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FHA proposes private flood insurance option
On November 10, the Federal Housing Administration (FHA) issued a proposed rule which would allow mortgagors the option to purchase private flood insurance on FHA-insured mortgages for properties located in Special Flood Hazard Areas (SFHAs). Under the Flood Disaster Protection Act of 1973, property owners located in an SFHA, and a community participating in the National Flood Insurance Program, are required to purchase flood insurance as a condition of receiving a mortgage backed by Fannie Mae or Freddie Mac, the Department of Veterans Affairs, the United States Department of Agriculture, or the FHA. The proposed rule would allow the purchase of private mortgage insurance for properties in SFHAs for the first time. Additionally, the proposed rule seeks comment on a compliance aid, which would “help mortgagees evaluate whether a flood insurance policy meets the definition of ‘private flood insurance.’” According to the FHA, between three and five percent of FHA borrowers could obtain a private flood insurance policy if the option becomes available.
FDIC releases January enforcement actions
On February 28, the FDIC released a list of administrative enforcement actions taken against banks and individuals in January. The FDIC issued 18 orders, which “consisted of two consent orders; one civil money penalty; three removal and prohibition orders; eight section 19 orders; three terminations of consent orders and cease and desist orders; and one order terminating prompt corrective action.” Among the actions was a civil money penalty assessed against a Montana-based bank for allegedly violating the Flood Disaster Protection Act by failing to obtain adequate flood insurance coverage on certain loans and failing to provide borrowers with notice of the availability of federal disaster relief assistance. Separately, in a joint action with the California Department of Business Oversight, the agency issued a consent order against a California-based bank related to alleged weaknesses in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance program. Among other things, the bank was ordered to (i) retain qualified management to ensure compliance with applicable laws and regulations; (ii) “correct all violations of law to the extent possible”; (iii) implement a revised, written BSA compliance program to address BSA/AML deficiencies; (iv) establish a written Customer Due Diligence Program to ensure the reasonable detection of suspicious activity and the identification of higher-risk customers; (v) adopt a process for reviewing transaction monitoring alerts; and (vi) “ensure that suspicious activity monitoring system is independently validated.”
OCC fines bank on flood insurance
On January 21, the OCC assessed a nearly $18 million civil money penalty against a national bank lender for alleged violations of the Flood Disaster Protection Act (FDPA). According to the OCC, the bank allegedly maintained FDPA policies and procedures which allowed the bank’s third-party servicer to extend the 45-day period after notification to the borrower that the flood insurance did not adequately cover the collateral. The OCC alleged that this resulted in the “untimely force placement of flood insurance” on loans secured by buildings or mobile homes located in special flood hazard areas. The bank agreed to pay the penalty without admitting or denying any wrongdoing.
FDIC releases September enforcement actions
On October 25, the FDIC announced its release of a list of administrative enforcement actions taken against banks and individuals in September. According to the press release, the FDIC issued 24 orders, which include “one consent order; five removal and prohibition orders; six assessments of civil money penalty; three voluntary terminations of deposit insurance; six section 19 orders; and three terminations of orders of restitution.”
Among other actions, the FDIC assessed separate civil money penalties (CMPs) against four banks for alleged violations of the Flood Disaster Protection Act:
- New Jersey-based bank CMP: Failure to (i) notify borrowers that they should obtain flood insurance; and (ii) follow force-placement flood insurance procedures;
- Wisconsin-based bank CMP: Failure to (i) maintain flood insurance coverage for the term of a loan; (ii) follow force-placement flood insurance procedures; and (iii) provide written notice to borrowers concerning flood insurance coverage prior to extending, increasing, or renewing a loan;
- Wisconsin-based bank CMP: Failure to (i) follow escrow requirements for flood insurance; and (ii) provide borrowers with notice of the availability of federal disaster relief assistance;
- Wisconsin-based bank CMP: Failure to (i) obtain flood insurance coverage on loans at the time of origination; (ii) obtain adequate flood insurance; (iii) follow escrow requirements for flood insurance; (iv) follow force-placement flood insurance procedures; and (v) provide borrowers with notice of the availability of federal disaster relief assistance.
The FDIC also assessed a CMP against an Oregon-based bank for allegedly violating RESPA and the TCPA by (i) placing telemarketing calls to consumers listed on the Do-Not-Call registry; and (ii) using an automated dialing system to send pre-recorded calls or text messages to consumers’ cell phones.
Additionally, the FDIC entered a notice of charges and hearing against a Georgia-based bank relating to alleged weaknesses in its Bank Secrecy Act compliance program.
OCC releases September and October enforcement actions
On October 18, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. The new enforcement actions include civil money penalty orders, prompt corrective action directives, removal and prohibition orders, and terminations of existing enforcement actions against individuals and banks. Included among the actions is a $100,000 civil money penalty issued against a Louisiana-based bank for an alleged pattern or practice of violations of the Flood Disaster Protection Act and its implementing regulations. The list also includes a $30 million consent order issued against a national bank for allegedly violating the statutory holding period for other real estate owned (previously covered by InfoBytes here).
FDIC fines bank for flood insurance violations
On September 27, the FDIC announced its release of a list of administrative enforcement actions taken against banks and individuals in August. According to the press release, the FDIC issued 13 orders, which include “four consent orders; one removal and prohibition order; four civil money penalty orders; two terminations of consent orders; and five section 19 orders.” Notably, the FDIC assessed a civil money penalty against a Texas-based bank for alleged violations of the Flood Disaster Protection Act, including failing to (i) obtain flood insurance coverage on loans at the time of origination, increase, extension, or renewal; (ii) maintain flood insurance coverage for the term of a loan; (iii) follow force-placement flood insurance procedures; or (iv) provide borrowers with notice of the availability of federal disaster relief assistance “in all cases whether or not flood insurance is available under the [National Flood Insurance Act] for the collateral securing the loan.”
FDIC enforcement actions include flood insurance, BSA violations
On August 30, the FDIC announced its release of a list of administrative enforcement actions taken against banks and individuals in July. The list reflects that the FDIC issued fourteen orders and one notice of charges, which include “four stipulated consent orders; four terminations of consent orders; four Section 19 orders; one stipulated civil money penalty order; one stipulated removal and prohibition order; and one notice of charges and hearing.”
Among other actions, the FDIC assessed a civil money penalty (CMP) against a Louisiana-based bank for alleged violations of the Flood Disaster Protection Act, including, among other things, (i) failing to obtain flood insurance coverage on loans at the time of origination, increase, renewal, or extension; or (ii) failing to maintain flood insurance coverage for the term of a loan secured by property located or to be located in a special flood hazard area.
The FDIC also entered into consent orders with an Oklahoma-based bank and a West Virginia-based bank relating to alleged weaknesses in their Bank Secrecy Act compliance programs.
Fed updates private flood insurance interagency examination procedures
On August 22, the Federal Reserve Board (Fed) issued CA 19-10, which provides updates to the interagency examination procedures for the Flood Disaster Protection Act (FDPA). The updated guidance is applicable to all Fed-supervised institutions with total consolidated assets of $10 billion or less, and supersedes CA 16-1’s FDPA examination procedures. Specifically, the updated procedures address new sections from a final interagency rule issued in February concerning the acceptability of private flood insurance (previously covered by InfoBytes here). Additionally, the updated procedures provide guidelines for lending institutions when considering a mutual aid society flood protection plan. The Fed notes that “state member banks may not typically analyze mutual aid society plans in the course of their lending activities,” and reminds lenders that acceptance standards for mutual aid society plans will vary depending on the state.
FDIC fines banks for flood insurance violations
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.
OCC releases June enforcement actions
On July 18, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. The new enforcement actions include personal cease-and-desist orders, civil money penalties, formal agreements, prompt corrective action directives, removal and prohibition orders, and terminations of existing enforcement actions. Included in the list is a formal agreement issued against a Texas-based bank on June 20 for alleged unsafe or unsound practices related to, among other things, compliance risk management and violations of laws and regulations concerning the Flood Disaster Protection Act (FDPA), Bank Secrecy Act, TILA, RESPA, and the Expedited Funds Availability Act. Among other things, the agreement requires the bank to (i) appoint a compliance committee responsible for submitting a written progress report detailing specific corrective actions; (ii) ensure that it has “sufficient and competent management”; (iii) prepare a risk-based consumer compliance program, which must include revised policies and procedures related to the Servicemembers’ Civil Relief Act, TILA-RESPA Integrated Disclosure rule, and the FDPA; and (iv) take measures to “ensure that current and satisfactory credit and proper collateral information is maintained on all loans.”