The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Farm Credit Administration (FCA), and the National Credit Union Administration (NCUA) have issued a new proposal to amend their regulations regarding loans in areas having special flood hazards to implement the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act). The proposed rule requires regulated lending institutions to accept policies that meet the statutory definition of private flood insurance in the Biggert-Waters Act and permit regulated lending institutions to accept flood insurance provided by private insurers that does not meet the statutory definition of “private flood insurance” on a discretionary basis, subject to certain restrictions.
Under the proposal lenders must conduct a verification to determine that the policy meets the definition of “private flood insurance.” The proposal includes an optional safe harbor that minimizes the compliance burden, but does not assure adequate collateral protection. The Agencies are proposing to permit a regulated lending institution to exercise its discretion to accept certain types of flood insurance policies issued by a private insurer other than private flood insurance policies that an institution is required to accept.
The proposal also would establish criteria to assist in determining that coverage offered by a mutual aid society assures compliance with federal flood insurance laws.
Comments will be received for 60 days after publication in the Federal Register. Publication is expected soon.
A copy of the proposed rule is available at https://www.federalreserve.gov/newsevents/press/bcreg/bcreg20161031a1.pdf