The Importance of Words…
Writer Tami Kennedy Burke caught up with Michael Maglaras, Superintendent of CFSIC, this past week on the issue of CFSIC funding. What follows is an excerpt from that interview.
TKB: There were news reports this past week about CFSIC running out of money. Can you comment on that?
MM: I can. First, if CFSIC were out of money, we wouldn’t be having this interview, because no one at CFSIC would be working. The use of the phrase “out of money” is not only misleading but also inaccurate.
TKB: So what really is CFSIC’s financial situation?
MM: Simply put, through the issuance of many Participation Agreements, which are the legally binding documents between CFSIC and the victims of this crisis, CFSIC has committed to future foundation remediation almost all the funds we received in June and July of 2020, totaling $30.6M.
TKB: So does that mean that the money has been spent and therefore isn’t in CFSIC’s bank account anymore?
MM: Of course not. What it means is that, at the moment I countersign each Participation Agreement, we set aside CFSIC’s full cost for that foundation replacement and escrow it as if it has already left our account. It’s the only fair way to manage this program. We never make commitments, which we make when I sign a Participation Agreement, unless we have actual funds in our account to cover the full value of CFSIC’s future payment to replace that foundation, regardless of when the construction can be scheduled. So when I stop countersigning PAs, it means that we have committed all available funds, with the exception of those funds needed to keep our insurance license and to maintain operations, until the next round comes in. We have done it this way since Day One.
TKB: What actually happens when you countersign a Participation Agreement? In other words, what are the steps in the process?
MM: I wouldn’t ask that question first. What I would ask is what are the steps leading up to the point where a claimant actually gets a Participation Agreement. Let’s start there.
TKB: Okay. I’ve got it. So let’s back up…
MM: First, you are placed in line to received a Participation Agreement only when you are an active claimant and have met all underwriting criteria. Your application is complete. All points of evidence have been included. You have a visual inspection confirming the status of your foundation and its severity, and those photographs and measurements are firmly a part of your file. You’ve been asked to go out and secure a minimum of two construction proposals from CRCOG-approved contractors. My adjustment staff has approved the numbers and a detailed listing of allowable costs. Finally, you’ve signed one of those proposals, which becomes your construction contract for your remediation, and have submitted it to the adjustment staff for final approval. It is then, and only then, that, if you are a severity class code 3 or 2 claimant, you can move into the PA line.
TKB: Okay. So is that the point where the claim adjuster uploads your file to the line to receive a Participation Agreement?
MM: It is. And it is only then. It doesn’t happen any sooner, and it can’t happen any way except as I’ve described. Your file is uploaded to the line, and it is date and time-stamped. If your file is uploaded at 8:01 AM and another adjuster uploads another claimant’s file at 8:02 AM, I can’t get to the 8:02 AM claimant before I get to you. This process has been in place for a long time and has been audited twice since inception.
TKB: So what happens after that?
MM: Whenever we have funds available, as we did in June and July, my staff goes back up into the PA line and starts where we last left off. What I mean by this is that we go backwards into the line to the precise day and time stamp, and take the next claimant in line on a strict order basis. We can’t do it any other way. In the case of this most recent round of funding, received in two parts in June and July of 2020, we had to go backward to September 2019 and take the very next claimant in the line in precise date and time-stamp order. When the next round of funding comes in June/July of 2021, we’ll go back and start issuing PAs to claimants in line since February 27, 2020.
TKB: So, in the interim…that is in between your funding allotments…are you saying that the process just continues?
MM: The answer is “no” if you’re talking about the issuance of new PAs. The answer is “yes” when you’re talking about managing disbursements, reviewing contractor proposals, dealing with claimant inquiries, and managing the day-to-day operations of CFSIC. We are now disbursing roughly $1 million per week in payments and reimbursements, with the vast majority of that spent on new construction deposits and continuing construction progress payments on work underway.
TKB: Can you be an inactive claimant and move into line for a PA?
MM: Never. If you don’t do what you have to, to make your claim active, you can never receive a PA. The first step in being put in line for a PA is to make your claim active. The reason for an inactive claim remaining inactive is never because CFSIC is preventing the claim from becoming active; it’s always because the claimant has failed to follow through or, very unfortunately, because the claimant may be waiting for an inordinate amount of time for a homeowner’s insurer to accept or decline their claim. The moment you become an active claimant you are that much closer to receiving funds.
TKB: So the news accounts that CFSIC is out of money weren’t exactly accurate?
MM: Correct. We don’t fault the news media. Our program is complex, and it takes a while for the public and the media to understand it. That’s why we’re here…to answer questions and to make sure that the CFSIC story is factual and correct. Construction is ongoing; commitments to victims are being fulfilled every day; we have daily interactions with claimants, state officials, and others seven days a week. CFSIC is quietly doing the job it was created to do.
TKB: So when CFSIC gets the next (and the last) $20 million CT bond allotment, and the second installment of the Healthy Homes surcharge funds next summer, what will happen?
MM: We will open back up for Participation Agreements. We will work seven days a week reviewing claimant files in the PA line, beginning with the first claimant waiting in line back to February 27, 2020, and getting those completed PAs to victims throughout the Northeast Corner. We’ll work quickly and efficiently to enable construction commitments to be made for dozens of claimants, including many more condominium units and PUDs. By the end of October of 2021, we’ll shut off the PA process again, and for the same reason noted above.
More About Pending Claim Status…
Transferring Your Claim
All CFSIC claimants (not just active claimants) will be able to transfer their existing inactive or Pending claims to a buyer of their home effective July 13, 2020, retroactive to June 1, 2020. Today, we are publishing on this site the following:
– red-marked changes to CFSIC’s Underwriting and Claims Management Guidelines;
– a new subsection, subsection 20, in the “For Homeowners” section of this site, which will detail how the process will work, inclusive of Q&A;
– a templated Claim Transfer Agreement governing the transfer of a claim in the “For Homeowners” section;
– a new subsection, subsection 11, in the “For Contractors” section of this site, providing claim transfer information for contractors.
What follows is an expanded (expanded from last week) Q&A about this important change.
Question: I’m a Type 1, severity Class 2, inactive claimant. If I sell my home and transfer my claim to the buyer, does that change the status of my claim?
Answer: No. The buyer gets the exact status you had at the moment of transfer.
Question: I’m in line for a Participation Agreement and have been in line for a while. I’ve been told that I may be in the next round of funding at some point after July 1, 2020, but I still plan to sell my house and give up my claim. Does my exact place in line for a Participation Agreement get transferred to the buyer?
Answer: Yes, if the buyer agrees to all terms and conditions of the Claim Transfer Agreement.
Question: Where can I find a sample of the Claim Transfer Agreement on this site?
Question: I’m a Pending claimant, and I’m aware that, given current anticipated projected funding, I may never get my claim paid unless CFSIC gets more money. If I transfer my claim because I sell my home, will the buyer be taking the same risk I am?
Answer: Absolutely. We may never have enough money to address Pending claimants.
Question: Can I transfer my claim without selling my home?
Question: Does this apply to condos? Does it apply to PUDs?
Answer: No for condos. (Remember that condo unit owners are technically not our claimants… associations are our claimants, because it is the association that owns the foundation.) It applies to PUDs.
Question: I’m a Type 2 claimant. Does it apply to my claim?
Question: Once I transfer my Type 1 claim to the buyer, can he or she re-sell the home and transfer the claim again?
Answer: No. The transfer of a claim can occur only once…from one Original Claimant to one Transfer Claimant. It can never be transferred again by the Transfer Claimant.
Question: Will I be able to sell my home first and then transfer the claim at some point after that?
Answer: No. The Claim Transfer Agreement date can only be the same date as the date of the sale of the home or a date prior to the sale. It it’s prior to the date of sale, and for some reason the sale does not go through…then the transfer is voided as if it had never occurred.
Question: OK, but I sold my house in the middle of June…how will the retroactive June 1 date affect me?
Answer: As stated above, on and after July 13, 2020, the date of the Claim Transfer Agreement must be the date of the sale of the home or a date prior to the sale. It cannot, however, be a date prior to June 1, 2020. In your example, you would still qualify.
Question: So are you saying that if I sold my home on May 15, 2020, I’m disqualified?
Answer: Yes, that’s what we’re saying…besides, at the date of sale you ceased to be a CFSIC claimant anyway, and the correct thing to do would have been to notify ESIS of your status so that someone else could have access to your funds. We are grandfathering this process back to June 1 as an accommodation only.
Question: Are you still going to stop the Pending application process on June 30 as previously announced?
Answer: Yes. We have already done so.
Question: I’m a Type 1, severity Class 3 active claimant. So if I transfer my claim to the buyer of my home, what am I really doing?
Answer: Looks like you don’t have a Participation Agreement yet, based on the question. So, what you’re doing is transferring almost every right, obligation, and duty you had for your active claim to the buyer of your home, who then agrees to take over those rights, duties, and obligations.
Question: But I’ve got a signed contract and am in line for a Participation Agreement. What happens if the buyer and the contractor can’t agree on the terms of the original contract or, alternatively, the contractor simply backs out of the arrangement?
Answer: The buyer can seek the required two proposals for construction services from CRCOG-approved contractors to substitute for the original contractor, one of which will eventually substitute for the original contract. CFSIC will keep an active claim “active” for a period of 180 days from the date of the Claim Transfer Agreement in order to allow time for this to happen. If it isn’t accomplished by then, the claim is removed from our system, it is no longer active, and the buyer is no longer in line…and must therefore start the process all over again as if the claim had never transferred. If we are not accepting applications at the time that happens, then the buyer may have to wait for years to reapply, or may never get an opportunity.
Question: Who is responsible for contacting ESIS ProClaim to tell them about the sale of a home?
Answer: Only the original homeowner (Original Claimant). ESIS will not accept communications of any kind from real estate agents or from Transfer Claimants (home buyers) regarding a claim transfer.
Question: Okay…what happens then?
Answer: When you provide ESIS ProClaim with your claim number by phone or email and indicate that you want to transfer your claim to the buyer of your home, they will provide you with a Claim Transfer Data Form to complete. You will send it back to them completed. The Superintendent’s office will then contact you and send you a Claim Transfer Agreement, which will require your signature and that of the buyer, as well as separate witnesses. You will return the fully-executed Claim Transfer Agreement back to the Superintendent’s office. Once this agreement is fully executed and received in the Superintendent’s office, the transfer of the claim can occur, and the permanent records of the claim are changed with regard to who the claimant is.
Question: I’ve already signed a proposal with a contractor. Who is responsible for telling the contractor that I’m selling my home?
Answer: You are. It is not ESIS ProClaim’s responsibility or CFSIC’s responsibility to do this. It also cannot be the real estate agent or the homebuyer. If you want to transfer your claim, you have to do this yourself.
Question: What will CFSIC accept as evidence that the Original Claimant has transferred the home to the Transfer Claimant?
Answer: A copy of the recorded deed.
Question: But I have a CHFA loan agreement that I’ve just entered into. What happens to that?
Answer: You have to address that with CHFA.
Question: My contractor started work on my foundation last week. Can I still transfer my claim?
Answer: No. Once work starts on your foundation, you have to see it through, or you terminate your construction contract. We cannot permit a claim to transfer if even the most preliminary part of the remediation process has begun.
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.
CFSIC’s 2020 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