NCUA Releases Interagency Statement Outlining Impact of Biggert-Waters Act

On Friday, March 29, 2013, the National Credit Union Administration (NCUA), along with other federal agencies, issued an Interagency Statement on the Impact of the Biggert-Waters Flood Insurance Reform Act of 2012. The guidance discusses the effective dates of certain provisions of the Act and the impact of the act on the agencies’ proposed Interagency Questions and Answers.

The act amended the Flood Disasters Protection Act of 1973, and a couple of the provisions were effective when it was enacted on July 6, 2012:

  • Amendments to the Force Placement of flood insurance:
    • Provide that the premiums and fees that a lender or servicer may charge the borrower include premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide sufficient coverage amount;
    • Require the lender or servicer, within 30 days of receiving a confirmation of a borrower’s existing flood insurance coverage, to terminate any force-placed insurance and refund to the borrower all force-placed insurance premiums and any related fees paid for by the borrower during any period of overlap between the borrower’s policy and the force-placed policy; and
    • Require a lender or servicer to accept as confirmation of a borrower’s existing flood insurance policy a declarations page that includes the existing flood insurance policy number and the identity and contact information for the insurance company or agent.
  • The maximum civil money penalty for a FDPA violation has been increased to $2,000. In addition, the penalty cap per year has been deleted.

The guidance also covers a longer list of provisions that are not effective until the Agencies go through the notice and comment rulemaking. These include:

  •  An amendment that allows lenders to accept private flood insurance policies as satisfaction of the mandatory purchase requirement.
  • Lenders are required to disclose to borrowers that:
    • Flood insurance under the National Flood Insurance Program (NFIP) is available from private insurance companies or from the NFIP directly;
    • Flood insurance that provides the same level of coverage as an NFIP policy may be available from private insurance companies; and
    • Borrowers are encouraged to compare policies.
  • And while lenders and servicers must establish escrow accounts for flood insurance premiums, certain lenders may be exempt from the escrow requirement if:
    • The institution has less than $1 billion in assets; and
    • The institution was not required by federal or state law to escrow taxes or insurance for the term of the loan, and did not have a policy to require escrow of taxes and insurance.

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Advocacy News, Compliance, NCUA.