Correcting the Record…
We were dismayed with one aspect of this past week’s reporting by Fox 61 about the recent CT Supreme Court ruling on the crumbling foundations issue.
What follows is an excerpt from the Fox 61 website:
“More than 70 Connecticut homeowners are suing their insurance company for the cost of crumbling foundation replacement. But now, after the ruling, they’ll likely drop those cases and turn to the state’s captive insurance company for help. The problem is that they’ve stopped accepting applications.”
What this paragraph implies is that these more than 70 homeowners, who have lost their battle with the commercial insurance industry, are now out of luck a second time, because they can’t now apply for assistance to CFSIC, because we are in a temporary suspension for the taking of new applications.
Not only is this mostly wrong…but what’s on CFSIC’s website, if this website had been consulted before those words had been written, would have made for a better and more accurate story.
Here are the facts:
1) The majority of homeowners who were in litigation with their insurers on an individual or collective basis are already CFSIC’s claimants.
2) Before we launched on January 10, 2019, we urged everyone then in litigation to apply, even though we would not be able to help them while they were in litigation, because we strongly suspected that the litigation would be decided in 2019.
3) The majority of those in litigation are in line in our system. We have a significant amount of data on them. We have their applications. We know the towns they live in. We know pretty much everything there is to know about the status of their impaired foundations. These claimants are “inactive” claimants, and many of them have been such since we opened our doors on January 10. They knew when they applied that they would be inactive until the litigation was settled or they withdrew from litigation…that was no surprise. They applied anyway, because we convinced them to get in line.
What does this mean? It means that even though we are in suspension, temporarily, for the taking of new applications, these litigants were already in line and are not new applicants.
It’s unfortunate that Fox 61 didn’t check its facts.
Here is what those inactive claimants now need to do:
Open up their documentation already received from ESIS ProClaim. Grab their claim number…again, already received from ESIS ProClaim (and which would have been issued to them the moment they originally applied, even though they were in litigation). Contact their adjuster in writing. Tell that adjuster that they are withdrawing from litigation.
They do this…we make their “inactive” claims…“active.” It’s that simple. It always was. This means that it is most likely that many of these homes will be funded for remediation by the end of 2020 or the beginning of 2021.
As we have indicated before in these pages, a crisis far greater than continued funding…is the crisis of misinformation.
Anyone taking the time to read our underwriting guidelines would already know what the process is if you are in litigation with an insurance company. It is spelled out clearly on this site.
Anyone taking a look at the infographics on this website could have, in five minutes, figured out the value of the statutory claim reserves we hold now for claimants in litigation.
Unfortunately, with the crumbling foundations crisis, and whether it’s about the public media or social media, it often seems to be about emphasizing the bad news.
We at CFSIC cannot control that tendency. What we can control are the facts, and over the past few days we have made a number of inactive claims active as a direct result of existing inactive claimants dropping their litigation. People who were in litigation are now coming forth and seeking our help because we already have their applications and their data. They are not new claimants. Their applications are not new applications.
The enemy of progress in the crumbling foundations crisis is rumor, misstated information, and lack of facts.
What creates a climate where more funding is possible to help more victims is really simple: read what’s on our website. It’s all there.
It’s time for responsible public media and responsible social media. The more truth…the more funding; the more funding…the fewer victims. It’s that simple.
On social media this past week someone was clear that he had heard that we were in fact never going to open our doors again for applications, and we would be in permanent shutdown. You have to ask yourself the question: is that wishful thinking on the part of that writer, and, if not, why would someone who purports to be a supporter of the victims of this crisis even consider writing something that purposely deceptive?
Where We Are
62 families have been returned to their homes as of last Friday.
CFSIC has 436 severity class coded 3 foundations on its books…with outstanding reserves of $78.3M.
CFSIC has 112 severity class coded 2 foundations on its books for eventual construction value of $23M.
The list of severity class coded 3 foundations is a long one. It’s going to take a while to get to the severity class 2 claimants, because of the way our funding comes to us.
What’s important is to understand that we expect no more funding until the end of June 2020. We hope that the Healthy Homes surcharge funding will be as much as $8.5M…but to be clear no one knows how much it will be.
We expect to get our next tranche of state Bond Commission funding at some point after July 1, 2020. We don’t know the day. We don’t know the month.
Meanwhile, we ration and preserve our cash by signing no more than three Participation Agreements per week, in order to make certain that we can meet all our obligations until the end of June.
To date, CFSIC has paid claims amounting to $22.3M.
Expanding Our Outreach to Condos…
The Board of Directors of CFSIC has decided to modify the company’s Underwriting and Claims Management Guidelines in order to extend our outreach to condominium associations and condo unit owners.
Beginning on November 26, 2019, CFSIC will not draw a distinction between individual homeowner-owned condo units and those now owned by banks or commercial investors.
The Board of Directors of CFSIC has taken a position from inception that it would not permit that portion of a condominium foundation platform lying below a bank or commercial investor-owned unit to be included in the calculation of allowable concrete costs to be paid by CFSIC.
This will now change effective November 26, 2019.
What follows is a Q&A that will help condominium associations understand the extent of this change and how it benefits associations who have already applied with the exclusion in place.
Question: I am a condo association president, and I signed our association’s original application to CFSIC. Do I have to re-apply all over again?
Answer: No. You will have to use a modified templated email transmittal to apply specifically for the bank-owned and investor-owned units, but you will not have to complete another CFSIC application. In other words, go here to see the template you will use to send your ESIS claim adjuster an email adding the bank/investor-owned units to your original application. You should copy this template into an email, with your new information, to go out under your name as a duly authorized officer of the association.
Question: My association has already gotten two contractor bids, and these bids already exclude bank/investor-owned units. What do I do now?
Answer: Contact the two contractors (or more) from whom you got your original bids…and simply ask them to re-bid using all applicable units in their revised calculations.
Question: Does the allowable concrete costs cap of $70,000 still apply per unit?
Answer: It does.
Question: So using an example of four units sitting on one foundation platform, where one of those units is owned by a bank that foreclosed on that unit and three are owned by individual homeowners…are you saying that CFSIC will now allow a cap on that foundation platform of 4 units X $70,000…or $280,000?
Answer: That’s correct.
Question: When does this all take effect?
Answer: At 9:00 AM on November 26, 2019.
Question: Do I have to wait until then to send you my updated email template and my revised contractor proposals?
Answer: No…you can do it at any time, but we just can’t do anything with the information you send us until 9:00 AM on November 26.
Question: But I heard that CFSIC is temporarily not taking any new applications…so how can this happen?
Answer: If you have already applied to CFSIC, and your application is in process and registered, then we are considering the addition of bank/investor-owned units to be an amendment to an existing application…not a new application.
Question: Is CFSIC changing the rules for PUDs and stand-alone single-family dwellings?
Answer: No. PUDs, multi-family, and single-family homes that are bank/investor-owned will continue to be excluded from consideration by CFSIC. We will also continue to exclude stand-alone condo units that are bank/investor-owned.
Question: Aren’t you concerned about a lot of investors suddenly running out and buying condo units as investments in order to get access to state funds?
Answer: We are…and it is for this reason that CFSIC will not permit the inclusion of any bank/investor-owned condo unit that became owned by a bank or commercial investor on or after 5:00 PM on December 1, 2019.
Question: So are you saying that if a commercial investor buys a condo unit in my association after December 1, the foundation under that condo would be ineligible?
Question: Are there any other conditions we should be aware of?
Answer: Yes…one very important one. CFSIC will not pay for the replacement of a condo foundation platform if the majority of the units on that platform are bank/investor-owned. In other words, if, for example, with a four-unit condo platform, three of those units are bank/investor-owned, CFSIC will not pay to replace that platform at all…including the platform lying underneath the one unit, in this case, owned by a homeowner.
Question: Okay…but what if, for example, a platform contains four units, two of which are individually owned and two of which are bank/investor-owned?
Answer: CFSIC will pay for the entire foundation replacement subject to the existing condo cap and replacement cost parameters, because there is no calculable majority either way.
The CHFA Credit Enhancements Program
You should go here to learn more about the CHFA credit enhancements program as it is now constituted. Please note that it currently does not apply to condominiums. CFSIC did not create and is not administering the loan program, and the ESIS claim team cannot advise you in any way about the terms and conditions of any aspect of the program. The link noted in this section will take you to an outline of the program, as well as to a section marked “Frequently Asked Questions.” We also recommend contacting the Homeowner Advocate using the contact information on the Department of Housing website for more assistance.
The 1099 Issue
We expected, based on early information we had received, that the IRS might be issuing a Private Letter Ruling on this issue within the past two weeks.
We await news on the IRS’s position.
A Message to Severity Class 2 Claimants (Originally Posted on October 28)…
As of last Friday, CFSIC had registered a total of 556 Severity Class 3 claims.
Inside this number are 35 claimants actively in litigation against their insurers, which means they are inactive claims. In addition, 33 claimants await word from their insurance companies as to their claims pending…which means they too are inactive until they are accepted or declined by those insurers. Lastly, 37 claimants remain inactive for other various reasons.
Of the 556 Severity Class coded 3 claimants noted above, when we deduct those claims that are incomplete, are awaiting word from their insurers, or are in litigation with their insurers…CFSIC has 451 Severity Class 3 claims that are active right now.
In turn, of these 451, 50 homes have been completed though our program. Of the 401 remaining as active Severity Class 3 claims, the Superintendent has countersigned 241 Participation Agreements, making those homes ready for remediation at some point, subject to homeowner/contractor construction timing agreement.
In summary, we have 160 remaining active Severity Class 3 claims, which are ahead of any Severity Class 2 claim, and we can’t get to those yet because we are rationing the last $20M in revenue received from the CT Bond Commission.
Now we get to Severity Class code 2 claims.
Behind the 160 current active Severity Class 3 claims we can’t yet get to, because we are rationing cash, we have received 105 Severity Class 2 claims, of which 93 have been moved to active status, and where these claimants will eventually be in process with CFSIC.
These claimants are known to us. Their claims are registered, and the reserves for these foundation replacements are recorded on our balance sheet…which means that CFSIC’s financials record that these 93 active Severity Class 2 claims exist and that, once we have access to additional funds, we will get to these claimants…but we can only get to these claimants after we get through processing the 160 known active Severity Class 3 claims noted above.
To be clear…we can’t now move any Severity Class 2 claims into line for remediation…which means the payment of funds…until we provide Participation Agreements to all existing active Severity Class 3 claimants.
As claims become active, they move up in priority with respect to access to available claim adjustment funds, but always in the order of severity: Class 3, followed by Class 2, followed by Class 1. Due to the prioritization system, active Severity Class 3 claim contractor proposal review will always take precedence over the review of active Severity Class 2 foundation replacement contractor proposals.
This is all about money…the way we receive it and the uncertainty of the timing of when we will receive the last two tranches of $20M.
The very good news is that one major potential stumbling block to our progress was removed when Governor Lamont recently went on record that CFSIC would in fact receive its last two $20 million bond installments. Up until that time, CFSIC had never been told that this would, in fact, happen with certainty, despite what is provided for in the original enabling legislation.
So, here’s what we know…and here’s what’s important for Type 1, Severity Class 2 claimants to know.
At this point we do not know when our next fiscal year bond allotment will be given to us. CFSIC is not due any additional bond funding until some point on or after July 1, 2020. We could get the next $20M on July 1 of 2020; we could get the next $20M on June 30, 2021; we could get the next $20M at any point in between those two dates.
What follows is a brief Q&A on Severity Class 2 claim status:
Question: I submitted my claim on January 10. I’m a Severity Class 2. How come I don’t have claim priority even though I submitted my application on the very first day?
Answer: You don’t because of the number of active Severity Class 3 claims ahead of you. Remember something else: of the $20M in bond funding CFSIC got in late September, more than $15M of it has already been committed to Severity Class 3 replacements.
Question: If a newly-active Severity Class 3 claimant submits proposals after I do, will that claim jump ahead of mine?
Answer: Yes. Based on the CFSIC prioritization of claim payments, an active Severity Class 3 claim will always jump ahead of an active Severity Class 2 claim.
Question: Okay. But when will I receive a Participation Agreement?
Answer: We don’t know. The issue at this point is the way in which funds are being disbursed to CFSIC. As stated above, we do not know when our next fiscal year bond allotment will be given to us. An educated guess would be that we are about a year away from being able to get Severity Class 2 claimants a Participation Agreement.
Question: But when will you actually get to reviewing the contractor proposals I sent you months ago?
Answer: We are starting that process next week. What we’re going to do is begin to review contractor proposals for Severity Class 2 claimants even though we can’t start the remediation process yet, because of the long line of Severity Class 3 claims still to be put into process. It’s going to take us a while, because we have a backlog of 93 active Severity Class 2 claims.
Question: Great news. So what happens after that?
Answer: Once we review proposals as part of our underwriting process, we will alert you if these proposals are valid and have met our criteria. You will then be able to make a choice of contractor, with the understanding that we can’t make a deposit to that contractor until we can put you in place for a Participation Agreement…which can only happen once we have issued Participation Agreements to all existing active Severity Class 3 claimants.
Question: I received my contractor proposals several months ago. Will they still be valid?
Answer: That’s between you and your contractor. We have asked all contractors who have provided proposals to claimants to hold their pricing for the job at exactly what was proposed…regardless of the amount of time it will take to schedule the project. However, we do not control contractor pricing. That is between the claimant and the contractor. CFSIC controls what costs are allowable, and all those costs are in turn controlled by the cap.
CFSIC’s Annual Report
CFSIC’s 2019 Audited Financial
If you have any questions about the operation of the program, ESIS is your best source of information on your claim, and their phone number and email are shown below.
As you work through the information and application process (understanding that we are in suspension for the taking of new applications), here’s how you can get help:
– Call ESIS (the claim adjuster) at: 844-763-1207
– Email ESIS at: firstname.lastname@example.org
– Email CFSIC at: email@example.com