Homeowners who have submitted applications for grants related to Hurricane Sandy damage have been advised to stop any construction work immediately to maximize the amount of money for which they will be eligible.

The statement from the state Department of Community Affairs came two days after the U.S. Department of Housing and Urban Development announced it would change its long-standing policy and allow federal grant dollars to be used to reimburse homeowners who have already done repairs on substantially damaged houses.

“This guidance is only to alert (property owners) of the risks associated with the decision to continue work,” according to the notice sent out late Thursday.

The state agency “will issue additional guidelines and procedures in the coming week regarding HUD reimbursement to ensure the maximum benefit is applied to New Jersey’s Sandy-impacted households and landlords,” DCA spokeswoman Lisa Ryan said.

Homeowners had been told earlier this year that they would be eligible for reimbursement if they proceeded with repairs. But shortly after the first grant awards were announced, homeowners along the shore who already had finished work were told they were ineligible for the grants and could not be reimbursed.

The problem, as HUD officials saw it, was that the work was being done without environmental reviews, which are required for federal grant dollars if damage meets or exceeds 50 percent of the pre-storm value of the house.

HUD’s new policy will allow reimbursement for work done up until the application is filed, according to the 14-page memo issued to states Tuesday.

Thursday was the last day homeowners could apply for the Reconstruction, Rehabilitation, Elevation and Mitigation grant program, but the new policy also affects landlords who may want to apply for the recently announced Landlord Rental Repair Program, which helps landlords pay for repairs provided the housing is turned into year-round units for low- to moderate-income residents.

“Everybody’s individual circumstance is a little bit different in terms of what you spend money on and whether that’s an allowable category of expenditure. So to people out there who are looking to get reimbursed and are already approved for the RREM program, go to one of our disaster recovery centers,” Gov. Chris Christie said Wednesday during the “Ask the Governor” segment on radio station New Jersey 101.5. “But the good news is for the first time in any disaster the federal government has listened to the pleas that we’ve been making in this administration with help from our folks in Congress.”

As part of the RREM grant program, the state Department of Environmental Protection will perform environmental reviews for any house for which one is required.

As of Tuesday, 14,257 people had applied for the RREM program, with 12,255 applications filed by the initial deadline of June 30. Of the first group of applications, 3,477 were approved, 5,848 were put on a waiting list and 2,476 were determined to be ineligible.

Residents told they were ineligible could appeal the decision. The DCA has deployed a team to work on the appeals, Ryan said. It was unclear how many of those applications could be affected by the new policy.

State Sen. Jim Whelan, D-Atlantic, said the news from the DCA further adds to homeowners’ confusion about who is eligible and what the criteria are for how residents are selected for the grant programs.

“It’s frustrating trying to get a handle on what and who is eligible, for what, and what is the criteria used for different pieces of this,” said Whelan, who also has applied for a grant to help pay for the damage to his Atlantic City house. “Now you’re telling people to hold off on doing more repairs? It’s very frustrating.”

Eligibility criteria for each grant was different. For the RREM program, which provides as much as $150,000 to repair, rebuild or elevate storm-damaged houses, homeowners must have had a household income of less than $250,000 per year, have registered with the Federal Emergency Management Agency and the house must have been the primary residence.

The program, in effect, was operated as a lottery because the demand for the $600 million in grants far outpaced the money available. The state also gave preference to homeowners with the most severe damage, along with homeowners who fell into low- to moderate-income brackets because of HUD requirements.

Contact Sarah Watson:

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Press copy editor since 2006, copy desk chief since 2014. Masters in journalism from Temple University, 2006. My weekly comics blog, Wednesday Morning Quarterback, appears Wednesday mornings at PressofAC.com.