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Inactive Financial Institution Letters 

Flood Insurance Regulations
September 9, 1996
SUBJECT: Loans in Areas Having Special Flood Hazards (Part 339 of FDIC's Rules and Regulations)

The FDIC, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration and the Farm Credit Administration have approved a joint final rule revising their existing flood insurance regulations. Attached is a copy of the FDIC regulation and the interagency preamble explaining certain issues. For FDIC-supervised institutions, the revised regulation becomes effective on October 1, 1996.

The agencies jointly published a notice of proposed revisions for public comment in the Federal Register on October 18, 1995. The agencies changed the proposed regulation in response to comments received. The final rule implements the provisions of the National Flood Insurance Reform Act of 1994 by:

  • adding and revising definitions to make flood insurance rules easier to understand,
  • clarifying the responsibilities of loan servicers with respect to federal flood insurance requirements,
  • providing authority for lenders and servicers to "force-place" flood insurance in certain instances,
  • establishing new escrow requirements for flood insurance premiums and interpreting the applicability of the escrow requirements under RESPA in the least burdensome manner,
  • interpreting the authority of a lender to charge a reasonable fee for a flood hazard determination to also extend to a "life-of-loan" monitoring fee, and
  • enhancing flood hazard notices to borrowers and requiring notices be provided to servicers of loans when flood insurance is required.
The agencies will, at a later date, publish additional guidance in a question and answer format to address more specific and technical questions not addressed in the preamble to the final regulation. For more information, you may contact Mark Mellon, Senior Attorney in the Regulation and Legislation Section of the FDIC Legal Division (202-898-3854), or Ken Baebel, Senior Review Examiner in the Division of Compliance and Consumer Affairs (202-942-3086).

Carmen J. Sullivan


PDF Format (243 kb, PDF help or hard copy),HTML Format

Distribution: FDIC-Supervised Institutions (Commercial and Savings)

Note: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 ((703) 562-2200).

Last Updated 07/13/1999

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