[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
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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
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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
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