Clawback backoff

No relief: Adding insult to injury, the Federal Emergency Management Agency is now demanding that some Sandy victims give back relief money they received after the storm.
Photo by Paul Martinka

The feds have finally agreed to stand down on their shake down of Sandy victims.

Under pressure from lawmakers, the federal Department of Housing and Urban Development has dropped its demand to take back relief funds from most Sandy victims who had received cash from the Federal Emergency Management Agency.

Those who received less than $20,000 from the disaster-relief agency will not be forced to reimburse other aid awarded by the government, as is normally required under federal laws against the duplication of benefits.

“These are not the people the feds should be knocking on the door of to pay up. They did not profit from this disaster and many of them are still paying for home repairs and will be for a long, long time,” said Sen. Charles Schumer (D–Park Slope), who penned a letter in July along with Sen. Kristen Gillibrand (D–New York) asking the government to cease and desist its recoupment efforts.

The federal clawback scheme arose following bombshell reports that the Federal Emergency Management Agency turned a blind eye to fraud that allowed insurance companies in the National Flood Insurance Program to shortchange policyholders.

Homeowners shafted by their insurance companies turned to recovery grants being offered through NY Rising and Build it Back — both funded by the federal government — to make vital repairs in the aftermath of the storm.

But as homeowners finally began receiving their long-denied flood-insurance claims, the federal housing agency sought to take advantage of laws against duplication of benefits to demand a chunk of the cash owed to Sandy victims in the fraud settlements.

The recoupment laws require that anyone who has agreed to a settlement must use the money first to repay not only the grants received through the recovery programs, but also Small Business Administration loans — which one local attorney said is patently unfair.

“The SBA loan is not a grant,” said Mitchell Shpelfogel, who represents nearly four dozen clients who sued their insurance companies for the fraud. “It’s a low-interest loan. I have clients who are happy to pay that loan back under the loan’s original terms, and get the funds they are entitled to under their policy.”

Fortunately, the agency can wave the recoupment laws at its discretion, and the housing department has folded under mounting pressure from elected officials. In addition to Schumer and Gillibrand’s letter, Mayor DeBlasio and Councilman Mark Treyger (D–Coney Island) sent their own letter to the housing department over the summer.

“We appreciate HUD heeding our calls and taking this important step,” said DeBlasio.

Not all grant recipients will be exempt from the claw back, and anyone who received more than $20,000 — about 25-percent of people affected by the duplication-of-benefits law — are still required to file assessment with the housing department.

In response to the housing department’s decision, the Federal Emergency Management Agency has decided to extend until Oct. 16 the deadline for filing a claim through the agency’s Sandy Claims Review Process, so that homeowners who hesitated to file for fear of losing their NY Rising or Build it Back grant funds.

Reach reporter Colin Mixson at cmixson@cnglocal.com or by calling (718) 260-4505.

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