Mediator to help flood buyouts burdened by debt

The modest circumstances of some flood victims are being driven home by the first wave of buyouts.

Perhaps 25 of the first 117 owners whose flooded properties will be bought at pre-flood value will not receive enough money to cover their mortgages or liens.

The eye-opening

statistic prompted the

City Council this week

to hire a mediator to help flooded property owners resolve such outstanding debt.

Without a resolution between the owners and those they owe, the city would not be able to gain title to the properties. That could mean abandoned homes left standing for an extended period of time, said Rita Rasmussen, city senior real estate officer.

The mediator will be paid $20,625, or about $825 per property, from local-option sales tax revenue.

The 117 properties - except for a few that are vacant lots - will be demolished within 90 days of buyout to make way for a greenway along the Cedar River.

The first buyout offers will be made within two weeks, with the first closings expected 30 to 60 days after that, said Jennifer Pratt,

city development coordinator.

The decision to hire a mediator came after a lengthy council discussion.

Council members Chuck Wieneke and Pat Shey noted that paying a mediator only gets the debt-holder and property owner to the table to talk. It does not guarantee that the debt-holder will agree to set aside the debt. They asked: What happens then?

Council member Justin Shields said the idea is to get the parties talking and see what can be resolved. Cleaning up debt issues, he said, is a benefit to flood victims, because it will allow them to move on and purchase other property.

The Federal Emergency Management Agency is providing almost $8 million for the first 117 buyouts. It will not pay for the mediation.

Buyouts for the bulk of flood-damaged properties will be paid by federal Community Development Block Grants.

The city estimates it may buy 1,300 properties all together.