Loans in Areas Having Special Flood Hazards-Private Flood Insurance: Notice of Proposed Rulemaking
OCC BULLETIN 2016-38
Loans in
Date:
To: Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Notice of Proposed Rulemaking
Summary
See original table at: https://www.occ.gov/news-issuances/bulletins/2016/bulletin-2016-38.html
Highlights
Pursuant to section 100239 of the Biggert-Waters Act, the proposed rule would require banks to accept "private flood insurance," as defined in the act, to satisfy the requirement that flood insurance be purchased in connection with loans secured by buildings or mobile homes located in special flood hazard areas in which flood insurance is available under the National Flood Insurance Program (NFIP). The proposed rule
- includes a "compliance aid" provision to assist a bank in determining whether a flood insurance policy meets the definition of private flood insurance and must be accepted.
- would permit banks to accept certain flood policies issued by private insurers that do not meet the definition of private flood insurance.
- would permit banks to accept private flood coverage provided by mutual aid societies, such as Amish Aid Societies, subject to certain restrictions.
Background
The National Flood Insurance Act of 1968 and the Flood Disaster Protection Act govern the NFIP. Among other things, these statutes require the purchase of flood insurance in connection with loans secured by certain properties and make available federally subsidized flood insurance to owners of improved real estate or mobile homes located in special flood hazard areas if the community where the improved real estate or mobile home is located participates in the NFIP. The
The Biggert-Waters Act significantly amended the NFIP requirements. Among other changes, the Biggert-Waters Act clarified the requirement to force place insurance, revised the escrow requirements, and required the agencies to issue a rule directing regulated lending institutions to accept private flood insurance as defined in the act. On
Currently, the OCC allows banks to accept private flood insurance in satisfaction of NFIP requirements on a discretionary basis if the bank determines that the insurance adequately protects its security for a loan. Until the OCC finalizes this proposed rule, banks may continue to accept private flood insurance as currently permissible.
Further Information
Please contact
Senior Deputy Comptroller and Chief Counsel
() *1 78 Fed. Reg. 65108 (
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