Santa Barbara Wildfire Caught Many Residents Underinsured

Raquel and Rex Smith bought their house for $73,000, 17 years ago, but their insurance coverage never kept pace with California real estate prices. When their house burned down last week in Santa Barbara’s disastrous wildfire it was worth $500,000, almost three times the amount of their insurance policy.

Raquel estimates that their insurance will not be enough to replace any of their possessions and will not even cover all their rebuilding costs.

“We’re lucky we live in an area where the value of our house went up so much . . . but my husband and I are working people and we don’t have the money to make up what we lost,” she said. “Our only hope now is federal aid.”

Raquel, a clerk at Thrifty Drug Stores, and her husband, a real estate agent, lined up outside a disaster assistance center that opened Tuesday in Santa Barbara and applied for a low-interest federal loan.

As weary firefighters in the foothills attempted to stamp out the final embers, after gaining full control of the wildfire early Tuesday, the Smiths and hundreds of others at the disaster assistance center discovered that financial help could still be months away.

The center was established to provide a wide range of assistance from county, state and federal agencies, enabling victims to receive emergency aid and information while they applied for low-interest loans and grants to rebuild damaged homes and businesses.

While some people Tuesday took home food and clothing vouchers from the Red Cross, no one took home the commodity they most needed--cash.

“You can’t get this money overnight,” said Jack Glover, a spokesman for the Federal Emergency Management Agency. “Borrowing $100,000 to replace a burned-out hillside home just can’t be done in a New York second.”

Once loan applications are filled out, damages must be verified by the federal Small Business Administration, which handles most of the applications. It could take about one to three months before residents obtain their loans or grants, officials said.

More than 400 homes were lost in the fire and about 1,500 people remain homeless, officials estimate. But the loans and grants offered at the center were only for those people who suffered uninsured losses, officials said.

Homeowners may apply for maximum loans of $100,000 on real estate and $20,000 to replace personal property like furniture, clothing or automobiles. Business owners are eligible for loans of up to $500,000.

Federal officials said 8% loans are available to applicants who have jobs and can repay them. Those of lower income may apply for 4% loans.

While the majority of those who lost homes in Santa Barbara had some insurance, many--like Raquel and Rex Smith--are “under-insured,” Glover said.

“This is the highest-priced block of houses I ever had to deal with in a disaster,” Glover said. “There’s no way the federal loans can cover the entire loss.”

Jon and Susi Rand estimated their uninsured loss at more than $1 million. The Rands, who live on a 32-acre ranch in the Santa Barbara foothills with views of the ocean and the city, lost a $400,000 vintage Lamborghini automobile, about $100,000 worth of tractors and other equipment, rare antiques and original Tiffany lamps, none of it insured.

“We had some insurance, just not enough,” said Jon Rand outside the disaster assistance center. “We took such a loss, we’re going to have to sell the property. No way can we afford to rebuild.”

The Rands and other temporarily homeless families were eligible to apply for rental assistance from FEMA for up to 18 months, but funds must be reapplied for every two to three months. Residents will receive their first rent check, officials said, about 10 to 12 days after applying.

For residents whose incomes were too low to qualify for any of the loans, state and federal grants totaling about $20,000 per family could be applied for. Also available for low-income residents are deferred state loans up to $30,000, which do not have to be repaid until the property is sold or transferred.