Rural Development

Joaquin Altoro 

Administrator

Rural Housing Service

1400 Independence Ave, SW 

Room 5011-S 

Washington, D.C. 20250

TO: All RHS MFH National Office Directors 

Field Office Staff

Rural Development

ATTN: Leadership Designees

Field Operations Division Program Staff 

Rural Development 

FROM: Joaquin Altoro 

Administrator

Rural Housing Service

SUBJECT: Multifamily Housing Guidance for Processing Insurance Claim 

Proceeds (Handbook 2-3560, 4.13 D.1. Bid Requirements) 

PURPOSE

The purpose of this Unnumbered Letter (UL) is to inform Multifamily Housing 

(MFH) staff of procedural changes to the process requirements for insurance claims, 

specifically related to bid requirements. Many insurance companies have specific 

requirements for hiring vendors (preferred contractors) as a condition of payment of 

funds. These procedural changes will reduce Agency and owner administrative 

burdens.

BACKGROUND

Handbook 2-3560, Chapter 4 , paragraph 4.13 D.1. Bid Requirements requires a 

minimum of two bids when the expenditure of reserve funds for a project (all work 

included in one contract) is estimated to cost more than $5,000. When there is an

Identity of Interest (IOI) entity between the borrower or property manager and a 

contractor, a minimum of three bids must be submitted to the Agency.

Many insurance companies have specific requirements for selecting preferred 

contractors. Rural Development’s bid requirements generally duplicate this work 

and add another layer of compliance.

EXPIRATION DATE: FILING INSTRUCTIONS:

June 30, 2024 Housing Programs

USDA is an equal opportunity lender, provider, and employer.
Page 2 

IMPLEMENTATION

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 is based on the insurance industry standard that the selected (preferred) contractor will not 

charge more than what the insurance company will pay 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 bid requirement guidance does not apply to reserve withdrawal 

requests that do not involve insurance claim proceeds. 

The contractor and insurance company will comply with all Agency design requirements, state and 

local laws and local code enforcement requirements.

If the insurance company receives executed contract documents, such as construction contracts, 

change orders, warranties, inspection reports, etc. the MFH Servicing Specialist may request 

copies of these documents for the project file.

In all cases where there is substantial or major rehabilitation, the selected contractor must adhere to 

Section 504 of the Rehabilitation Act of 1973. If substantial or major rehabilitation includes 

development of plans and specifications, the plans and specifications should be reviewed by 

Program Support Services, Architectural Services Branch, prior to the start of the work.

If you have any questions regarding the guidance in this UL, please contact Deb Reed, Finance & 

Loan Analyst, Asset Management Division, Policy & Budget Branch (deb.reed@usda.gov) or 

telephone 712-254-4365.