PROPOSED FLOOD REGULATIONS

Recently the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Farm Credit Administration, the National Credit Union Administration (jointly referred to as the Agencies) issued 166 pages of proposed rules for loans in areas having special flood hazards. The revisions to existing rules are based on changes from the Biggert-Waters Flood Insurance Reform Act of 2012. Comments are being accepted until December 10, 2013.

The Agencies propose to:

  • Require regulated lending institutions to escrow premiums and fees for flood insurance for any loans secured by residential improved real estate or a mobile home, unless the institutions has total assets of less than $1 billion and, as of the Act’s date of enactment, July 6, 2012, was not required by Federal or State law to escrow taxes or insurance for the term of the loan and did not have a policy to require escrow of taxes and insurance.
  • Require that regulated lending institutions to accept private flood insurance that meets the statutory definition to satisfy the mandatory purchase requirement.
  • Adopt new and revised sample notice forms and clauses, including a modified Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance, a new Notice of Requirement to Escrow for Outstanding Loans, and a new sample clause regarding the new escrow requirement that may be included with the force-placement notice.
  • Amend the force-placement of flood insurance provisions to clarify that a lender or its servicer has the authority to charge a borrower for the cost of flood insurance coverage commencing on the date on which the borrower’s coverage lapsed or became insufficient.
  • Make needed technical corrections.
  • Integrate the OCC and the FDIC flood insurance regulations for national banks and Federal savings associations and for State non-member banks and State savings associations, respectively.

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