Five federal agencies on Friday issued guidance on how bankers should respond to the increased National Flood Insurance Program coverage limits for multifamily housing. Effective on June 1, the Federal Emergency Management Agency, which administers the NFIP, increased the coverage limits from $250,000 to $500,000 for apartments, co-ops, hotels, dormitories and other residences with five or more units.
The Federal Reserve, FDIC, OCC, National Credit Union Administration and Farm Credit Administration said that the Biggert-Waters flood insurance reform law does not require lenders to perform an immediate, full file search of its loan portfolio. The obligation to determine the adequacy of insurance coverage only arises if the lender or servicer “receives notification” or “makes a determination” that the building is inadequately insured, the agencies said.
Since the higher coverage limits were announced in December, bankers have sought regulatory guidance on their obligations to ensure their multifamily property borrowers acquire additional coverage -- seeking to avoid a need to send force-placement notifications on June 1. With so little time before the higher coverage limits took effect, ABA noted, banks had to choose between doing nothing and facing possible regulatory criticism or unnecessarily preparing to initiate the force-placement process.
Read the guidance.
For more information, contact Kevin McKechnie.