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OCC BULLETIN 2013-24
Subject: Flood Insurance
Date: October 11, 2013
To: Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Notice of Proposed Rulemaking
The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), Farm Credit Administration (FCA), and National Credit Union Administration (NCUA) have issued a Notice of Proposed Rulemaking that would amend regulations regarding loans in areas having special flood hazards to implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act or Act). Specifically, the proposal would establish requirements with respect to the escrow of flood insurance payments, the acceptance of private flood insurance policies, and the force-placement of flood insurance. Furthermore, the OCC is proposing to integrate its flood insurance regulations for national banks and federal savings associations (collectively, banks), currently set forth at 12 CFR 22 and 12 CFR 172. The proposed rule has a 60-day comment period, ending on December 10, 2013.
Escrow of Flood Insurance Payments
Private Flood Insurance
The National Flood Insurance Act of 1968 and the Flood Disaster Protection Act, as amended, govern the NFIP. Among other things, these statutes require the purchase of flood insurance on certain properties and make available federally subsidized flood insurance to owners of improved real estate or mobile homes located in special flood hazard areas if the community where the improved real estate or mobile home is located participates in the NFIP.1 The Federal Emergency Management Agency (FEMA) administers the NFIP.2 OCC, Board, FDIC, NCUA, and FCA regulations implement these statutes for the lending institutions they supervise.
The Biggert-Waters Act significantly amends the NFIP requirements. Among other things, the Act (1) requires regulated lending institutions to escrow premiums and fees for flood insurance on residential improved real estate, unless the regulated lending institution meets the statutory small institution exception;3 (2) directs regulated lending institutions to accept private flood insurance, as defined by the Act, and to notify borrowers of the availability of private flood insurance; and (3) clarifies that the cost of premiums and fees incurred for force-placed insurance may include costs for coverage beginning on the date on which the flood insurance coverage lapsed or did not provide sufficient coverage, and establishes procedures for terminating force-placed insurance.
Please contact Rhonda L. Daniels, Compliance Specialist, Compliance Policy Division, (202) 649-5405; Margaret C. Hesse, Senior Counsel, Community and Consumer Law Division, (202) 649-6350, or Heidi M. Thomas, Special Counsel, Legislative and Regulatory Activities Division, (202) 649-5490 or (202) 649-6360.
Amy S. Friend
3 Subsequent to the enactment of the Biggert-Waters Act, Congress clarified that the flood insurance escrow requirement applies only to residential loans secured by residential improved real estate. See Public Law No. 112-281 (January 14, 2013).