Flood Insurance rules have changed continuously over the past few years.
On July 6, 2012 Congress passed the Biggert-Waters Flood Insurance Reform Act (Biggert-Waters).
On March 23, 2014 Congress passed the Homeowner Flood Insurance Affordability Act (Affordability Act). The Affordability Act revised certain sections of Biggert-Waters, eliminated or delayed other sections and created new rules.
In June 2015, the financial institution regulatory agencies released final rules implementing most of the provisions of both of the above laws.
In January 2019 the financial institution regulatory agencies published final rules implementing the requirements for the mandatory purchase of private flood insurance.
On June 26, 2020, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration released proposed new and revised Interagency Questions and Answers Regarding Flood Insurance (FAQs). The updates include, but are not limited to, the detached structure exemption, escrow requirements, and force-placement rules. The comment period ended on September 4, 2020. Final FAQs are expected soon.
Financial institutions are still dealing with issues and uncertainties regarding flood insurance requirements, including the detached structure exemption, force placement requirements, and escrow provisions. Once complete the FAQs will resolve many of those problems. Other provisions of the flood insurance requirements still plaque many financial institutions.
- When flood insurance is required;
- How to determine the accurate amount of required insurance the borrower must purchase;
- What the purchase requirements are when multiple buildings are located on a property in a special flood hazard area;
- The final requirements for the mandatory acceptance of private flood insurance;
- The detached structure exemption and how to utilize it;
- The requirement to escrow flood insurance premiums and the exemptions allowed from the escrow requirements;
- The rules for force-placing flood insurance;
- Whether increasing a loan balance due to force-placing flood insurance requires an escrow account to be established;
- What steps should be taken if a flood hazard determination does not mirror the special flood hazard area dictated by the insurance company; and
- How a financial institution should monitor those loans designated to be in a special flood hazard area.
Who Should Attend?
The program is designed for compliance officers, operations personnel, mortgage loan officers, loan originators and others involved in obtaining and maintaining flood insurance on mortgage loans.