Bank of North Dakota May Offer Homeowners Low-Interest Disaster Loans

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A key provision in the North Dakota Legislature’s disaster aid bill would provide low-interest, unsecured loans of up to $30,000 for homeowners hit especially hard by this year’s flooding, the Bank of North Dakota’s president said on Nov. 8.

The measure would allow the state-owned bank to use up to $60 million for the loans, which would carry a 1 percent interest rate, bank President Eric Hardmeyer told lawmakers during a hearing.

Borrowers would not have to pay interest in the loan’s first year, and the homeowner’s local city or county could reduce its principal by up to 50 percent over five years, if the owner continued living in the home.

Most of the money would have to be used for rehabilitating a damaged home. Under the proposal, the bank would not take a mortgage on the property or have any collateral other than the borrower’s own guarantee of repayment.

“It also provides a little bit of money to make ends meet, to continue to make mortgage payments, car payments … any other kind of need that they may have in the short run,” Hardmeyer said.

The plan, called the Rebuilders Loan Program, came under scrutiny during the hearing by the North Dakota House and Senate appropriations committees on the disaster bill, which includes $569 million in spending over two years.

Of that sum, $235 million would come from federal flood-relief grants that have not been approved by Congress. The bill also includes $153 million in spending from the state’s general treasury.

Lawmakers questioned the proposal’s offer to reduce the principal of loans to property owners who continue living in their homes.

Rep. Jeff Delzer, R-Underwood, the chairman of the House Appropriations Committee, said it might run afoul of the North Dakota Constitution’s ban on taxpayer-financed gifts.

Residents of Barnes, Benson, Burleigh, McHenry, Morton, Ramsey, Renville, Richland and Ward counties would be eligible for the loans.

Those counties have been judged to have suffered the most extensive flood damage, and affected residents have been eligible to apply for Federal Emergency Management Agency grants of up to $30,200.

Hardmeyer said the loan program would piggyback on work already done by FEMA to determine whether homeowners were eligible for federal grants. He said recipients would not be able to borrow more than $30,000, but he added that North Dakotans who got smaller federal grants may be able to borrow more under the loan program.

Hardmeyer told lawmakers he was unsure about the loan demand the initiative would generate. More than 4,000 homes were flooded in Minot alone, and about 1,000 in Bismarck, Mandan and rural Burleigh and Morton counties, he said.

In an interview, he said the demand “will just depend on whether homeowners want to incur additional debt.”

“As it looks today, (loan demand) is going to be significant in certain areas of the state,” Hardmeyer said.