April 10, 2007 / 2:31 AM / 12 years ago

Louisiana criticizes federal plan for homeowners

NEW ORLEANS (Reuters) - More Louisiana homeowners may not be able to repair hurricane-blighted properties after federal changes in how aid money is distributed, a state agency said on Monday.

Barbara Johnson goes through some belongings inside her house, severely flooded in Hurricane Katrina, in New Orleans, in this March 27, 2007 file photo. More Louisiana homeowners may not be able to repair hurricane-blighted properties after federal changes in how aid money is distributed, a state agency said on Monday. REUTERS/Lee Celano

The Louisiana Recovery Authority said state and federal authorities ended an impasse over how to deliver federal grants by agreeing to pay out lump sums to reimburse homeowners for damage sustained in hurricanes Katrina and Rita.

But the new plan could make it easier for lenders to seize the grants of up to $150,000 to satisfy unpaid mortgages and expose people to contractor fraud because it lacks protections established by the state-designed Road Home program, LRA officials said.

“H.U.D. basically said, ‘You’ve got to do lump sum payments.’ So if we end up with increased blight, it’s because of HUD’s policy,” Recovery Authority housing task force chair Walter Leger said.

The authority oversees the rebuilding of coastal areas ravaged by the 2005 hurricanes.

The Road Home, a $10 billion program designed to encourage residents to return to Louisiana and rebuild, had been distributing the funds in installments as work was being done on grant recipients’ homes.

The installments were designed to safeguard borrowers from having back taxes and unpaid mortgages seized, and to assure lenders that mortgage holders were repairing and occupying their homes, said Recovery Authority director Andy Kopplin.

The terms were also meant to protect homeowners from contractor fraud and to lessen the risk that property owners would abandon the thousands of empty and decaying houses that still dot many New Orleans neighborhoods, he said.

More than 200,000 Louisiana homes were damaged or destroyed by Hurricane Katrina, which struck the Gulf Coast in 2005.

The U.S. Department of Housing and Urban Development ordered the change in policy in March.

The move prompted angry reactions from state officials, who said the federal agency had given no indication in months of negotiations that the Road Home program, launched last August, was not in compliance with rules governing federally financed reimbursement programs.

“This has just been typical of the federal bureaucracy since the hours after Katrina hit ... at every level” said Sam Jones, adviser to Louisiana Gov. Kathleen Babineaux Blanco.

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