The OCC issued a bulletin which provides guidance to national banks on how to deal with periods during which the authority of the Federal Emergency Management Agency to issue flood insurance contracts under the National Flood Insurance Program has lapsed. On May 31, 2010 the current reauthorization of the National Flood Insurance Program lapsed. The bulletin also provides guidance that will apply if there are any future lapses in the National Flood Insurance Program.
According to the OCC, national banks may continue to make loans subject to the Flood Disaster Protection Act and OCC regulations without flood insurance when the National Flood Insurance Program is not available. However, national banks must continue to make flood determinations, provide timely, complete, and accurate notices to borrowers, and comply with other parts of the flood insurance regulations. In addition they must evaluate safety and soundness and legal risks and manage those risks during the lapse period. Further, national banks should have a system in place to ensure that policies are obtained as soon as available following reauthorization for properties that are subject to mandatory flood insurance coverage.