CARH’S BROADCAST E-MAIL – Regulatory Alert
August 3, 2023
On July 14, 2023, the Rural Housing Service (RHS) issued an Unnumbered Letter entitled, Multifamily Housing Guidance for Processing Insurance Claim Proceeds (Handbook 2-3560, 4.13 D.1. Bid Requirements). On December 22, 2022, CARH sent a letter to RD on a variety of insurance related issues. Among those issues was a recommendation that when insurance companies select the contractor making repairs on a property, the requirement for multiple bids should be eliminated. The UL and guidance set forth below make that change.
On August 2, RHS sent out the following information for stakeholders:
Rural Housing Service is pleased to announce guidance for processing insurance claim proceeds when the insurance company selects a contractor (sometimes referred to as a preferred contractor) to perform the mitigation or repairs. To alleviate redundancy and the administrative burden of processing insurance claim proceeds when the insurance company selects a contractor to perform the mitigation or repairs, the Agency will no longer require the minimum bids.
In instances where the insurance company selects a contractor to perform insurance proceed funded mitigation or repairs, the Agency agrees that the 2-bid reserve account requirement is not applicable.
In instances where the insurance company selects a contractor that has an Identity of Interest with the insurance company, owner or management agent, the Agency agrees that the 3-bid reserve account requirement is not applicable.
This guidance is based on the insurance industry standard that the selected (preferred) contractor will not charge more than what the insurance company will be, and therefore, the deductible is the only expense the property will incur.
This guidance does not apply to, or change the bid requirements for, reserve account requirements if the insurance company does NOT select the contractor on insurance claim mitigation or repairs. This guidance does NOT apply to reserve withdrawal requests that do not involve insurance claim proceeds.
In all cases that involve substantial or major rehabilitation, the selected (preferred) contractor must adhere to Section 504 of the Rehabilitation Act of 1973.
If you have questions regarding this guidance, you may contact the project’s assigned servicing specialist in the MFH Field Operations Division. The assigned specialist can be found on the Agency’s website at https://www.sc.egov.usda.gov/data/MFH.html by selecting the link under the heading Multifamily Housing 514 & 515 Property Assignments. The servicing specialist’s name is listed in the column “Assigned To” and the specialist’s email is in the column “Assigned To Email.”
Subscribers to CARH’s Electronic AN Express received notice of the RD’s Unnumbered Letter on this subject on July 24. If you would like to subscribe to the Electronic AN Express, click here.
For other news and information affecting the affordable rural housing industry, please visit the Newsroom on CARH’s website, www.carh.org.