Smart communities are developing longer-term financial recovery after floods

Following the summer floods of 2016, federal funding for flood disaster recovery ended in April 2017 and the state of Texas left many damaged homeowners empty-handed and facing a crippling financial gap. The $1.4…

Smart communities are developing longer-term financial recovery after floods

Following the summer floods of 2016, federal funding for flood disaster recovery ended in April 2017 and the state of Texas left many damaged homeowners empty-handed and facing a crippling financial gap. The $1.4 billion that Texas received was used to address the immediate needs of small businesses, local governments, floodplain management and flood insurance victims. However, hundreds of homeowners remain on a near-term financial waiting list for assistance. The disparity in the response has raised concerns about future hurricanes, wildfires and other disasters.

For centuries, disasters have served as opportunities for governments to facilitate economic recovery, and Texas should take advantage of federal disaster funding as such. But three days after the president signed an official disaster declaration that indicated the disaster had hit Texas, the program that provides disaster relief to homeowners ended. An additional $100 million in block grants was approved by Congress in early 2018. Two months later, more than 700 homeowners on the list for federal housing assistance were still waiting for permanent financial assistance. To date, nearly 400 homeowners have received a payment from private lenders, and yet a decade later these homeowners remain financially vulnerable.

A couple of weeks ago, Consumer Financial Protection Bureau (CFPB) President Richard Cordray announced a pilot program that encourages non-profits and community-based groups to develop a financial preparation and recovery plan for Texas homeowners and provide access to affordable credit. The Texas justice dept is partnering with CFPB in order to improve access to credit for Texas homeowners.

Homeowners:

– Are not yet insured against future disasters

– Are not able to get loans from the USDA or FHA.

– Are limited in their ability to generate a revenue stream.

– Have low credit scores

– Are often citizens of low-income or disadvantaged communities.

Additionally, CFPB reports that over 60 percent of flood-damaged homeowners could not get coverage from their insurance company or were denied insurance coverage due to prior flood claims or an active flood insurance order. More than one-third of mortgage holders in Texas are underwater.

In addition to available credit products for homeowners and renters, Homeownership Opportunity Fund (HOME) will help Texas homeowners pursue options such as short-term emergency housing (title loans), short-term rental (renters make $1,800 a month), and selling homes (insurance is not required). HOME will also provide help for low and moderate-income homebuyers. The HOME program will not only expand access to credit for affected homeowners, but also create jobs and strengthen the economy.

Homeowners must continue to prepare and develop an action plan for their families, identify potential risks to their homes and obtain specific information on flood insurance options and homebuying resources. These efforts are not only beneficial to homeowners affected by the June 2017 floods, but for all homeowners across the state who are protected by this program. By integrating affordable homebuying with financial preparation and recovery, the program helps prevent future flood losses and establishes a new market for sustainable housing that is long term beneficial to the long-term economic and fiscal well-being of the state.

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