Memphis, Tennessee has had more than its fair share of floods over the years, and these days in County Shelby the homeowners seem to be going underwater at least as frequently as their houses.

This is making recovery from the forces of nature that struck earlier this month even more complicated than usual – American households already underwater financially may see the value of their investments dip further as the markets react to the risk of more water damage in the future.

Just before the rains came, HUD Secretary Shaun Donovan toured the area and went on record as saying “A key part of the work that we’ve been doing in the administration is to stabilize the housing market. As I think the president often says, we have to be able to walk and chew gum at the same time.”

Shaun Donovan has just announced a 90 day period of foreclosure grace affecting all HUD lenders in the ravaged areas. Breaking news indicates that $15 million in CDBG Grants may also be re-directed to the clear-up effort.

But Mayor Keith McDonald of Bartlett is worried that embattled Shelby homeowners may misunderstand the good intention behind the deal – already the rumor is spreading that their homes may be further bonded in the process.

“They were afraid that somehow this was a loan against their house,” he explained. “I just hope that as we […] deal with those recipients, that we do a really good job of explaining that this is not just a way for us to get a lien against your house and then force you out.”

The HUD Secretary is clear as a bell on how things are going to work in flooded Tennessee. He stresses that a flexible approach is needed in an unpredictable time, and that the administration’s goal of keeping troubled Americans in their homes remains the overall objective.

The flood-recovery money will have to come from HAMP grants already awarded to local government authorities for more traditional purposes – in this case the man from HUD is leaving it up to them to re-juggle their budgets in the light of where the greater local need is found.

Reversing the effects of flooding is not an easy job to do, and it’s likely that the work will still be deep in progress when the housing markets turn. In some places the damage is more serious than usual – this time Bill Creek in Millington went over the top of levees in two places, followed by the Loosahatchie River in full spate. $28 million’s worth of disaster assistance has already been approved in Tennessee, and 18,000 Tennesseans have applied for direct aid.

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