NCUA Issues Request for Comment on Proposed Flood Insurance
October 15, 2013
Oct. 15, 2013
The National Credit Union Administration (NCUA) has issued a joint notice of proposed rulemaking to amend flood insurance rules. The proposed rule would implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 with respect to private flood insurance, the escrow of flood insurance payments, and the forced-placement of flood insurance.
The proposed rule would require that credit unions accept private flood insurance as defined in Biggert-Waters to satisfy mandatory purchase requirements, and solicits comment on whether the NCUA should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers.
In addition, the proposal would require credit unions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home—not including business, agricultural, and commercial loans—unless the institutions qualify for the statutory exception.
The statutory exception applies only to credit unions with less than $1 billion in assets as of Dec. 31 of either of the two prior calendar years which were also not required to escrow under federal or state law on or before July 6, 2012.
The proposal also includes new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement. Finally, the proposal would clarify that credit unions have the authority to charge a borrower for the cost of force-placed flood insurance coverage beginning on the date on which the borrower’s coverage lapsed or became insufficient, and it stipulates the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.
The NCUA’s proposal would implement only the provisions of Biggert-Waters relating to the mandatory purchase of flood insurance over which the NCUA has jurisdiction. Accordingly, credit unions should review Biggert-Waters for further information about revisions to the flood insurance statutes that will not be implemented through this rulemaking.
Credit unions have until Dec. 10 to comment on the proposed rule.
Questions? Contact the Compliance Hotline: 1.800.546.4465, email@example.com.