Some Northland homeowners struggle months after floodThe financial impact of disasters such as the June 2012 flooding typically hit later, as homeowners grapple with dwindling resources, mounting debt and nearing foreclosure.
By: Candace Renalls, Duluth News Tribune
Picture a balloon being blown up, getting bigger and bigger.
Eventually it explodes.
That’s how Dan Williams of Lutheran Social Service describes the burgeoning financial crisis for a growing number of victims of last June’s flood in the Northland.
The financial impact of such disasters typically hits later, as homeowners grapple with dwindling resources, mounting debt and nearing foreclosure.
Increasingly, a portion of flood victims are reaching that point.
Without flood insurance or flood-relief loans, they may have skipped mortgage payments to pay for emergency cleanup and repairs. Some lost time from work and exhausted their savings. They may have paid for repairs with credit cards or put off reconstruction they couldn’t afford.
They’re running out of options.
So far, at least 50 flood victims have sought the free financial counseling offered by Lutheran Social Service, with 30 clients in January and February alone.
And the numbers are growing. March numbers already are surpassing February's, according to Williams, the program’s director.
A recent survey of flood victims found that most owners of the 1,900 homes that had significant damage are doing comparatively well. Forty percent have completed repairs; 25 percent have repairs pending as they wait for financing, contractors or state relief loans to close.
But the owners of up to 200 flood-damaged homes are facing severe financial hardship.
That’s in addition to the 7 percent — or approximately 130 homes — that won’t be rebuilt as their owners wait for buyouts, according to the survey by Carlton County and Flood Homes With Hope, a network of government and nonprofits involved in the local flood recovery efforts.
The 40 to 50 homeowners who have completed the repairs or started repairs and now realize they can’t pay for their homes anymore are of particular concern, said Drew Digby, Carlton County’s special projects and long-term recovery manager.
“They face a lot of difficulty,” he said. “They may have tried to put all repairs on credit cards or just did it and realized they didn’t pay other bills because of it.”
They may have lost their jobs, had hours reduced or are also dealing with health issues, he said.
While flood victims were encouraged to apply for federal or state flood-relief loans, millions of dollars in loan money went unclaimed. Some people didn’t know about the forgivable loans, some haven’t applied because they knew they couldn’t pay them back and others were waiting to see if the government would buy their property.
The local survey further found that some didn’t qualify or accept loans because of health or financial conditions. And many older residents who qualified for loans didn’t accept them because they feared it would financially prevent them from moving to assisted living within 10 years. Deadlines for applying for the loans have now passed.
Those facing financial difficulty are encouraged to work with professional financial counselors, Digby said.
So how can financial counselors help?
Williams said they can help people budget and come up with a financial game plan. They can help flood victims negotiate a payment plan with creditors and reduce their interest rates. They can help those who are falling behind on their income taxes. They can help people work out a mortgage loan modification or advise them of their rights in the foreclosure process.
“We can work directly with mortgage companies and make it much more likely that someone is going to get their mortgage situation resolved,” he said.
A lot of places provide financial counseling, some for a fee, but the biggest provider in the region is Lutheran Social Service, Digby noted.
While about 130 homes won’t be rebuilt, largely because rules prohibit the rebuilding of homes in a floodway or with more than 50 percent damage, the repercussions of up to 200 more homes being abandoned is far-reaching, affecting property tax rolls and weakening the community, Digby said.
“A lot of them have made emergency repairs but have their homes stripped bare,” he said. “Some may just walk away from their houses, even though they may have done some work.”