In a little-known rule that one top state official derided as "foolishness," Road Home applicants who take a buyout, but agree to buy a new home in Louisiana, get nailed with a 40 percent penalty unless they buy the new house within 90 days.
Buried deep in reams of grant closing documents, the time limit apparently escaped the notice of even senior state officials, who variously disowned and criticized the rule, which affects about 4,500 grant applicants.
Applicants just now finding out about the rules as they go to grant closings, meanwhile, fumed over the unwelcome surprise.
Road Home has officially become the most sadistic reality game show ever.
Contestants on the Road Home Reality Game show will have 90 days to buy a house in the post-Katrina New Orleans market featuring these kinds of insurance issues, limited access to inspectors, suspicious real estate agents and mortgage brokers, and the possibility of another catastrophic Federal Flood, under the threat of losing 40 percent of their "grant" (which, by the way, they may also have to pay taxes on.. or maybe still pay back their SBA loan with).
Okay so it's tough. Our plucky contestants, however, are not undeterred. Like the "Survivors" they are, they're still ready to fight and scratch and play for that cash. But wait.. there's a catch.
The few grant recipients who had heard about the so-called "60/40 rule" got another surprise from a quirk in the calculation of "60 percent": the program calculates the percentage based on the home's value, not the final grant award. That makes a huge difference.
For instance, let's say a homeowner with a $200,000 home who got $100,000 in insurance proceeds is eligible for a $100,000 Road Home buyout. If the state applied the 40 percent penalty to the final award, the homeowner would collect $60,000 after the penalty.
But instead, the state takes the 40 penalty off the home's appraised value. In the same case, the state would apply the 40 percent to a value of $200,000, leaving $120,000 -- then subtract the insurance proceeds of $100,000, making the first installment of the grant just $20,000.
Holy crap, Howie! That damn banker is at it again. And you thought it was interesting enough already. How many contestants will defeat the Road Home obstacle course before the money runs out? Will all this excitement necessitate sending the once and future governors to "charm school"? And just whose cuisine will reign supreme? I know we all can't wait for the next exciting plot twist.
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