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On May 11, 2022, the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (jointly, the agencies) issued revised questions and answers (Q & As) regarding federal flood insurance law and the agencies’ implementing regulations.
The Q & As have not been updated since 2011. There have been multiple new laws that amended the flood insurance requirements in that period. The interagency regulations have also been revised several times. There are answers in the existing Q & As that are incorrect and following the guidance could result in violations. Eleven years is a long wait for an update, but this appears to be a case of better late than never.
The new and revised Q & As:
- Include 140 questions in a 263-page document broken down into 19 sections.
- Are effective immediately.
- Cover a broad range of technical flood insurance topics, including the escrow of flood insurance premiums, the detached structure exemption to the flood insurance purchase requirement, force placement procedures, and private flood insurance.
The Q & As contain information and clarification not included in the laws or regulations. This is essential information that all lenders need to assure full compliance, and thereby avoid civil monetary penalties. The Q & As are effective immediately, there is no delayed effective date. Lenders must get it right, right now.
You’ll receive a detailed manual that serves as a handbook long after the recording is viewed.
Upon completion of this recording, you’ll understand the new and revised questions regarding:
- Determining the Applicability of Flood Insurance Requirements for Certain Loans;
- Exemptions from the Mandatory Flood Insurance Purchase Requirements;
- Private Flood Insurance – Mandatory Acceptance;
- Private Flood Insurance – Discretionary Acceptance;
- Private Flood Insurance – General Compliance;
- Standard Flood Hazard Determination Form (SFHDF);
- Flood Insurance Determination Fees;
- Flood Zone Discrepancies;
- Notice of Special Flood Hazards and Availability of Federal Disaster Relief;
- Determining the Appropriate Amount of Flood Insurance Required;
- Flood Insurance Requirements for Construction Loans;
- Flood Insurance Requirements for Residential Condominiums and Co-Ops;
- Flood Insurance Requirements for Home Equity Loans, Lines of Credit, Subordinate Liens, and Other Security Interests in Collateral Located in an SFHA;
- Requirement to Escrow Flood Insurance Premiums and Fees – General;
- Requirement to Escrow Flood Insurance Premiums and Fees – Escrow Small Lender Exception;
- Requirement to Escrow Flood Insurance Premiums and Fees – Escrow Loan Exceptions;
- Force Placement of Flood Insurance;
- Flood Insurance Requirements in the Event of the Sale or Transfer of a Designated Loan and/or Its Servicing Rights; and
- Mandatory Civil Money Penalties.
The recording is designed for loan operations management, lenders, risk managers, compliance officers, loan servicing personnel, auditors, and others with responsibilities related to obtaining flood insurance at origination and maintaining flood insurance throughout the life of a loan.