Hurricane Evacuees COME HOME With the Help of Cincinnati FHLBank

Before this fall, Charles and Gladys Duggan of Biloxi, Miss., had never heard of the Federal Home Loan Bank of Cincinnati. But, since Hurricane Katrina washed out their home in August, a lot has changed for the Duggans, and the FHLBank is helping rebuild their lives.

In the wake of last year's record-breaking hurricane season, the FHLBank created a $15 million "New Neighbors" fund to create permanent housing for hurricane evacuees, offering grants of $20,000 to home buyers. That money will help the Duggans buy a condo in Florence, Ky., outside Cincinnati. "It was a miracle to find out about that $20,000," Gladys Duggan said.

The FHLBank of Cincinnati's New Neighbors program is among the largest corporate cash contributions to help 2005's hurricane victims. While many corporate programs were aimed at immediate relief-giving to the American Red Cross or providing clothing and drinking water, for example-the FHLBank's effort took a longer view, said David Hehman, president and chief executive officer of the FHLBank.

"The issue was these people are going to need homes, places to live, over the next several years," Hehman said. Creation of the fund "was viewed as a longer-term response, as opposed to the initial responses with food, supplies, and water."

The FHLBank's district of Ohio, Kentucky, and Tennessee has seen a deluge of evacuees from the hurricanes-upwards of 40,000 by some estimates, with the bulk concentrated in the Memphis area and the rest of Tennessee. As Hehman, Chairman Charles "Bud" Koch, and the board of directors discussed how the FHLBank might help victims of the disaster, they decided to stick to what they knew best-housing.

The FHLBank's response was modeled after its Affordable Housing Program, through which more than S200 million in grants and loan subsidies have helped to create some 35,000 units of affordable housing since 1990. "We are uniquely qualified," Hehman said. "We have a successful AHP program, we have a great distribution system through our 745 members, and we felt we ought to piggyback on that in helping hurricane evacuees."

The FHLBank's board of directors unanimously approved the two-year, $15 million New Neighbors fund. The fund would award grants of $20,000 to homebuyers displaced by hurricanes Katrina, Rita, and Wilma, for purchase of homes up to $175,000 in value. It would also grant up to $20,000 per unit for rental housing for hurricane evacuees.

The FHLBank worked to spread the word about the New Neighbors program through a series of workshops conducted throughout the district in November. Some 200 lenders and housing specialists attended.

Jack Kenkel, president of Victory Community Bank in Fort Mitchell, Ky., owns a condominium in Gulf Shores, Ala., and saw first-hand the devastation caused there by Hurricane Ivan in 2004. When Katrina hit in August, Kenkel said he looked for ways to help victims find housing, and he attended a New Neighbors workshop in Cincinnati.

"Once I found out it was a simple process to qualify, I called local real estate agents and said 'go find somebody.' It wasn't a week later, they had two clients," he said.

One of them was the Duggans. Not a drop of floodwater had ever been in the Duggans' house in Biloxi, not even during Hurricane Camille, a Category 5 monster that ravaged Mississippi and Louisiana in 1969. The Duggans home sits 15 feet above sea level, and the living room floor is another two feet above that. With Hurricane Katrina headed their way last August, the Duggans planned to wait it out, as they did with every other storm the past 50 years. They made it through Camille-the worst ever-and believed they'd make it through this one.

But on the morning of August 29, with Katrina howling outside, Charles Duggans German shepherd was restless, pacing the living room. "I said 'why don't you sit down?' And I looked and I saw about an inch and a half of water with something floating in it," he said. "That's the first time I realized the water was coming in."

Within 20 minutes, the water was chest-high, pouring through doors and broken windows. Nearly everything the Duggans owned was submerged.

By dusk, the storm surge was back at sea, leaving behind busted homes and busted lives. Gladys Duggan said she found some of her belongings nearly two blocks away from her house. Four days later, the Duggans, who are retired and in their 70s, were on the first flight out of Jackson, Miss., with one suitcase of donated clothing and other items. They landed in Cincinnati, to stay with their son in nearby Richwood, Ky, and figure out what to do next.

The Duggans received $5,000 in insurance to cover the damage to their home in Biloxi, and $10,000 for a family cottage next door that had been lifted off its foundation by the storm surge. Gladys Duggan said she made up her mind not to return to Biloxi almost as soon as she left. "We're going to look for a house and just start over," she said. It was "sheer luck," she said, that they learned of the New Neighbors program through their real estate agent as they prepared to buy a condo.

Kenkel, of Victory Community Bank, said he's certain there are many more hurricane evacuees who could take advantage of the program, but don't believe they're able to buy a house. "People think there's no way they can buy a house, given that they've got no income, and they probably have negative net worth given what they owe on their old house," he said.

But bankers are trying to accommodate evacuees, if, for instance, their credit was good before the hurricanes and if they demonstrate an ability to pay their bills. "It's probably not the end of the world if you don't have a job and you have these problems with your current debt situation. It's not impossible to get your life changed around. There are workarounds," including the New Neighbors grants, he said.

Locating hurricane evacuees who could use the program has been challenging, said Carol Mount Peterson, senior vice president for housing and community investment at the FHLBank. Even five months after the hurricanes, many of those affected haven't decided where to settle. For many evacuees, their decision may rest on how soon they find jobs, or how quickly reconstruction progresses in hurricane-damaged areas, she said.

The Bank of Bartlett in Bartlett, Tenn., outside Memphis, has begun contacting local school districts to identify families that may need help relocating. Robert Byrd, chairman and CEO of the bank, said four districts in the Memphis area have 2,200 students who've relocated from hurricanestricken areas, representing about 1,100 families.

Mr. Byrd said the New Neighbors program "is significant help for people who need it."

So far, the program has funded 19 homebuyers and development of 20 rental units, to the tune of $780,000. The FHLBank's Peterson said the number of calls received from evacuees needing help with housing is increasing by the day. "People are beginning to emerge, but more slowly than we had anticipated," she said. "This will definitely be our major focus, at least for the next six months, finding where people are and what their intentions are," she said.