The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the National Credit Union Administration (collectively, the “Agencies”) have jointly proposed twenty-four new questions and answers that address private flood insurance and will supplement the existing Interagency Questions and Answers Regarding Flood Insurance. Comments are being accepted regarding the proposed changes until May 17, 2021, which is 60 days after publication in the Federal Register.
Under the Biggert-Waters Insurance Reform Act of 2012 (“Biggert-Waters Act”), the Agencies were mandated to issue a rule to direct lending institutions to accept “private flood insurance” and to notify borrowers of the availability of private flood insurance. Regulations that implemented these provisions of the Biggert-Waters Act were part of the Agencies’ final rule issued in 2019. The proposed questions and answers are intended to clarify lender responsibilities under the final rule and “increase the public understanding of the Agencies’ respective flood insurance regulations.”
The proposed new questions and answers are separated into three sections
- Mandatory Acceptance – when lenders are required to accept private flood insurance and when a policy must be reviewed or can be accepted without further review if it meets the mandatory acceptance criteria.
- Discretionary Acceptance – when lenders may exercise discretion to accept or refuse private flood insurance that does not meet the statutory definition.
- General Compliance subjects – such as maximum deductibles allowed, and lender fees for third party policy reviews.
The Agencies plan to publish one consolidated final set of Interagency Questions and Answers in the Federal Register that includes both the proposed private flood insurance questions and answers and the proposed flood insurance questions and answers issued in July 2020, which covered broader topics like escrowing flood insurance premiums, and force-placement procedures.
