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  • Fed issues enforcement action for flood insurance violations

    Federal Issues

    On February 6, the Federal Reserve Board (Fed) announced an enforcement action against a Virginia-based bank for alleged violations of the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses a $9,500 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 $2,000 per violation.

    Federal Issues Federal Reserve Enforcement Consumer Finance Mortgages Bank Regulatory Bank Supervision National Flood Insurance Act Flood Insurance

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  • Federal Reserve hits bank for flood insurance violations

    Federal Issues

    On January 30, the Federal Reserve Board (Fed) announced an enforcement action against a New York-based bank for allegedly violating the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses a $36,500 civil money 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 for each violation. The consent order was signed by both the bank and the Fed on January 24.

     

    Federal Issues Federal Reserve Enforcement National Flood Insurance Act Regulation H Flood Insurance Consent Order

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  • FDIC fines bank for flood insurance violations

    Federal Issues

    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.”

    Federal Issues FDIC Enforcement Flood Insurance Flood Disaster Protection Act National Flood Insurance Act

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  • Fed issues enforcement action for flood insurance violations

    Federal Issues

    On September 5, the Federal Reserve Board announced an enforcement action against a Nebraska-based bank for allegedly violating the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses a $37,000 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.

    Federal Issues Federal Reserve Enforcement Flood Insurance National Flood Insurance Act

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  • Fed issues two enforcement actions for flood insurance violations

    Federal Issues

    On August 20, the Federal Reserve Board announced enforcement actions against two separate Massachusetts-based banks for allegedly violating the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The first consent order assesses a $20,000 penalty against the bank for a pattern or practice of violations of Regulation H, but does not specify the number or the precise nature of the alleged violations; the second consent order assesses a $36,000 penalty, while similarly not specifying the number or precise nature of the violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.

    Federal Issues Federal Reserve Enforcement Flood Insurance National Flood Insurance Act

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  • FDIC fines banks for flood insurance violations

    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.

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

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  • Federal Reserve issues enforcement actions for flood insurance, BSA/AML violations

    Federal Issues

    On May 16, the Federal Reserve Board (Board) announced an enforcement action against a Nebraska-based bank for allegedly violating the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses a $69,000 penalty against the bank, but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty for a pattern or practice of violations under the NFIA is $2,000 per violation.

    The same day, the Board issued an order of prohibition against a former employee and institution-affiliated party of an Illinois-based bank for allegedly engaging in unsafe and unsound lending practices, including engaging in improper lending practices and failing to implement adequate Bank Secrecy Act/anti-money laundering controls and training. The terms of the order prohibit the individual from, among other things, “participating in any manner in the conduct of the affairs of any financial institution or organization specified in section 8(e)(9)(A) of the [Federal Deposit Insurance Act],” or “voting for a director, or serving or acting as an institution-affiliated party.”

    Federal Issues Federal Reserve Enforcement Flood Insurance National Flood Insurance Act Bank Secrecy Act Anti-Money Laundering

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  • Banking agencies issue final rule on private flood insurance

    Federal Issues

    On February 12, the Federal Reserve Board, Farm Credit Administration, FDIC, National Credit Union Administration, and the OCC issued a joint final rule amending regulations governing loans secured by properties in special flood hazard areas to implement the provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 concerning private flood insurance. As previously covered by InfoBytes, the provisions, among other things, require regulated lending institutions to accept policies that meet the statutory definition of “private flood insurance,” and clarify that lending institutions may choose to accept private policies that do not meet the statutory criteria for “private flood insurance,” provided the policies meet certain criteria and the lending institutions document that the policies offer “sufficient protection for a designated loan, consistent with general safety and soundness principles.” The final rule takes effect July 1.

    (See also FDIC FIL-8-2019, NCUA press release, and OCC press release.)

    Federal Issues Federal Reserve OCC FDIC NCUA Farm Credit Administration Flood Insurance National Flood Insurance Act Flood Disaster Protection Act National Flood Insurance Program

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  • FDIC fines banks for flood insurance violations, releases December enforcement actions

    Federal Issues

    On January 25, the FDIC announced a list of administrative enforcement actions taken against banks and individuals in December. The 15 orders include “two Section 19 orders; one civil money penalty; three removal and prohibition orders; four consent orders; one prompt corrective order; three terminations of consent orders; and one notice.” The FDIC assessed a civil money penalty against an Illinois-based bank for alleged violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act (NFIA) including failing to (i) obtain flood insurance coverage on loans at origination; (ii) maintain flood insurance; and (iii) “properly force place flood insurance.”

    A second civil money penalty was assessed against a Wisconsin-based bank for allegedly engaging in a pattern of violating the FDPA and the NFIA, including failing to (i) follow force placed flood insurance procedures, including notifying a borrower of a lapse in flood insurance coverage and force placing the necessary insurance in a timely fashion; (ii) obtain adequate flood insurance coverage on a loan at origination; and (iii) provide notice to a borrower concerning whether flood insurance under the NFIA was available for the collateral securing a loan.

    There are no administrative hearings scheduled for February 2019. The FDIC database containing all 15 enforcement decisions and orders may be accessed here.

    Federal Issues FDIC Enforcement Flood Disaster Protection Act National Flood Insurance Act Mortgages

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  • Final rule subject to approval will require federally regulated lending institutions to accept private flood insurance

    Federal Issues

    Recently, the FDIC and OCC approved a joint final rule governing the acceptance of private flood insurance policies. (The final rule must also be approved by—and is still under review with—the other agencies jointly issuing the rule: the Federal Reserve Board, Farm Credit Administration, and National Credit Union Association.) The final rule amends regulations governing loans secured by properties in special flood hazard areas to implement the provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert Waters) concerning private flood insurance (see previous InfoBytes coverage of the proposed rule here). The National Flood Insurance Act and the Flood Disaster Protection Act require flood insurance on improved property that secures a loan made, increased, extended, or renewed by a federally regulated lending institution (lending institution) if the property is in a special flood hazard area for which flood insurance is available under the National Flood Insurance Program (NFIP). Biggert Waters required the Agencies to adopt regulations directing lending institutions to accept insurance that meets the definition of “private flood insurance” in lieu of NFIP flood insurance.

    The final rule, once approved by all five regulators, will institute the following provisions to take effect July 1:

    • Lending institutions must accept private flood insurance policies meeting the definition of “private flood insurance.”
    • Lending institutions may rely on a “streamlined compliance aid provision” to determine, without further review, that a policy meet the definition of “private flood insurance” if the policy (or an endorsement to the policy) contains the following language: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.”
    • Lending institutions may choose to accept private policies that do not meet the statutory criteria for “private flood insurance” as long as the policies meet certain criteria and the lending institutions document that the policies offer “sufficient protection for a designated loan, consistent with general safety and soundness principles.”
    • Lending institutions may exercise discretion when accepting non-traditional flood coverage issued by “mutual aid societies,” subject to certain conditions including that the lending institutions’ primary federal supervisory agency has determined that the plans qualify as flood insurance. However, the final rule does not require lending institutions to accept coverage issued by mutual aid societies.

    Federal Issues Federal Reserve OCC FDIC NCUA Farm Credit Administration Flood Insurance National Flood Insurance Act Flood Disaster Protection Act National Flood Insurance Program

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