WASHINGTON (10/15/13)--The National Credit Union Administration and other federal regulators are seeking comment on potential changes to regulations pertaining to loans secured by property located in special flood hazard areas.
The joint agency proposal would require that regulated lending institutions accept private flood insurance, as defined in the Biggert-Waters Flood Insurance Reform Act of 2012, and satisfy mandatory purchase requirements outlined in that bill.
The flood insurance reform act, which became law in July 2012, extended the National Flood Insurance Program (NFIP) until Sept. 30, 2017. The bill also called for flood insurance reforms, including the phasing out of subsidies for many properties, raising the cap on annual premium increases, allowing multifamily properties to purchase NFIP policies, imposing minimum deductibles for flood claims, requiring the NFIP administrator to develop a plan for repaying the debt incurred from Hurricane Katrina, and establishing a technical mapping advisory council to deal with map modernization issues.
The new joint agency release asks whether federal financial regulatory agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers.
The joint agency proposal would:
- Require regulated lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home, not including business, agricultural and commercial loans, unless the institutions qualify for a statutory exception;
- Result in new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement;
- Clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage after a homeowner's private insurance lapses or becomes insufficient; and
- Outline the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.
The joint agency proposal is co-signed by the NCUA, the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
Comments on the release will be accepted until Dec. 10.