HR-4100 was proposed before the CDBG grants were authorized. It achieved the same goals by setting up a recovery corporation to use proceeds from Treasury Bond sales to purchase properties in New Orleans neighborhoods affected by the storm. Homeowners will have the option to participate or not. Once purchased for some amount (current negotiation suggests the homeowner will get their mortgage value plus some percentage, say 60%, of any equity they may have had at pre-Katrina valuation) the home becomes the property of the corporation but the homeowner retains an option to repurchase the property in the future (first right of refusal? time limit? amount?)

Baker set the tone and initial design for the use of CDBG money that the state ultimately  received.

Ultimately the plan is likely to expose the federal government no more than $10-20 billion (est. 150,000 homes at $150,000 each) and cost no more than $1 billion per year to purchase large swaths of New Orleans. This land will have significant commercial value but is not suitable for low density residential housing because of risk of flooding. With its existing commitment to levees, the government ought to be able to recover much of this cost in sale of the real estate for other purposes within just a decade or two.

Why do it? First there is a fairness issue stemming from the idea that New Orleans would not be in this fix had the federal levees not failed. This idea gets tied up with a negligence and liability argument as well. Second there are mortgage banking problems from the foreclosures that are likely with no bailout.