The National Credit Union Administration (NCUA) and the four federal banking regulatory agencies (collectively the Agencies) issued a joint notice of proposed rulemaking to amend regulations requiring the purchase of flood insure for property located in special flood hazard areas. The proposed rule seeks to implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) with respect to private flood insurance, the escrow of flood insurance payments, and the forced-placement of flood insurance.
The proposed rule requires that regulated lending institutions, which include credit unions, accept private flood insurance as defined in Biggert-Waters Act to satisfy the mandatory purchase requirements. The proposal solicits comment on whether the agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers. In addition, the 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.
The proposal includes new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement. Finally, the proposal would clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage beginning on the date on which the borrower’s coverage lapsed or became insufficient. The proposal would also stipulate the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.
Comments are due to NCUA and the other agencies by December 10, 2013. Please submit comments to CUNA by December 2.