Guest Post: Bank Of North Dakota’s Rules For Flood Recovery Loans Are Seriously Flawed
The legislature passed a $50 million dollar re-builders loan program as part of the flood response disaster bill during special session. It was supposed to setup a loan program to help people repair their homes and stay in the community. The Bank of North Dakota was given the task of writing up rules for the program, and there are major problems with the rules they’ve written.
The program allows homeowners to apply for a loan up to $30,000 at 1% for maximum of 20 years with payments starting after 2 years. Pretty simple right? Not exactly.
The rules say 20% of the loan may be used for debt service, debt retirement, etc., which is a rule that came from the legislature. The rules also say 80% of the loan can be used for flood damage not repaired as of November 14, 2011 or about 5 months after the flood occurred. The 80% was in legislation, but the restrictive date was not.
Why do we care about when the damages were repaired? Shouldn’t we be concerned that they were repaired and people are staying in the community? What about the person who hasn’t paid the contractor in full yet, do they qualify for this loan program since most the work is already done? From my reading of the rules, I don’t think that person would quality.
The rules also say that the loans can only cover repairs not paid for by flood insurance or SBA loans. By saying that repairs already covered by SBA loans, which most flood victims have received, it would seem that you disqualify borrowers who took those loans.
The Bank of North Dakota program also requires flood insurance to be purchased (SBA does also) even though the loan isn’t in anyway tied to the property, but rather a personal and unsecured loan. In fact during the special session in which this program was authorized an amendment was offered by a Senator that would’ve required flood insurance for these loans, but it failed in committee. So the Bank of North Dakota is pushing requirements through its rules that the legislature specifically declined to include.
There are more problems too. The BND’s rules exclude clean out expenses and landscaping too from coverage. Isn’t this part of the recovery process and making a home livable? I read this to mean the government knows more about what you need then the homeowner, which isn’t right. If a person wants to put some grass seed down so their children can play in the yard next summer should government tell them sorry we can’t help?
The State of North Dakota isn’t FEMA, SBA or a Federal Government agency and we should have a more common-sense program for flood relief. To me this program isn’t simple, but rather complex and exclusionary, typical of the Federal Government, but not the great State of North Dakota.
Who is going to determine which expenses the loan can be used for? I believe it will be the local banks and credit unions which are doing and servicing the loans for a small fee and are happy to do so I might add. Is the government turning the local banks and credit unions into the bad guys by having them tell homeowners they can’t get a loan because they started their home repairs at the wrong time? Or because they’re using the loan proceeds on the wrong sort of “not approved” recovery expense?
Many homeowners have made substantial repairs their homes or are still in the process of doing so and these rules are excluding these people. The government, in its great wisdom, is picking winners and losers with these unfair discriminatory rules.
When I voted for the disaster package I didn’t vote to exclude anyone from the loan program. I think the Bank of North Dakota and the other agencies which crafted the “rules” to this loan program dropped the ball and didn’t put together a complete program that can be used by all.
Shouldn’t the goal of the program be to use the full $50 million and make a big impact on the communities hurt by floods? They seemed to be concerned about making sure they don’t lend out the full amount authorized and that the money goes to those who they determine “need” it. If the money gets all lent out couldn’t the Bank of North Dakota simply ask for more authority next legislative session or go to the emergency commission and/or budget section with the request before session? I believe the answer is yes. I don’t see my fellow legislators turning down such a request.
Rep. Roscoe Streyle is a Republican representing District 3 in North Dakota’s State Assembly. He is the Director of Information Systems & Security at United Community Bank of North Dakota in Minot and is also a restaurant owner.
Tags: bank of north dakota, flooding, North Dakota News
