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Agencies Issue Flood Insurance Rule

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Joint Release
Board of Governors of the Federal Reserve System
Farm Credit Administration
Federal Deposit Insurance Corporation
National Credit Union Administration
Office of the Comptroller of the Currency

​For Immediate Release

June 22, 2015

 

Agencies Issue Flood Insurance Rule

 

Five federal regulatory agencies today announced the approval of a joint final rule that modifies regulations that apply to loans secured by properties located in special flood hazard areas. The final rule implements provisions of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) relating to the escrowing of flood insurance payments and the exemption of certain detached structures from the mandatory flood insurance purchase requirement. The final rule also implements provisions in the Biggert-Waters Flood Insurance Reform Act of 2012 (the Biggert-Waters Act) relating to the force placement of flood insurance.

In accordance with HFIAA, the final rule requires regulated lending institutions to escrow flood insurance premiums and fees for loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed on or after January 1, 2016, unless the loan qualifies for a statutory exception. In addition, certain regulated lending institutions are exempt from this escrow requirement if they have total assets of less than $1 billion. Further, the final rule requires institutions to provide borrowers of residential loans outstanding as of January 1, 2016, the option to escrow flood insurance premiums and fees. The final rule includes new and revised sample notice forms and clauses concerning the escrow requirement and the option to escrow. 

The final rule includes a statutory exemption from the requirement to purchase flood insurance for a structure that is a part of a residential property if that structure is detached from the primary residence and does not also serve as a residence. However, under HFIAA, lenders may nevertheless require flood insurance on the detached structures to protect the collateral securing the mortgage.

Lastly, the final rule includes the Biggert-Waters Act provisions on force placement. These provisions clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage beginning on the date on which the borrower’s coverage lapses or becomes insufficient. The final rule also stipulates the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.

This final rule does not address the private flood insurance provisions in the Biggert-Waters Act. The agencies plan to address these provisions in a separate rulemaking.

The final rule is being issued by the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency.

The agencies expect the final rule to be published in the Federal Register shortly. 

 

 
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Media Contacts:               

Federal Reserve Board Susan Stawick ​(202) 452-2955
​FCA ​Mike Stokke ​(703) 883-4056
​FDIC ​David Barr ​(202) 898-6992
NCUA ​Ben Hardaway ​(703) 518-6333
​OCC ​Stephanie Collins
​(202) 649-6870

 


NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the United States, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At MyCreditUnion.gov, NCUA also educates the public on consumer protection and financial literacy issues.

--NCUA--

Office of Public & Congressional Affairs

703.518.6330
pacamail@ncua.gov

Contacts:

John Fairbanks
Office: 703.518.6336
Mobile: 571.438.0801
jfairbanks@ncua.gov

Ben C. Hardaway
Office: 703.518.6333
Mobile: 703.298.5223
bhardaway@ncua.gov

Kenzie Snowden
Office: 703.518.6334
ksnowden@ncua.gov

"Protecting credit unions and the consumers who own them through effective regulation"

9/20/2018 6:00 PM