David Hammer / Eyewitness News
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NEWORLEANS- Wednesday, the HUD Inspector General came out with an eye-popping report. It said that 85 percent of homeowners who got federal elevation grants through the Road Home hadn't proved that they ever lifted their homes.

Click to read the audit

But that only tells half the story.

The HUD inspector was only concerned with the fate of $900 million that came from the federal Department of Housing and Urban Development for elevation grants through the Road Home program.

There's a whole other $750 million that went to about half of those same homeowners through a separate federal agency, FEMA. It's the Hazard Mitigation program.

A lack of clarity in the distribution of the HUD money, and delays in getting the additional FEMA money out the door, explain why the inspector general is now questioning what 24,000 homeowners have done with the aid.

The years after Hurricane Katrina were a struggle for many homeowners. They waited years for Road Home money, only to face confusing rules changes and rising construction costs.

In New Orleans, most of them got a portion of their Road Home grants in 2008 and 2009 -- $30,000 incentive grants to help them elevate their houses to safer levels. Homeowners signed covenants agreeing to elevate their homes within three years.

'And of course, we all know that elevation in our community costs vastly more than $30,000 for some people. So some people may have used a portion of that money to begin to try to elevate, they quickly learned that it was not enough.'

Most people were stuck. In 2010, HUD's Inspector General checked a sample of about 200 homes that got the grants and 95 percent of them had not elevated.

The state had a remedy. It had $1.2 billion in Hazard Mitigation grants from FEMA, but it was fighting with the agency over how to use it. When Gov. Bobby Jindal took office in 2008, FEMA was threatening to take the money back. The new state administration cobbled together a $750 million home elevation program and promised to pay the grants as work was completed, not in a lump sum like the Road Home.

But that program didn't start paying out in earnest until 2011. And then, it was beset by fraud and abuse, like dozens of abandoned homes I found that were lifted at taxpayer expense, or program officials convicted of selling names of homeowners to contractors at $10,000 a pop.

The waste was so bad, FEMA cut off the state Hazard Mitigation elevation funding in 2012.

But now, that troubled FEMA program is the state's last hope to make sure the $700 million the HUD IG is questioning gets used properly.

The state and the IG relied on homeowners' self-reporting to determine if they had complied with program rules. Of the 28,000 homeowners surveyed 24,000 were not able to prove they fully elevated.

Of those, the state expects 7,000 to 8,000 to become compliant using the additional Hazard Mitigation money.

In fact, Pat Forbes, executive director of the state Office of Community Development, said that after the IG finished his review last fall, 1,092 of the 'noncompliant' homeowners finished their elevations with Hazard Mitigation funds.

'We're working with homeowners everyday to get them in compliance,' Forbes said. 'Of the 15,027 referenced in the report as noncompliant, 8,343 of those had not responded to a letter, meaning that their compliance status had not yet been determined.'

The HUD IG wants the state to be more aggressive in taking back some grant money. But the state still hopes to work things out other ways. So far, it's only collected $2.7 million from 490 recipients.

'We have been in discussions with HUD on designing programs that will assist some of these homeowners who have not yet completed their construction, and we are working aggressively with HUD to ensure that homeowners get in compliance,' Forbes said.

The big hold-up for many in the Hazard Mitigation program is that they have to use the $30,000 they got years ago from the Road Home grants before they can qualify for any of the FEMA aid -- and a lot of them have spent it already. Some to enrich themselves; but more often on actually rebuilding their homes because the Road Home rebuilding grants were not sufficient for the simple repair work.

Most who spent the money ended up signing promissory notes with shoring companies saying they'd pay it back over time. But others, like Carrie Merrill of New Orleans East, don't even have enough money to do that.

'No, I haven't tried to do that,' Merrill said. 'I live on a fixed income. I was hurt at my last job. And I just don't have the money.'

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