. Finger. Yes, I agree with myself. And the reason I 
proposed that is because where we know that the pre-storm value 
led to discriminatory impacts, yielding lower grants for 
African-Americans, indeed removing that would impact everyone 
in the program, but a discriminatory disaster housing program 
necessarily impacts everyone. We cannot continue to operate a 
discriminatory housing program here. Where we have the data to 
support that, we need to craft a remedy. And one idea is to 
take out pre-storm value so that grants will be based on the 
correct determinations of estimated cost of damage. That is one 
idea, knowing the discriminatory formula that we have. It is 
certainly not the only idea and we do need to be forward 
thinking and pragmatic and know that we will not have endless 
resources to continue to operate this program. At the same 
time, we cannot gloss over something so big as the problems we 
see with pre-storm value.
    Mr. Green. Thank you.
    Mr. Colangelo?
    Mr. Colangelo. Yes.
    Mr. Green. I suspected you would say yes.
    Let me just ask you one additional question, Mr. Colangelo.
    In your efforts to call this to the attention of the 
appropriate parties, have you had an opportunity--and I do not 
want you to get into the litigation, let us talk about pre-
litigation--have you had an opportunity to sit and has there 
been any opportunity for some sort of mediation by way of 
judicial mandate or judicial--no mediation?
    Mr. Colangelo. No, there is not.
    Mr. Green. I know that in the Federal courts, it is not as 
commonplace as it is in State courts. Is there any rule that 
would prohibit a request for mediation in such a circumstance?
    Mr. Colangelo. No, there is not, Congressman.
    Mr. Green. I am exceedingly concerned about this. It is 
very unfortunate that after all we have fought for to get the 
1968--actually 1965 as well as 1968 civil rights laws, that we 
find ourselves in 2009 with this sort of circumstance and we 
have to find ourselves trying to find a remedy after the fact. 
It just does not make sense that if something is called to the 
attention of the appropriate persons that we would not have an 
appropriate remedy. If there is something that I am missing, I 
will gladly rethink my position, but I did get answers earlier 
from a prior panel that seems to confirm that this formula is 
inherently invidious discrimination. By virtue of just imposing 
it, by simply using it, it seems to discriminate and it goes 
back to the red-lining, goes back to the housing patterns. But 
someone has to say, not on my watch. Someone has to say, it 
stops here, this much, no more.
    I hope that we will be able to rectify some of these 
concerns. And Mr. Chairman, I thank you for your indulgence. I 
know that I have gone longer than I should. I yield back.
    Mr. Cleaver. Thank you.
    Let me thank all of you on behalf of Chairwoman Waters, for 
donating the most valuable thing you have, which is time, to 
helping us with information that will be used hopefully to help 
you. We appreciate the fact that you came out.
    We want to thank again Dillard University for today and the 
Chair would have me note that some members of this subcommittee 
may have additional questions for the panelists and we might 
ask for the submission of some information in writing. And 
without objection, the hearing record will remain open for 30 
days after today for members to submit written questions to 
those of you who are serving as witnesses and to place the 
responses you give us in the record.
    We appreciate your participation; this panel is dismissed.
    And before we adjourn, without objection, the written 
statement of the following organization will be made a part of 
this hearing: The Citizens Road Home Action Team. That will be 
included.
    And this says, close the hearing. This hearing is 
adjourned. Bang the gavel.
    [Whereupon, at 4:50 p.m., the hearing was adjourned.]




                            A P P E N D I X



                            August 20, 2009


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


