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FEDERAL AGENCIES AMEND REGULATIONS REGARDING FLOOD HAZARD AREAS - 82 FEDERAL REGISTER 4953  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”) are amending their regulations regarding […]

FEDERAL AGENCIES AMEND REGULATIONS REGARDING FLOOD HAZARD AREAS - 82 FEDERAL REGISTER 4953 

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”) are amending 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 (the “Act”), effective July 1, 2019. 

Regulated lending institutions:

  • Must accept policies that meet the statutory definition of “private flood insurance” in the Act;
  • May exercise their discretion to accept flood insurance policies issued by private insurers and plans providing flood coverage issued by mutual aid societies that do not meet the statutory definition of “private flood insurance” subject to certain restrictions.

The Act requires institutions to accept private flood insurance that meets both (1) the statutory definition of private flood insurance and (2) the mandatory purchase requirement. The amended rule includes a streamlined compliance aid provision to assist institutions with evaluating policies by relying on written assurances from the insurer that a policy satisfies the criteria set out in the Act.

The amended rule permits institutions to accept flood insurance policies issued by private insurers that do not meet the statutory and regulatory definition of private flood insurance if the policy:

  • Provides coverage in the amount required by the flood insurance purchase requirement;
  • Is issued by an authorized insurer that is licensed, admitted, or not disapproved by a state insurance regulator;
  • Covers both the mortgagor(s) and the mortgagee(s) as loss payees, except in the case of a policy that is provided, and for which the premium is paid by a condominium association, cooperative, homeowners association, or other applicable group; and
  • Provides sufficient protection of the designated loan, consistent with general safety and soundness principles, and the institution documents its conclusion regarding sufficiency of the protection of the loan in writing.

The amendment provides that an institution, in satisfaction of the mandatory flood insurance requirement, may accept a plan provided by a mutual aid society, as defined below, if the institution's primary Federal supervisory agency has determined that such plans qualify as flood insurance for purposes of the Act and the plan:

  • Provides coverage in the amount required by the flood insurance purchase requirement;
  • Covers both the mortgagor(s) and the mortgagee(s) as loss payees; and
  • Provides sufficient protection of the designated loan, consistent with general safety and soundness principles, and the lending institution documents its conclusion regarding sufficiency of the protection of the loan in writing.

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Diane Jenkins

Director, National Mortgage Compliance Practice Group, AsurityDocs Of Counsel, Sandler Law Group

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