Flood Insurance Review & Update
The world of flood insurance is in turmoil at the present time. This program provides a review and update of the applicable laws and regulations. It is designed to clarify the many flood requirements that apply to financial institutions.
On July 6, 2012, President Obama signed into law the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters).
- Some of the Biggert-Waters changes were effective immediately upon becoming law;
- Other provisions are effective on June 1, 2014, as a result of revised FEMA rules;
- Others are waiting on final interagency regulations, which were expected to be published soon, but have now been delayed; and
- All of these efforts will be partially undone and delayed by passage of the Homeowners Flood Insurance Affordability Act, which Congress completed on March 13, 2014.
Provisions of Biggert-Waters that:
- Eliminate many subsidies on insurance rates;
- Increase the maximum penalty for flood violations;
- Require the lender to terminate the flood insurance it “force places” and issue refunds to homeowners who already have their own coverage;
- Increase the coverage available on multifamily structures;
- Expand the requirement to escrow for flood insurance premiums;
- Establish a requirement for minimum deductibles;
- Clarify issues related to flood insurance on condominiums;
- Require a new disclosure related to private flood insurance; and
- Require lenders to accept private flood insurance policies that meet certain requirements.
Provisions of the Homeowners Flood Insurance Affordability Act that:
- Reinstate lower rates for grandfathered properties that were repealed under Biggert-Waters;
- Extend the effective date for Biggert-Waters escrow rules from July 6, 2014 to January 1, 2016.
- Create a limit on annual rate increases;
- Repeal property sales and new policy triggers;
- Provide refunds of overpaid premiums to certain policyholders;
- Delay, clarify and limit Biggert-Waters escrow requirements.
FEMA program changes that are effective June 1, 2014, including:
- New policy limits for multi-family residential buildings; and
- Revised deductible amounts and changes to the minimum deductible.
Status of interagency flood regulations.
Loan officers, processors and others responsible for assuring that flood insurance disclosures are provided and that an appropriate amount of insurance is purchased upfront and maintained throughout the life of the loan.
Jack Holzknecht, CRCM, a principal with Pegasus Educational Services, LLC, has been delivering the word on lending compliance for 37 years. Jack’s career began as a federal bank examiner. He also headed the form and software division of a regional consulting company and spent seven years in charge of their education division. He also developed and delivered training for the FDIC and OTS.
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