Bailout for Katrina Homeowners and Lenders Funded
House and Senate negotiators agreed last week on a $94.5-billion emergency spending bill that would include $4.2 billion to reimburse New Orleans homeowners and lenders for uninsured property damaged by Hurricane Katrina. The money, part of a $9-billion package for uninsured hurricane victims who did not have flood insurance, would be given to victims under a Community Development Block Grant in amounts up to $150,000.
Under the program, the funds, minus insurance settlements and other grants, will go to homeowners whose primary residences were destroyed or severely damaged, or to relocate out of state.
The borrower can sell the home to the state for 60% of its pre-storm value, minus insurance proceeds and other federal disaster repair funds.
If the borrower decides to sell, the lender may be asked to write-off a portion of the debt. To participate in the program, homeowners must have at least $5,300 of uninsured damages from hurricanes Katrina or Rita.