Multiple Agencies Release Interagency Statement on Maximum Flood Insurance Coverage

Federal agencies, including the National Credit Union Administration (NCUA), have released an interagency statement on the increased maximum flood insurance coverage for other residential buildings. The new National Flood Insurance Program (NFIP) maximum limit of other residential building coverage available to $500,000 is up from the previous amount of $250,000.

The Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve, Farm Credit Administration and NCUA jointly issued the statement.

The change comes as a result of the Biggert-Waters Flood Insurance Reform Act of 2012, which extended the NFIP’s authority through September 2017, and mandated major flood insurance reforms, including phasing out subsidies for many properties and raising the cap on annual premium increases.

The new coverage limits are available for new policies, policy renewals, or existing policies with change endorsements effective on or after June 1. The increase in the maximum amount of coverage available under the NFIP could affect the minimum amount of flood insurance required for both existing and future loans secured by buildings.

The release also states that “if, as a result of the increase in the maximum limit of building coverage for these buildings, a lender or its servicer determines on or after June 1, 2014, that the building securing the designated loan is now covered by flood insurance in an amount less than required by federal flood insurance regulation, it should take steps to ensure that the borrower obtains sufficient coverage, including force placing insurance pursuant to federal law.”

If the borrower fails to obtain sufficient coverage within 45 days of notification, the lender or purchaser must purchase coverage on the borrower’s behalf. The lender or its servicer may charge the borrower for the cost of premiums and fees incurred, including premiums and fees incurred for coverage beginning on the date on which flood insurance coverage did not provide a sufficient coverage amount.

Compliance Question of the Week

When is the credit union required to have a state certified or licensed appraiser?        

An appraisal performed by a state certified or licensed appraiser is required for all real estate related financial transactions, except when:

  1. The transaction value is $250,000 or less;
  2. A lien on real property has been taken as collateral through an abundance of caution and where the terms of the transaction as a consequence have not been made more favorable than they would have been in the absence of a lien;
  3. A lien on real estate has been taken for purposes other than the real estate’s value;
  4. A lease of real estate is entered into, unless the lease is the economic equivalent of a purchase or sale of the leased real estate;
  5. The transaction involves an existing extension of credit at the credit union, provided that:
    1. There is no advancement of new monies, other than funds necessary to cover reasonable closing costs; and
    2. There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union’s real estate collateral protection after the transaction.
  6. The transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan or interest in a loan, pooled loans, or interests in real property, including mortgage-backed securities, and each loan or interest in a loan, pooled loan, or real property interest met the requirements of this regulation, if applicable, at the time of origination;
  7. The transaction is wholly or partially insured or guaranteed by a U.S. government agency or U.S. government sponsored agency; or
  8. The transaction either:
    1. Qualifies for sale to a U.S. government agency or U.S. government sponsored agency; or
    2. Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association (“Fannie Mae”) or Federal Home Loan Mortgage Corporation (“Freddie Mac”) appraisal standards applicable to that category of real estate.
  9. The NCUA regional director has granted a waiver from the appraisal requirement for a category of loans meeting the definition of a member business loan.

Related Links:

Legal Briefs

National Credit Union Administration (NCUA)

The agenda for the June 19 NCUA Board Meeting is now available.

The NCUA released Letter to Credit Unions No. 14-CU-07, reminding credit unions that CUSO contracts must be amended by the end of June in order to comply with the CUSO rule.

Consumer Financial Protection Bureau (CFPB)

CFPB Director Richard Cordray delivered written testimony to the Senate Committee on Banking, Housing and Urban Affairs, discussing the positive impact that the CFPB has had on consumer protection.

The CFPB is requesting information on the use of mobile banking services by consumers. The information request is looking to gather information on how consumers use mobile devices to access financial services and how low-income and underserved consumers could benefit from mobile services.

Federal Reserve Board (FRB)

The June 2014 edition of FedFlash is now available.

The Federal Reserve is issuing a notice of proposed of rulemaking regarding regulations for capital planning and stress testing.

Federal Housing Finance Agency (FHFA)

The FHFA has released its 2013 Report to Congress, detailing findings from the examinations of Fannie Mae and Freddie Mac in 2013, along with the Federal Home Loan Banks.

Internal Revenue Service (IRS)

The IRS announced that it has adopted a Taxpayer Bill of Rights aimed at helping taxpayers better understand their rights.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of May 30, 2014. The last update prior to this was May 23, 2014.

OFAC has updated its SDN Search Tool, which is now called the “Sanctions List Search” which allows users to search for a name on the SDN and FSE lists at the same time.

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

Posted in Compliance, Federal, NCUA.