Removing Barriers Blog

CUNA Suggests Improvements to Private Flood Insurance Proposal
Posted January 04, 2017 by CUNA Advocacy

Today, CUNA filed a letter with NCUA on an interagency proposal to amend 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. As mandated by the Biggert-Waters Act, the proposed rule would require lending institutions—including credit unions—to accept policies that meet the statutory definition of “private flood insurance” and permit them to accept flood insurance provided by private insurers that does not meet the statutory definition but does meet certain established criteria. 

While we generally agree with most of the proposed requirements, we ask NCUA to be mindful of placing additional regulatory requirements on credit unions and to provide adequate time for compliance with any new requirements, being mindful that the changes contemplated will affect most—if not all—credit unions. 

The proposal would include a “compliance aid provision” that provides that a policy is deemed to meet the definition of “private flood insurance” if certain criteria are met. However, we believe it would be more appropriate to include a “safe harbor” rather than the proposed “compliance aid provision,” which would not relieve a lending institution of the requirement to accept a policy that meets the definition of “private flood insurance” and the mandatory purchase requirement. We believe a “safe harbor” that effectively eliminates or reduces the lending institution of liability in verifying whether a private insurance policy meets the statutory requirements is more appropriate than a tool that simply assists the lender in complying with the regulation. 

With regard to timing, because of all of the new regulations that credit unions are currently managing, we ask NCUA to provide adequate time for them to comply with the provisions in the proposed regulation. While NCUA has not included a possible effective date, since the changes contemplated in the proposal will require updates to forms and systems, we request an effective date that is no less than 180 days from the date a final rule is published in the Federal Register.