PROPOSED FLOOD INSURANCE REGULATIONS

The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), the Farm Credit Administration (FCA), and the National Credit Union Administration (NCUA) (collectively, the Agencies) are proposing to amend their flood insurance regulations to implement certain provisions of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), which amends some of the changes to the Flood Disaster Protection Act of 1973 mandated by the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters).

The Agencies propose to revise their respective flood insurance regulations to incorporate HFIAA’s provisions exempting certain detached structures on residential property from the mandatory flood insurance purchase requirement and to implement the statute’s provisions requiring the escrow of flood insurance premiums and fees.

The Agencies plan to address proposed regulations dealing with private flood insurance and force-placed flood insurance in a separate rulemaking.

It is disappointing to note that the proposal includes the following: “Therefore, if on or before July 6, 2012, the institution: (i} was not required under Federal or State law to deposit taxes, insurance premiums, fees, or any other charges in an escrow account for the entire term of any loan secured by residential improved real estate or a mobile home; and (ii) did not have a policy of consistently and uniformly requiring the deposit of taxes, insurance premiums, fees, or any other charges in an escrow account for any loans secured by residential improved real estate or a mobile home, the institution may be eligible for the small lender exception provided it meets the size threshold.” This provision will make many financial institutions ineligible for the escrow exemption.

The agencies will accept comments for 60 days after publication.

A copy of the proposed regulations is available here.

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