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Feds abandon clawbacks on Sandy payments, extend claims deadline

Flooding and debris caused by the storm surge

Flooding and debris caused by the storm surge from superstorm Sandy in Mastic Beach on Oct. 31, 2012. Credit: Amanda Voisard

Federal officials have agreed to abandon plans to claw back disaster recovery grants from thousands of superstorm Sandy victims who receive larger flood insurance settlements through the government's effort to review disputed claims.

The U.S. Department of Housing and Urban Development said it plans to announce Wednesday that it will allow storm victims to keep up to $20,000 in rebuilding grants -- even if they receive additional insurance proceeds. The move comes after weeks of lobbying by Sen. Chuck Schumer (D-N.Y.) and others.

"These families have suffered enough and shouldn't be further victimized through no fault of their own," Harriet Tregoning, HUD's principal deputy assistant secretary for community planning and development, said in a statement.

Meanwhile, Schumer said in an interview he had reached a deal with the Federal Emergency Management Agency to push back the deadline for storm victims to reopen their flood insurance claims until Oct. 15. The initial deadline was Tuesday.

A FEMA spokesman said, "We hope by extending the deadline we are addressing any remaining concerns some may have about entering the claims review process."

Advocates for storm victims welcomed both developments, saying they could bring crucial relief to thousands of homeowners who have struggled for nearly three years to recover from the 2012 storm.

"It's great news for Sandy victims," said Schumer. "It hopefully will set a precedent for future recoveries."

For months, storm victims have said they feared the notion that HUD could claw back disaster relief grants from anyone who received additional insurance payouts. Lawyers have cited the issue as the chief reason so many homeowners have declined FEMA's offer to review their flood claims.

The grants, part of the $50.5 billion Sandy relief package approved in 2013, were distributed through the state recovery program, New York Rising, and provided up to $400,000 to rebuild.

Yet, federal law prohibits disaster victims from receiving government assistance for expenses already covered by insurance, loans or other sources. In other words, it is illegal for storm victims to be paid twice with federal funds for the same repair job.

Say, for example, that a homeowner receives a $10,000 federal grant to replace a waterlogged floor. Later, the same homeowner appeals a flood insurance claim and nets another $10,000 to fix the floor. Under law, he or she would be obliged to return the grant.

Storm victims, however, have argued that the grants and insurance settlements were based on estimates that didn't match the cost of rebuilding on Long Island. Many of those who were supposedly paid twice for the same repair still came up short, they said.

Tregoning said HUD has the discretion to balance the hardships of storm victims against the need to recoup federal funds. In the end, she said, the agency determined that wholesale clawbacks were not worth the cost. "We have a larger responsibility to facilitate recovery, not to hinder it just because these families didn't receive sufficient flood insurance payments," Tregoning said.

FEMA, which runs the National Flood Insurance Program, agreed to review up to 142,000 flood insurance claims after thousands of storm victims said they were underpaid and, in some cases, intentionally defrauded. The allegations have led to a criminal probe and the departure of two top flood insurance officials.

Nearly 12,700 policyholders, or about 9 percent of those eligible, have signed up to have their claims reopened. After completing 715 reviews, the agency has found nearly 65 percent of homeowners were underpaid by an average of about $16,000. Nearly 75 percent of those received less than $20,000, which is HUD's threshold to claw back rebuilding grants.

Homeowners who receive more than that amount may still be required to repay any grants above $20,000. But they will have the opportunity, HUD said, to demonstrate that both payments were necessary to pay the cost of repairs.

Melissa Luckman, who directs the Disaster Relief Clinic at Touro Law School in Central Islip, said most storm victims would welcome the news. But there may be resentment, she said, from the hundreds of homeowners who reopened their flood claims and have paid attorneys to guard against having to repay grants.

"If they had told people this when the process first opened," she said, "a lot of people would have done this process on their own and not hired lawyers."

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