Dozens of real estate deals involving rehabbed Katrina-damaged homes are in limbo
When New Orleans Mayor Mitch Landrieu approved $10 million last month for a key housing subsidy program that had run out of money, his spokesman said the effort could "move forward as planned with no new snags."
View full sizeDiah Stephenson is trying to sell his house at 10139 Hammond St. in eastern New Orleans but the buyer is having problems getting money from the FANO program. Despite the promise, program officials say a new bureaucratic roadblock is keeping them from issuing any new loans, leaving dozens of real estate deals in limbo.
If the money were flowing, 164 families each would be in line for up to $65,000, plus $10,000 in closing costs, toward the purchase of a rehabilitated Katrina-damaged home. Adding to the program's allure, the "soft second mortgages," as they are called, can be forgiven if the recipients stay in the homes for at least five years.
Frustrated lenders, builders and prospective homebuyers who cheered Landrieu last month are now throwing their hands up again.
"I think it's misleading to say the program is ready to move forward and yet the banks can't move forward, and here I am under contract for six months now," said Diah Stephenson, referring to the eastern New Orleans house he rebuilt and is holding, in spite of the costs, for a family that's in line for one of the forgivable loans. "I'm a patient person, but I am growing wary of this."
The latest problem for the soft-second mortgage program, which has succeeded in getting 415 families into rehabbed homes, is that the $10 million from the city technically started a new program, even though it looks the same as an identical $27 million soft-second mortgage effort the Finance Authority of New Orleans has been running for the past two years.
Both programs used federal recovery money approved by the state, but from slightly different sources. The first $27.8 million was New Orleans' share of money the state carved out of a small rental aid program. The latest $10 million comes from the U.S. Department of Housing and Urban Development's Community Development Block Grant program, and now the city wants the Finance Authority to comply with various HUD procedures that it apparently didn't follow when administering the first $27 million.
The result has been a he-said-she-said between the city and the Finance Authority. The agency's executive director, Mtumishi St. Julien, told real estate agents last week that the delay is not in his control. His spokeswoman, Terrell Perry, said this: "At the moment, there is no anticipated date to commence the city's new soft second program. The Finance Authority is working with city officials on new protocols and procedures based on the city's specifications for compliance."
A city spokesman responded by saying it's up to the Finance Authority to get moving.
"No new snags," Ryan Berni said. "The city has simply insisted that FANO adopt existing, standardized HUD compliance procedures to monitor the funds. It's both in the best interest of FANO and the program's applicants to follow the law. The sooner FANO meets all federal requirements, the sooner money can get into the hands of those who have been waiting for it."
According to the city, that will primarily require the Finance Authority to fill out paperwork, such as a "cost allocation plan" that describes how the money is distributed, explains the use of any third-party administrators and includes FANO's financial statements. It also requires stringent documentation of applicant information, such as income verification and a check of other federal aid a family may have received.
Hoping to strike a conciliatory tone, Perry said the Finance Authority "supports the city in their effort to formulate a new soft second program." But, she added, there's still "no anticipated date to commence the city's new soft second mortgage program."
David Hammer can be reached at dhammer@timespicayune.com or 504.826.3322.