Duplication of Benefits

3 Duplication of Benefits (DOB)

For fairness, consistency and the responsible use of public funds, all Housing Recovery Program awards (except for the small Wind and Wildfire mitigation grants) will be evaluated for duplication of benefit regardless of funding source. Duplication of benefits is a review to determine if more funding was provided through various sources than was needed to complete the work of renovation or rebuilding after a disaster. Those receiving disaster assistance funding are asked during the process to list the resources they have available for the project and to sign an affidavit stating that the list is accurate. 

Federal regulations prohibit the State from providing assistance that duplicates any other benefits received and exceeds the total rebuilding or renovation need of the recipient. When determining the rebuilding gap to calculate an award, the Housing Recovery Program is required to consider all funding sources that applicants have available to them to help rebuild or repair. 

The small Wind and Wildfire Mitigation $5,000 grants will not be evaluated for duplication of benefits as these are a direct grant to pay for or reimburse installation of identified hazard mitigation elements.  These small grants will be provided through State funds and are not subject to federal requirements.

3.1 Definition of DOB

A duplication occurs when a person, household, business, or other entity receives disaster assistance from multiple sources for the same recovery purpose, and the total assistance received for that purpose is more than the total need.

For example, if a homeowner needs $75,000 to repair their home and they receive $10,000 from insurance, $25,000 from FEMA, $20,000 from a Community Foundation, and $5,000 in personal GoFundMe donations ($60,000 total) for the specific purpose of rebuilding, the maximum amount of money they can receive from another source for home repairs is $15,000. The funds awarded must also be spent on the intended purpose, in this case, repairing or rebuilding the home.

The amount of any duplication is the amount of assistance received or available to an Applicant in excess of the Applicant’s total need. The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) requires that recipients of federal disaster recovery funding make certain that no "person, business concern or other entity" will receive duplicative assistance. A Duplication of Benefits (DOB) occurs when:

• A beneficiary receives assistance or has assistance available to them, and
• It comes from multiple sources (examples: private insurance, FEMA, NFIP, non- profits, etc.), and
• The total assistance amount available to the Applicant, after excluding non-duplicative amounts, exceeds the need for a particular recovery purpose, in this case rebuilding.
   

For the Housing Recovery Program, all funding sources that are available for an applicant to help repair or rebuild their home must be considered in a DOB review.

The following funding sources are included: 

• Insurance payments for repairs and rebuilding
• Federal Emergency Management Agency (FEMA) - only funds for repairs or rebuilding are duplicative
• Small Business Association (SBA) - duplicative for traditional loans only
• Other federal, state, or local funding
• Other nonprofit, private sector or charitable funding, if for repairs or rebuilding (e.g. Community Foundation Boulder County Rebuild grants)
• State of Colorado Sales Tax Refund
• County Use Tax Refund
• Local Use Tax or Fee rebates or reimbursements
• Any other funding received for repairs or rebuilding (e.g. GoFundMe funds specifically for the purpose of rebuilding or repair)

The most common examples where funds are not considered duplicative include:

• Funds provided for a different purpose (i.e. FEMA assistance not tied to rebuilding)
• Funds not available to the applicant (i.e. a forced mortgage payoff)
• Private loans without federal subsidy
• Pre-existing assets or lines of credit

3.2 Treatment of Households with SBA Loans

For households with SBA loans in excess of $10,000, the traditional rebuild and mitigation loans are considered a duplication with SBA loan funds.  Traditional loans may not be used to replace or reduce SBA loans.  Specifically,

• Applicants over 150% AMI who are approved for an SBA loan in excess of $10,000 are not eligible for the Housing Recovery Program funding (rebuild and mitigation). 
• All households, including those with SBA loans, may apply for the $5,000 mitigation grant. 
   

Any portion of the SBA loan that is for personal property will not be considered a duplication as that falls under the category of “funds provided for a different purpose.” The traditional loan is intended for those who were unable to access SBA loan assistance. It cannot be used to supplant or reduce the SBA loan.

This policy is consistent with the Disaster Recovery Reform Act (DRRA) of 2018 which modified the treatment of subsidized loans under the Stafford Act for disasters declared between January 1, 2016 and December 31, 2021, so that when certain conditions are met, the loans are no longer a DOB.

For subsidized loans made in response to DRRA Qualifying Disasters, accepted but undisbursed loan amounts (e.g., accepted but undisbursed SBA loan amounts) are not considered a DOB.

DRRA amendments also allow for individuals to be reimbursed for some costs of eligible activities that were paid with subsidized loans if it can be proven that all federal assistance was used toward a loss suffered as a result of the major disaster or emergency. If the subsidized loan was used to carry out an eligible activity that addressed a loss suffered as a result of a major disaster or emergency, HUD considers reimbursement of eligible costs paid with that loan to be used toward a loss suffered as a result of the major disaster or emergency. If an Applicant falls under this provision, refer to section V.B.2(iii) of 84 FR 28836 for a list of conditions to be met.

3.3 Treatment of Insurance

Insurance is typically the primary source of rebuilding funds with other sources of assistance intended to help fill the gap between rebuilding costs and insurance. The Housing Recovery Program is intended to come after insurance payments and cannot be used to replace funds owed to the household by the insurance company. Therefore, the award calculation for the program assumes that the insurance company will pay up to the lower of the insurance coverage or the rebuilding cost, and it is the insurance coverage limit that is used in calculating the award (excluding contents). There will be cases where the insurance company has disputed costs or otherwise is not paying the full amount of coverage. In these cases, applicants must exercise due diligence related to insurance payments for the reconstruction or renovation of properties impacted by the declared disaster. HRP funds cannot be used in lieu of good faith efforts to receive the full amount of insurance proceeds due.

In order to adjust the insurance payment amount to a number less than the coverage limit, the household will need to provide one of the following:

• A final payment or settlement from an insurance company identified as final. Should more than one policy be in effect, final payment or settlement information for all policies is required.  
• Other documentation from the insurance company that indicates a total payout amount that will be less than the coverage limit upon completion of the project.
• If an applicant has filed a complaint with the Colorado Division of Insurance, include complaint and any outcome or resolution if available.
• In the absence of clear documentation regarding the total payout amount from the insurance company, the applicant must demonstrate and provide documentation that they have made at least two requests in writing to the insurance company for information on the final amount plus any documented responses from the insurance company.

In the absence of the above information, the original coverage limit will remain the basis of the award calculation. A duplication of benefits review will be completed at the time of award and again at the end of the compliance period. The homeowner is responsible for identifying any additional insurance (or other) awards made after the HRP award determination as outlined below in section 3.4.

3.4 DOB Process and Verification

During the Housing Recovery Program application process, the applicants must certify that they have disclosed to DOLA and its HRP program administrator all other funds available from, received by, or to be received from any party as compensation for damages resulting from the declared disaster for which assistance may be provided by DOLA. Applicants also must certify that they will disclose all future funds they reasonably expect to receive from any party as compensation for damages or loss resulting from this declared disaster for which assistance has been provided. 

A DOB review must be completed and validated by the homeowner at multiple points in the process. The HRP Duplication of Benefits process is as follows:

For Traditional Loans:

1. Duplication of Benefits check is conducted prior to award.
2. A verification check is performed prior to closing after pulling a credit report.
3. Applicants are required to recertify if there are any changes in their financial situation.

For Forgivable Loans:

1. Duplication of Benefits check is conducted prior to award.
2. A verification check is performed at fund holdback review.
3. A verification check is performed at loan closeout (year 3 of forgivable loan or upon sale prior to year 3)

In the event that additional funds are received by applicants at any duplication of benefits checkpoint, the HRP program administrator will do the following: 

1. Determine if there is an additional gap for eligible expenses that the additional funds can be credited towards.
2. Determine if there are any non-rebuilding recovery needs that the funds can be credited towards.
3. If neither of the above scenarios apply, the applicant will be required to repay the duplicative assistance amount to the program administrator who will then repay DOLA for any duplicative assistance funds collected.

Through the affidavit, the applicant acknowledges that the source and amount of any and all additional funds received for costs associated with rebuilding, replacement, renovation and mitigation funded under the associated loan will be reported to DOLA and its HRP Program Administrator within 15 calendar days of receipt. If DOLA determines the additional funds to be duplicative, the loan funds will be reduced and/or the applicant will be required to repay any funds disbursed to them that are determined to be duplicative.

A Subrogation agreement will be signed by the Applicant(s), to ensure that if any additional duplication of funds is disbursed to the Applicant after the grant is disbursed, the Applicant is required to pay these funds back to the program. Verification of no additional duplicative funds received is required through the 36-month compliance period.