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Fed fines bank for flood insurance violations
On December 1, the Federal Reserve Board announced a civil money penalty against a New-York based bank. In its order, the Fed alleged that the bank violated the National Flood Insurance Act (NFIA) and Regulation H. The order assesses a $105,500 civil money penalty against the bank in connection with its “alleged pattern or practice of violations of Regulation H,” but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,392 per violation.
FHA to accept private flood insurance for FHA-insured mortgages
On November 21, FHA published a final rule in the Federal Register to allow homeowners with FHA-insured mortgages to obtain flood insurance policies that meet FHA requirements from private insurance providers. Specifically, the Acceptance of Private Flood Insurance for FHA-Insured Mortgages final rule updates agency regulations to give borrowers the option to purchase a comparable private insurance policy that conforms to FHA requirements in lieu of a National Flood Insurance Program (NFIP) policy for FHA-insured mortgages secured by properties located in FEMA-designated special flood hazard areas (SFHAs). Previously, only flood insurance obtained through the NFIP was accepted. The final rule applies to all FHA-insured single family Title II mortgages, including home equity conversion mortgages, and loans insured under FHA Title I programs. Lenders should refer to Mortgagee Letter 2022-18 for guidance on implementing the final rule’s requirements, which are effective December 21.
Concurrently, HUD issued a press release stating that beginning December 21, “FHA will require lenders to provide detailed flood insurance coverage information when electronically submitting mortgages for FHA insurance on properties in SFHAs.” According to HUD, “[t]his data collection is an objective included in HUD’s Climate Action Plan and will allow FHA to capture and analyze flood insurance information on mortgages in its portfolio at a more granular level than has been possible previously.”
Fed takes action against bank for flood insurance violations
On September 27, the Federal Reserve Board announced a civil money penalty against a Pennsylvania-based bank. In the order, the Fed alleged that the bank violated the National Flood Insurance Act (NFIA) and Regulation H. The order assesses a $41,500 penalty against the bank for an alleged pattern or practice of violations of Regulation H, but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,392 per violation.
FDIC releases July enforcement actions
On August 26, the FDIC released a list of administrative enforcement actions taken against banks and individuals in July. During the month, the FDIC issued seven orders consisting of “two orders of prohibition, two orders to pay civil money penalty, two section 19 orders, and one order terminating consent order.” Among the actions is an order to pay a civil money penalty imposed against an Iowa-based bank related to alleged violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act of 1968. Among other things, the FDIC claimed that the bank: (i) “made, increased, extended, or renewed loans secured by a building or mobile home located or to be located in a special flood hazard area without requiring that the collateral be covered by flood insurance”; (ii) “made, increased, extended or renewed loans secured by a building or mobile home located or to be located in a special flood hazard area without providing timely notice to the borrower as to whether flood insurance was available for the collateral”; and (iii) “failed to comply with proper procedures for force-placing flood insurance in instances where the collateral was not covered by flood insurance at some time during the term of the loan.” The order requires the payment of a $2,500 civil money penalty. The actions also include a civil money penalty imposed against a Texas-based bank related to six alleged violations of the FDPA for “failure to obtain flood insurance or obtain an adequate amount of insurance coverage, at or before loan origination, for all structures in a flood zone, including multiple structures,” among other alleged violations. The order requires the payment of a $6,000 civil money penalty.
Fed takes action against bank for flood insurance violations
On July 7, the Federal Reserve Board announced a civil money penalty against a Massachusetts state bank. In the order, the Fed alleged that the bank violated the National Flood Insurance Act (NFIA) and Regulation H. The order assesses a $17,000 penalty against the bank for an alleged pattern or practice of violations of Regulation H but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.
FDIC releases May enforcement actions
On June 24, the FDIC released a list of 14 public enforcement actions taken against banks and individuals in May. These orders consist of “two consent orders, one modification of an 8(e) prohibition order, three orders to pay civil money penalty, three orders of prohibition, two section 19 orders, and one order of prohibition from further participation and order to pay, one order terminating amended supervisory prompt corrective action directive, and one order of termination of insurance.” Included is an order to pay a civil money penalty imposed against a Texas-based bank related to alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claimed that the bank failed “to obtain flood insurance or obtain an adequate amount of insurance coverage, at or before loan origination, for all structures in a flood zone, including multiple structures,” and failed “to force-place flood insurance, after loan origination, when the insurance on buildings securing the loan” was insufficient or nonexistent. The order assessed a $2,000 civil money penalty.
The FDIC also issued a consent order against a Utah-based bank based on alleged unsafe or unsound banking practices relating to the Bank Secrecy Act. The bank neither admitted nor denied the alleged violations but agreed to, among other things, “increase its oversight of the Bank's compliance with the BSA” and “conduct a comprehensive assessment of BSA/AML staffing needs.”
Fed announces enforcement actions against Minnesota and Arkansas state banks
On June 21, the Federal Reserve Board released civil penalty orders against two state banks, both relating to alleged violations of the National Flood Insurance Act (NFIA) and its implementing regulation, Regulation H. The first civil penalty order, against a Minnesota-based bank, assessed a $4,950 penalty for an alleged pattern or practice of violations of Regulation H but does not specify the number or the precise nature of the alleged violations. The second civil penalty order, against an Arkansas-based bank, assessed a $13,950 penalty for an alleged pattern or practice of violations of Regulation H without specifying the number or precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.
FDIC releases April enforcement actions
On May 27, the FDIC released a list of administrative enforcement actions taken against banks and individuals in April. During the month, the FDIC made public eight orders consisting of “three consent orders, one order of prohibition, one order to pay civil money penalty, one section 19 order, and two orders terminating consent orders.” The FDIC also released one notice seeking "an order of prohibition and an order to pay civil money penalty.” An order to pay a civil money penalty was imposed against a Missouri-based bank related to alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claimed that the bank: (i) “made, increased, extended, or renewed loans secured by a building or mobile home located or to be located in a special flood hazard area without requiring that the collateral be covered by flood insurance”; and (ii) “made, increased, extended, or renewed a loan secured by a building or mobile home located or to be located in a special flood hazard area without providing timely notice to the borrower and/or the servicer as to whether flood insurance was available for the collateral.” The order requires the payment of a $2,250 civil money penalty.
The FDIC also issued a consent order to a Louisiana-based bank, which alleged that the bank had “unsafe or unsound banking practices or violations of law or regulation relating to deficiencies in management and Board oversight, earnings performance, capital support, interest rate risk management, and asset quality.” The bank neither admitted nor denied the alleged violations but agreed to, among other things, “maintain its Total Risk-Based Capital ratio equal to or greater than 12.00 percent.”
Agencies issue revised interagency flood insurance Q&As
On May 11, the FDIC, OCC, Federal Reserve Board, NCUA, and the Farm Credit Administration (the agencies) jointly issued revised, reorganized, and expanded interagency questions and answers (Q&As) regarding federal flood insurance laws. The revised Q&As supersede versions published in 2009 and 2011, and consolidate Q&As proposed by the agencies in 2020 and 2021 (covered by InfoBytes here). Reflecting significant changes to flood insurance requirements made by the Biggert-Waters Flood Insurance Reform Act and the Homeowner Flood Insurance Affordability Act, as well as regulations issued by the agencies to implement these laws, the revised Q&As consist of 144 Q&As (including 24 private flood insurance Q&As) covering a range of topics, including the escrow of flood insurance premiums, the detached structure exemption to the mandatory flood insurance purchase requirement, force placement procedures, and the acceptance of flood insurance policies issued by private insurers. The agencies also made non-substantive revisions to certain Q&As to provide more direct responses to questions asked, additional clarity, or make technical corrections. In response to concerns raised by several commenters, the agencies confirmed that they are providing the interagency Q&As “as guidance only,” and clarified that “all the Q&As apply to all policies, whether [National Flood Insurance Program] or a flood insurance policy issued by a private insurance company, unless otherwise noted in the Q&A.” Additionally, the agencies noted “that they are working individually and on an interagency basis to address financial risks associated with climate change consistent with the [a]gencies’ regulatory and supervisory authorities,” and therefore “decline to make changes to any of the Q&As in response to climate risk change.
The same day, the agencies issued Loans in Areas Having Special Flood Hazards; Interagency Questions and Answers Regarding Flood Insurance. The interagency questions and answers replace the 2009 and 2011 publications and consolidate Q&As proposed by the agencies in July 2020 and in March 2021. This bulletin rescinds: (i) OCC Bulletin 2009-26, Flood Disaster Protection Act: Revised Interagency Questions and Answers Regarding Flood Insurance; (ii) OCC Bulletin 2011-42, Flood Disaster Protection Act: Interagency Questions and Answers Regarding Flood Insurance’ (iii) OCC Bulletin 2020-69, Flood Disaster Protection Act: Proposed Revisions to Interagency Questions and Answers Regarding Flood Insurance; (iv) OCC Bulletin 2020-78, Flood Disaster Protection Act: Agencies Extend Comment Period on Proposed Revisions to Interagency Questions and Answers Regarding Flood Insurance; and (v) OCC Bulletin 2021-13, Flood Disaster Protection Act: Proposed Interagency Questions and Answers Regarding Private Flood Insurance.
FDIC releases February enforcement actions
On March 25, the FDIC released a list of administrative enforcement actions taken against banks and individuals in February. During the month, the FDIC made public six orders consisting of “three Orders to Pay Civil Money Penalty, two orders terminating consent order, and one consent order.” Among those announced were two civil money penalties for alleged violations of the Flood Disaster Protection Act. In one civil money penalty, imposed against a Kansas-based bank, the FDIC claimed that the bank “made, increased, extended, renewed, sold, or transferred a loan secured by a building or mobile home located or to be located in a special flood hazard area without properly notifying the Administrator of FEMA or their designee.” The order requires the payment of a $2,250 civil money penalty. In another civil money penalty, imposed against a Minnesota-based bank, the FDIC claimed that the bank: (i) “made, increased, extended, or renewed loans secured by a building or mobile home located or to be located in a special flood hazard area without requiring that the collateral be covered by flood insurance”; (ii) “made, increased, extended or renewed a loan secured by a building or mobile home located or to be located in a special flood hazard area without providing timely notice to the borrower and/or the servicer as to whether flood insurance was available for the collateral”; and/or (iii) “failed to comply with proper procedures for force-placing flood insurance in instances where the collateral was not covered by flood insurance at some time during the term of the loan.” That order requires the payment of a $3,000 civil money penalty.