Compliance Blog

Written by Bernadette Clair, Regulatory Compliance Counsel

In our July 11th blog, we mentioned that President Obama signed a long-term reauthorization of the National Flood Insurance Program (NFIP), extending the program through September 30, 2017.  In addition to the five-year extension, the Biggert-Waters Flood Insurance Reform Act of 2012 (Act), which can be found here starting on page 521, contains additional provisions impacting credit unions.

Here are a few highlights that caught my eye:

• Increased Penalties.  The Act increases civil money penalties that can be assessed against lenders for failure to comply with flood insurance requirements.  The Act sets forth a penalty of $2,000 per violation and removes the penalty cap.
• Mandatory Escrow.  The Act contains a provision requiring lenders to escrow flood insurance payments.  The requirement applies to “any mortgage outstanding or entered into on or after the expiration of the 2-year period beginning on the date of enactment of this Act.” (Section 100209(b)).  There is a limited exemption for institutions with assets of less than $1,000,000,000 that meet certain additional criteria.
• Disclosures.  Notification will be required under RESPA that flood insurance is available under the NFIP or from a private insurance company, whether or not the real estate is located in an area having special flood hazards.
• Force-Placed Insurance.  The Act requires lenders to release a force-placed policy within 30 days of receipt of confirmation of a borrower’s flood insurance coverage and refund premiums for the period during which the force-placed policy and the borrower’s policy were both in effect.
• Premium Subsidies.   Provision of the Act also phase out certain federal premium subsidies, and prohibits subsidies for any property not previously insured by the NFIP or with a lapsed flood insurance policy.  These changes could impact member’s flood insurance premiums for second home loans, refinances, as well as other loans.

FEMA has indicated that guidance on the NFIP implementation will be provided in future bulletins.

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Regulatory Alerts.  NAFCU’s Regulatory Affairs Team has issued two Regulatory Alerts seeking input from NAFCU members on the CFPB’s proposed TILA/RESPA rule.  The first alert, 12-EA-19, covers the proposed definition of finance charge.  The additional proposed changes are covered by the second alert, 12-EA-20.