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Financial Services Law Insights and Observations

FDIC fines banks for flood insurance violations

Federal Issues FDIC Enforcement Flood Disaster Protection Act National Flood Insurance Act Civil Money Penalties Mortgages

Federal Issues

On July 26, the FDIC announced its release of a list of administrative enforcement actions taken against banks and individuals in May and June. The list reflects that the FDIC issued 15 orders, which include “one stipulated consent order; three termination of consent orders; five Section 19 orders; one stipulated civil money penalty order; two stipulated removal and prohibition orders; two voluntary terminations of deposit insurance; and one adjudicated civil money penalty order.”

Among other actions, the FDIC assessed a civil money penalty (CMP) against a Wisconsin-based bank for alleged violations of the Flood Disaster Protection Act and National Flood Insurance Act, including, among other things, failing to (i) obtain flood insurance coverage on loans at the time of origination; (ii) obtain adequate flood insurance coverage on loans; (iii) meet escrow requirements for flood insurance; (iv) follow force-placement flood insurance procedures; or (v) provide borrowers with notice of the availability of federal disaster relief assistance when reviewing loans or within a reasonable timeframe.

The FDIC Board also adopted and affirmed an administrative law judge’s recommended decision and issued a CMP against a Louisiana-based bank for alleged violations of the National Flood Insurance Act. The findings stem from a 2015 compliance examination, and included failures to (i) obtain or maintain flood insurance coverage; (ii) obtain sufficient flood insurance coverage; and (iii) properly notify borrowers of coverage discrepancies.

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