Legislation Will Establish a Clear Process to Protect Homeowners from Financially Ruinous Payback Demands by State, Mediate Funding Disputes
The full Assembly on Thursday unanimously approved legislation sponsored by Assembly Democrats Reed Gusciora, Elizabeth Maher Muoio and Tim Eustace establishing protections for struggling Superstorm Sandy victims who are forced to repay rebuilding funds that were already disbursed to them, an issue that came to light during a fall legislative hearing Gusciora held on the anniversary of the historic storm.
The committee’s hearing revealed that requests for repayment, or “clawbacks” as they are known, were common during the state’s well-documented failure to administer a majority of the $1.1 billion in federal HUD rebuilding funds. The Department of Community Affairs (DCA) would issue letters to homeowners whom it determined received too much aid under the programs, outlining how much they are expected to pay back, but without providing individuals with any other recourse.
“One of the most disturbing things we heard during our fall hearing on the anniversary of Sandy was that some individuals who had received state aid in order to rebuild their lives and homes in the wake of this terrible storm, were being asked to pay back some or all of the money without any clear process for mediation,” said Gusciora (D-Mercer/Hunterdon), who chairs the Regulatory Oversight, Federal Relations, and Reform Committee. “This bill is about making sure that both the state and homeowners have a defined, institutional process to resolve their disputes so that already beleaguered homeowners aren’t subjected to more nightmares. The misguided and financially ruinous process currently in place ends with the passage of this bill.”
To address the problem, the legislation (A-4784) advanced today delineates a clear process by which the DCA will be required to notify any future homeowners to whom they over-disbursed. Furthermore, it would establish clear options for repayment, set limits on maximum monthly repayments based on income, and allow DCA to consider hardship conditions in the collection of debts. It also creates an appeals process by which individuals can petition DCA to cancel their debts.
“Imagine getting a letter, while you’re in the midst of trying to rebuild your life, that indicates you owe the state tens of thousands of dollars you don’t have,” said Muoio (D-Mercer/Hunterdon). “Not only is it terrifying, but when there’s no explanation and little recourse provided, it becomes a nightmare. No one who accepted aid in good faith should have to live with that fear.”
“It’s infuriating that nearly five years after Sandy hit, we are still trying to clean up the administrative mess created by the state’s mishandling of funding disbursement,” said Eustace (D-Bergen/Passaic). “This bill will establish a fair process for the state to be repaid with the ultimately goal of ensuring that repayment doesn’t financially ruin homeowners and that those who continue to suffer extreme hardship as a result of the storm are protected.”
The bill establishes specific procedures to be used by DCA as it attempts to recover overpayments in funding given by the Reconstruction, Rehabilitation, Elevation and Mitigation (RREM), and Low-to-Moderate Income (LMI) Homeowners Rebuilding Programs in the aftermath of the historic 2012 storm.
Specifically, the bill requires the DCA to notify a Sandy-impacted homeowner when it is determined that they have received an overpayment of RREM or LMI funds that must be repaid to the state. The notice must provide information about the type of debt owed, an accounting of all funds disbursed to the Sandy-impacted homeowner, an explanation of a Sandy-impacted homeowner’s rights; information on how a Sandy-impacted homeowner may appeal the department’s determination; information on options for the repayment of debt; and information on any interest and penalties that may accrue if the debt is not paid within the period permitted by the bill.
If a Sandy-impacted homeowner does not have sufficient assets to immediately repay the debt in full, they may apply for a repayment plan. Eligibility for a repayment plan is based on a DCA review of the homeowner’s assets, income and reasonable living expenses to determine whether they can pay a portion of the debt with an initial payment and make payments for the remainder of the debt in regular installments.
The bill also requires DCA to establish two payment plans that allow for repayment of the debt over a period of 36 months to 60 months, depending on whether a Sandy-impacted homeowner’s net disposable income is sufficient to pay the debt on time. The maximum payment under a payment plan cannot be greater than one-half of one percent of a Sandy-impacted homeowner’s monthly income, or six percent of their monthly income, whichever is lesser.
If a homeowner does not have sufficient income, assets, or resources to make payments, the debt, except for any portion that a Sandy-impacted homeowner can pay through disposable assets, will be compromised and considered paid in full. When determining the ability of a Sandy-impacted homeowner to repay the debt, the department may consider the homeowner’s age, health, financial hardship, and other extraordinary circumstances as determined by the commissioner.
The bill also permits a homeowner to appeal, in writing, the department’s determination that they received an over-disbursement of RREM or LMI funds. A homeowner may also appeal, in writing, the department’s determination that they are ineligible for either a payment plan or a compromise of the debt.
The legislation now heads to the Senate for consideration.