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NCUA Issues New Flood Insurance Proposal
Friday, October 24, 2014 6:40 AM

The NCUA Board, along with the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Farm Credit  Administration, issued a proposed rule to amend their regulations regarding loans in areas having special flood hazards to implement certain provisions of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA).

The HFIAA amended the Biggert-Waters Flood Insurance Reform Act of 2012 and the proposal issued yesterday essentially replaces the current pending proposal under Biggert-Waters.

The proposed rule would:

  • Establish requirements with respect to the escrow of flood insurance payments. The proposal would also implement an exemption in HFIAA for certain detached structures from the mandatory flood insurance purchase requirement;
  • Amend the provisions that tie the escrow requirement to the origination, refinance, increase, extension, or renewal of a loan on or after January 1, 2016, and provide additional exceptions to the escrow requirement;
  • Apply the HFIAA mandate that regulated lending institutions provide an option to borrowers to escrow flood insurance premiums and fees for loans that are outstanding as of January 1, 2016; and
  • Provide a new exemption to the mandatory flood insurance purchase requirements for a structure that is part of a residential property but is detached from the primary residential structure and does not serve as a residence.

The proposed rule also includes new and revised sample notice forms and clauses. Comments are due to the agency in 60 days and CUNA will be posting a Regulatory Call to Action shortly.