Federal Banking Agencies Issue Final Flood Insurance Rule

FDIC Federal Reserve OCC Flood Insurance Agency Rule-Making & Guidance Biggert-Waters Act

On June 22, the federal banking agencies issued a joint final rule that modifies the mandatory purchase of flood insurance regulations to implement some provisions of the Biggert-Waters and Homeowner Flood Insurance Affordability Acts. Notable highlights include that the final rule, among other things: (i) expands escrow requirements for lenders who do not qualify for a small lender exception, (ii) clarifies the detached structure exemption, (iii) introduces new and revised sample notice forms and clauses relating to the escrow requirement and the availability of private flood insurance, and (iv) clarifies the circumstances under which lenders and servicers may charge borrowers for lender-placed flood insurance coverage. The escrow provisions and sample notice forms will become effective on January 1, 2016, and all other provisions will become effective October 1, 2015.  The agencies reminded that the escrow provisions in effect on July 5, 2012, the day before Biggert-Waters was enacted, will remain in effect and be enforced through December 31, 2015.

The agencies also indicated that they plan to address Biggert-Waters’ private flood insurance provisions through a separate rulemaking.