“Many victims of Sandy were in the midst of major home repairs and had no choice but to reject these offered SBA loans because they could not take on any more debt,” Schumer said. “This policy will punish these homeowners, and HUD should do everything in its power to make sure these individuals are eligible for additional federal assistance.”

Penalized for doing the right thing

The state was given $1.7 billion for the NY Rising program, $838 million of which is to be allocated to housing. Residents said they had heard from program representatives that they could receive as much as $150,000 if they qualified.

Kevin Reilly is among the many Long Beach residents who fear they will lose critical funding if the SBA regulation is not overturned. Reilly said he was approved for an $88,000 loan, but declined to take it. “We didn’t take that money, and now we’re being held accountable for it, which is a little scary,” he said.

Reilly said that between insurance coverage and the help of family and friends, he came up with enough money to repair his home. By the time the SBA loan was approved, the work was almost done, and he did not want to take on the extra debt. “It was coming at a time when it wouldn’t be helpful,” he said.

Weeks later, however, Reilly received a letter from the city stating that his house was 57 percent damaged. Suddenly, he wasn’t as far along in his repairs as he thought, and was faced with the prospect of either raising his house above the base flood elevation or paying much larger flood insurance premiums.

Reilly said he is relying on grant assistance, although the $88,000 SBA loan will be subtracted from his grant, most likely leaving him without enough money to raise his home. “That’s going to create a tremendous gap in what we will be able to do…,” he said. “A lot of us are depending on that funding to be able to come into FEMA compliance.”

The situation is even more frustrating, Reilly added, because FEMA directed flood victims to apply for SBA loans after the storm, whether or not they wanted them. He said he was told that if he didn’t apply, he would be ineligible for other funding in the future. Ironically, the outcome was the exact opposite. “It’s like a penalty for listening to FEMA,” he said.