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Monday, April 1, 2013

Interagency Statement on the Impact of Biggert-Waters: Lender-Placed Flood Insurance Requirements

On Friday, an Interagency Statement from the Fed, FDIC, OCC, NCUA, and FCA issued guidance on the Biggert-Waters Act's effects on the Flood Disaster Protection Act of 1973 (FDPA), which includes changes to lender-placed flood insurance.  The effects on lender-placed flood insurance, which are in effect, include:
  • Notice of inadequate flood insurance coverage must be given 45 days before charges are assessed.
  • Charges for premiums and fees can be retroactively applied to the date of lapse.
  • Lender-placed coverage must be terminated within 30 days of receipt of adequate coverage, which includes a flood insurance policy declarations page with the policy number and insurance company or agent contact information.
With respect to civil money penalties: "The maximum civil money penalty for a FDPA violation has been increased to $2,000. In addition, the penalty cap per year has been deleted."

These requirements are separate from the CFPB's lender-placed insurance rules, which specifically exclude flood insurance required under the Flood Disaster Protection Act of 1973.

Private flood insurance and escrow requirements are also addressed in the Interagency Statement, but those provisions will not become effective until regulations are issued.
Read the Interagency Statement.