4000 - Advisory Opinions
Riegle Community Development and Regulatory Improvement Act of 1994 Requires Use of Complete FEMA Map and Panel Numbers for Real Property Offered as Collateral for Loan
January 18, 1995
Mark A. Mellon, Senior Attorney
This is in response to your letter of December 20, 1994 concerning federal flood insurance compliance requirements.
You state in your letter that your institution, an insured nonmember bank, requires flood insurance if a determination is made that real property which has been offered by a borrower as collateral for a loan is located in an area designated as having special flood hazards. The borrower must provide proof of flood insurance coverage before your bank will make the loan. The proof of flood insurance is included in the loan files. In instances where real property offered as collateral is not located in an area designated as having special flood hazards, the panel number of the Federal Emergency Management Administration (the "FEMA") map which was relied upon for this determination is listed in the loan records.
You note that FDIC Financial Institution Letter 29--90 states that at a minimum, insured nonmember bank must list in their loan records the complete FEMA map panel number used in flood insurance determinations. You state that it is burdensome to list the map panel numbers for those loans where the property is covered by flood insurance and ask to be excused from the requirement with respect to such loans. You further state that your bank will continue to list the map panel numbers for those loans where the real property offered as collateral is not located in an area designated as having special flood hazards.
As you may know, all depository institutions will soon be required under federal law to use a standard form for flood insurance determinations which must list FEMA map panel numbers. Section 528 of the Riegle Community Development and Regulatory Improvement Act of 1994 (the "RCDRIA") amends the National Flood Insurance Act (the "NFIA") by adding a new section 1365 (42 U.S.C. § 4104b). This section requires the Director of the FEMA to develop a Standard Flood Hazard Determination Form ("SFHDF") for determining whether real property offered as collateral on a loan is located in an area designated as having special flood hazards. Section 1365(b)(2) of the NFIA provides that the SFHDF shall require, among other things, the complete map and panel numbers for the real property offered as collateral on a loan.
The SFHDF shall be established by FEMA regulations issued no later than 270 days after the date of enactment of the RCDRIA. The RCDRIA was signed into law on September 23, 1994. The FDIC must promulgate a regulation which requires the use of the SFHDF by all insured nonmember banks. This regulation must be issued together with the FEMA regulation which establishes the SFHDF and will have an effective date of 180 days after the date of issuance. Upon this effective date, all insured nonmember banks will be required by FDIC regulation to use the SFHDF and must keep a copy of this document in their loan files. We do not see any point in partially excusing insured nonmember banks from the requirement of listing FEMA map panel numbers in their loan records only to subsequently reinstate the requirement that they be listed. We therefore cannot comply with your request.