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| A group of federal agencies
joined together to create flood insurance policy rules.
A rule proposed would
implement some provisions of the Biggert-Waters Flood Insurance Reform Act of
2012. If it becomes official after a comment period that ends Dec. 10, 2013,
it will impact the way lenders handle homeowner's flood insurance coverage.
Agencies proposing the rule
include: The FDIC, the Office of the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System, the National Credit Union
Administration and the Farm Credit Administration. If approved, it would
impact all loans under each agency, and it would apply to all institutions
that have less than $1 billion in assets.
Proposed rule highlights
* Lenders would be required
to accept private flood insurance policies for mortgage loans that require
coverage. To qualify, a private insurance policy must meet the statutory
definition of "private flood insurance" and adhere to the minimum
requirements under the Flood Disaster Protection Act.
* Lenders must tell
homeowners if private flood insurance is available, and encourage them to
compare rates and benefits of private coverage against those offered by the
National Flood Insurance Program (NFIP).
* Lenders must escrow flood
insurance premiums and fees, making the coverage part of a homeowner's
monthly mortgage payment. The proposed rule includes some specific details,
such as when lenders must begin escrowing, including a 90-day written notice
before escrowing outstanding loans. It also includes an exemption for some
smaller lenders, as well as for business, commercial and agricultural loans,
second lien loans, and residential condominium association policies.
* Lenders could still force-place a flood insurance policy on
any homeowner that drops or takes out too little coverage. However, the rule
would require the lender to terminate a force-placed insurance policy and
refund any payments within 30 days for overlapping coverage.
Source: Florida Realtors®
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