HB-1-3550

APPENDIX 10

SINGLE FAMILY HOUSING FIELD GUIDANCE ON 

DISASTER DECLARATIONS

I. PURPOSE

The following provides general guidance to Agency staff for appropriate action following a 

disaster covered by a Presidential Disaster Declaration (Major Disaster Declaration or Fire 

Management Declaration). Additional guidance may be provided from the National Office 

(e.g., funding guidance and unique program type codes if special disaster funding is 

received). 

Field Offices should check the Federal Emergency Management Agency (FEMA) website

at www.fema.gov for Presidential Disaster Declarations in areas served. This appendix 

applies to designated areas eligible for Individual and/or Public Assistance.. 

Unless otherwise specified in this appendix, disaster assistance applications for Section 

502 Direct and Section 504 Loans and/or Grants should be accepted, evaluated, and 

closed following the same procedures as described in Chapters 2 through 10 and 12 of 

this Handbook. This applies to existing customers returning for subsequent assistance or 

new customers. The focus by Agency staff will be to serve those affected by the disaster 

as quickly and efficiently as possible. Awareness of policies and procedures such as 

proper use of funds remain of the utmost importance. 

Processes specific to disaster assistance include: 

• Disaster victims should be directed to contact FEMA, the Small Business

Administration (SBA), their homeowner insurance company, and other agencies

or charitable organizations offering assistance.

• Agency staff must obtain certification statements from recipients that indicate

they have not received other benefits for the same purpose as the RD assistance.

• Funds received from FEMA and other sources for disaster relief should not be

considered in the net family assets.

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Revised (06-02-23) PN 583
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• Applicants must establish that physical damage to their home was caused by the

natural disaster.

• The maximum Section 504 grant assistance to any one household for one

dwelling to address the damage caused by the natural disaster and make the home

decent, safe, and sanitary may not exceed ten percent of the national average area

loan limit. This allowance only applies one year from the declaration date.

• Section 504 grant funds may not be used for cosmetic improvements (e.g., ceiling

fans, wall cabinets, or crown molding) and the purchase or replacement of nonessential appliances (washing machines, dryers, microwaves, etc.).

II. ADDITIONAL STATE/FIELD OFFICE ROLES AND RESPONSIBILITIES

• Designate an individual to coordinate Rural Development response and recovery

efforts.

• Obtain the State Preliminary Damage Assessment from FEMA.

• Plan and conduct outreach efforts to reach disaster victims.

• Consider utilizing Field Offices outside of the disaster area to support

application processing activities.

• Coordinate assistance from local appraisers, insurance adjusters, and other

agencies to verify losses when possible.

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III. DOCUMENTATION OF IMPACT

The following documentation must be in the case file:

• Home is in a disaster area identified in the Presidential Disaster Declaration.

• Applicant must provide documentation regarding destruction of or damage to the

residence. This may include an insurance report, an inspection report by an

independent fee inspector or government agency, or conclusive photographic evidence

showing the destruction or damage.

• Applicant’s insurance information claim is needed for insurance benefits and evidence

to show that the damage to the property is not fully covered.

• Proof of ownership, rental, or other arrangement for principal residence documentation

in the designated disaster area.

• Certification written on Form RD 410-4, Uniform Residential Loan Application, page 8,

“I/we certify that I/we have not previously nor do I/we anticipate receiving any other

payment or benefit of any kind for the same purpose for which I/we am applying for

assistance from Rural Development.” This must also be signed by all parties of the

application and/or owners of the home to be repaired.

• Staff must make responsible efforts to avoid providing duplicate benefits. If applicable,

this includes verification from the mortgage lender of insurance coverage and

verification by the insurer of coverage.

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IV. PORTFOLIO MONITORING

Immediately following a disaster there is usually little application activity as most 

residents are in “recovery mode”. Outreach efforts take effect over time, applications 

begin coming in, and supplemental funding may or may not become available. The

focus is on providing assistance to those in great need. State Offices need to monitor 

activities of the affected Field Offices during this time.

Items to consider include the following:

• Are there outreach efforts in all affected areas of the designation?

• Are funds being used for persons and families affected or displaced by the

presidential declared disaster?

• Are disaster funds utilized for eligible purposes?

• Do applicants meet all 502 or 504 eligibility requirements?

• Does the property meet all 502 eligibility requirements?

• Is FEMA’s disaster declaration specified in the case files?

• Is there certification and follow up in the applicant’s case file to indicate the applicant

has not received assistance through homeowner’s insurance, FEMA, SBA

or other organizations for the same purpose?

• Are the disaster loans and grants coded properly (as applicable)?

Monitoring by the State Office does not end with the file review. Open communication 

with the staff of the affected Field Office(s) is important. Communication and 

coordination with other agencies before, during, and after is important to the success of 

recovery.

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V. CUSTOMER SERVICE AND LOANSERVICING

Rural Development makes every effort to help existing borrowers who are victims of 

disaster to recover from the financial hardship, to minimize the potential for delinquency 

liquidation, and to protect the Government’s interest. The Servicing and Asset 

Management Office (Servicing Office) will take the lead. However, Field Office staff 

may frequently be the first contact point.

Field Staff should refer existing customers seeking loan servicing assistance to 

Servicing Office at:

USDA Rural Development 

Servicing Office

Attn: Customer Assistance

Post Office Box 66818 

St. Louis, Missouri 63166-6818 

Phone: (800) 793-8861 

NOTE: The following information is provided for awareness of field staff. The 

Servicing Office will continue to provide customers with servicing options and 

decisions.

Upon notice of a disaster declaration, collection calls and treasury offset will be 

suspended for all borrowers residing in the declaration area. In addition, the following 

servicing options will be available for borrowers affected by the natural disaster:

Insured Losses: If security property is to be repaired, the borrower’s Rural

Development loan account must be current before insurance proceeds can be released. 

An authorized Field Office employee may release insurance proceeds less than $10,000 

to the borrower when presented with the insurance company's repair list. Insurance 

proceeds of $10,000 or more must be forwarded to Servicing Office, Hazard Insurance 

Section, according to current claims handling procedures. A Field Office employee will 

inspect repairs when completed as required under 7 CFR 3550.110(d) (3) and RD 

Instruction 1924-A. If security property is not going to be repaired, insurance proceeds 

must be applied to pay off the loan. Recapture is calculated based on the market value at 

the time of the loss, according to 7 CFR 3550.162. If market value is less than the debt, 

Servicing Office will apply the insurance proceeds to the amount of the debt, including 

recapture. Market value is determined by a recent file appraisal if documented that it 

represents an accurate indication of value at the time of the loss.

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Uninsured Losses: A borrower who sustains an uninsured loss is covered by the 

moratorium authority below but is in default of the mortgage by failing to keep the 

property insured. If a borrower incurs an uninsured loss, the Field Office will notify 

Servicing Office through Task 285 of the estimated amount of damage to the property 

and the date of loss. I f a borrower is unable to pay off the debt or repair the house with 

personal resources or other credit, the debt must be settled under 7 CFR 3550.253. 

Moratorium: Under the exception authority of 7 CFR 3550.8, Servicing Office is 

authorized to grant a moratorium for a period not to exceed 180 days for 502 and 504 

borrowers located in the declared area. Borrowers who have lost employment, sustained 

severe property damage or medical expenses, should contact Servicing Office for an 

extension for up to 18 additional months, not to exceed a total of 24 months. After the 

completion of the moratorium period, the account will automatically be reamortized.

Escrow will not be required.

Reamortization: Since SBA is statutorily prohibited from making disaster loans 

to persons delinquent on a federal debt, Servicing Office is authorized to 

reamortize a delinquent 502 Direct account when a borrower shows evidence of 

application for a disaster loan from the SBA.

The primary servicing actions in the natural disaster area will continue to be the 

responsibility at Servicing Office as described in this Handbook; however, assistance 

may be needed from the Field so that Servicing Office can adequately service the 

loan.

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