Sunday, January 20, 2008

Part six: House of mirrors or house of cards?

A continuation of the How's the house coming? saga...

Initially I was full of confidence in our ability to finance a new house. I thought we were fairly well insured, and we qualified for both a Road Home grant and an SBA Disaster Assistance loan at a favorable interest rate. But now all the last-minute shenanigans and regulatory intrusions were threatening to bring the whole deal down like a house of cards.

With further prodding, I discovered that there might be other ways to increase our loan amount. Only part of the SBA loan eligibility was based on the value of my flood-damaged house. I discovered that we had not maxed-out the allowable loan for personal property, another component of the SBA loan.

When my Darling Wife and I had first compiled a list of personal property lost in the flood, we had only made a list that would get us to the maximum coverage on the personal property portion our flood insurance. SBA was willing to loan us money for the uninsured loss in personal property up to their limit, which they said only required that we send them an itemized list. We did this and finally were successful in increasing the loan amount to a figure that would make the purchase deal work.

Net result: increase in our SBA Disaster Assistance loan of about 25%.

And since we still had not been able to get to a successful closing with Road Home, they had still not sent us any of the grant we are supposed to receive. Not to worry, SBA had told me many months ago, because SBA will simply loan us what we need until Road Home comes through. We were still barred from receiving anything that might trespass into "duplication of benefits," so when Road Home finally sent a check we would simply turn it over to SBA and pay down the loan. That would certainly be helpful.


Somewhere along the way, perhaps as a result of their multiple failed attempts to close on our grant, Road Home reported to SBA that they had in fact given us money. SBA responded by dutifully deducting that same amount from our Disaster Assistance loan as they are required to do to avoid the "duplication of benefits" problem. Need I say that calls to Road Home to correct this error were a colossal waste of time?

Net result: No money from Road Home and a decrease in SBA Disaster Assistance loan left us thousands of dollars short of completing the purchase of the new house.

That's when I came up with a brilliant plan--if I do say so myself. I decided to borrow the money from a local bank until Road Home finally got their act together. Yes, it would cost us money, but it would free us from the quagmire of the state grant program. It would allow us to proceed with the purchase now and deal with the bureaucracy later.

I applied online at Whitney Bank, answered some additional questions on the phone and soon we were approved. I called this our "gap loan" and advised SBA that there would be a second lien on the new house. We would pay it off as soon as we received the grant money so it was only a short-term burden.

Once again, SBA initially told me, "Not a problem." But of course it turned out to be a problem--more than one. One day our case worker called my Darling Wife to inquire on some minor detail and she remarked that we were looking forward to receiving the Road Home grant. The case worker immediately told her that we were required to turn over to SBA any money we get from Road Home. She protested and explained that we were going to use the Road Home money to pay off the gap loan, but the case worker was not deterred; he advised her to read the contract we had signed.

My Darling Wife was on the verge of tears when she called me at work that day. After getting ahold of my case worker at SBA, I explained once again, in excruciating detail, what we were doing and why we were doing it. We were not going to turn over any Road Home money to SBA unless it exceeded the amount reported to SBA already, the amount already subtracted from our loan eligibility. I think he finally got it, but I knew for certain this problem would keep cropping up as we moved forward in the process.

And then of course, since the bank will also be putting a lien on the new house, my case worker informed me that our file would have to be sent back to the Loan Approval Officer to okay the presence and position of the second mortgage. "This usually takes no more than 10 days," he tried to say with encouragement. After speaking again with my wife, the case worker agreed to hand-carry the revisions to the Loan Approval Officer and to ask for an expedited review. I'm not sure, but I think she cried during that phone call which might account for the sudden show of concern and urgency.

Earlier I described the situation as a house of cards, but when you consider the many and incessant rules controlling the process, it really begins to resemble a house of mirrors. We were just trying to find the way out, but every time we thought we were close, we found that we had been fooled.

Exacerbating the problem was that every few weeks we were assigned a new case worker who I then had to "train" all over again. My list of SBA case workers from July 2007 to present includes: Gerry, Cindy, Willie, Roxanne, Linda, Toni, Amy, Gerald and Tamara.

And here is another fun wrinkle in our quest to buy a house.

In November, the upstairs tenant of the house we were tying to purchase moved out. Good news because we were planning on taking the upstairs anyway and thus avoided having to throw them out. Bad news because the sellers said they would rent it again unless we completed the sale swiftly or paid them to keep the apartment empty. So starting in mid-November, we began paying for an empty apartment--with money coming right out of our pockets due to the insufferably slow movement of paperwork at SBA and Road Home.

As 2007 came to a close, we must have been closer to finally getting into a house. But as we celebrated our second Christmas in a FEMA Travel Trailer on an empty lot in a flood-ravaged neighborhood in New Orleans, the dream of having a place to call our own felt as far away as the moon.

Part seven: The city on the edge of forever

Thursday, January 17, 2008

Part five: What's the frequency, Kenneth?

A continuation of the How's the house coming? saga...

When we moved with our Precious Daughter and two cats into the FEMA Travel Trailer, we thought it was the right idea. We thought we would soon be building a new house, and that although a bit cramped, it would be worth it to be there to oversee and help during the construction. But that dream evaporated many months ago, and the grand adventure of living like New Orleans pioneers was just not so grand anymore.

At the same time as all that tomfoolery with Road Home was going on, I was also enjoying a lively negotiation with our Disaster Assistance loan from the Small Business Administration. SBA had told us up front that there were few rules regarding our relocation, that they just wanted to help us get into a comparable house, that we were already approved so the paperwork wouldn't take long at all. And I stupidly believed them.

The shifting rules and roadblocks began as soon as they received a copy of the purchase agreement for their review and approval. The first thing SBA told me was that since I was no longer rebuilding, our case had to be reassigned to the Relocation Team. So the person I had spoken to, the person who had given me advice and counsel regarding the process for buying a house was not the right person to talk to at all. Once reassigned to a case manager on the Relocation Team, multiple issues began to spring up.

For instance, my damaged property was in a flood zone, which made me eligible for a relocation loan--but so was the new property. The fact that the house had not flooded in Katrina was not relevant. According to the flood map, the new house was in a flood hazard area. Now, keep in mind that the theoretical flood map was drawn to indicate the potential flooding to the so-called 100-year flood, whereas the house had survived the very real and actual Hurricane Katrina flood, which is estimated to be something near the 400-year event.

What if I obtained a survey to prove that the floor elevation was above the theoretical 100-year elevation? Wouldn't matter, I was told. All we look at is the map.

Net result: our disaster assistance loan eligibility was lowered. I certainly understand the reason for the disincentive to move from one flood zone to another, but clearly that is not what I am doing since the new house is above the base flood elevation. Unfortunately, all SBA cares about is the line on the map.

I did get a surveyor out there to give me elevations, and sure enough the house is above the base flood elevation. And while one arm of the federal government (SBA) is indifferent to this fact, another arm of the government (FEMA) offered us flood insurance at a lower rate.

With a decrease in SBA funding and the inability of Road Home to properly close on our grant, it was beginning to look doubtful that we would be able to purchase the house we had under contract. But we persisted, in part because we really liked the house and the neighborhood, and also because we had already spent about $1,000 on various inspections. The sellers remained graciously patient as we sorted out the details, but we knew they would not wait forever.

At this same time, I pointed out to SBA that if their goal was to help us purchase a "comparable house," we would in fact need more money. The amount of our loan had been calculated using pre-Katrina valuations, and as anyone can tell you, those numbers just don't apply anymore. I pointed out that not only were housing prices up, but prices in the unflooded areas of the city were higher than before Katrina, too. I pointed out that I had actual recent quotes for building a new house that could support my argument. My SBA case worker was sympathetic. "Send me your documentation and we should be able to help."

I sent in the construction cost estimates described previously and waited for the response. And waited. And waited.

It turns out the SBA case worker really doesn't have any authority to make any decisions. The case worker is simply the receptionist and mail clerk. You call, and they answer the phone. You send documents, and they route it to the responsible person. In this case, the documentation I provided was sent to the Loss Verification officer. After a long wait, I asked the case worker if I could speak to this person to see what was causing the delay. No, I was told, only when the Loss Verification officer was ready.

Finally I got the call. And the answer was, "Yes, we will increase your loan $5,000." But that's not even enough to cover inflation, I protested. What about the documentation I provided? "We cannot consider outside information," the Loss Verification worker said. "We have our own methods of calculating local market conditions." Okay, so why did my case worker tell me to send in documentation? "I don't know," she said.

Net result: it was a colossal waste of time and effort.

With the patience of Job, I spoke to my case worker about this. "I guess I was mistaken," he said. I have since fantasized about going all "Ashley Morris" on him, but know that no one can approach the greatness of the master and it probably would not have helped anyway.

But here's the thing: I do not want to sound ungrateful. SBA has offered to give us a loan for a great rate, a rate that is really going to help us buy a house that we can live in for years to come. Although my family was the victim of a major catastrophe, I do not consider myself "entitled" or "due" any reparations. I very much appreciate the assistance offered via SBA as a genuine act of kindness from my fellow Americans and our government. So all the while I'm wrenching with frustration, I have to keep reminding myself to not lose sight of the fact that this is public assistance, a kind of charity.

I am truly thankful for the help. But then again, why can't I get correct information? Why aren't these rules and procedures public information? This has been dragging on for 5 months--can't they help me any faster?

One night after dinner, our Precious Daughter said, "I'm going to my room to read." She walked the five feet from the table to her bed, and climbed into the pigeon hole of the lower bunk. At that moment I felt despair for myself and my family for the first time since returning to New Orleans in late September 2005.

Part six: House of mirrors or house of cards?

Tuesday, January 15, 2008

Part four: Closing in on an option

A continuation of the How's the house coming? saga...

I work for the federal government. I thought I knew something about mind-numbing rules, esoteric regulatory requirements and the paralysis that comes from running an organization by committee. And yet...

We sent the revised option letter to Road Home in late May. In mid July, we received a call from a title company under contract with the state. "We'd like to schedule your grant closing." Excited but cautious, I asked for details. They emailed me the closing documents ahead of the meeting, which confirmed my fears. They still had us as Option 1 when we needed to be Option 2.

The key difference is that Option 1 is a rebuilding grant while Option 2 is a relocation grant that requires turning over the damaged property to the Road Home Corporation. So while the dollar amounts are not very different in our case, the paperwork is very different. I'm no expert, but obviously Option 2 would require a title search and a title transfer while Option 1 would require only a lien on the property.

I notified the title company of the error and cancelled the appointment. Somebody from Road Home called again in late August. "Come tomorrow morning for your closing," we were told. Is the paperwork fixed? We can't tell you, we don't have your file, we're just making calls to schedule appointments.

Skeptical but unwilling to miss the opportunity to close on our grant, my Darling Wife and I both took off from work to attend our last-minute closing. As soon as they handed us our file, I looked it over and found it was still wrong. We had a hard time convincing the people at the closing center that there was an error but they finally agreed to look into it.

In late September I received another call from Road Home. "I'm calling to schedule your closing," the cheerful lady informed. I asked questions about the grant and the lady put me on hold for a while. When she came back on the line, she determined that our file was still flagged as Option 1 and thus the paperwork was still wrong. She searched our file and found the amendment we had sent in May and said, "I don't know what the problem is or why this hasn't been corrected yet."

My most recent conversation with Road Home was on December 27, when, yet again, a cheerful person called to schedule our closing for the next day. When I asked if corrections had finally been made to our file she put me on hold for several minutes, came back on the line to tell me she was conferring with a "supervisor," put me on hold for another several minutes, and finally informed me that our file was still not updated.

I asked if the title search had been completed yet, and she said the file indicated that a title search had been ordered but not received. I did not bother to ask why she was calling to schedule a closing appointment for a file that was, with just a few minutes examination, obviously not completed.

This is clearly the pattern with Road Home: They call near the end of the month to schedule an appointment for the very next day. And I think I know why--they need to conduct enough closings to make their quota. It does not seem important whether those closings occur with the correct documents, or the correct dollar amounts, or even with the full understanding of the homeowners. All that appears to matter is that they make a flurry of closings at the end of each month.

The bottom line is that as of this writing, we still have not seen dollar one of the grant we were promised from Road Home. In order to get our lives out of this bureaucratic rut, we had to make other financial arrangements which I will explain later. We still hope to receive a grant some day, but whether that will be in one month or one year is anybody's guess.

Now keep in mind that we had signed a purchase agreement for a house in mid July. We apparently were foolish enough to think we could close on that house within a month. So while all this back-and-forth with Road Home is going on, we've had to request extensions on the purchase agreement. Several, in fact. We were amazed and grateful that the seller agreed to our requests.

Still, it would not be fair to focus all attention on Road Home, because at the same time we were also navigating the labyrith bureaucracy of SBA with frustratingly similar results.

Part five: What's the frequency, Kenneth?

Sunday, January 13, 2008

Part three: Switching gears

A continuation of the How's the house coming? saga...

I finally said, "Honey, at these prices, we could just buy a house in an unflooded part of the city." To my surprise, she quickly agreed. I had only said that half seriously anyway. We both love our Vista Park neighborhood and we were both excited about being "pioneers" in the area. We've never built a house and we were looking forward to picking out everything from faucets to flooring.

But the reality of the situation was beginning to wear us down. Life in a FEMA Travel Trailer was quickly going from an exciting adventure to an annoying inconvenience. As the dream of rebuilding failed to break ground, the willingness to persevere in the little white box drained away.

So we decided to look. We decided we should see what was available on the market and at what price. We hooked up with a Realtor and started looking at the listings. It looked promising.

My major concern was with the funding. Up until now, we had been approved for a loan with SBA (Small Business Association) and a grant from Road Home based on our plan to rebuild. I pulled out the Road Home paperwork and read the fine print. According to their program, we had the option to relocate anywhere in Louisiana.

There were some differences in the options. It turns out the only difference money-wise is that we would not be eligible for mitigation money, which I was not sure we would actually get anyway because of arcane rules that barred "duplication of benefits" and problems with funding the program.

But if we were to rebuild on our land, we would get the grant money AND keep the property, whereas if we relocated, even if just right next door, we would be required to surrender our property in order to receive the same grant money. That certainly required some analysis, and it makes one wonder if the purpose of the Road Home program is to help us build better, stronger, smarter, or, if the goal is to hook people into staying in the same, flood-threatened locations. I have my own opinion on that topic.

I called Road Home and they said, "Just sign and send in a revised form indicating that you want to change from Option 1 to Option 2." Sounded simple, but anyone who knows anything about Road Home knows how impossible it is for anything connected to Road Home to be simple. Without going into all the boring details, we had already been waiting a few months for our closing. I knew that switching gears would be a problem no matter how optimistic their telephone answering center reps sounded.

I also called SBA and I was told, "Not a problem! You're already approved for a disaster assistance loan." But if I buy instead of build, does that change the dollar amount? And what are the rules? Am I required to buy a house that is exactly the same size in number or rooms, or square feet? Can I buy a double if I find one in our price range? Is there any penalty for buying a house in a flood zone, or an incentive to buy outside of a flood zone?

The answer was, again, simple. I was told there were not many rules. "Just find a house you want to buy and send in your purchase agreement and we'll review it." Those nice people at SBA just wanted us to get back into a comparable house as soon as possible. I expressed reservations. There must be some rules. I did not want to waste my time looking at houses that SBA would not approve. I did not want to waste my time and the time of everyone else involved by putting a house under contract only to be told that the house would not be approved for some abstruse reason. I wanted to know the rules up front.

"Don't worry," I was told, "You're pre-approved."

In July, my Darling Wife and I found a house we loved on the relative high ground of Esplanade Ridge. It was a two-story house with an upstairs apartment and a downstairs apartment. The house did not flood in Katrina, and we decided we'd like to buy it and live upstairs. We made an offer and it was accepted.

In mid July we forwarded the signed purchase agreement to SBA and Road Home. And that's when we entered bureaucratic hell.

Part four: Closing in on an option

Wednesday, January 09, 2008

Part two: Alternatives

A continuation of the How's the house coming? saga...

I asked around for a recommendation for a contractor, but there wasn't much positive response. A lot of, "Whatever you do, stay away from this guy." I talked to some contractors but I was not impressed with what I heard.

One day earlier this year the Home Builders Association of New Orleans was hosting an open house. I found a list of homes online and saw that several were on Canal Boulevard not too far from my flooded part of the city. I walked through several homes, most of which were modular.

They didn't look too bad, those modular houses. At one they had the plans for the house right there on the kitchen counter. I looked over the framing and foundation plans and I liked what I saw. They were using 2x6 framing for exterior walls which added strength and insulation value. The modular home building process benefits from factory construction at a faraway location that is not subject to bad weather, locally inflated material costs, shortage of local trades, and other issues that made new home construction so difficult here.

Their standard installation places houses 4 feet off the ground--good but not great. I asked if they could go higher and they said, "Sure!"

I arranged a second meeting with the modular people and we went over some of the options. They gave me a catalogue of floor plans and a list of options. My Darling Wife and I just shopped for the features we wanted as if we were ordering from a menu. Again, we selected a plan with 3 bedrooms, two and half baths with a total of 2,210 square feet of living area. The bare-walls base price was quoted at $269,410, but we were hopeful we could work out a deal.

A day or so later, they gave me their quotation.

I hope you're sitting down.

Because the bottom line price was $409,000.

Again, that's house only. We already own the land.

This price was a little better in that it did include a sidewalk and driveway, appliances and other items the first builder had left off. But the price was still too high. The contractor said going up the additional height was the main culprit. Although the base price included piles and piers to go up 4 feet, the cost to add 6 feet more was an additional $60,000. No way. No way that it could cost that much. No way that we could afford that much. No way that I would spend that much on a new house even if I had it.

Oh sure, there's always room to negotiate. But I also suspected that no matter what cost was agreed upon, the final price would always be higher. I've heard dozens of stories from people who hired contractors to do specific work at a fixed price only to find that it costs more.

Before it was over, I met with several home builders. I've only detailed one of them here, but they all ended with no success. We had just about run out of alternatives.

Part three: Switching gears

Monday, January 07, 2008

How's the house coming?

I get asked this a lot. It's one of those questions that is all too common in post-K New Orleans.

Another version: "Y'all back in ya house yet?"

The answer is simple and complicated. We have no house. What remained when the flood water was pumped out was not worth saving, especially since it was much too low for me to ever comfortably live in it again.

Regular readers of this blog know much of the long story of the past two years. We planned to have the house demolished right away. But then there was a fire, and so we delayed demolition until the insurance and fire departments had completed their investigations. And so we moved into a FEMA Travel Trailer so that I could be on-site as our new house was constructed. And then the fire department never did complete their investigation to my knowledge, but the insurance company finally relented after many months and settled the claim. And so we proceeded with the demolition of the house. And so we started working on plans to build a new house. And so I had sand placed on our vacant lot in anticipation of building.

I have not blogged about progress on the house for many months because there was little or nothing to report. Unless of course, you want to hear the story of ridiculously high construction estimates and frustration with trying to wrench a simple loan from SBA and the promised grant from Road Home. Unless of course, you like those kinds of stories, you should stop reading now.

And because it is a long and convoluted story I will post it in several parts.

For those of you still with me, here is the full answer to, "How's the house coming?"

Part one: Concrete-filled blockhead

I had two criteria for the new house: elevated and strong. My Darling Wife wanted it to be beautiful, too. We started shopping around for a builder almost immediately after the hurricane and found one who specialized in concrete-filled polystyrene block construction. The exterior walls would be built of foam blocks that resemble Legos. Reinforcing steel and concrete would fill the voids. Interior walls and the roof would be conventional wood frame construction. The ground level would be mostly open and the first living level would be 12 feet above the ground.

We first talked to this builder in late 2005. We saw some homes he had built in Slidell, homes that had withstood wind and waves. We were impressed. With a stucco finish these homes were are beautiful as conventional framing but were stronger and energy efficient, too. He told us the typical cost for the houses he builds was about $115 per square foot. We wanted a raised house so I told my Darling Wife that we should budget a little more--say $125 per square foot. We wanted a house with about 2,000 square feet, so we set our sights on $250,000.

Now keep in mind that we already own the land--this is all house I'm talking about here. Thanks to flood insurance we were able to pay off our mortgage with a few nickels to spare, so I thought we were in good financial shape as we made plans to rebuild. With help from Road Home and an SBA Disaster Assistance loan it was completely feasible. I did not worry for one minute about the money.

For comparison, we first moved into Vista Park for about $150,000 in 1999--land, house and a shed in the back. But we understood and accepted the reality that Katrina and pressure on the building trades along with my determination to build a wind and flood resistant house were going to drive prices up

The builder recommended that we get house plans drawn up by a person who understood the concrete-filled block construction details. We dutifully hired her and set about planning our new house. It had three bedrooms, two and half baths, front and rear porches and a paved ground level that was open on three sides. It had about 2,200 square feet of living space. It took a while for the lady to complete the plans because she was very busy, but we stuck with her because of the builder's recommendation. We brought the plans to the builder and discussed our vision for our new home.

A few days later I received an email with a spreadsheet attachment. There were a lot of line items and estimated quantities spread out over several pages until I came to the bottom line.

I hope you're sitting down.

Because the bottom line price was $434,640.

Dumbfounded, I checked the numbers and I checked the math in the spreadsheet. Yes, it added up. And to add insult to injury, I noticed that some line items had zero allotted--things like appliances, Builder's Risk Insurance, storm shutters, a site survey, sidewalks and driveways. The builder's estimate confirmed the total living area of 2,184 square feet, net cost $199 per square foot. Add in the porches and garage and it comes to 2,883 square feet, net cost $151 per square foot. Again, this is for the house ONLY. We already own the land.

I called the contractor to discuss as calmly as one can under such circumstances. He told me that was just his "first run through" of the numbers and he promised to go over it again.

A few days later and another spreadsheet arrived by email. This time the price was a little under $400,000.

I spoke to the contractor again. "Don't panic," he told me. "There's still some wiggle room in those numbers."

I asked him, "About 40 percent wiggle room? Because that's what it needs to be."

After a long phone call, we parted company, and I realized that after many months of waiting, planning, and paying for a set of house plans, we had accomplished nothing but spend several months in a FEMA Travel Trailer. Our dream of a sturdy concrete-filled block home was pulverized leaving me feeling like a total blockhead.

Part two: Alternatives

Friday, January 04, 2008

Best blog of 2007

It was posted on The Wet Bank Guide a week ago, the sweet story of Mark's spiritual reconnection with New Orleans.

"Next to me my wife listened and watched as Braud wiped at his eyes between singing and blowing. This Pentecost of the lost reached down and touched her as well. She told me later that in that moment she understood my earlier announcement that I wanted to, no needed to go home to New Orleans, to a city at that time more than still half underwater and in near complete ruin. She understood that my past light-hearted remarks about emigrating to American from New Orleans were not a joke but a way of saying how much I needed to be home, that home was more than just where she and I and the kids lived but a very specific and irreplaceable point on the map. She had watched me the preceding weeks glued to the television and computer, sleeping maybe five hours a night and slowly unraveling in grief, and that night in Fargo saw that grief paraded on stage.

"She told me it was then she knew that she had to let me come home."

Read it all now.