Alert April 02, 2013

Federal Agencies Issue Guidance Concerning Revisions to Flood Disaster Protection Act

The FRB, FDIC, OCC, National Credit Union Administration and Farm Credit Administration (the “Agencies”) jointly issued an interagency statement (the “Interagency Statement”) on the impact of the revisions to the Flood Disaster Protections Act of 1973 (the “FDPA”) made by the Biggert-Waters Flood Insurance Reform Act of 2012 (the “Act”).

The Interagency Statement notes that changes to certain force placement provisions of the FDPA and an increase of the maximum civil money penalty to $2,000 for each violation of the FDPA became effective on July 6, 2012, the date of enactment of the Act.  The amendments to the force placement provisions of the FDPA provide that:

  • premiums and fees for which a borrower may be charged include premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or on which the borrower did not provide a sufficient amount of money to obtain coverage;
  • a lender or servicer, within 30 days of receiving a confirmation of a borrower’s existing flood insurance coverage, must terminate any force-placed insurance and make a refund in an appropriate amount to the borrower;
  • a lender or servicer must accept, as confirmation of the borrower’s existing insurance coverage, a declaration page with the borrower’s existing flood insurance policy number and certain information about the insurance company or insurance agency.

The Interagency Statement also notes that the following three requirements of the Act are not yet effective and will not be effective until implementing regulations are issued by the Agencies.  Those provisions require that: (1) lenders accept private flood insurance policies if the coverage satisfies standards set in the Act; (2) lenders disclose to borrowers certain information regarding the National Flood Insurance Program; and (3) certain lenders and servicers establish escrow accounts for flood insurance premiums and fees for certain loans.