Regulators issued a joint notice of proposed rulemaking last week to amend rules related to loans secured by properties located in flood hazard zones under the Biggert-Waters Flood Insurance Reform Act.
Under the proposed rules, institutions would be required to accept private flood insurance as defined by the law to meet the mandatory purchase requirements, requesting comment on whether regulators should adopt new regulations on the acceptance of private flood insurance.
The proposal would also require lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential real estate or a mobile home, agricultural and commercial loans.
Institutions would also be required to send out revised sample notice forms and clauses addressing the availability of private flood insurance coverage and the escrow requirement. Lending institutions would have the authority to charge a borrower for the cost of force-placed insurance beginning on the date on which coverage lapsed.
The proposed rule was issued by the Federal Reserve, Farm Credit Administration, FDIC, National Credit Union Administration and OCC. Public comments are due on or before Dec. 10, though comments related to the Paperwork Reduction Act analysis will come due 60 days after the rule is published in the Federal Register.