Low-cost disaster loans protect
homes -- and wallets
Editor's note: Project Impact
ended in 2001 and is no longer a source for loans. Bankrate.com
has information on other
ways you can get a loan to protect your home against natural
An ounce of prevention may be worth a pound of cure.
But $10,000 from a government-backed loan program might just save
Mae and Federal
Emergency Management Agency officials have teamed up to make
that kind of money available to borrowers through FEMA's Project
Impact initiative. As a result, homeowners in many states can
upgrade and retrofit their houses to withstand the wrath of hurricanes,
tornadoes, earthquakes and other natural disasters -- all at a reasonable
"There are two things that really make Project Impact
successful," says Barry Scanlon, who was FEMA's director of corporate
affairs when the program launched. "One is to make sure people are
aware and make the education as easy as possible for them, as simple
as possible. In addition to that, we want to give them some manner
of a financial incentive or motivation for why they should do this.
"There are a lot of good reasons why people should
be doing prevention."
Many homes threatened
Homeowners don't know how or when she'll strike, but Mother Nature
seems to enjoy wreaking havoc on them 12 months out of the year.
Floods and earthquakes hit regardless of the date. Tornadoes march
across the Midwest in the spring. Hurricanes and tropical storms
pound coastlines from Texas to Massachusetts between June and November.
While mortgage lenders require people to get homeowners
insurance so they can rebuild after a disaster, they don't say anything
about making properties damage-resistant in the first place. That
makes many people complacent, even with memories of Hurricane Andrew
in 1992. Homeowners who do want to make improvements can run into
trouble, too. Because they'll usually need home equity loans to
finance the work, they're at the mercy of contractors who may not
be qualified to do the work and banks that may charge an arm and
a leg for it anyway.
Against this backdrop, officials started brainstorming
in 1998 about ways to offer a more attractive financing option.
Some suggested taking a loan program designed to help people make
their homes more energy efficient and modifying it to promote disaster
preparedness. After further discussion, Fannie Mae and FEMA ran
with the idea and introduced the Project Impact Prevention Loan
for Florida residents.
"FEMA came to us to look at what kind of loan program
could be used to fund this kind of work," says Dave Carey, Fannie
Mae's director of marketing. "They're looking to get out in front
of these storms, really, and have people make improvements before
Plan being phased in
Currently, only residents of the Sunshine State, California, Georgia,
Oklahoma and Kansas can get financing through the new program. The
agencies plan to roll it out in other regions over time.
Officials eventually hope homeowners all around the
country will be able to use the program for everything from building
tornado-resistant safe rooms to reinforcing gabled roofs against
In the meantime, here's how a typical loan might work:
A homeowner would hear about it from media reports,
a flyer at a store such as Home Depot or an insert included with
his insurance statement. The borrower would then contact Fannie
Mae or FEMA, who have reviewed and certified various contractors
in the area, to get a list of professionals who can do the work.
Next, the customer would sit down with that contractor
and go over what needed to be done and how much it would cost. Once
that was completed, an application would be submitted by the contractor
and a rate and payment schedule would be set based upon the borrower's
credit history. After the contractor finished the work, the homeowner
would have to review and sign off on it. Only after that happened
would the professional be paid and the payment notices start showing
up at the borrower's house.
Backstage, two specialty lenders, Crown
Bank of Casselberry, Fla., and First
Financial Funding Group of Mission Viejo, Calif., would fund
the loan and sell it off to the agency in the same way a regular
lender sells conventional first mortgages into the secondary market.
"The good thing about it is the money stays with the
special purpose lender and it goes straight to the contractor once
the homeowner says they're satisfied with the work," says Scanlon
of FEMA. "You don't have any of the problems of the loans where
people don't end up doing the work."
Interest rates range are generally lower than what other unsecured
personal loans offer. To find out the latest rates offered in your
area as well as the average rate nationally, check the Bankrate.com's
personal loan rate table. People can choose to make fixed payments
for up to 10 years with Project Impact loans and borrow up to $20,000.
Unlike home equity products, borrowers won't enjoy
a tax deduction on the interest they pay. But they also won't have
to get a property appraisal, pay closing costs or face annual fees
like they might with a home equity line of credit.
"The idea would be to make it as simple as possible
for the contractor ... and as simple as possible for the homeowner,"
"We wanted to work with FEMA because we feel they
certainly have a good idea that if people can improve or fortify
their home so that it's not damaged in the first place, they're
already ahead of the game."
FEMA's dirt-cheap loans can disaster-proof
homes with anything from "safe rooms" to dirt. Here are some
of the areas where Project Impact Prevention Loans are available,
and what can be done with the money.
Strengthening roofs, especially
gabled ones, to handle hurricane-force winds by installing
extra wood bracing in the attic. Raising the home elevation
by putting it on stilts, as in the Keys, or jacking it up
and putting in more fill.
Construction of a "safe room,"
or reinforced bunker, that can withstand winds up to 250 mph
or more. Retrofitting a current room to meet similar specifications.
Raising the home elevation.
Earthquakes, floods, fires
Have the house bolted to its foundation.
Install flame-retardant shingles on the roof. Raise the home
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