Bush OKs Katrina Bailout For Homeowners, Lenders
President Bush has signed an emergency spending bill that will provide $4.2 billion to bail out Louisiana homeowners uninsured for flooding caused by hurricanes Katrina and Rita last year. The money will be used to grant up to $150,000 for each homeowner who did not have flood insurance and whose home was damaged or destroyed during one of the two massive storms.
A similar, but much smaller, bailout is in the works for Mississippi homeowners where as much as $1.5 billion is expected to be granted. Louisiana's "The Road Home Program" will be as much of a bailout for lenders, which hold the mortgages on all of the damaged properties.
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 those who were forced to relocate out of state. The borrower can sell their 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.