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Gillibrand bill would end New York Rising ‘clawbacks’

Legislation would prevent NY Rising from recouping duplication of benefits

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Rosa Berland moved to Long Beach with her husband, Steve Leible, a New York City firefighter, and their two daughters a year before Hurricane Sandy destroyed their West End bungalow.

Like many storm victims, the family was displaced, and was told by the Federal Emergency Management Agency in the days after the storm to take out a Small Business Administration loan to help them rebuild. “We were told that if we didn’t apply for the SBA loan, then we might not be eligible for other grant funding,” Berland recalled. They were approved for a loan.

Their home was more than 80 percent damaged in the storm, and needed to be completely reconstructed and elevated. So they later sought assistance from the supplementary funding program NY Rising, and the work on their home was completed in 2014.

But NY Rising recently told Berland and Leible that they must repay $10,000, claiming that the SBA funding they initially received is considered a duplication of benefits. “As you can imagine, we certainly can’t afford that,” Berland said. “The total amount that we got from NY Rising, the SBA loan and the National Flood Insurance Program is not equal to what it cost us to recover.”

Not only did she and her husband empty their savings to rebuild, but they were also among the thousands of Sandy victims who sued their flood insurance carriers — FEMA administers the NFIP — after they were significantly underpaid based on fraudulent damage reports and lowball repair estimates.

“In the interim, we accrued debt while we were waiting to get our insurance settlement and grant money,” Berland said. “We bought building materials with our own credit card, and we still hold that debt and the mortgage on the original house. If the National Flood Insurance Program had paid out in a fair and timely way, and we didn’t have to take them to arbitration with our lawyers, we probably wouldn’t be in this situation at all.”

Seven years after Sandy, Berland and Leible are among the hundreds of storm victims on Long Island who are being told they owe NY Rising money.

In response, U.S. Sen. Kirsten Gillibrand introduced legislation on Tuesday that would protect those homeowners from so-called “clawbacks” after they received federal disaster funds to rebuild and elevate their homes. Specifically, Gillibrand said that the legislation, the Sandy Duplication of Benefits Fairness Act, would help homeowners who are being forced to repay thousands of dollars they received from NY Rising.

NY Rising was launched in April 2013, promoted as a way to help homeowners fill the funding gaps left by FEMA, SBA and their insurance carriers. The program was tasked with distributing nearly $2 billion in federal Sandy aid money allocated to the state. The grant money comes from the U.S. Department of Housing and Urban Development, but is administered by the state’s Governor’s Office of Storm Recovery.

Before NY Rising was established, however, many homeowners were told by FEMA that in order to receive any federal disaster assistance, they must first apply for an SBA loan. According to Gillibrand, many households took out those loans, as suggested, “in order to get back on their feet and remain eligible for other forms of federal assistance.”

Homeowners who received money from NY Rising are now being informed that the SBA payments they received are considered duplicative, and must be paid back — the result of “a technicality they were not warned about,” Gillibrand said in a news release. “This has blindsided many families, and homeowners caught under the ‘duplication of benefits’ rule are being forced to pay back the grant money they were depending on to recover from the storm.”

The legislation, she said, would authorize HUD to waive that requirement and allow homeowners to “keep these critical funds.” Last year, Congress enacted legislation that waived the duplication-of-benefits restriction to allow SBA loan recipients to be eligible to receive disaster relief grants, like those administered by NY Rising, but only made the fix retroactive to 2016.

Gillibrand’s legislation would amend that law and make the duplication-of-benefits fix retroactive to Oct. 1, 2012, making Sandy survivors eligible to keep the grant funding even if they also received an SBA loan.

A spokesman for NY Rising did not return a call requesting comment. A spokeswoman for Gillibrand said that the bill has the support of U.S. Rep. Peter King, who is planning to lead the effort to pass a version of the legislation in the House.

“Senator Gillibrand also plans to put this bill forward as an amendment to the Senate Appropriations Bill that is on the floor for a vote this week, and will fight to make sure this passes Congress,” the spokeswoman said.

Michelle Insignia, executive director of Adopt-A-House Inc., said it was crucial that the bill be approved. She said she believes NY Rising is seeking to claw back as much as $8 million from some 300 families on Long Island. In many cases, homeowners not only took out SBA loans, but also emptied their retirement savings to rebuild. Many faced the daunting process of going through what has been described as a byzantine application process to receive NY Rising funds, and now continue to deal with contractor fraud and face looming deadlines to complete work on their homes.

“When homeowners thought they were closed out [of NY Rising] with their repairs and elevations, they started to get letters for recapture and were told that they had a duplication of benefits because they had an SBA loan,” Insignia said. “We have people that NY Rising are suing to get the money back.”

FEMA conducted 2,755 post-Sandy home inspections in Long Beach, and determined that 860 homes were more than 50 percent damaged and would have to be raised or demolished. Residents who were determined to stay were required to elevate their homes to meet new FEMA height requirements, and others who sustained less damage had the option to apply for funding to raise their homes and avoid hefty flood insurance premiums. Generally, the maximum NY Rising award is $300,000.

The city’s building commissioner, Scott Kemins, said that more than 90 percent of residents who were displaced have returned to their homes, and the city has issued 1,579 certificates of occupancy since Sandy for elevations, new homes or Sandy-related repairs. Many of those homeowners received funding from NY Rising.

Berland lauded Gillibrand’s bill, saying it would help her and many other homeowners. “Sandy has been a forgotten storm for so long and we just want equitable treatment,” she said. “The bill is really exciting because we know that, hopefully, it will pass and help us recover from the storm financially, and protect other people in our community. This is partially due to community activists lobbying their elected representatives, including Gillibrand, and storm victims writing testimonial letters about how the duplication of benefits had adversely affected them financially and impeded their recovery.”