Road Home Program officials have issued clarification regarding "assignability," which refers to homeowners who want to transfer their rights to a Road Home grant to whoever buys the property.

Policy snarl adds to Road Home detours

Officials do about-face on transfer of grants from owners to buyers

Some of the key officials and policy documents meant to guide frustrated Louisiana homeowners through the Road Home program instead have led them astray, incorrectly telling them their grants will be reduced if they try to transfer the award to someone buying their home on the open market.

In speeches to real estate agents, e-mail messages to homeowners and public comments by a top Louisiana Recovery Authority official, the program has disseminated the wrong information about its policy regarding "assignability," which refers to homeowners who want to transfer their rights to a Road Home grant to whoever buys the property. On several occasions, homeowners have been told that upon selling, the sales price will be subtracted from the grant amount. In most cases, that would drastically reduce or even eliminate the grant, essentially nullifying a powerful incentive to buy flood-damaged properties.

Road Home officials now confirm that's dead wrong. If an application goes through the so-called "assignment" process, the buyer of a flood-damaged home can keep the whole grant amount -- regardless of the sales price. The transfer requires only that the buyer take on the responsibility of rebuilding the home and must live there for three years.

That's the opposite of what real estate agents and grant applicants were told by Road Home officials, even those at the highest levels. One ICF official, for instance, told a gathering of local real estate agents in a speech that sellers would have to subtract the sales price from their grant if they transferred it in a private sale, even if they assigned the benefits and responsibilities of the award. Another top official from the Louisiana Recovery Authority interpreted the policy the same way in a recent interview, only to retract the statement later.

Real estate agents say the misinformation has thrown a wet blanket on the rebuilding effort by paralyzing homeowners and those who might have bought their flood-damaged properties.

Al Palumbo, Lakefront manager for Latter & Blum Inc., said his agents have encountered problems with three such cases in recent weeks. Their clients are afraid to proceed to closing because they can't assure potential buyers that they won't lose some or all of the grant.

"This is a big deal," Palumbo said. "As Realtors, if we put together a deal and the grant gets changed, then we can't put together a sale anyone's comfortable with. It's such a moving target, and it's another reason people aren't able to make a decision."

Confusion and misinformation are among the reasons why about half of the 33,190 homeowners who have received Road Home grant commitments haven't accepted their awards. An estimated 5,000 of them have not contested their estimated grant award, but are not ready to take the money because of various uncertainties. Another 11,000 or so won't accept their grants because they are challenging the amount.

Problem from the start

While confusion over some other Road Home policies has stemmed from midstream rule changes, made in response to complaints, in this instance some Road Home and LRA officials apparently misunderstood the assignment policy from the beginning.

When the LRA wrote the policy last year, the agency considered the possibility of reducing the grant by the price of a property sale because it thought federal laws would consider the sales proceeds and the grant a duplication of benefits. The agency ultimately decided that wasn't the case, but even some of its leaders apparently didn't get that message.

Walter Leger, the appointed chairman of the LRA's housing task force and a trusted source of information for many homeowners, said last week that he mistakenly thought the sales price would have to be subtracted from any grant award.

"There was a point in which there was discussion of subtracting, and we've determined we're not going to do that," Leger said. "The deduction I told you about last time is not correct."

Then at the beginning of this month, Fred Duplantis, ICF's technical adviser for the small rental repair program, told a group of Lakeview real estate agents that the policy required that the grant award be reduced by the sales price, even handing out a policy document appearing to back that assessment.

Mired in ambiguity

ICF spokeswoman Gentry Brann acknowledged last week that was incorrect, calling the policy document "poorly written."

Reading two separate sections of the policy, it's easy to see why Duplantis got confused. Road Home Policy Section 5.3 says proceeds from the sale of a home are considered "other compensation" that reduce the amount of an award, seeming to confirm Duplantis' interpretation.

But the policy seems to contradict itself in Section 10, which specifically governs assignment. It dictates that buyers who sign a special contract are eligible for the same grant award as the original owner of the house. Brann said Duplantis was wrong and, as a rental specialist, he should not have been addressing the real estate agents about homeowner policies and would not be allowed to do so again.

Before the end of the day Friday, officials updated the Road Home Web site, www.road2la.org, with an assignment fact sheet clearly stating that a home sale has no effect on the value of a grant transferred in the sale.

Putting a damper on deals

But meanwhile, applicants were told the opposite and potential sales fell by the wayside. Robert Armstrong, an agent with French Quarter Realty, said he had several clients with buyers lined up, but none was willing to go forward with the sale without assurances that the full grant amount could be transferred in the sale.

ICF counselors told Armstrong's clients in Lakeview and Lakewood South, who didn't want to divulge their names, that their awards would be reduced to nothing if they sold their homes for more than their grants were worth.

In a series of e-mail messages between Armstrong's Lakeview client and ICF's information team, the applicant was told he was entitled to the maximum $150,000 grant because his uninsured damages were $181,961. But he also was told -- incorrectly -- that if he sold his house, the sales price would be deducted from the $181,961, which would have eliminated the grant completely because his sales price was nearly $400,000.

These ICF employees also were incorrect and their actions were considered "internal personnel matters," Brann said.

Brann said ICF would embark on an aggressive retraining of its employees and a large public information effort on assignment policy, including meetings with real estate agent associations.

"This is the most difficult policy we have," Brann said. "Even the LRA didn't have it straight."

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