The FDIC Board of Directors today approved a proposed rule
that would expand flood insurance requirements for loans in areas
with special flood hazards. The proposed amendment to the FDIC's
regulations reflects amendments to federal flood insurance
legislation made by the Riegle Community Development and Regulatory
Improvement Act of 1994.
The interagency proposal was approved by the Comptroller of
the Currency on Monday. The other financial institution regulators
are expected to take similar action shortly.
Among other provisions, the proposal would:
Establish new escrow requirements -- a lending institution
that requires the escrow of taxes, property insurance
premiums, fees or other charges must require the escrow of
flood insurance premiums;
Provide explicit authority for lenders and servicers to
"force-place" flood insurance when adequate coverage is
lacking and a borrower fails to purchase insurance within 45
days of being notified of the requirement;
Permit the imposition of civil money penalties up to $350 for
each violation against a lender that engages in a pattern or
practice of violating the flood insurance statute or
Add new authority for lenders to charge a reasonable fee for
determining if a property is located in a flood hazard area in
certain circumstances; and
Require lending institutions to notify purchasers or lessees
if the property securing the loan is located in a special
flood hazard area (SFHA).
Additionally, the proposal requires the agencies to assess
compliance with the National Flood Insurance Program when examining
the institutions it supervises, and to use a new standard form
developed by the Federal Emergency Management Agency for recording
whether a security property for a given loan is located in an SFHA.
Comments on the proposed amendments will be received by the
FDIC for 60 days following publication in the Federal Register.
Congress created the Federal Deposit Insurance Corporation in 1933 to restore
public confidence in the nation's banking system. The FDIC insures deposits at
the nation's 12,000 banks and savings associations and it promotes the safety and
soundness of these institutions by identifying, monitoring an addressing risks
to which they are exposed.