By Murray Wennerlund published 4-15-2018 updated 11-17-2024
We all get turned around from time to time while navigating uncharted waters. What may be a walk in the park for our Federal Employees—who remind us that $1.00 from Federal Department A and $1.00 from Federal Department B is considered a Duplication of Federal Benefits—can be confusing. Who would have known that DOB covers more than just federal dollars when federal dollars are involved?
If you don't see your DOB listed, please send a message using the contact form below this article.
Question: What is a duplication of benefits with NFIP Flood Insurance, Temporary Housing Assistance, and Homeowner Insurance and explain why it's a duplication of benefits with reference to CFR or HUD and FEMA amendments and policy clarifications.
Answer: Duplication of benefits occurs when an individual or household receives financial assistance from multiple sources for the same disaster-related expense. According to FEMA, this is also known as "double-dipping" and is prohibited by law.
Why It's a Duplication of Benefits:
Flood Insurance: If a homeowner receives funds from their flood insurance for home repairs, they cannot also receive federal disaster assistance for the same repairs.
Temporary Housing Assistance (THA): If a homeowner receives THA to live in their gutted home while repairs are made, they cannot also receive funds from other sources for the same purpose.
Homeowner Insurance: Similar to flood insurance, if a homeowner receives funds from their homeowner's insurance for repairs, they cannot also receive federal disaster assistance for the same repairs.
References to CFR, HUD, and FEMA:
CFR (Code of Federal Regulations): Title 44, Part 206, Subpart F, Section 206.191 outlines the policies for implementing the Stafford Act, which includes preventing duplication of benefits.
HUD (U.S. Department of Housing and Urban Development): Works in coordination with FEMA to ensure that disaster assistance is not duplicated.
FEMA (Federal Emergency Management Agency): Provides guidance and policy clarifications to prevent duplication of benefits, ensuring that assistance is not provided for the same disaster-caused need from multiple sources.
Policy Clarifications:
FEMA's Individuals and Households Program: Provides financial assistance and direct services to eligible individuals and households with uninsured or underinsured necessary expenses and serious needs.
DRRA (Disaster Recovery Reform Act) Provisions: Authorizes the President to waive certain duplication of benefits if it is in the public interest and will not result in waste, fraud, or abuse.
Duplication of benefits is avoided to ensure that federal assistance is used efficiently and effectively, without overlapping with other sources of aid. This coordination helps maximize resources and support disaster survivors in their recovery process.
Forced Mortgage Payoffs: If your bank orders a mortgage payoff, the funds used must come from your NFIP (Flood Insurance) money, not CDBG-DR funds. The money from your Flood Insurance used to pay off your mortgage is not considered a duplication of benefits. According to HUD, when other non-CDBG disaster assistance is taken by lenders for a forced mortgage payoff, those funds are not considered available to the homeowner and do not constitute a duplication of benefits for housing rehabilitation or reconstruction.
Why homeowners need to understand the Duplication of Benefits (DOB) process.
In 2018, a Louisiana homeowner recovering from the 2016 floods was penalized for not taking an SBA loan they were forced to apply for by FEMA. The State of Louisiana determined that if a homeowner applied for a loan but did not accept it, the loan would still be available to the homeowner indefinitely. As a result, the state listed all SBA loans as a Duplication of Benefits. When homeowners found that their SBA loans wouldn't cover the total amount of the required repairs and filed for HUD CDBG-DR grants under the unmet needs policy, the State of Louisiana instructed them to return to the SBA and request additional funds. The State of Louisiana’s stance contributed to many disaster recovery failures.
HUD had to step in to provide clarification with the following two notices:
The Disaster Recovery Reform Act of 2018 (DRRA) was also updated to remove the SBA loan from the duplication of HUD CDBG-DR grants.
During a public meeting comment period the Louisiana homeowner expressed concern about how the state of Louisiana was following HUD guidelines concerning the SBA DOB for declined loans.
The following is public record.
Homeowner: Small Business Administration Loan (SBA) PUBLIC COMMENTS RE: APA 1 MASTER ACTION PLAN FOR RECOVERY FROM GREAT FLOODS 2016 I would like the Recovery Task Force to speak with specifics on how the reimbursement will work. Additionally, please explain in detail the duplication of benefits. I have been told the State will consider the total amount an applicant could receive from a SBA loan and not the actual amount received. Please explain how this duplicates benefits, when the applicant did not receive the funds. Most homeowners, like I, did not take the amount offered by SBA as I would have owed more than my home was valued. If the State proceeds with this course, most people will not qualify for additional assistance. This is unfair and penalizes people that are acting wisely and prudently with their homes.
Louisiana OCD-DRU RESPONSE: Thank you for your comment on the state of Louisiana's proposed Action Plan for recovery from the Great Floods of 2016. OCD-DRU will include your comment and our response when we submit the plan to HUD for approval in February. In response to your comment related to SBA loans and whether these should be considered a duplication of benefits received by homeowners, please be advised that this is not a state of Louisiana policy. According to current federal agency guidance, federal grants/loans cannot be used to repay other federal grant/loans. Additionally, the amount of loan funds approved by SBA is considered a duplication of benefits. Community Development Block Grant-Disaster Recovery funds were allowed to pay off SBA loans after Hurricane Katrina, but HUD subsequently issued guidance in November 2011, in which it clarified the duplication of benefits requirements under the Stafford Act for CDBG-DR grantees. The November 2011 guidance can be found at: FR-2011-11-16 2011-29634.pdf. The state is working with Congress and the federal government to recommend ways to amend some of the requirements related to SBA loans that would provide relief to homeowners but is currently establishing policies and procedures that work within these constraints and the current funding available through CDBG-DR. OCD-DRU strongly encourages you to contact your U.S. Congress member and share your concerns about this situation. [END RESPONSE]
The State of Louisiana OCD-DRU Administration Manual Section 2 Exhibit 2-5 DOB Policy.
The next step is to identify assistance that is not available for the activity.
This includes funds received that are not for the same purpose as the CDBG activity, such as funds not available to the applicant (e.g., forced mortgage payoff, contractor fraud), funds from private loans not guaranteed by the SBA (forgivable loans are duplicative), and any other asset or line of credit available to the applicant, such as checking and savings accounts, stocks, etc. These funds are not considered duplicative and may be excluded from being deducted as a duplication of benefits.
Finally, after subtracting the duplicate funds received or available to receive from the proposed activity cost, calculate the maximum CDBG award. Once the maximum CDBG award has been determined, applicants will be required to sign an agreement (either subrogation or Cooperative Endeavor Agreement) requiring them to return to OCD/DRU any assistance received for the same purpose as the CDBG disaster recovery funds. This agreement is to be monitored by OCD/DRU program staff, grantees, and subrecipients at least annually for three years. Unless an additional need is established, disaster recovery funds must be recaptured to the extent they are in excess of the need and duplicate other assistance received by the beneficiary for the same purpose.
July 25, 2013 HUD Guidance on Duplication of Benefit Requirements and Provision of CDBG Disaster Recovery (DR) Assistance Grantees may assist households and businesses that have declined SBA loans,... CDBG_SBA_GUIDE.PDF
Research Resources:
Additional reading from TruckAndTools.Com