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Federal R eserve Bank
OF DALLAS
ROBERT

D. M C T E E R , J R .
DALLAS , TEX AS

P R E S ID E N T
AND

C H IE F

E X E C U T IV E

O F F IC E R

November 16, 1995

75265-5906

Notice 95-109

TO:

The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District

SUBJECT
Joint Rulemaking Regarding
Lending in Areas Having Special Flood Hazards
DETAILS
The Board of Governors of the Federal Reserve System, the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervi­
sion, and the National Credit Union Administration are proposing to amend their
regulations, and the Farm Credit Administration is proposing to issue new regulations
regarding loans in areas having special flood hazards.
This action is required by statute and is intended to implement the provisions
of the National Flood Insurance Reform Act of 1994. Among other statutorily mandated
provisions, the proposal would establish new escrow requirements for flood insurance
premiums, explicit authority and the requirement for lenders and services to "force-place"
flood insurance under certain circumstances, enhanced flood hazard notice requirements,
and new authority for lenders to charge fees for determining if a property is located in a
special flood hazard area.
The Board must receive comments by December 18, 1995. Please address
comments to William W. Wiles, Secretary, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551. All
comments should refer to Docket No. R-0897.

ATTACHMENT
A copy of the Board’s notice as it appears on pages 53961-85, Vol. 60, No.
201, of the Federal Register dated October 18, 1995, is attached.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333 -4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston
Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

MORE INFORMATION
For more information, please contact Eugene Coy at (214) 922-6201. For
additional copies of this Bank’s notice, please contact the Public Affairs Department at
(214) 922-5254.
Sincerely yours,

Wednesday
October 18, 1995

Part II
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 22

Federal Reserve System
12 CFR Part 208

Federal Deposit Insurance
Corporation
12 CFR Part 339

Department of the Treasury
Office of Thrift Supervision
12 CFR Parts 563 and 572

Farm Credit Administration
12 CFR Part 614

National Credit Union
Administration
12 CFR Part 760
Loans in Areas Having Special Flood
Hazards; Proposed Rule

53962

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 22
[Docket No. 95-24]
RIN 1557—
AB47

FEDERAL RESERVE SYSTEM
12 CFR Part 208
[Regulation H, Docket No. R-0897]

other statutorily mandated provisions,
the proposal would establish new
escrow requirements for flood insurance
premiums, explicit authority and the
requirement for lenders and servicers to
“force-place” flood insurance under
certain circumstances, enhanced flood
hazard notice requirements, and new
authority for lenders to charge fees for
determining if a property is located in
a special flood hazard area.
DATES: Comments must be received by
December 18, 1995.
ADDRESSES: Comments should be

directed to:
OCC: Communications Division,
Office of the Comptroller of the
Currency, 250 E Street, SW.,
12 CFR Part 339
Washington, DC 20219, Attention:
RIN 3064-AB66
Docket No. 9 5 -2 4 . Comments may be
inspected and photocopied at the same
DEPARTMENT OF THE TREASURY
location. In addition, comments may be
sent by facsimile transmission to FAX
Office of Thrift Supervision
number 202/874—
5274 or by electronic
12 CFR Parts 563 and 572
mail to
REG.COMMENTS@OCC.TREAS.GOV.
[No. 95-179]
Board: William W. Wiles, Secretary,
RIN 1550-AA82
Board of Governors of the Federal
Reserve System, 20th Street and
FARM CREDIT ADMINISTRATION
Constitution Avenue, NW., Washington,
DC 20551, Attention: Docket No. R 12 CFR Part 614
0897, or delivered to room B -2222,
Eccles Building, between 8:45 a.m. and
RIN 3052-AB57
5:15 p.m. Comments may be inspected
NATIONAL CREDIT UNION
in Room M P-500 between 9:00 a.m. and
ADMINISTRATION
5:00 p.m. weekdays, except as provided
in § 261.8 of the Board of Governors’
12 CFR Part 760
rules regarding availability of
information, 12 CFR 261.8.
Loans in Areas Having Special Flood
FDIC: Jerry L. Langley, Executive
Hazards
Secretary, Attention: Room F—
402,
Federal Deposit Insurance Corporation,
AGENCIES: Office of the Comptroller of
550 17th Street NW., Washington, DC
the Currency, Treasury; Board of
20429. Comments may be delivered to
Governors of the Federal Reserve
Room F—
400, 1776 F Street, NW.,
System; Federal Deposit Insurance
Washington, DC 20429, on business
Corporation; Office of Thrift.
days between 8:30 a.m. and 5:00 p.m. or
Supervision, Treasury; Farm Credit
sent by facsimile transmission to FAX
Administration; National Credit Union
number 202/898-3838. Internet:
Administration.
COMMENTS@FDIC.GOV. Comments
ACTION: Joint notice of proposed
will be available for inspection and
rulemaking.
photocopying in room 7118, 550 17th
Street, NW., Washington, DC 20429,
SUMMARY: The Comptroller of the
between 8:30 a.m. and 5:00 p.m. on
Currency (OCC), Board of Governors of
business days.
the Federal Reserve System (Board),
OTS: Chief, Dissemination Branch,
Federal Deposit Insurance Corporation
Records Management and Information
(FDIC), Office of Thrift Supervision
Policy, Office of Thrift Supervision,
(OTS), and National Credit Union
1700 G Street NW., Washington, DC
Administration (NCUA) are proposing
20552, Attention: Docket No. 95-179.
to amend their regulations, and the
Farm Credit Administration (FCA) is
These submissions may be hand
delivered to 1700 G Street, NW., from
proposing to issue new regulations,
9:00 a.m. to 5:00 p.m. on business days
regarding loans in areas having special
flood hazards. This action is required by or may be sent by. facsimile transmission
statute and is intended to implement the to FAX number (202/906-7755).
Comments will be available for
provisions of the National Flood
inspection at 1700 G Street NW., from
Insurance Reform Act of 1994. Among

FEDERAL DEPOSIT INSURANCE
CORPORATION

1:00 p.m. until 4:00 p.m., on business
days.
FCA: Patricia W. DiMuzio, Associate
Director, Regulation Development,
Office of Examination. Farm Credit
Administration, 1501 Farm Credit Drive,
McLean, VA 22102-5090. Copies of all
comments will be available for
examination by interested parties in
Regulation Development, Office of
Examination, Farm Credit
Administration.
NCUA: Becky Baker, Secretary of the
Board, National Credit Union
Administration, 1775 Duke Street,
Alexandria, VA 22314-3428. Comments
will be available for inspection at the
same location. Send comments to Ms.
Baker via the bulletin board by dialing
703/518-6480. Send one copy by U.S.
mail or fax to FAX number 703/5186319.
FOR FURTHER INFORMATION CONTACT:

OCC: Carol Workman, Compliance
Specialist (202/874—
4858), Compliance
Management; Margaret Hesse, Attorney,
Community and Consumer Law
Division (202/874-5750), Jacqueline
Lussier, Senior Attorney, or Saumya'
Bhavsar, Attorney, Legislative and
Regulatory Activities Division (202/
874-5090), Office of Chief Counsel.
Board: Diane Jackins, Senior Review
Examiner, Jennifer Lowe, Review
Examiner (202/452-3946), Division of
Consumer and Community Affairs;
Lawranne Stewart, Senior Attorney
(202/452-3513), or Rick Heyke,
Attorney (202/452-3688), Legal
Division. For the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), Eamestine Hill or Dorothea
Thompson (202/452-3544).
FDIC: Mark Mellon, Senior Attorney,
Regulation and Legislation Section (202/
898-3854), Legal Division, or Ken
Baebel, Senior Review Examiner (202/
942-3086), or Barbara L. Boehm,
Consumer Affairs Specialist (202/9423631), Division of Compliance and
Consumer Affairs.
OTS: Larry Clark, Program Manager,
Compliance and Trust, Compliance
Policy (202/906-5628); Catherine
Shepard, Senior Attorney, Regulations
and Legislation Division (202/9067275), Office of Chief Counsel.
FCA: Robert G. Magriuson, Policy
Analyst, Regulation Development (703/
883-4498), Office of Examination; or
William L. Larsen, Senior Attorney,
Regulatory Operations Division (703/
883-4020), Office of General Counsel.
For the hearing imDaired only, TDD
(703/883-4444).
NCUA: Kimberly Iverson, Program
Officer (703/518-6375), Office of
Examination and Insurance; or Jeffrey

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
Mooney, Staff Attorney (703/518-6563),
Office of General Counsel.

guidelines implementing common
statutory or supervisory policies.

SUPPLEMENTARY INFORMATION:

B. T he N ation al F loo d Insu ran ce
Program

I. Background
A. Introduction
The Riegle Community Development
and Regulatory Improvement Act, Pub.
L. 103-325, 108 Stat. 2160 (CDRI Act),
which the President signed into law on
September 23, 1994, comprehensively
revised the Federal flood insurance
statutes. The flood insurance provisions
of the CDRI Act require the OCC, Board,
FDIC, OTS, and NCUA to revise their
current flood insurance regulations. The
FCA is required to promulgate flood
insurance regulations for the first time.
The six agencies are issuing this
proposal jointly in order to fulfill these
statutory requirements. All six of the
agencies have coordinated and
consulted with the Federal Financial
Institutions Examination Council
(FFIEC), as is required by certain of the
CDRI Act flood insurance provisions.1
This preamble first briefly describes
the National Flood Insurance Program
(NFIP), then highlights the CDRI Act
amendments to it that are of significance
to the institutions supervised by the six
agencies. Institutions are encouraged to
consult the CDRI Act for further detail
about the provisions described here as
well as for amendments to the NFIP that
do not require rulemaking by the six
agencies.2
Following the description of the
statutory background is a discussion of
the substance of the proposed
regulations. The agencies’ proposals are
substantively consistent, although the
format of the regulatory text varies in
order to accommodate the format
currently in use at each agency.3 With
respect to flood insurance regulations,
these proposals satisfy the statutory
obligations of the OCC, Board, FDIC,
and OTS under section 303(a) of the
CDRI Act. That section requires each of
these agencies to review and streamline
its regulations and to work jointly to
make uniform all regulations and
1 T h e heads o f five o f th e six ag en cies (OCC,
Board, FDIC, O T S, and NCUA) com prise the
m em bership o f the FFIEC.
2 See, e.g., CDRI A ct sectio n s 521 (flood insurance
p u rch ase requirem ent for F ed eral disaster re lie f
recip ien ts m ay not be w aived ), 522 (Federal agency
len d ers su b ject to provision s o f statute), 573
(in crease in m axim um flood in su ran ce coverage
am ou nts), 5 7 9 (delay o f effectiv e date o f flood
in su ran ce p o licies), and 582 (flood disaster
a ssistan ce barred in certain circu m stan ces; duty to
provide certain n otices on transfer o f property).
3 T h is proposal is also a com pon en t o f the OCC’s
Regulation Review Program. Each o f the agencies
involved in this rulem aking is engaged in a sim ilar
effort to reduce un n ecessary regulatory burden and
to sim p lify and clarify’ its regulations.

The NFIP is administered primarily
under two statutes: the National Flood
Insurance Act of 1968 (1968 Act) and
the Flood Disaster Protection Act of
1973 (1973 Act). These statutes are
codified at 42 U.S.C. 4001^1129.4 The
1968 Act made Federally subsidized
flood insurance available to owners of
improved real estate or mobile homes
located in special flood hazard areas if
their community participates in the
NFIP. A special flood hazard area
(SFHA) is an area within a flood plain
having a one percent or greater chance
of flood occurrence in any given year.5
SFHAs are delineated on maps issued
by FEMA for individual communities.6
A community establishes its eligibility
to participate in the NFIP by adopting
and enforcing floodplain management
measures to regulate new construction
and by making substantial
improvements within its SFHAs to
eliminate or minimize future flood
damage.7
The 1973 Act amended the NFIP by
requiring the OCC, Board, FDIC, OTS,
and NCUA to issue regulations
governing the lending institutions they
supervise. The regulations directed
lenders to require flood insurance on
improved real estate or mobile homes
serving-as collateral for a loan (security
property) if the security property was
located in a SFHA in a participating
community. To implement statutory
amendments enacted in 1974, the
regulations required lenders to notify
borrowers that security property is
located in a SFHA and of the
availability of Federal disaster
assistance with respect to the property
in the event of a flood.
C. CDRI A ct A m en dm en ts
Title V of the CDRI Act, the National
Flood Insurance Reform Act of 1994
(Reform Act), comprehensively revises
the NFIP. The Reform Act is intended to
increase compliance with flood
insurance requirements and
participation in the NFIP in order to
provide additional income to the
National Flood Insurance Fund and to
decrease the financial burden of
4 T h e Fed eral Em ergency M anagem ent Agency
(FEM A ) adm in isters the N FIP; its regulations
im plem en tin g the NFIP appear at 4 4 C FR parts 5 0 7 9 (1995).
5 44 CFR 59.1.
6 44 CFR part 65.
7 44 CFR part 60.

53963

flooding on the Federal government,
taxpayers, and flood victims.8
The Reform Act changed some of the
terms used to refer to regulators and
entities subject to the NFIP. The Reform
Act refers to the six regulators
collectively as the Federal entities for
lending regulation. This preamble
discussion refers to the six regulators as
the Federal entities for lending
regulation or the agencies. The Reform
Act, and this preamble discussion, refer
to the institutions supervised by the six
agencies collectively as regulated
lending institutions or lenders.9
The following provisions of the
Reform Act are especially significant to
regulated lending institutions.
References to the appropriate sections of
the CDRI Act are given in parentheses.
S co p e o f cov erag e (section s 511, 512,
522). The Reform Act expanded the
scope of coverage of the NFIP in several
ways. First, it added the FCA to the list
of regulators covered by the NFIP and
added Farm Credit banks and other
lenders supervised by the FCA to the
list of covered financial institutions.
Second, the Reform Act directed the
Federal National Mortgage Association
(Fannie Mae) and the Federal Home
Loan Mortgage Corporation (Freddie
Mac) to implement procedures
“reasonably designed to ensure” that
property securing the residential
mortgage loans they purchase is covered
by flood insurance if the security
property is located in a SFHA in a
community that participates in the
NFIP. Thus, entities not directly covered
by Federal flood insurance laws will
indirectly be required to satisfy the
statutory flood insurance requirements
if they sell residential mortgage loans to
Fannie Mae or Freddie Mac.
Third, as discussed more fully below,
some of the Reform Act’s provisions
apply to loan servicers. The Reform Act
defines the term servicer to include any
person responsible for receiving any
scheduled periodic payments from a
borrower pursuant to the terms of a
loan, including amounts for taxes,
insurance premiums, and other charges
with respect to the property securing a
loan, and making the payments with
respect to the amounts received from
the borrower as may be required
pursuant to the terms of the loan.
Dates o f A pplicability. Except for the
standard flood hazard determination
8 H.R. C onf. Rep. No. 6 5 2 , 103d Cong., 2d Sess.
195 (1 9 9 4 ) (C onference Report).
9 In the statute, the term len d er also refers to a
Fed eral agency len d er, w hich m eans a Federal
agency that m akes direct loans secured by im proved
real estate or a m o b ile hom e. T h is proposal does not
apply to Fed eral agency len .iers. See CDRI A ct
section s 5 1 1 , 5 12, 522.

53964

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

form and escrow provisions described
later in this preamble, the flood
insurance provisions in the Reform Act
that apply to insured banks, savings
associations, and credit unions took
effect on September 23,1 9 9 4 , the date
of enactment of the Reform Act. The
Reform Act specifically provides that
the regulations implementing the flood
insurance purchase requirement
promulgated by the OCC, Board, FDIC,
OTS, and NCUA that were in effect
immediately before the date of
enactment remain in effect until these
agencies issue the new rules that the
Reform Act requires. Thus, loans in
compliance with the agencies’ existing
flood insurance rules that are made
before new rules are finalized do not
violate the requirements imposed by
Federal flood insurance laws.
The statutory provisions that apply to
Fannie Mae and Freddie Mac take effect
on September 23, 1995. Unlike the
regulated lending institutions
supervised by the other Federal entities
for lending regulation, Farm Credit
System (System) institutions were not
part of the NFIP before passage of the
Reform Act and are not subject to any
current flood insurance regulations. In
section 522 of the Reform Act, Congress
made clear that System participation in
the NFIP would not be required for a
minimum of one year after enactment of
the Reform Act, thus ensuring a
transition period for integration of the
System into the NFIP.
As set forth below, a number of the
Reform Act provisions require agency
implementing regulations. These
regulations will establish the basic
framework for participation by System
institutions in the NFIP. While it could
be argued that System institutions
should be required to comply as of
September 23, 1995, with applicable
statutory requirements of the Reform
Act that do not require FCA regulations,
the FCA believes that piecemeal
applicability of Reform Act
requirements before the fundamental
regulatoiy framework envisioned by
Congress is in place might be unfairly
burdensome to institutions and
unnecessarily difficult for the FCA to
enforce.
Further, the FCA believes that System
lenders should have the opportunity to
comment on NFIP implementing
regulations before their requirements go
into effect. Accordingly, the FCA will
not criticize System institutions in
examinations for failure to follow the
requirements of the Reform Act until
FCA implementing regulations are
effective. Notwithstanding this
interpretation of R form Act
applicability, to ensure a smooth

integration of the System into the NFIP,
the FCA encourages System lending
institutions to initiate adequate
preparations so that their lending
activities will comply with NFIP
requirements by the time final flood
insurance regulations are adopted.
F loo d Insu ran ce requ irem en t (section
522). Under the 1973 Act, regulated
lending institutions could not “make,
increase, extend, or renew” any loan
secured by improved real estate or a
mobile home located in a SFHA in a
participating community unless the
security property and any personal
property securing the loan was covered
for the life of the loan by flood
insurance. The Reform Act continues
this basic requirement but adds a new
exemption for small, short-term loans—
those with an original principal balance
of $5,000 or less and a repayment term
of one year or less.
E scrow o f flo o d in su ran ce p ay m en ts
(section 523). The Reform Act directs
the agencies to issue rules imposing a
new escrow requirement for flood
insurance payments. Under these rules,
a regulated lending institution that
requires the escrow of taxes, property
insurance premiums, fees, or other
charges for a loan secured by residential
improved real estate must require the
escrow of flood insurance premiums
and fees as well. Loans secured by
commercial property are not subject to
this escrow requirement.
F orced p la cem en t o f flo o d in su ran ce
(section 524). The 1973 Act did not
expressly authorize lenders to
purchase— or force place— flood
insurance on behalf of a borrower. The
Reform Act explicitly confers forced
placement authority on both lenders
and servicers, and requires lenders and
servicers to force place insurance under
certain circumstances. If, at the time of
origination or at any time during the
term of a loan, the lender or servicer
determines that the security property
and any personal property securing the
loan lack adequate flood insurance
coverage, the lender or servicer must
notify the borrower of the borrower’s
responsibility to obtain coverage at the
borrower’s expense. If the borrower fails
to purchase flood insurance within 45
days after that notification, the lender or
servicer must purchase the insurance on
the borrower’s behalf.
The forced placement authority and
requirement are self-implementing, and
apply to all loans outstanding on or after
September 2 3 ,1 9 9 4 .10 In forced
placement situations, the lender or
10 W ith regard to the tim ing o f the ap p licab ility
o f th is requirem ent to Sy stem in stitu tio n s, see
discu ssion under “ Dates o f ap p lica b ility ,” supra.

servicer may pass the cost of the
insurance— premiums and fees— on to
the borrower.
The Reform Act also provides
procedures for the resolution of
disputed flood hazard determinations
that would trigger the mandatory
purchase requirement. At the joint
request of the borrower and regulated
lending institution, the Director of
FEMA will review the determination
and within 45 days make the final
decision whether or not the building or
mobile home is located in an area
having special flood hazards. Review of
a flood insurance determination may be
requested whenever a determination
occurs, either at origination or at any
time during the term of the loan. FEMA
published a notice of proposed
rulemaking with respect to these
procedures on June 1 5 ,1 9 9 5 , 60 FR
31442. The comment period closed on
August 15, 1995.
P en alties (section 525). The Reform
Act authorizes the appropriate Federal
entity for lending regulation to impose
civil money penalties against a
regulated lending institution that
engages in a pattern or practice of
violating the flood insurance statute or
regulations. Notice and opportunity for
hearing are required before civil money
penalties may be imposed. Penalties
may be assessed in amounts of up to
$350 for each violation, not to exceed
$100,000 per calendar year, for any
single regulated lending institution.
The agencies note that liability for
civil money penalties remains with the
regulated lending institution that
committed the violation. Transfer of the
loan does not extinguish the liability of
the transferring lender; conversely, the
transferee is not liable for violations
committed by another lender that
previously held the loan.
The agencies also note that a lender
that purchases or renews flood
insurance in the appropriate amount on
a borrower’s behalf under the statute’s
forced placement provisions is deemed
by the express language of the statute to
have complied with the agencies’
regulations requiring lenders to ensure
adequate coverage on security property
located in a SFHA.
F loo d determ ination fe e s (section
526). The 1973 Act did not expressly
authorize regulated lending institutions
to charge borrowers for the cost of
making a flood insurance determination.
The Reform Act provides that any
person making a loan secured by
improved real estate or a mobile home,
or any servicer for such a loan, may
charge a reasonable fee for the costs of
determining whether the building or
mobile home is located in a SFHA. The

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
lender or servicer acting on behalf of the institutions must use the form beginning
lender may charge the determination fee 180 days after the issuance of the rule,
to the borrower or, in the case of a loan
or January 2,1996.
Exam ination regarding co m p lia n ce
transfer or sale, the loan purchaser
(section 529). The Reform Act requires
under prescribed circumstances. These
each appropriate Federal entity for
include when the determination (1) is
lending regulation to assess compliance
made in connection with the making,
with the NFIP when it conducts
increasing, extending, or renewing of
examinations of the regulated lending
the loan that the borrower initiates, (2)
institutions it supervises. The OCC,
is made in response to map changes by
Board, FDIC, OTS, and NCUA are
FEMA, or (3) results in the purchase of
required to report to Congress on
flood insurance under the forced
compliance by insured depository
placement provisions.
N otice requirem ents (section 527).
institutions and insured credit unions
The 1968 Act, as amended, required
with the requirements of the NFIP. The
regulated lending institutions to provide FCA has authority under the Farm
notice to purchasers or lessees if the
Credit Act (12 U.S.C. 2001-2279bb-6) to
property seeming the loan is located in
assess compliance by Farm Credit
a SFHA. The Reform Act further amends System institutions with the NFIP.
A vailability o f flo o d m a p s (section
the 1968 Act: (1) to add detail to the
575). Under the Reform Act, FEMA
required contents of the notice; (2) to
require regulated lending institutions to must make flood insurance rate maps
and related information available free of
give notice of special flood hazards to
charge to the Federal entities for lending
loan servicers, as well as to purchasers
regulation (and certain other
or lessees; and (3) to require lenders to
governmental entities) and at a
notify FEMA of the identity of the
reasonable cost to all other persons.
servicer of a loan subject to flood
FEMA also must provide notice of any
insurance requirements and of the
change to flood insurance map panels,
identity of the new servicer if there is
including changes effected by letter of
a change in loan servicers.
The Reform Act also requires the
map amendment or letter of map
Director of FEMA (or the Director’s
revision, not later than 30 days after the
designee) to provide advance notice of
map change or revision becomes
the expiration of any flood insurance
effective. FEMA must either publish this
contract to the owner of the property
notice in the Federal Register or
covered by the contract, the loan
provide notice by another, comparable
servicer of any loan secured by such
method. Finally, every six months
insured property, and (if known to the
FEMA must publish a compendium of
Director) the owner of the loan.
all changes and revisions to flood
Standard flo o d h az ard determ ination
insurance map panels and all letters of
fo rm (section 528). The Reform Act
map amendment and revision for which
requires FEMA to develop a standard
it published notice during the preceding
form for recording a lender’s
six months. These compendia are
determination whether security
available free of charge to the Federal
property for a given loan is located in
entities for lending regulation (and
a SFHA for which flood insurance is
certain other governmental entities) and
available. The Reform Act mandates that for a fee set by FEMA to all other
the form be developed by regulations
persons.
issued 270 days after September 23,
II. Description of the Proposal
1994, the date of enactment. FEMA
published a notice of proposed
A. Overview
rulemaking with respect to the form on
The Reform Act directs the Federal
April 7 ,1995, 60 FR 17758, and a final
entities for lending regulation to write
rule on July 6 ,1 9 9 5 , 60 FR 35276.
regulations implementing certain of its
FEMA’s final rule was effective upon
provisions and specifies their content.
publication in the Federal Register.
The OCC, Board, FDIC, OTS, and NCUA
The Reform Act also requires the
Federal entities for lending-regulation to are proposing to revise their current
flood insurance regulations 1 to reflect
1
issue regulations requiring regulated
the changes required by the Reform Act.
lending institutions to use the standard
The FCA is proposing new flood
form developed by FEMA. The Reform
insurance regulations for the
Act mandates that the agencies’
institutions it regulates. All of the
regulations be issued together with
agencies were mindful of the need to
FEMA’s rule establishing the form. The
keep regulatory burden to a minimum as
agencies published a final rule that
complies with this statutory
11 O T S ’s cu rren t flood in su ran ce regulation is
requirement on July 6 ,1 9 9 5 . 60 FR
co d ified at 12 CFR 5 6 3 .4 8 . F or ease o f referen ce, the
35286. Under this rule, as mandated by
O T S is creating a new part 572 for its flood
in suran ce regulation and repealin g 12 C FR 5 6 3 .4 8 .
the Reform Act, regulated lending

53965

they prepared this proposal, and,
accordingly, are proposing only
regulatory requirements necessary to
implement the Reform Act.
The purpose of the Reform Act is to
strengthen and enhance the NFIP. It
does not focus on the safety and
soundness of financial institutions.
Depending on the location and activities
of a lender, adequate flood insurance
coverage may be important from a safety
and soundness perspective as a
component of prudent underwriting and
as a means of protecting the lender’s
ongoing interest in its collateral.
Accordingly, this preamble notes issues
that may raise safety and soundness,
concerns in some circumstances and
invites comment on these issues so that
the agencies can consider whether to
provide informal guidance, separate
from these implementing regulations,
that addresses safe and sound banking
practices with respect to flood
insurance.
In deciding whether guidance of this
type is appropriate, the agencies will
consider the fact that a lender’s needs
with respect to flood insurance vary
widely depending on the type of
lending the institution does and the
geographic areas it serves. Therefore,
each lender is generally in the best
position to tailor its flood insurance
policies and procedures to suit its
business. The agencies encourage
lenders to evaluate and, when
necessary, modify their flood insurance
programs to comport with both the
requirements of Federal flood insurance
laws and regulations and principles of
safe and sound banking.
B. T opic-by-T opic D iscussion
Authority, Purpose and Scope
The agencies have expanded this
section to add detailed statements of
authority, purpose and scope. The FCA
is proposing language similar to that
proposed by the other agencies. The
NCUA is proposing to replace the
current question and answer format of
its flood insurance regulations with
standard regulation text so that its flood
insurance regulations are consistent
with the other agencies.
Loan Servicers
' The agencies propose to apply their
regulations implementing the escrow,
forced placement, and flood hazard
determination fee provisions of the
Reform Act to regulated lending
institutions and to loan servicers acting
on behalf of regulated lending
institutions. The agencies propose to
cover loan servicers in this way for
several reasons. First, the agencies do

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Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

not have jurisdiction over all servicers.
Some servicers are not regulated lending
institutions or their affiliates.
Second, the agencies do not interpret
the NFIP to impose obligations on loan
servicers independent from the
obligations it imposes on the owner of
a loan.
The NFIP looks to activities that are
conducted by lenders rather than loan
servicers—that is, the making,
increasing, extending, or renewing of a
loan—as the triggers for ensuring
adequate flood insurance coverage. The
mandatory purchase requirement under
section 102 of the 1973 Act (42 U.S.C.
4012a(b)) applies only to lenders.
Moreover, the Conference Report
indicates that a principal reason for the
adoption of the forced placement
provision was to remove any doubt that
lenders have the legal authority to
require borrowers to purchase flood
insurance or, if the lender purchases the
insurance, to require the borrower to
pay for it. Conference Report at 199. The
agencies conclude that loan servicers
were covered by the provision so that
they could perform for the lender the
administrative tasks related to the
forced placement of flood insurance—
including providing the requisite
notices to borrowers, arranging for the
insurance, and collecting and
transmitting insurance premiums—
without fear of liability to the borrower
for the imposition of unauthorized
charges.
Finally, section 102(f) of the 1973 Act
(42 UJ5.C. 4012a(f)) as added by section
525 of the CDRI Act does not authorize
the agencies to seek civil money
penalties against loan servicers that are
not regulated lending institutions. The
statute’s failure to impose liability on
servicers independent of lenders
reinforces the conclusion that a
servicer’s obligation to comply with
NFIP requirements arises from its
contractual relationship with a lender.
A lender thus may fulfill its duties
under the NFIP by imposing its
responsibilities on the servicer under a
servicing contract. Accordingly, lenders
should include in their loan servicing
agreements language ensuring that the
servicer will take all necessary steps
with respect to escrow requirements,
forced placement of flood insurance,
flood hazard determinations, and
notices if the lender or its servicer
should determine that there are
deficiencies in any of these aspects of
servicing agreements.
Definitions
The agencies have added or revised
certain definitions, including
definitions of the terms “building,”

“designated loan,” 12 “mobile home,”
and “servicer.” The agencies also added
certain definitions that enable them to
streamline the operative provisions of
the regulation, including definitions of
the terms “Director,” “residential
improved real estate,” and “special
flood hazard area.”
Flood Insurance Requirement
The Reform Act did not change the
basic requirement for the purchase of
flood insurance when a security
property is located in a special flood
hazard area in a participating
community, nor did it modify the
minimum required amount of the
insurance.13 The minimum amount
continues to be the lesser of the amount
of the outstanding principal balance of
the loan or the maximum limit for
coverage under the 1968 A ct.14
Accordingly, the five agencies that
currently have flood insurance
regulations are not proposing any
substantive amendment to the text that
implements this portion of the statute.
Loan Purchase as Equivalent to Loan
Origination
«

The agencies’ current regulations
differ in their treatment of the issue
whether the purchase of a loan
constitutes the making of a loan for
purposes of flood insurance. The OCC
and the Board take the position that a
loan purchase is not an event that
triggers the obligation to make a flood
hazard determination. The FDIC has not
previously had an opportunity to
express an opinion on the question.
The O TS’s current regulations, on the
other hand, view the purchase of a loan
as the equivalent of the making of a loan
for flood determination purposes. In an
effort to promote uniformity among the
agencies, the OTS is considering
aligning its position with that of the
OCC and the Board, so that a loan
purchase by a savings association would
not trigger an obligation to make a flood
hazard determination.15 Based on its
12 T h e d efin ition o f the term “ designated loan ”
refers to loans “ secured by a bu ild in g or m obile
h om e” b ecau se, as a practical m atter, flood
in su ran ce is generally available only w ith respect
to a stru ctu re or m obile hom e and not w ith respect
to the land on w h ich the structure or m obile hom e
sits. T h is d efin ition is unique to the ag en cies’ flood
in su ran ce regulations and carries no im plication
about the nature or exten t o f th e co llateral that a
len d er otherw ise requires as a m atter o f prudent
underw riting.
13 See also section 5 7 3 o f the CDRI A ct, increasing
th e m axim um flood in suran ce coverage lim its.
l4 In addition to the dollar lim its in the 1 9 6 8 Act,
flood in su ran ce coverage under the N FIP is lim ited
to the overall value o f the property less the value
o f the land.
15 O T S has h istorically taken a different position
on th is qu estion than the OCC and the Board.

regulations governing loan purchasing,
NCUA previously took the position that
if flood insurance would have been
required for a Federal credit union to
grant the loan, flood insurance would be
necessary for the credit union to
purchase the loan.
The OCC and the Board do not
propose to revise their current
regulatory language to add a loan
purchase as a “tripwire” for
determining whether adequate flood
insurance exists. The statute identifies
the events—the making, increasing,
extending, or renewing of a loan—that
trigger a lender’s obligation to review
the adequacy of flood insurance
coverage on an affected loan. The
Reform Act does not include loan
purchase in this list of specified
tripwires. The OCC and the Board note
that a loan purchaser may always
require as a condition of purchase that
the seller determine whether the
security property is located in a SFHA.
The Reform Act authorizes the seller to
charge a fee to the purchaser for making
this determination.
With respect to residential mortgage
loans sold in the secondary market, the
inclusion of loan purchase as a tripwire
event may be unnecessary because of
the expansion of the scope of the NFIP’s
coverage with regard to Fannie Mae and
Freddie Mac. Fannie Mae and Freddie
Mac are the largest volume purchasers
of residential mortgage loans. As a
practical matter, these entities establish
the industry standards not only for the
residential mortgage loans that they buy,
but for all residential mortgage loans
that the originator does not intend to
keep in portfolio. The bulk of home
loans sold to other purchasers,
including regulated lending institutions,
typically conform with Fannie Mae and
Freddie Mac standards. Pursuant to the
Reform Act amendments,16 those
standards will include adequate flood
insurance coverage on collateral
securing loans sold to these entities. The
OCC and the Board believe that
including loan purchase as a regulatory
tripwire could result in the imposition
of duplicative (and potentially
S ec tio n 102(b) o f th e 1973 A ct (42 U .S.C . 4012a(b))
provides that regulated lending in stitution s m ay not
“ m ak e” any loan secured by im proved real estate
or a m o b ile hom e located in a SFH A unless the
security property is covered by an adequate policy
of flood in suran ce. T he O T S ’s predecessor, the
Fed eral H om e Loan Bank Board, con sid ered the
word “ m ak e” to be broad enough to in clu d e loan
purch ases. O therw ise, savings in stitu tio n s could
evade flood insurance requirem ents by the sim ple
exp ed ien t of purchasing, rather than originating,
loans. See 34 FR 5 7 4 9 (Feb. 15, 1974). A ccordingly,
the O T S ’s regulations im plem enting the 1973 Act
con strue the phrase “ m ake a lo a n ” as includ ing
purchased loans, see 12 CFR 5 6 3 .4 8 (b ).
16 S ec tio n 5 2 2 o f the CDRI A ct.

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
inconsistent) requirements on the seller
and the purchaser of a residential
mortgage loan sold in the secondary
market.
As noted previously, the FDIC has not
previously had an opportunity to
express an opinion on the question of
whether the purchase of a loan is
equivalent to the making of a loan for
purposes of Federal flood insurance
laws. The FDIC now proposes, in the
interest of regulatory consistency, to
formally adopt the position adhered to
by the OCC and the Board that a loan
purchase is not an event that triggers the
obligation to make a flood hazard
determination.
Given the Reform Act’s extension of
the flood insurance requirements to
Fannie Mae and Freddie Mac, the OTS
believes that coverage of loan purchases
may no longer be necessary, especially
if the agencies issue guidance on loan
purchases, as discussed below.
Therefore, the OTS, in an effort to
promote consistent treatment for all
regulated lending institutions, proposes
to remove loan purchases from its flood
insurance regulations. The OTS requests
comment on this proposal.
Prior to the Reform Act, the NCUA
took the position that if flood insurance
would have been required for a Federal
credit union to grant the loan, flood
insurance would be necessary for the
credit union to purchase the loan. This
position is based upon the requirements
of 12 CFR 701.23(b)(1) of the NCUA
regulations, which state that a Federal
credit union may only purchase a loan
if it could have granted that loan or if
the loan is restructured within 60 days
after purchase so that it is a loan the
Federal credit union could grant. The
NCUA invites comment on whether it
should maintain this position.
All of the agencies are considering
whether, as a supervisory matter, to
provide guidance on the flood insurance
policies that institutions should follow
when they purchase loans, including
nonconforming home loans, loans
secured by commercial property,
portfolios of loans, and loan
participations. Loans in these categories
may be subject to underwriting
standards that differ significantly from
those established by Fannie Mae,
Freddie Mac, or other governmentsponsored enterprises for housing.
Institutions with portfolios that include
purchased loans may need to develop
procedures to ensure that such
purchases do not result in
concentrations of loans secured by
property subject to flood hazards for
which insurance is not available or has
not been obtained. The agencies invite

comment on the need for this type of
guidance and on what it should include.
Loan Acquisitions Involving Table
Funding Arrangements.
The agencies also invite comment
regarding whether lenders who provide
table funding to close loans originated
by mortgage brokers or mobile home
dealers should be deemed to be
“making” or “purchasing” loans for
purposes of the flood insurance
requirements. In the typical table
funding situation, the party providing
the funding ordinarily reviews and
approves the credit standing of the
borrower and issues a commitment to
the broker or dealer to purchase the loan
at the time the loan is originated.
Frequently, all loan documentation and
other statutorily mandated notices are
supplied by the party providing the
funding, rather than the broker or
dealer. The funding party provides the
original funding for the mortgage loan
“at the table” when the broker or dealer
and the borrower close the loan.
Concurrent with the loan closing, the
funding party acquires the loan from the
broker or dealer. Technically, however,
the party providing the funding is
purchasing rather than originating the
loan.
The Financial Accounting Standards
Board (FA SB )17 provides guidance on
the issue whether the party providing
the funding should account for a table
funding arrangement as a loan purchase
or loan origination, and what criteria
should be used to evaluate whether a
table funding arrangement constitutes a
loan purchase or a loan origination. A
mortgage loan acquired by the party
providing the funding in a table funding
arrangement should be accounted for as
a purchase of the loan by the acquirer
if the loan is legally structured as an
origination by the broker or dealer and
if the broker or dealer is independent of
the provider of funds. In making these
determinations, the broker or dealer
must satisfy each of five criteria. Those
criteria are:
1. The broker or dealer is registered and
licensed to originate and sell loans under the
applicable laws of the states or other
jurisdictions in which it conducts business;
2. The broker or dealer originated,
processed, and closed the loan in its own
name and is the first titled owner of the loan,
with the mortgage banking enterprise
becoming a holder in due course;
3. The broker or dealer is an independent
third party and not an affiliate of the
mortgage banking company. As a nonaffiliate,
the correspondent must bear all of the costs
17
See F in a n cia l A ccou n tin g Standards Board,
E IT F Abstracts, Em erging Issu es T ask F orce Issue
No. 9 2 - 1 0 , "L o a n A cq u isitio n s Involving Table
Fu n d in g A rran gem ents.” 1 9 9 3 .

53967

of its place of business, including the costs
of its origination operations;
4. The broker or dealer must sell loans to
more than one mortgage banking enterprise
and not have an exclusive relationship with
the acquirer; and
5. The broker or dealer is not directly or
indirectly indemnified by the mortgage
banking enterprise for market or credit risks
on loans originated by the broker or dealer.
However, a commitment by the mortgage
banking enterprise for the purchase of loans
from the broker or dealer is not considered
to be an indemnification for purposes of this
requirement.
If any of the criteria is not met, then the
loan should be accounted for as an
originated loan by the provider of the
funds.
Under the Real Estate Settlement
Procedures Act of 1974, as amended, (12
U.S.C. 2601-2617) (RESPA), table
funding is defined as a settlement at
which a loan is funded by a
contemporaneous advance of loan funds
and an assignment of the loan to the
person advancing the funds.18 A tablefunded transaction is not a “secondary
market transaction.” 24 CFR 3500.2. A
bona fide transfer of a loan obligation in
the secondary market is not covered by
RESPA or Regulation X, with certain
exceptions. 24 CFR 3500.5(b)(7). The
regulation provides that in determining
what constitutes a bona fide transfer of
a loan obligation in the secondary
market, HUD will consider the real
source of funding and the real interest
of the funding lender. Mortgage broker
transactions that are table-funded are
not “secondary market transactions.”
Neither the creation of a dealer loan nor
the first assignment of such loan to a
lender is a “secondary market
transaction.”
In the agencies’ view, a table-funded
transaction is more like a lo an '
origination by the provider of funds
than a purchase of a loan in the
secondary market by that entity. Thus,
lenders who provide table funding to
close loans originated by a mortgage
broker or mobile home'dealer will be
considered to be making a loan for
purposes of the flood insurance
requirements. The agencies request
comment on this position and whether
the FASB or RESPA standard is a more
appropriate guideline.
Applicability of Federal Flood
Insurance Requirements to Subsidiaries
The question whether Federal flood
insurance legislation applies to
mortgage banking subsidiaries of
regulated lending institutions is mooted
18
R egu lation s issu ed by th e D epartm ent o f
H ousing and U rban D evelopm ent (HUD) under
R ESPA appear in 24 C FR pari 3 5 0 0 (Regulation X).

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Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

to some extent by the previously noted
Reform Act amendment requiring
Fannie Mae and Freddie Mac to ensure that any improved real estate or mobile
home located in a SFHA that secures a
mortgage loan these entities purchase is
covered by the legally required amount
of flood insurance. Since mortgage
bankers generally securitize their
mortgage loans and then sell them in the
secondary market, any such loan that is
sold to either Fannie Mae or Freddie
Mac must comply with their
requirements and therefore must be
covered by flood insurance.
Fannie Mae and Freddie Mac
primarily purchase residential mortgage
loans, however, and then usually for 1to 4-family residential unit dwellings.
As a result, most mortgage loans secured
by commercial property or by
residential property with more than 4
units are not subject to Fannie Mae or
Freddie Mac requirements. Each
agency’s discussion with respect to the
applicability of Federal flood insurance
requirements to the subsidiaries of the
institutions it regulates is set forth
below.
OCC and Board. National banks’
operating subsidiaries are subject to the
rules applicable to the operations of
their parent banks as provided under 12
CFR 5.34. Similarly, state member
banks’ operating subsidiaries are subject
to the rules applicable to the operations
of their parent banks.
FDIC. The FDIC is responsible for the
federal supervision of state chartered
banks which are not members of the
Federal Reserve System. The FDIC has
been given specific legal authority to
fulfill that function through the
prescription of such rules and
regulations as the Board of Directors of
the FDIC may deem necessary to carry
out the provisions of the Federal
Deposit Insurance Act (FDI Act) or any
other law which the FDIC has the
responsibility of administering or
enforcing including Federal flood
insurance legislation. S ee section
9 (a)(Tenth) of the FDI Act (12 U.S.C.
1819(a)(Tenth)). The authority of the
FDIC to regulate insured nonmember
banks extends to activities that such
institutions may conduct through
subsidiaries. The FDIC therefore
proposes to require by regulation that a
subsidiary of an insured nonmember
bank that engages in lending secured by
real estate must comply with Federal
flood insurance requirements. The FDIC
invites comment from all interested
parties on this proposed interpretation.
The FDIC proposes to make subsidiaries
of insured nonmember banks subject to
Federal flood insurance requirements by
defining the term “bank” to include a

subsidiary of such an institution. The
FDIC invites comments on this
proposed method.
OTS. Operating subsidiaries of
Federal savings associations are subject
to the rules, including flood insurance
regulations, applicable to their parent
savings associations. 12 CFR 545.81(e).
However, the current OTS regulations
implementing the 1973 Act do not apply
to a service corporation. 12 CFR
563.48(a); discussed in 39 FR 5749 (Feb.
15, 1974). Because the Reform Act
defines the term regulated lending
institution to include, among other
things, any bank, savings and loan
association, or similar institution
subject to the supervision of a Federal
entity for lending regulation, the OTS is
proposing to apply its flood insurance
regulations to service corporations that
engage in mortgage lending. The OTS
believes this position is consistent with
the statutory language and
Congressional intent, and ensures
uniform and consistent treatment for
regulated financial institutions. The
OTS requests comment on this proposal.
FCA. Service corporations organized
under the Farm Credit Act (12 U.S.C.
2001-2279bb-6) are System institutions
subject to the regulations applicable to
the operations of their parent banks. 12
U.S.C. 2213. Since System service
corporations have no authority to
extend credit, the applicability of these
proposed flood insurance requirements
to such organizations should not be in
question. 12 U.S.C. 2211.
NCUA. A credit union, by itself, with
other credit unions and/or with non­
credit union parties, may invest in or
loan money to a corporation or limited
partnership, called a credit union
service organization (CUSO), which
provides services to its credit union
investors. 12 CFR 701.27(d). CUSOs are
not directly regulated by the NCUA;
rather, NCUA establishes the conditions
for Federal credit union investments in
and loans to such organizations. 12 CFR
701.27(a). Since NCUA does not
exercise direct regulatory or supervisory
jurisdiction over them, NCUA believes
that CUSOs are not regulated lending
institutions subject to the Reform Act.
However, CUSOs that originate
mortgage loans generally do not
warehouse those loans. Their loans are
either sold directly to the secondary
market or sold to the credit union.
Therefore, as a practical matter, CUSOs
must adhere to the Federal flood
insurance requirements when making
loans since, as described herein, loans
purchased by credit unions or sold to
Fannie Mae or Freddie Mac must
conform with these requirements.

Exemptions
Before its amendment by the Reform
Act, the 1973 Act provided an
exemption to the basic flood insurance
requirement for State-owned property
covered under a policy for selfinsurance satisfactory to the Director of
FEMA. 42 U.S.C. 4012a. The proposal
retains this exemption and adds the
Reform Act’s new exemption for loans
with an original principal balance of
$5,000 or less and a repayment term of
one year or less.
Escrow of Flood Insurance Payments
The Reform Act requires the agencies
to adopt rules providing that a regulated
lending institution must require the
escrow of flood insurance premiums for
loans secured by residential properties
if the lender requires the escrow of other
funds to cover other charges associated
with the loan, such as taxes, premiums
for other types of insurance, and fees.
The proposal implements this new
requirement. Where appropriate,
servicing agreements between a lender
and loan servicer also should require a
loan servicer to escrow flood insurance
premiums.
Escrow of flood insurance premiums
is not required if the regulated lending
institution does not require escrow of
taxes, insurance premiums, or other
payments. Thus, if a regulated lending
institution terminates a loan escrow
account, the lender is no longer required
to escrow flood insurance premiums.
Under section 523 of the CDRI Act (42
U.S.C. 4012a(d)), escrow accounts for
flood insurance premiums are subject to
the applicable provisions of section 10
of RESPA, 12 U.S.C. 2609. Section 10
generally limits the amount that may be
maintained in an escrow account and
requires certain escrow account
statements.19 The regulations
implementing section 10 appear at 24
CFR 3500.17 (1995). S ee also 60 FR
8812 (Feb. 15,1995) and 60 FR 24734
(May 9, 1995) (revising § 3500.17). The
requirement to escrow flood insurance
premiums will take effect when the new
19 C ertain loans are exem pt from RESPA ,
how ever, in clu d ing a loan for any purpose on
property o f 25 acres or m ore, or an exten sion of
cred it prim arily for a b u sin ess, co m m ercial, or
agricu ltural purpose. See 12 U .S.C . 2 6 0 6 ; 24 CFR
3 5 0 0 .5 . T hu s R ESP A is narrow er in scop e than the
Fed eral flood in su ran ce legislation . T h e agencies
are o f the op inio n that sectio n 10 o f R ESPA applies
to flood in su ran ce escrow a ccou n ts only if t h e ,
un d erlying loan is covered by R ESP A . For exam ple,
a len d er that originates a loan in a sp ecia l flood
hazard area prim arily for a bu sin ess, co m m ercial or
agricu ltural purpose m ust escrow flood insurance
prem ium s if it escrow s other types o f paym ents
(such as paym ents for in su ran ce or.taxes) but the
escrow a ccou n t established for that loan need not
com ply w ith the requirem en ts o f section 10 of
RESPA .

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
rules implementing the Reform Act are
final.
Forced Placement of Flood Insurance
The Reform Act requires a regulated
lending institution or servicer acting on
its behalf to purchase— or “force
place”—flood insurance for the
borrower if the regulated lending
institution or servicer determines that
adequate coverage is lacking. The
statute does not prescribe how or when
the regulated lending institution or
servicer should make this
determination. The Reform Act does
say, however, that the determination
may occur at the time of origination or
at any time during the term of the loan.
The forced placement provision applies
to all loans outstanding on or after
September 2 3 ,1 9 9 4 .20
The agencies note that the Reform Act
contains provisions designed to make it
easier for lenders and servicers to obtain
actual notice of remappings or of the
expiration of coverage of flood
insurance. FEMA must publish notice of
all remappings; and FEMA must
provide advance notice of the expiration
of insurance coverage to property
owners, loan servicers, and (if known to
FEMA) the owners of the loans.
Portfolio Review
The Reform Act and the proposed
rules do not require regulated lending
institutions or servicers to undertake a
review of all loans in portfolio as of
September 23, 1994, that is, a retroactive
portfolio review. First, the Reform Act
does not revise the list of events that
trigger a determination, that is, the
making, increasing, renewing, or
extension of a loan. Second, the Reform
Act imposes no requirement for
retroactive portfolio review. Finally, a
requirement for retroactive portfolio
review would impose a burden on
regulated lending institutions that is
both costly and unnecessary in light of
the system of specific tripwires that the
Reform Act establishes.
Similarly, the agencies do not believe
that the Reform Act requires regulated
lending institutions or servicers to
conduct portfolio reviews on a
prospective basis. The 1968 and 1973
Acts as amended by the Reform Act do
not prescribe portfolio review, or any
other method, as the means that lenders
or servicers should use to determine
whether security property is adequately
covered by flood insurance, nor does it
require that determinations be made at
any particular time.
20 W ith regard to the tim ing o f the ap p licab ility
o f th is requirem ent to System in stitu tio n s, see
d iscu ssio n under “Dates o f a p p lica b ility ,” supra.

Because the Reform Act does not
mandate review of loan portfolios, the
agencies do not propose to establish
such a requirement by regulation.
Regulated lending institutions and their
servicers will nonetheless need to
develop policies and procedures to
ensure that, where a determination has
been made that property securing a loan
is located in a SFHA, they are in
compliance with the Reform Act’s
forced placement provision.
In addition, it may be appropriate as
a matter of safety and soundness for the
agencies to ensure that institutions that
are significantly exposed to the risks for
which flood insurance is designed to
compensate determine the adequacy of
flood insurance coverage by (1) periodic
reviews, or (2) reviews triggered by
remapping of areas represented in a
regulated lending institution’s loan
portfolio.
The agencies solicit comment on the
advisability of issuing guidance in this
area and on how the guidance should
differentiate among regulated lending
institutions based on their levels of
exposure to flood risk. In particular, the
agencies invite comment describing the
methods that regulated lending
institutions already use or are
considering for determining the
adequacy of flood insurance coverage;
the cost (or other burden) associated
with portfolio reviews; and on whether
the additional loans for which flood
insurance would be required as a result
of portfolio reviews would be significant
in relation to a regulated lending
institution’s or servicer’s portfolio.
Penalties
The penalty provisions of the Reform
Act are self-executing. They do not
require the agencies to develop
regulations to implement them, and the
agencies are not proposing to do so.
Determination Fees
The Reform Act authorizes a lender or
servicer acting on behalf of a lender to
charge a reasonable fee for making a
flood hazard determination,
notwithstanding any other Federal or
State law. This fee may be charged to
the borrower under certain
circumstances specified in the statute; if
the borrower initiates the transaction
(the making, increasing, extending, or
renewing of a loan) that triggers a flood
hazard determination; if the
determination reflects FEMA’s revision
of map areas subject to flooding; or if
the determination results in the
purchase of flood insurance under the
forced placement provision. In the case
of a sale or transfer of the loan, the fee
may be charged to the purchaser or

53969

transferee. The proposal includes the
same authorization to charge reasonable
determination fees as the Reform Act.
Section 526 of the CDRI Act (42
U.S.C. 4012a(h)) constitutes an
authorization to charge fees in certain
circumstances, notwithstanding the
provisions of any other Federal or State
law. It does not limit the ability of a
lender to provide for determination fees
in other circumstances under its lending
contract, provided that such fees are not
in conflict with other Federal or State
laws.
Notice Requirements
The proposal revises the current
regulation to reflect the provisions
added by the Reform Act that prescribe
the minimum contents of a regulated
lending institution’s notice concerning
special flood hazards to borrowers and
loan servicers.
The 1968 Act (42 U.S.C. 4104a)
requires regulated lending institutions
to notify the “purchaser or lessee (or
obtain satisfactory assurances that the
seller or lessor has notified the
purchaser or lessee)” of special flood
hazards. In this context, the terms
“purchaser” and “lessee” refer to the
person who will occupy a property. The
Reform Act did not amend this statutory
language. The current regulation states
that theregulated lending institution
must notify the borrower of special
flood hazards and states that in lieu of
such notification, a regulated lending
institution may obtain satisfactory
written assurance that the seller or
lessor has so notified the borrower prior
to the execution of the sale or lease
agreement. Each of the agencies has
used the word “borrower” in place of
the “purchaser” or “lessee” designation
contained in the stathte, primarily to
provide greater clarity. The proposal
does not change this terminology.
The agencies invite comment on the
advisability of retaining this language.
The notification to the borrower and
servicer must include a warning that the
building on the improved real estate or
the mobile home is or will be located in
an area having special flood hazards, a
description of the flood insurance
purchase requirements under section
102(b) of the 1973 Act (42 U.S.C.
4012a(b)), a statement that insurance
may be purchased under the NFIP and
is also available from private insurers,
and any other information that the
Director of FEMA considers necessary to
carry out the purposes of the NFIP. The
proposal follows the statute and

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Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

requires that these items be included in
the notice.21
The current regulatory provision
requiring lenders to provide notice to
borrowers of the availability of Federal
disaster relief'assistance in the event of
flooding implements a portion of the
1&73 Act (42 U.S.C. 4106(b)) that has
not been amended substantively and,
therefore, remains unchanged.
The 1968 Act requires the lender to
provide notice of special flood hazards
within a reasonable period of time in
advance of the signing of the documents
involved in the transaction. The
proposal reflects the Reform Act
amendment that added the loan servicer
to the entities that must be notified.
However, in the agencies’ view, it may
not be possible in all cases for a lender
to provide such advance notice to a loan
servicer. The agencies request comment
on the appropriate timing of the
notification to the loan servicer.
The current regulations require that
the borrower, prior to closing, furnish
the lender with a written
acknowledgment of the receipt of the
notices. The Reform Act mandates that
the agencies’ regulations require lenders
to retain a record of the receipt of the
notices by the borrower and the loan
servicer. The proposed regulation
reflects this change and deletes the
acknowledgment provision.
The agencies request comment on
whether the final regulations should
require the lender to retain a copy of
each notice in its files.
The substance of the “safe harbor”
provision in the current regulations
permitting lenders to rely on the
language presented in sample notices
that currently appear either in the body
of the regulations or in an appendix to
the regulations remains unchanged. The
language in the sample notices is
revised to reflect amendments to the
1968 Act (42 U.S.C. 4104a(a)(3)) made
by section 527 of the CDRI Act.
The proposal also implements the
new requirement that regulated lending
institutions notify the Director of FEMA
(or the Director’s designee) of the
identity of the loan servicer and of any
change in the servicer with respect to
any loan secured by improved real
estate or a mobile home located in a
SFHA. The agencies understand that the
Director of FEMA intends to designate
21 R eaders sh ou ld be aw are that section 1364 of
th e 1 9 6 8 A ct as am end ed by sec tio n 5 2 7 o f the CDRI
A ct requires that the n otice o f sp ecial flood hazards
also list any other in form ation th at th e D irector of
th e FEM A co n sid ers n ecessary to carry out the
purposes o f the NFIP. T h e ag en cies have been
in form ed by FEM A staff that at th e present tim e
th ere are no plan s to require th at an y other
in form ation be listed on the n otice.

the insurance agent that writes the flood
insurance to receive the notice.
The agencies request comment on
whether the final regulations should
require the lender to retain a copy of the
notice of the identity of the servicer in
its files.
Use-of Standard Flood Hazard
Determination Form
As mentioned in the B ackgroun d
section of this proposal, each agency has
issued a final rule requiring the
institutions they supervise to use the
standard flood hazard determination
form developed by FEMA when they
determine whether improved real estate
or a mobile home offered as collateral
for a loan is located in a SFHA. For the
convenience of the reader, the sections
of the regulatory text established by
those final rules are included in this
proposal. The regulatory text contains
nonsubstantive revisions made to reflect
abbreviations and minor word changes
to fit the format of the proposed
regulations.
The Reform Act permits lenders to
rely on third-party determinations but
only if the third party guarantees the
accuracy of the information provided to
the lender. Moreover, the Reform Act
permits a lender to rely on a previous
determination whether the security
property is located in a special flood
hazard area and exempts the lender ■
from liability for errors in the previous
determination, if the previous
determination is not more than seven
years old and the basis for it was
recorded on the standard flood hazard
determination form that FEMA has
developed.
There are two clearly defined
exceptions to relying on a previous
determination. A lender may not rely on
a previous determination if FEMA’s
map revisions or updates have caused
the security property to be located in a
SFHA, or if the lender contacts FEMA
and discovers that map revisions or
updates affecting the security property
have been made after the date of the
previous determination.
Recordkeeping Requirements
The rules of the five agencies that
currently have flood insurance
regulations include a requirement that
an institution keep records sufficient to
show how it has determined whether
loans fall within the coverage of the
NFIP and the implementing regulations.
The proposal removes this provision
because the proposed provisions on
recordkeeping appear in the substantive
sections to which they pertain,
including the required use of the

standard flood hazard determination
form and the notification sections.
Agricultural Lending Considerations
System lending institutions have
raised preliminary questions regarding
the operation of the NFIP, particularly
with respect to the cost of insuring
agricultural structures that secure loans.
The FCA notes that questions regarding
the operation and cost structure of the
NFIP should be directed to FEMA as
administrator of the NFIP. However, the
FCA recognizes that System institutions
are entering the NFIP for the first time
and are concerned about their new
administrative responsibilities under
the NFIP as well as the costs of flood
insurance to borrowers. The FCA is not
in the position to respond fully to some
of the concerns that have been raised
regarding the NFIP, but FEMA officials
indicate that the NFIP does differentiate
between non-residential agricultural
buildings and other types of nonresidential buildings for purposes of
pricing flood insurance. Thus a barn,
storage shed or other type of agricultural
structure at a given elevation in a SFHA
might cost less to insure against flood
loss than another type of commercial
structure more susceptible to flood
damage. Where required, borrowers may
insure their non-residential buildings
using one policy with a schedule
separately listing the buildings22 or on
a separate policy for each building. Each
building must be covered by flood
insurance.
Concern has also been expressed
regarding treatment under the NFIP of
improved property securing an
agricultural loan that is located within
a SFHA but on high ground making
flooding unlikely. FEMA officials
indicate that a borrower in such
circumstances could apply to FEMA for
a Letter of Map Amendment, which, if
granted would exclude the building
from the SFHA and eliminate the
requirement for flood insurance on the
structure. S ee 44 CFR part 70. As
previously noted, questions regarding
the operation of the NFIP generally
should be directed to FEMA and NFIP
officials.
III. Regulatory Flexibility Act
Under section 605(b) of the
Regulatory Flexibility Act (RFA) (5
U.S.C. 605(b)), the initial regulatory
flexibility analysis otherwise required
under section 603 of the RFA (5 U.S.C.
603) is not required if the head of the
agency certifies that the rule will not
22 FEM A also perm its use o f sch ed u les to list
m u ltip le stru ctu res for purposes o f th e standard
flood hazard d eterm ination form . See 6 0 FR 3 5 276,
3 5 2 8 0 (July 6, 1 9 9 5 ): 4 4 CFR part 6 5 , App. A.

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
have a significant economic impact on
a substantial number of small entities
and the agency publishes such
certification and a succinct statement
explaining the reasons for such
certification in the Federal Register
along with its general notice of
proposed rulemaking.
Pursuant to section 605(b) of the RFA,
the OCC, Board, FDIC, OTS, and NCUA
hereby certify that this proposed rule
will not have a significant economic
impact on a substantial number of small
entities. The agencies expect that this
proposal will not: (1) Have significant
secondary or incidental effects on a
substantial number of small entities, or
(2) create any additional burden on
small entities. Moreover, this proposal
is required by the Reform Act.
Accordingly, a regulatory flexibility
analysis is not required.
As a general matter, the proposed rule
does not impose standards that are in
excess of industry standards with
respect to flood insurance, as those
standards are reflected in the
underwriting standards for Fannie Mae
and Freddie Mac. Further, for those
lenders already covered by existing
flood insurance requirements, the
proposed rule does not represent a
significant increase over the burden
imposed under the current rules. For
such lenders, the proposed rules would
increase burden above that imposed
under the current rules in the following
respects: (1) Where the lender escrows
other tax and insurance payments,
premiums for required flood insurance
must be escrowed as well; (2) the
content of the notices currently
provided to borrowers is modified; and
(3) notice to FEMA of the servicer of the
loan on property in a special flood
hazard area is required.23 Each of these
additions to the current rules is required
by the Reform Act.
IV. Paperwork Reduction Act of 1995
The OCC, FDIC, OTS, and NCUA
invite comment on:
(1) Whether the proposed collection
of information contained in this notice
of proposed rulemaking is necessary for
the proper performance of each agency’s
functions, including whether the
information has practical utility;
(2) The accuracy of each agency’s
estimate of the burden of the proposed
information collection;
23 T h e provision co n cern in g forced placem en t o f
flood in su ran ce is self-im p lem en tin g and is
in clu d ed in the proposed ru les only to ensure that
len d ers are aware of the authority and requirem ents
o f that provision. Inclu ding th e prov ision in the
proposed rule does not im pose any add itional
bu rden on lenders.

(3) Ways to enhance the quality,
utility, and clarity of the information to
be collected; and
(4) Ways to minimize the burden of
the information collection on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Respondents/recordkeepers are not
required to respond to this collection of
information unless it displays a
currently valid OMB control number.
OCC: The collection of information
requirements contained in this notice of
proposed rulemaking have been
submitted to the Office of Management
and Budget for review in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on
the collections of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(1557), Washington, DC 20503, with
copies to the Legislative and Regulatory
Activities Division (1557), Office of the
Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
The collection of information
requirements in this proposed rule are
found in 12 CFR 22.6, 22.7, 22.9, and
22.10. This information is required to
evidence compliance with the
requirements of the National Flood
Insurance Program with respect to
lenders (national banks) and borrowers
(anyone who applies for a loan secured
by improved real property or a mobile
home which may be located in a special
flood hazard area). The likely
respondents/recordkeepers are national
banks.
Estimated average annual burden hours per
respondent/recordkeeper: 26 hours.
Estimated number of respondents and/or
recordkeepers: 3,000.
Estimated total annual reporting and
recordkeeping burden: 78,000 hours.
Start-up costs to respondents: None.
Records are to be maintained for the period
of time respondent/recordkeeper owns the
loan.
Board: In accordance with section
3506 of the Paperwork Reduction Act of
1995 (44 U.S.C. Ch. 35; s e e also 5 CFR
1320 Appendix A Item 1), the Board
reviewed the proposed rule under the
authority delegated to the Board by the
Office of Management and Budget.
Comments on the collections of
information should be sent to the Office
of Management and Budget, Paperwork
Reduction Project (7100-0280),
Washington, DC 20503, with copies of
such comments to be sent to Mary M.
McLaughlin, Federal Reserve Board
Clearance Officer, Division of Research
and Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.

53971

The collection of information
requirements in this proposed
regulation will be included in 12 CFR
208.23. This information is required to
evidence compliance with the
requirements of the National Flood
Insurance Program with respect to
lenders (state chartered member banks)
and borrowers (anyone who applies for
a loan secured by improved real
property or a mobile home which may
be located in a special flood hazard
area). The respondents/recordkeepers
are for-profit financial institutions,
including small businesses.
Respondent/recordkeepers are not
required to respond to this collection of
information unless it displays a
currently valid OMB control number.
The OMB control number is 7100-0280.
It is estimated that there will be 975
respondent/recordkeepers and a total of
25,977 hours of annual hour paperwork
burden. The estimated annual hour
paperwork burden per respondent/
recordkeeper is 26.6 hours, 1 hour for
recordkeeping and, when the property is
located in a special flood hazard area, a
total of 25.6 hours for: (a) Notifying the
borrower and the servicer; (b) notifying
the Director of the initial servicer; (c) if
necessary, notifying the Director when
the loan servicer has changed; and (d)
if necessary, notifying the borrower
regarding forced placement. Banks
likely will add the required records to
their existing usual and customary loan
documentation. Thus there is estimated
to be no significant annual cost burden
over the annual hour burden.
Additionally, the Board estimates that
there is no associated capital or start up
cost. Based on an hourly cost of $20, the
annual cost to the public is estimated to
be $519,540.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Board, no issue of confidentiality under
the Freedom of Information Act arises.
Comments are invited on: (a) Whether
the proposed collection of information
is necessary for the proper performance
of the Board’s functions, including
whether the information has practical
utility; (b) the accuracy of the Board’s
estimate of the burden of the proposed
information collection, including the
cost of compliance; (c) ways to enhance
the quality, utility, and clarity of the
information to be collected; and (d)
ways to minimize the burden of
information collection on respondents,
including through the use of automated
collection techniques or other forms of
information technology.
FDIC: The collections of information
contained in this notice of proposed
rulemaking have been submitted to the

53972

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the
collections of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(3604-0092), Washington, DC 20503,
with copies of such comments to be sent
to Steven F. Hanft, Office of the
Executive Secretary, Room F—
453,
Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC
20429.
The collections of information
requirements in this proposed
regulation are found in 12 CFR 339.6,
339.7, 339.9, and 339.10. This
information is required to evidence
compliance with the requirements of the
National Flood Insurance Program with
respect to lenders (state chartered
nonmember banks) and.borrowers
(anyone who applies for a loan secured
by improved real estate or a mobile
home which may be located in a special
flood hazard area).
The likely respondents/recordkeepers
are insured nonmember banks and their
subsidiaries.
Estimated number of respondents/
recordkeepers: 6,250.
Estimated average annual burden hours per
respondent/recordkeeper: 26 hours.
Estimated total annual reporting and
recordkeeping burden: 162,500 hours.
Start-up costs to respondents: None.
Records are to be maintained for the period
of time respondent/recordkeeper owns the
loan.
OTS: The reporting requirements
contained in this notice of proposed
rulemaking have been submitted to the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the
collections of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(1550), Washington, DC 20503, with
copies to the OTS, 1700 G Street, NW.,
Washington, DC 20552.
The recordkeeping requirements in
this notice of proposed rulemaking are,
found in 12 CFR 572.6, 572.7, 572.9,
and 572.10. The recordkeeping
requirements set forth in this notice of
proposed rulemaking are needed by the
OTS in order to supervise savings
associations and develop regulatory
policy. The likely recordkeepers are
OTS-regulated savings associations.
Estimated number of respondents and/or
recordkeepers: 1,500.
Estimated average annual burden hours per
recordkeeper: 26 hours.
Estimated total annual reporting and
recordkeeping burden: 39,000 hours.

Start-up costs to respondents: None.
Records are to be maintained for the period
of time respondent/recordkeeper owns the
loan.
NCUA: The collection of information
requirements contained in this notice of
proposed rulemaking will be submitted
to the Office of Management and Budget
(OMB) for review under the Paperwork
Reduction Act. Written comments on
the collection of information should be
forwarded directly to the OMB Desk
Officer indicated below at the following
address: OMB Reports Management
Branch, New Executive Office Building,
Room 10202, Washington, DC 20503.
Attn: Milo Sunderhauf. NCUA will
publish a notice in the Federal Register
once OMB action is taken on the
submitted request.
The collection of information
requirements'in this proposed
regulation are found in 12 CFR 760.6,
760.7, 760.9 and 760.10. This
information is required to evidence
compliance with the requirements of the
National Flood Insurance Program with
respect to lenders (Federally insured
credit unions) and borrowers (members
that apply for a loan secured by
improved real estate or a mobile home
which may be located in a special flood
hazard area). The likely recordkeepers
are Federally insured credit unions.
Estimated number of respondents and/or
recordkeepers: 700.
Estimated average annual burden hours per
respondent/recordkeeper: 26 hours.
Estimated total annual reporting and
recordkeeping burden: 16,325 hours.
Start-up costs to respondents: None.
Records are to be maintained for the period
of time respondent/recordkeeper owns the
loan.
V. Executive Order 12866
OCC and OTS: The OCC and the OTS
have determined that this proposed rule
is not a significant regulatory action as
defined in Executive Order 12866.
VI. Executive Order 12612
NCUA: This proposed rule, like the
current 12 CFR part 760 it would
replace, will apply to all Federally
insured credit unions. The NCUA
Board, pursuant to Executive Order
12612, has determined, however, that
this proposed rule will not have a
substantial direct effect on the States, on
the relationship between the national
government and the States, or on the
distribution of power and
responsibilities among various levels of
government. Further, this proposed rule
will not preempt provisions of State law
or regulations.

VII. Unfunded Mandates Reform Act of
1995
OCC and OTS: Section 202 of the
Unfunded Mandates Reform Act of
1995, Pub. L. 104-4, 109 Stat. 48 (1995)
(Unfunded Mandates Act), requires that
covered agencies prepare a budgetary
impact statement before promulgating a
rule that includes any Federal mandate
that may result in the expenditure by
State, local, and tribal governments, in
the aggregate, or by the private sector, of
S100 million or more in any one year.
If a budgetary impact statement is
required, section 205 of the Unfunded
Mandates Act also requires covered
agencies to identify and consider a
reasonable number of regulatory
alternatives before promulgating a rule.
As discussed in the preamble, the
proposed rule revises current OCC and
OTS flood insurance regulations as
prescribed by Title V of the Riegle
Community Development and
Regulatory Improvement Act of 1994,
Pub. L. 103-325, Title V, 108 Stat. 2160
(1994) (Reform Act). The Reform Act
specifically requires six agencies,
including the OCC and OTS, to
implement certain of the Reform Act’s
amendments through regulations.
Therefore, to the extent that the
proposed rules impose new Federal
requirements, such requirements are
statutorily mandated by the Reform Act.
Nevertheless, the OCC and OTS have
determined that the proposed rules will
not result in expenditures by State,
local, and tribal governments, or by the
private sector, of more than $100
million in any one year. Accordingly,
the OCC and OTS have not prepared a
budgetary impact statement or
specifically addressed the regulatory
alternatives considered.
List of Subjects
12 CFR Part 22
Flood insurance, Mortgages, National
banks, Reporting and recordkeeping
requirements.
12 CFR Part 208
Accounting, Agriculture, Banks,
banking, Confidential business
information, Crime, Currency, Federal
Reserve System, Flood insurance,
Mortgages, Reporting and recordkeeping
requirements, Securities. ,
12 CFR Part 339
Flood insurance, Reporting and
recordkeeping requirements.
12 CFR Part 563
Accounting, Advertising, Crime,
Currency, Flood insurance, Investments,
Reporting and recordkeeping

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
requirements, Savings associations,
Securities, Surety bonds.

apply to loans secured by buildings or
mobile homes, regardless of location.

12 CFR Part 572

§ 22.2 Definitions.

Flood insurance, Reporting and
recordkeeping requirements, Savings
associations.

(a) A ct means the National Flood
Insurance Act of 1968, as amended (42
U.S.C. 4001-4129).
(b) B an k means a national bank or a
bank located in the District of Columbia
and subject to the supervision of the
Comptroller of the Currency.
(c) Building means a walled and
roofed structure, other than a gas or
liquid storage tank, that is principally
above ground and affixed to a
permanent site, and a walled and roofed
structure while in the course of
construction, alteration, or repair.
(d) Com m unity means a State or a
political subdivision of a State that has
zoning and building code jurisdiction
over a particular area having special
flood hazards.
(e) D esignated loan means a loan
secured by a building or mobile home
that is located or to be located in a
special flood hazard area in which flood
insurance is available under the Act.
(f) D irector means the Director of the
Federal Emergency Management
Agency.
(g) M obile h o m e means a structure,
transportable in one or more sections,
that is built on a permanent chassis and
designed for use with or without a
permanent foundation when attached to
the required utilities. The term m o b ile
h o m e does not include a recreational
vehicle. For purposes of this part, the
term m o bile h o m e means a mobile home
on a permanent foundation.
(h) NFIP means the National Flood
Insurance Program authorized under the
Act.
(i) R esiden tial im p rov ed r ea l estate
means real estate upon which a home or
other residential building is located or
to be located.
(j) Servicer means the person
responsible for:
(1) Receiving any scheduled, periodic
payments from a borrower under the*
terms of a loan, including amounts for
taxes, insurance premiums, and other
charges with respect to the property
securing the loan; and
(2) Making payments of principal and
interest and any other payments from
the amounts received from the borrower
as may be required under the terms of
the loan.
(k) S p ecia l flo o d h az ard area means
the land in the flood plain within a
community having at least a one percent
chance of flooding in any given year, as
designated by the Director.

12 CFR Part 614
Agriculture, Banks, banking, Flood
insurance, Foreign trade, Reporting and
recordkeeping requirements, Rural
areas.
12 CFR Part 760
Credit unions, Mortgages, Flood
insurance, Reporting and recordkeeping
requirements.
Office of the Comptroller of the
Currency
12 CFR CHAPTER I

Authority and Issuance
For the reasons set forth in the joint
preamble, chapter I of title 12 of the
Code of Federal Regulations is proposed
to be revised to read as follows:
PART 22—LOANS IN AREAS HAVING
SPECIAL FLOOD HAZARDS
Sec.
22.1 Authority, purpose, and scope.
22.2 Definitions.
22.3 Requirement to purchase flood
insurance where available.
22.4 Exemptions.
22.5 Escrow requirement.
22.6 Required use of standard flood hazard
determination form.
22.7 Forced placement of flood insurance.
22.8 Determination fees.
22.9 Notice of special flood hazards and
availability of Federal disaster relief
assistance.
22.10 Notice of servicer’s identity.
Appendix A to Part 22—Sample Form of
Notice of Special Flood Hazards and
Availability of Federal Disaster Relief
Assistance
Authority: 12 U.S.C. 93a; 42 U.S.C. 4012a,
4104a. 4104b, 4106, and 4128.
§ 22.1

Authority, purpose, and scope.

(a) Authority. This part is issued
pursuant to 12 U.S.C. 93a and 42 U.S.C.
4012a, 4104a, 4104b, 4106, and 4128.
(b) Purpose. The purpose of this part
is to implement the requirements of the
National Flood Insurance Act of 1968
and the Flood Disaster Protection Act of
1973, as amended (42 U.S.C. 4 0 0 1 4129).
(c) S cope. This part, except for §§ 22.6
and 22.8, applies to loans secured by
buildings or mobile homes located or to
be located in areas determined by the
Director of the Federal Emergency
Management Agency to have special
flood hazards. Sections 22.6 and 22.8

53973

§ 22.3 Requirement to purchase flood
insurance where available.

A bank shall not make, increase,
extend, or renew any designated loan
unless the building or mobile home and
any personal property securing the loan
is covered by flood insurance for the
term of the loan. The amount of
insurance must be at least equal to the
lesser of the outstanding principal
balance of the designated loan or the
maximum limit of coverage available for
the particular type of property under the
Act.
§ 22.4

Exemptions.

The flood insurance requirement
prescribed by § 22.3 does not apply with
respect to:
(a) Any State-owned property covered
under a policy of self-insurance
satisfactory to the Director, who
publishes and periodically revises the
list of States falling within this
exemption; or
(b) Property securing any loan with an
original principal balance of $5,000 or
less and a repayment term of one year
or less.
§22.5

Escrow requirement.

If a bank requires the escrow of taxes,
insurance premiums, fees, or any other
charges for a loan secured by residential
improved real estate or a mobile home
that is made, increased, extended, or
renewed after [effective date of final
regulation], then the bank shall also
require the escrow of all premiums and
fees for any flood insurance required
under § 22.3. The bank, or a servicer
acting on behalf of the bank, shall
deposit the flood insurance premiums
on behalf of the borrower in an escrow
account. Depending upon the type of
loan, such escrow account may be
subject to escrow'requirements adopted
pursuant to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12
U.S.C. 2609), which generally limits the
amount that may be maintained in
escrow accounts for certain types of
loans and requires escrow account
statements for those accounts. Upon
receipt of a notice from the Director or
other provider of flood insurance that
premiums are due, the bank or its
servicer shall pay the amount owed to
the insurance provider from the escrow
account.
§ 22.6 Required use of standard flood
hazard determination form.

(a) Use o f form . A bank shall use the
standard flood hazard determination
form developed by the Director (as set
forth in Appendix A of 44 CFR part 65)
when determining whether the building
or mobile home offered as collateral

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Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

security for a loan is or will be located
in a special flood hazard area in which
flood insurance is available under the
Act. The standard flood hazard
determination form may be used in a
printed, computerized, or electronic
manner.
(b) Retention o f form . A bank shall
retain a copy of the completed standard
flood hazard determination form, in
either hard copy or electronic form, for
the period of time the bank owns the
loan.

(f)
Use o f p rescrib ed form o f notice. A
securing the loan is located in a special
bank may comply with the notice
flood hazard area; or
(4) Results in the purchase of flood
requirements of this section by
providing written notice to a borrower
insurance coverage under § 22.7.
(c)
P urchaser or transferee fe e . The feeand to the servicer containing the
may be charged to the purchaser or
language presented in appendix A to
transferee of a loan in the case of the
this part not less than ten days before
sale or transfer of the loan.
the completion of the transaction (or not
later than the bank’s commitment if the
§ 22.9 Notice of special flood hazards and
period between the commitment and the
availability of Federal disaster relief
completion of the transaction is less
assistance.
than ten days).
(a) N otice requirem ent. When a bank

makes, increases, extends, or renews a
§22.10 Notice of servicer’s identity.
loan secured by a building or a mobile
(a) N otice requirem ent. When a bank
home located or to be located in a
makes, increases, extends, renews, sells,
special flood hazard area, the bank shall or transfers a loan secured by a building
If a bank, or a servicer acting on
mail or deliver a written notice to the
or mobile home located or to be located
behalf of the bank, determines, at the
borrower and to the servicer in all cases
in a special flood hazard area, the bank
time of origination or at any time during
whether or not flood insurance is
shall notify the Director (or the
the term of a designated loan, that the
available under the Act for the collateral Director’s designee) in writing of the
building or mobile home and any
securing the loan.
identity of the servicer of the loan.
personal property securing the
(b) Contents o f notice. The written
(b) T ransfer o f servicing rights. The
designated loan is not covered by flood
notice must include the following
bank shall notify the Director (or the
insurance or is covered by flood
information:
Director’s designee) of any change in the
insurance in an amount less than the
(1) A warning, in a form approved by
servicer of a loan described in paragraph
amount required under § 22.3, then the
the Director, that the building or the
(a) of this section within 60 days after
bank or its servicer shall notify the
mobile home is or will be located in a
the effective date of the change. Upon
borrower that the borrower should
special flood hazard area;
any change in the servicing of a loan
obtain flood insurance, at the borrower’s
(2) A description of the flood
described in paragraph (a) of this
expense, in an amount at least equal to
insurance purchase requirements set
section, the duty to provide notice
the amount required under § 22.3, for
forth in section 102(b) of the Flood
under this paragraph (b) shall transfer to
the term of the loan. If the borrower fails Disaster Protection Act of 1973, as
the transferee servicer.
to obtain flood insurance within 45 days amended (42 U.S.C. 4012a(b));
after notification, then the bank or its
(3) A statement, where applicable,
Appendix A to Part 22—Sample Form
servicer shall purchase insurance on the that flood insurance coverage is
of Notice of Special Flood Hazards and
borrower’s behalf. The bank or its
available under the NFIP and may also
Availability of Federal Disaster Relief
servicer may charge the borrower for the be available from private insurers; and
Assistance
cost of premiums and fees incurred in
(4) A statement whether Federal
We are giving you this notice to inform you
purchasing the insurance.
disaster relief assistance may be
that:
available in the event of damage to the
_____ The building securing the loan for
§ 22.8 Determination fees.
building or mobile home caused by
which you have applied is or will be located
(a) G eneral. Notwithstanding any
flooding in a Federally-declared
in an area with special flood hazards.
Federal or State law other than the
_____ The mobile home securing the loan
disaster.
Flood Disaster Protection Act of 1973, as
for which you have applied is or will be
(c) Timing o f notice. The bank shall
located in an area with special flood hazards.
amended (42 U.S.C. 4001—
4129), any
provide the notice required by
The area has been identified by the
bank, or a servicer acting on behalf of
paragraph (a) of this section to the
Director of the Federal Emergency
the bank, may charge a reasonable fee
borrower and the servicer within a
Management Agency (FEMA) as a special
for determining whether the building or reasonable time before the completion
flood hazard area using FEMA’s Flood
mobile home securing the loan is
of the transaction.
Insurance Bate Map or the Flood Hazard
(d) R ecord o f receipt. The bank shall
located or will be located in a special
Boundary Map for the following community:
retain a record of the receipt of the
flood hazard area.
___________. This area has at least a one
notices by the borrower and the servicer percent (1%) chance of being flooded in any
(b) B orrow er fe e . The determination
for the period of time the bank owns the given year. The risk grows each year. For
fee may be charged to the borrower if
example, during the life of a 30-year
loan.
the determination:
(s) A lternate m eth od o f notice. Instead mortgage loan, the risk of a flood in a special
(1) Is made in connection with a
flood hazard area is at least 26%.
of providing the notice to the borrower
making, increasing, extending, or
Federal law allows a lender and borrower
required by paragraph (a) of this section, jointly to request the Director of FEMA to
renewing of the loan that is initiated by
a bank may obtain satisfactory written
the borrower;
review the determination of whether the
assurance from the seller or lessor that,
(2) Reflects the Director’s revision or
property securing the loan is located in a
within a reasonable time before the
special flood hazard area. If you would like
updating of floodplain areas or floodto make such a request, please contact us for
completion of the sale or lease
risk zones;
further information.
transaction, the seller or lessor has
(3) Reflects the Director’s publication
_____ The community in which the
notified the borrower that the building
of a notice or compendium that:
property securing the loan is located
or mobile home is or will be located in
(i) Affects the area in which the
participates in the National Flood Insurance
a special flood hazard area. The bank
building or mobile home securing the
Program (NFIP). Federal law will not allow
shall retain a record of the written
loan is located; or
us to make you the loan that you have
assurance from the seller or lessor for
(ii) By determination of the Director,
applied for if you do not purchase flood
the period of time the bank owns the
insurance. The flood insurance must be
may reasonably require a determination
maintained for the life of the loan.
loan.
whether the building or mobile home
§ 22.7 Forced placement of flood
insurance.

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
• Flood insurance coverage under the
NFIP may be purchased through an insurance
agent who will obtain the policy either
directly through the NFIP or through an
insurance company that participates in the
NFIP. Flood insurance also may be available
from private insurers that do not participate
in the NFIP.
• At a minimum, flood insurance
purchased must cover the lesser of:
(1) The outstanding principal amount of
the loan; or
(2) The maximum amount of coverage
allowed for the type of property under the
NFIP.
• Federal disaster relief assistance (usually
in the form of a low-interest loan) may be
available for damages incurred in excess of
your flood insurance if your community’s
participation in the NFIP is in accordance
with NFIP requirements.
_____ Flood insurance coverage under the
NFIP is not available for the property
securing the loan because the community in
which the property is located does not
participate in the NFIP. In addition, if the
non-participating community has been
identified for at least one year as containing
a special flood hazard area, properties
located in the community will not be eligible
for Federal disaster relief assistance in the
event of a Federally-declared flood disaster.
Dated: September 11,1995.
Eugene A. Ludwig,
Comptroller o f the Currency.
Federal Reserve System
12 CFR CHAPTER II

Authority and Issuance
For the reasons set forth in the joint
preamble, part 208 of chapter II of title
12 of the Code of Federal Regulations is
proposed to be amended as set forth
below:
PART 208— MEMBERSHIP OF STATE
BANKING INSTITUTIONS IN THE
FEDERAL RESERVE SYSTEM
(REGULATION H)
1. The authority citation for part 208
continues to read as follows:
Authority: 12 U.S.C. 36, 248(a), 248(c),
321-338a, 371d, 461, 481-486, 601, 611,
1814, 1823(j), 1828(o), 1831o, 1831p-l, 3105,
3310, 3331-3351, and 3906-3909; 15 U.S.C.
78b, 781(b), 781(g), 781(i), 78o-^(c)(5), 78q,
78q— and 78w; 31 U.S.C. 5318; 42 U.S.C.
1,
4012a, 4104a, 4104b, 4106, and 4128.
§208.8

[Amended]

2. In § 208.8, paragraph (e) is removed
and reserved, and appendix A—Sample
Notices is removed.
3. A new § 208.23 is added at the end
of subpart A to read as follows:
§ 208.23 Loans in areas having special
flood hazards.

(a) P u rpose an d sco p e— (1) Purpose.
The purpose of this section is to
implement the requirements of the

National Flood Insun nee Act of 1968
and the Flood Disaster Protection Act of
1973, as amended (42 U.S.C. 4 0 0 1 4129).
(2) S cop e. This section, except for
paragraphs (f) and (h) of this section,
applies to loans secured by buildings or
mobile homes located or to be located
in areas determined by the Director of
the Federal Emergency Management
Agency to have special flood hazards.
Paragraphs (f) and (h) of this section
apply to loans secured by buildings or
mobile homes, regardless of location.
(b) D efinitions. (1) A ct means the
National Flood Insurance Act of 1968,
as amended (42 U.S.C. 4001—
4129).
(2) Building means a walled and
roofed structure, other than a gas or
liquid storage tank, that is principally
above ground and affixed to a
permanent site, and a walled and roofed
structure while in the course of
construction, alteration, or repair.
(3) Com m unity means a State or a
political subdivision of a State that has
zoning and building code jurisdiction
over a particular area having special
flood hazards.
(4) D esignated loan means a loan
secured by a building or mobile home
that is located or to be located in a
special flood hazard area in which flood
insurance is available under the Act.
(5) D irector means the Director of the
Federal Emergency Management
Agency.
(6) M obile h o m e means a structure,
transportable in one or more sections,
that is built on a permanent chassis and
designed for use with or without a
permanent foundation when attached to
the required utilities. The term m o bile
h o m e does not include a recreational
vehicle. For purposes of this section, the
term m o b ile h o m e means a mobile home
on a permanent foundation.
(7) NFIP means the National Flood
Insurance Program authorized under the
Act.
(8) R esid en tial im p rov ed rea l estate
means real estate upon which a home or
other residential building is located or
to be located.
(9) S ervicer means the person
responsible for:
(i) Receiving any scheduled, periodic
payments from a borrower under the
terms of a loan, including amounts for
taxes, insurance premiums, and other
charges with respect to the property
securing the loan; and
(ii) Making payments of principal and
interest and any other payments from
the amounts received from the borrower
as may be required under the terms of
the loan.
(10) S p ecia l flo o d h az ard area means
the land in the flood plain within a

53975

community having at least a one percent
chance of flooding in any given year, as
designated by the Director.
(c) R equ irem ent to p u rch ase flo o d
in su ran ce w here av ailable. A state
member bank shall not make, increase,
extend, or renew any designated loan
unless the building or mobile home and
any personal property securing the loan
is covered by flood insurance for the
term of the loan. The amount of
insurance must be at least equal to the
lesser of the outstanding principal
balance of the designated loan or the
maximum limit of coverage available for
the particular type of property under the
Act.
(d) Exem ptions. The flood insurance
requirement prescribed by paragraph (c)
of this section does not apply with
respect to:
(1) Any State-owned property covered
under a policy of self-insurance
satisfactory to the Director, who
publishes and periodically revises the
list of States falling within this
exemption; or
(2) Property securing any loan with an
original principal balance of $5,000 or
less and a repayment term of one year
or less.
(e) E scrow requirem ent. If a state
member bank requires the escrow of
taxes, insurance premiums, fees, or any
other charges for a loan secured by
residential improved real estate or a
mobile home that is made, increased,
extended, or renewed after [effective
date of final regulation], then the state
member bank shall also require the
escrow of all premiums and fees for any
flood insurance required under
paragraph (c) of this section. The state
member bank, or a servicer acting on
behalf of the bank, shall deposit the
flood insurance premiums on behalf of
the borrower in an escrow account.
Depending upon the type of loan, such
escrow account may be subject to
escrow requirements adopted pursuant
to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12
U.S.C. 2609), which generally limits the
amount that may be maintained in
escrow accounts for certain types of
loans and requires escrow account
statements for those accounts. Upon
receipt of a notice from the Director or
other provider of flood insurance that
premiums are due, the state member
bank or its servicer shall pay the amount
owed to the insurance provider from the
escrow account.
(f) R equ ired use o f stan dard flo o d
h az ard determ ination form — (1) Use o f
form . A state member bank shall use the
standard flood hazard determination
form developed by the Director (as set
forth in Appendix A of 44 CFR part 65)

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Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

when determining whether the building
or mobile home offered as collateral
security for a loan is or will be located
in a special flood hazard area in which
flood insurance is available under the
Act. The standard flood hazard
determination form may be used in a
printed, computerized, or electronic
manner.
(2) Retention o f form . A state member
bank shall retain a copy of the
completed standard flood hazard
determination form, in either hard copy
or electronic form, for the period of time
the bank owns the loan.
(g) F orced p la cem en t o f flo o d
insurance. If a state member bank, or a
servicer acting on behalf of the bank,
determines, at the time of origination or
at any time during the term of a
designated loan, that the building or
mobile home and any personal property
securing the designated loan is not
covered by flood insurance or is covered
by flood insurance in an amount less
than the amount required under
paragraph (c) of this section, then the
bank or its servicer shall notify the
borrower that the borrower should
obtain flood insurance, at the borrower’s
expense, in an amount at least equal to
the amount required under paragraph
(c) of this section, for the term of the
loan. If the borrower fails to obtain flood
insurance within 45 days after
notification, then the state member bank
or its servicer shall purchase insurance
on the borrower’s behalf. The state
member bank or its servicer may charge
the borrower for the cost of premiums
and fees incurred in purchasing the
insurance..
(h) D eterm ination fe e s —(1) General.
Notwithstanding any Federal or State
law other than the Flood Disaster
Protection Act of 1973, as amended (42
U.S.C. 4001—
4129), any state member
bank, or a servicer acting on behalf of
the bank, may charge a reasonable fee
for determining whether the building or
mobile home securing the loan is
located or will be located in a special
flood hazard area.
(2) B orrow er fe e . The determination
fee may be charged to the borrower if
the determination:
(i) Is made in connection with a
making, increasing, extending, or
renewing of the loan that is initiated by
the borrower;
(ii) Reflects the Director’s revision or
updating of floodplain areas or floodrisk zones;
(iii) Reflects the Director’s publication
of a notice or compendium that:
(A) Affects the area in which the
building or mobile home securing the
loan is located, or

(B) By determination of the Director,
may reasonably require a determination
whether the building or mobile home
securing the loan is located in a special
flood hazard area; or
(iv) Results in the purchase of flood
insurance coverage under paragraph (g)
of this section.
(3) P urchaser or transferee fe e . The
fee may be charged to the purchaser or
transferee of a loan in the case of the
sale or transfer of the loan.
(1) N otice o f sp ec ia l flo o d h azard s an d
av ailability o f F ed eral d isaster r e lie f
assistan ce— (1) N otice requirem ent.
When a state member bank makes,
increases, extends, or renews a loan
secured by a building or mobile home
located or to be located in a special
flood hazard area, the bank shall mail or
deliver a written notice to the borrower
and to the servicer in all cases whether
or not flood insurance is available under
the Act for the collateral securing the
loan.
(2) Contents o f notice. The written
notice must include the following
information:
(i) A warning, in a form approved by
the Director, that the building or the
mobile home is or will be located in a
special flood hazard area;
(ii) A description of the flood
insurance purchase requirements set
forth in section 102(b) of the Flood
Disaster Protection Act of 1973, as
amended (42 U.S.C. 4012a(b));
(iii) A statement, where applicable,
that flood insurance coverage is
available under the NFIP and may also
be available from private insurers; and
(iv) A statement whether Federal
disaster relief assistance may be
available in the event of damage to the
building or mobile home caused by
flooding in a Federally-declared
disaster.
(3) Timing o f notice. The state
member bank shall provide the notice
required by paragraph (i)(l) of this
section to the borrower and the servicer
within a reasonable time before the
completion of the transaction.
(4) R ecord o f receipt. The state
member bank shall retain a record of the
receipt of the notices by the borrower
and the servicer for the period of time
the bank owns the loan.
/(5) A lternate m eth od o f notice. ■
Instead of providing the notice to the
borrower required by paragraph (i)(l) of
this section, a state member bank may
obtain satisfactory written assurance
from the seller or lessor that, within a
reasonable time before the completion
of the sale or lease transaction, the seller
or lessor has notified the borrower that
the building or mobile home is or will
be located in a special flood hazard area.

The state member bank shall retain a
record of the written assurance from the
seller or lessor for the period of time the
bank owns the loan.
(6 ) Use o f p rescrib ed form o f notice.
A state member bank may comply with
the notice requirements of this
paragraph (i) by providing written
notice to a borrower and to the servicer
containing the language presented in
appendix A to this section not less than
ten days before the completion of the
transaction (or not later than the bank’s
commitment if the period between the
commitment and the completion of the
transaction is less than ten days).
(j) N otice o f serv icer’s identity — (1)
N otice requirem ent. When a state
member bank makes, increases, extends,
renews, sells, or transfers a loan secured
by a building or mobile home located or
to be located in a special flood hazard
area, the bank shall notify the Director
(or the Director’s designee) in writing of
the identity of the servicer of the loan.
(2) T ransfer o f servicing rights. The
state member bank shall notify the
Director (or the Director’s designee) of
any change in the servicer of a loan
described in paragraph (j)(l) of this
section within 60 days after the effective
date of the change. Upon any change in
the servicing of a loan described in
paragraph (j)(l) of this section, the duty
to provide notice under this paragraph
(j)(2) shall transfer to the transferee
servicer.
Appendix A to § 208.23— Sample Form
of Notice of Special Flood Hazards and
Availability of Federal Disaster Relief
Assistance
We are giving you this notice to inform you
that:
_____ The building securing the loan for
which you have applied is or will be located
in an area with special flood hazards.
_____ The mobile home securing the loan
for which you have applied is or will be
located in an area with special flood hazards.
The area has been identified by the
Director of the Federal Emergency
Management Agency (FEMA) as a special
flood hazard area using FEMA's Flood
Insurance Rate Map or the Flood Hazard
Boundary Map for the following
community:___________. This area has at
least a one percent (1%) chance of being
flooded in any given year. The risk grows
each year. For example, during the life of a
30-year mortgage loan, the risk of a flood in
a special flood hazard area is at least 26%.
Federal law allows a lender and borrower
jointly to request the Director of FEMA to
review the determination of whether the
property securing the loan is located in a
special flood hazard area. If you would like
to make such a request, please contact us for
further information.
_____ The community in which the
property securing the ioan is located

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

53977

participates in the National Flood Insurance
Appendix A to Part 339—Sample Form of
(i)
R esiden tial im p rov ed r ea l estate
Program (NFIP). Federal law will not allow
Notice of Special Flood Hazards and
means real estate upon which a home or
us to make you the loan that you have
Availability of Federal Disaster Relief
other residential building is located or
Assistance
applied for if you do not purchase flood
to be located.
insurance. The flood insurance must be
Authority: 42 U.S.C. 4012a, 4104a, 4104b,
(j) Servicer means the person
maintained for the life of the loan.
4106, and 4128.
responsible for:
• Flood insurance coverage under the
(1) Receiving anv scheduled, periodic
NFIP may be purchased through an insurance § 339.1 Authority, purpose, and scope.
payments from a borrower under the
(a) Authority. This part is issued
agent who will obtain the policy either
terms of a loan, including amounts for
directly through the NFIP or through an
pursuant to 42 U.S.C. 4012a, 4104a,
taxes, insurance premiums, and other
insurance company that participates in the
4104b, 4106, and 4128.
charges with respect to the property
NFIP. Flood insurance also may be available
(b) Purpose. The purpose of this part
securing the loan; and
from private insurers that do not participate
is to implement the requirements of the
(2) Making payments of principal and
in the NFIP.
National Flood Insurance Act of 1968
• At a minimum, flood insurance
and the Flood Disaster Protection Act of interest and any other payments from
the amounts received from the borrower
purchased must cover the lesser of.
1973, as amended (42 U.S.C. 4 0 0 1 - m
(1) The outstanding principal amount of
as may be required under the terms of
4129).
the loan; or
the loan.
(c) S cop e. This part, except for
(2) The maximum amount of coverage
(k) S p ecia l flo o d h az ard area means
§§ 339.6 and 339.8, applies to loans
allowed for the type of property under the
the land in the flood plain within a
secured by buildings or mobile homes
NFIP.
community having at least a one percent
located or to be located in areas
• Federal disaster relief assistance (usually determined by the Director of the
chance of flooding in any given year, as
in the form of a low-interest loan) may be
Federal Emergency Management Agency designated by the Director.
available for damages incurred in excess of
to have special flood hazards. Sections
§ 339.3 Requirement to purchase flood
your flood insurance if your community’s
339.6 and 339.8 apply to loans secured
insurance where available.
participation in the NFIP is in accordance
by buildings or mobile homes,
with NFIP requirements.
A bank shall not make, increase,
regardless of location.
’ ____ Flood insurance coverage under the
_
extend, or renew any designated loan
NFIP is not available for the property
§339.2 Definitions.
unless the building or mobile home and
securing the loan because the community in
any personal property securing the loan
(a) A ct means the National Flood
which the property is located does not
is covered by flood insurance for the
Insurance Act of 1968, as amended (42
participate in the NFIP. In addition, if the
term of the loan. The amount of
U.S.C. 4001-4129).
non-participating community has been
insurance must be at least equal to the
(b) B an k means an insured State
identified for at least one year as containing
lesser of the outstanding principal
nonmember bank and an insured State
a special flood hazard area, properties
balance of the designated loan or the
located in the community will not be eligible branch of a foreign bank or any
maximum limit of coverage available for
subsidiary of an insured State
for Federal disaster relief assistance in the
nonmember bank.
the particular type of property under the
event of a Federally-declared flood disaster.
(c) Building means a walled and
Act.
By order of the Board of Governors of the
roofed structure, other than a gas or
Federal Reserve System, October 3, 1995.
§339.4 Exemptions.
liquid storage tank, that is principally
William W. Wiles,
The flood insurance requirement
above ground and affixed to a
Secretary o f the Board.
permanent site, and a walled and roofed prescribed by § 339.3 does not apply
with respect to:
structure while in the course of
Federal Deposit Insurance Corporation
(a) Any State-owned property covered
construction, alteration, or repair.
12 CFR CHAPTER III
under a policy of self-insurance
(d) C om m unity means a State or a
satisfactory to the Director, who
political subdivision of a State that has
Authority and Issuance
publishes and periodically revises the
zoning and building code jurisdiction
list of States falling within this
over a particular area having special
For the reasons set forth in the joint
exemption; or
flood hazards.
preamble, the Board of Directors of the
(e) D esignated loan means a loan
(b) Property securing any loan with an
FDIC proposes to revise part 339 of
original principal balance of $5,000 or
secured by a building or mobile home
chapter III of title 12 of the Code of
that is located or to be located in a
less and a repayment term of one year
Federal Regulations to read as follows:
special flood hazard area in which flood or less.
PART 339— LOANS IN AREAS HAVING insurance is available under the Act.
§ 339.5 Escrow requirement.
(f) D irector means the Director of the
SPECIAL FLOOD HAZARDS
If a bank requires the escrow of taxes,
Federal Emergency Management
Sec.
insurance premiums, fees, or any other
Agency.
339.1 Authority, purpose, and scope.
charges for a loan secured by resid en tial
(g) M obile h o m e means a structure,
339.2 Definitions.
improved real estate or a mobile home
transportable in one or more sections,
339.3 Requirement to purchase flood
that is made, increased, extended, or
that is built on a permanent chassis and
insurance where available.
renewed after [effective date of final
designed for use with or without a
339.4 Exemptions.
permanent foundation when attached to regulation], then the bank shall also
339.5 Escrow requirement.
require the escrow of all premiums and
339.6 Required use of standard flood hazard the required utilities. The term m o b ile
fees for any flood insurance required
h o m e does not include a recreational
determination form.
under § 339.3. The bank, or a servicer
339.7 Forced placement of flood insurance. vehicle. For purposes of this part, the
term m o bile h o m e means a mobile home acting on behalf of the bank, shall
339.8 Determination fees.
deposit the flood insurance premiums
on a permanent foundation.
339.9 Notice of special flood hazards and
(h) NFIP means the National Flood
on behalf of the borrower in an escrow
availability of Federal disaster relief
assistance.
Insurance Program authorized under the account. Depending upon the type of
339.10 Notice of servicer’s identity.
Act.
loan, such escrow account may be

53978

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

paragraph (a) of this section to the
borrower and the servicer within a
reasonable time before the completion
of the transaction.
(d) R ecord o f receipt. The bank shall
retain a record of the receipt of the
notices by the borrower and the servicer
for the period of time the bank owns the
loan.
(e) A lternate m eth od o f notice. Instead
of providing the notice to the borrower
required by paragraph (a) of this section,
a bank may obtain satisfactory written
assurance from the seller or lessor that,
within a reasonable time before the
§ 339.6 Required use of standard flood
completion of the sale or lease
hazard determination form.
transaction, the seller or lessor has
notified the borrower that the building
(a) Use o f form . A bank shall use the
or mobile home is or will be located in
standard flood hazard determination
a special flood hazard area. The bank
form developed by the Director (as set
shall retain a record of the written
forth in Appendix A of 44 CFR part 65)
assurance from the seller or lessor for
when determining whether the building
the period of time the bank owns the
or mobile home offered as collateral
loan.
security for a loan is or will be located
(f) Use o f p rescrib ed form o f notice. A
in a special flood hazard area in which
bank may comply with the notice
flood insurance is available under the
requirements of this section by
Act. The standard flood hazard
providing written notice to a borrower
determination form may be used in a
and to the servicer containing the
printed, computerized, or electronic
language presented in appendix A to
manner.
this part not less than ten days before
(b) R etention o f form . A bank shall
the completion of the transaction (or not
retain a copy of the completed standard
§ 339.9 Notice of special flood hazards and later than the bank’s commitment if the
flood hazard determination form, in
availability of Federal disaster relief
period between the commitment and the
either hard copy or electronic form, for
assistance.
completion of the transaction is less
the period of time the bank owns the
(a) N otice requirem ent. When a bank
than ten days).
loan.
makes, increases, extends, or renews a
§339.10 Notice of servicer’s Identity.
§ 339.7 Forced placement of flood
loan secured by a building or a mobile
(a) N otice requirem ent. When a bank
insurance.
home located or to be located in a
special flood hazard area, the bank shall makes, increases, extends, renews, sells,
If a bank, or a servicer acting on
or transfers a loan secured by a building
mail or deliver a written notice to the
behalf of the bank, determines, at the
or mobile home located or to be located
time of origination or at any time during borrower and to the servicer in all cases
in a special flood hazard area, the bank
whether or not flood insurance is
the term of a designated loan, that the
available under the Act for the collateral shall notify the Director (or the
building or mobile home and any
Director’s designee) in writing of the
securing the loan.
personal property securing the
identity of the serviter of the loan.
(b) Contents o f notice. The written
designated loan is not covered by flood
(b) Transfer o f servicing rights. The
notice must include the following
insurance or is covered by flood
bank shall notify the Director (or the
information:
insurance in an amount less than the
Director’s designee) of any change in the
(1) A warning, in a form approved by
amount required under § 339.3, then the
servicer of a loan described in paragraph
the Director, that the building or the
bank or its servicer shall notify the
(a) of this section within 60 days after
mobile home is or will be located in a
borrower that the borrower should
the effective date of the change. Upon
obtain flood insurance, at the borrower’s special flood hazard area;
any change in the servicing of a loan
(2) A description of the flood
expense, in an amount at least equal to
described in paragraph (a) of this
insurance purchase requirements set
the amount required under § 339.3, for
section, the duty to provide notice
the term of the loan. If the borrower fails forth in section 102(b) of the Flood
under this paragraph (b) shall transfer to
to obtain flood insurance within 45 days Disaster Protection Act of 1973, as
the transferee servicer.
amended (42 U.S.C. 4012a(b));
after notification, then the bank or its
(3) A statement, where applicable,
servicer shall purchase insurance on the
Appendix A to Part 339—Sample Form
that flood insurance coverage is
borrower’s behalf. The bank or its
of Notice of Special Flood Hazards and
servicer may charge the borrower for the available under the NFIP and may also
Availability o f Federal Disaster Relief
be available from private insurers; and
cost of premiums and fees incurred in
Assistance
(4) A statement whether Federal
purchasing the insurance.
We are giving you this notice to inform you
disaster relief assistance may be
that:
§ 339.8 Determination fees.
available in the event of damage to the
_____ The building securing the loan for
building or mobile home caused by
(a) General. Notwithstanding any
which you have applied is or will be located
Federal or State law other than the
flooding in a Federally-declared
in an area with special flood hazards.
•
=
Flood Disaster Protection Act of 1973, as disaster.
_____ The mobile home securing the loan
(c) Timing o f notice. The bank shall
amended (42 U.S.C. 4001-4129), any
for which you have applied is or will be
located in an area with special flood hazards.
provide the notice required by
bank, or a servicer acting on behalf of
subject to escrow requirements adopted
pursuant to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12
U.S.C. 2609) which generally limits the
amount that may be maintained in
escrow accounts for certain types of
loans and requires escrow account
statements for those accounts. Upon
receipt of a notice from the Director or
other provider of flood insurance that
premiums are due, the bank or its
servicer shall pay the amount owed to
the insurance provider from the escrow
account.

the bank, may charge a reasonable fee to
the borrower for determining whether a
building or mobile home securing the
loan is located or will be located in a
special flood hazard area.
(b) B orrow er fe e . The determination
fee may be charged to the borrower if
the determination:
(1) Is made in connection with a
making, increasing, extending, or
renewing of the loan that is initiated by
the borrower,
(2) Reflects the Director’s revision or
updating of floodplain areas or floodrislf zones;
(3) Reflects the Director’s publication
of a notice or compendium that:
(i) Affects the area in which the
building or mobile home securing the
loan is located; or
(ii) By determination of the Director,
may reasonably require a determination
whether the building or mobile home
securing the loan is located in a special
flood hazard area; or
(4) Results in the purchase of flood
insurance coverage under § 339.7.
(c) P u rchaser o r transferee fe e . The fee
may be charged to the purchaser or
transferee of a loan in the case of the
sale or transfer of the loan.

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
The area has been identified by the
Director of the Federal Emergency
Management Agency (FEMA) as a special
flood hazard area using FEMA’s Flood
Insurance Fate Map or the Flood Hazard
Boundary Map for the following community:
This area has at least a one percent (1%)
chance of being flooded in any given year.
The risk grows each year. For example,
during the life of a 30-year mortgage loan, the
risk of a flood in a special flood hazard area
is at least 26%.
Federal law allows a lender and borrower
jointly to request the Director of FEMA to
review the determination of whether the
property securing the loan is located in a
special flood hazard area. If you would like
to make such a request, please contact us for
further information.
_____ The community in which the
property securing the loan is located
participates in the National Flood Insurance
Program (NFIP). Federal law will not allow
us to make you the loan that you have
applied for if you do not purchase flood
insurance. The flood insurance must be
maintained for the life of the loan.
• Flood insurance coverage under the
NFIP may be purchased through an insurance
agent who will obtain the policy either
directly through the NFIP or through an
insurance company that participates in the
NFIP. Flood insurance also may be available
from private insurers that do not participate
in the NFIP.
• At'a minimum, flood insurance
purchased must cover the lesser of.
(1) The outstanding principal amount of
the loan; or
(2) The maximum amount of coverage
allowed for the type of property under the
NFIP.
• Federal disaster relief assistance (usually
in the form of a low-interest loan) may be
available for damages incurred in excess of
your flood insurance if your community’s
participation in the NFIP is in accordance
with NFIP requirements.
_____ Flood insurance coverage under the
NFIP is not available for the property
securing the loan because the community in
which the property is located does not
participate in the NFIP. In addition, if the
non-participating community has been
identified for at least one year as containing
a special flood hazard area, properties
located in the community will not be eligible
for Federal disaster relief assistance in the
event of a Federally-declared flood disaster.
By order of the Board of Directors.
Dated at Washington, D.C., this 26th day of
September, 1995.
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
Office of Thrift Supervision
12 CFR CHAPTER V

Authority and Issuance
For the reasons set forth in the joint
preamble, subchapter D of chapter V of
title 12 of the Code of Federal

Regulations is proposed to be amended,
as set forth below:
SUBCHAPTER D—REGULATIONS
APPLICABLE TO ALL SAVINGS
ASSOCIATIONS PART 563—OPERATIONS

1. The authority citation for part 563
is revised to read as follows:
Authority: 12 U.S.C. 375b, 1462,1462a,
1463, 1464, 1467a, 1468, 1817, 1828, 3806.
§ 563.48

[Removed]

2. Section 563.48 is removed.
3. A new part 572 is added to read as
follows:
PART 572— LOANS IN AREAS HAVING
SPECIAL FLOOD HAZARDS
Sec.
572.1 Authority, purpose, and scope.
572.2 Definitions.
572.3 Requirement to purchase flood
insurance where available.
572.4 Exemptions.
572.5 Escrow requirement.
572.6 Required use of standard flood hazard
determination form.
572.7 Forced placement of flood insurance.
572.8 Determination fees.
572.9 Notice of special flood hazards and
availability of Federal disaster relief
assistance.
572.10 Notice of servicer’s identity.
Appendix A to Part 572—Sample Form of
Notice of Special Flood Hazards and
Availability of Federal Disaster Relief
Assistance
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464; 42 U.S.C. 4012a, 4104a, 4104b, 4106,
and 4128.
§ 572.1

Authority, purpose, and scope.

(a) Authority. This part is issued
pursuant to 12 U.S.C. 1 4 6 2 ,1462a, 1463,
1464 and 42 U.S.C. 4012a, 4104a, 4104b,
4106, 4128.
(b) Purpose. The purpose of this part
is to implement the requirements of the
National Flood Insurance Act of 1968
and the Flood Disaster Protection Act of
1973, as amended (42 U .S.C .40014129).
(c) S cop e. This part, except for
§§ 572.6 and 572.8, applies to loans
secured by buildings or mobile homes
located or to be located in areas
determined by the Director of the
Federal Emergency Management Agency
to have special flood hazards. Sections
572.6 and 572.8 apply to loans secured
by buildings or mobile homes,
regardless of location.
§572.2

Definitions.

(a) A ct means the National Flood
Insurance Act of 1968, as amended (42
U.S.C. 4001-4129).
(b) [Reserved]
(c) Building means a walled and
roofed structure, other than a gas or
liquid storage tank, that is principally

53979

above ground and affixed to a
permanent site, and a walled and roofed
structure while in the course of
construction, alteration, or repair.
(d) Com m unity means a State or a
political subdivision of a State that has
zoning and building code jurisdiction
over a particular area having special
flood hazards.
(e) D esignated loan means a loan
secured by a building or mobile home
that is located or to be located in a
special flood hazard area in which flood
insurance is available under the Act.
(f) D irector o f FEMA means the
Director of the Federal Emergency
Management Agency.
(g) M obile h o m e means a structure,
transportable in one or more sections,
that is built on a permanent chassis and
designed for use with or without a
permanent foundation when attached to
the required utilities. The term m obile
h o m e does not include a recreational
vehicle. For purposes of this part, the
term m o b ile h o m e means a mobile home
on a permanent foundation.
(h) NFIP means the National Flood
Insurance Program authorized under the
Act.
(i) R esiden tial im p rov ed r ea l estate
means real estate upon which a home or
other residential building is located or
to be located.
(j) S ervicer means the person
responsible for:
(1) Receiving any scheduled, periodic
payments from a borrower under the
terms of a loan, including amounts for
taxes, insurance premiums, and other
charges with respect to the property
securing the loan; and
(2) Making payments of principal and
interest and any other payments from
the amounts received from the borrower
as may be required under the terms of
the loan.
(k) S p ecia l flo o d h az ard area means
the land in the flood plain within a
community having at least a one percent
chance of flooding in any given year, as
designated by the Director of FEMA.
§ 572.3 Requirement to purchase flood
insurance where available.

A savings association shall not make,
increase, extend, or renew any
designated loan unless the building or
mobile home and any personal property
securing the loan is covered by flood
insurance for the term of the loan. The
amount of insurance must be at least
equal to the lesser of the outstanding
principal balance of the designated loan
or the maximum limit of coverage
available for the particular type of
property under the Act.

53980
§572.4

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
Exemptions.

The flood insurance requirement
prescribed by § 572.3 does not apply
with respect to:
(a) Any State-owned property covered
under a policy of self-insurance
satisfactory to the Director of FEMA,
who publishes and periodically revises
the list of States falling within this
exemption; or
(b) Property securing any loan with an
original principal balance of $5,000 or
less and a repayment term of one year
or less.
§ 572.5

Escrow requirement.

If a savings association requires the
escrow of taxes, insurance premiums,
fees, or any other charges for a loan
secured by residential improved real
estate or a mobile home that is made,
increased, extended, or renewed after
[effective date of final regulation], then
the savings association shall also require
the escrow of all premiums and fees for
any flood insurance required under
§ 572.3. The savings association or a
servicer acting on behalf of the savings
association, shall deposit the flood
insurance premiums on behalf of the
borrower in an escrow account.
Depending upon the type of loan, such
escrow account may be subject to
escrow requirements adopted pursuant
to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12
U.S.C. 2609), which generally limits the
amount that may be maintained in
escrow accounts for certain types of
loans and requires escrow account
statements for those accounts. Upon
receipt of a notice from the Director of
FEMA or other provider of flood
insurance that premiums are due, the
savings association or its servicer shall
pay the amount owed to the insurance
provider from the escrow account.
§ 572.6 Required use of standard flood
hazard determination form.

(a) Use o f form . A savings association
shall use the standard flood hazard
determination form developed by the
Director of FEMA (as set forth in
Appendix A of 44 CFR part 65) when
determining whether the building or
mobile home offered as collateral
security for a loan is or will be located
in a special flood hazard area in which
flood insurance is available under the
Act. The standard flood hazard
determination form may be used in a
printed, computerized, or electronic
manner.
(b) Retention o f form . A savings
association shall retain a copy of the
completed standard flood hazard
determination form, in either hard copy

or electronic form, for the period of time
the savings association owns the loan.

transferee of a loan in the case of the
sale or transfer of the loan.

§ 572.7 Forced placement of flood
insurance.

§ 572.9 Notice of special flood hazards and
availability of Federal disaster relief
assistance.

If a savings association, or a servicer
acting on behalf of the savings
association, determi les, at the time of
origination or at any time during the
term of a designated loan, that the
building or mobile home and any
personal property securing the
designated loan is not covered by flood
insurance or is covered by flood
insurance in an amount less than the
amount required under § 572.3, then the
savings association or its servicer shall
notify the borrower that the borrower
should obtain flood insurance, at the
borrower’s expense, in an amount at
least equal to the amount required
under § 572.3, for the term of the loan.
If the borrower fails to obtain flood
insurance within 45 days after
notification, then the savings
association or its servicer shall purchase
insurance on the borrower’s behalf. The
savings association or its servicer may
charge the borrower for the cost of
premiums and fees incurred in
purchasing the insurance.
§572.8

Determination fees.

(a) G eneral. Notwithstanding any
Federal or State law other than the
Flood Disaster Protection Act of 1973, as
amended (42 U.S.C. 4001—
4129), any
savings association, or a servicer acting
on behalf of the savings association,
may charge a reasonable fee for
determining whether the building or
mobile home securing the loan is
located or will be located in a special
flood hazard area.
(b) B orrow er fe e . The determination
fee may be charged to the borrower if
the determination:
(1) Is made in connection with a
making, increasing, extending, or
renewing of the loan that is initiated by
the borrower;
(2) Reflects the Director of FEMA’s
revision or updating of floodplain areas
or flood-risk zones;
(3) Reflects the Director of FEMA’s
publication of a notice or compendium
that:
(i) Affects the area in which the
building or mobile home securing the
loan is located; or
(ii) By determination of the Director of
FEMA, may reasonably require a
determination whether the building or
mobile home securing the loan is
located in a special flood hazard area; or
(4) Results in the purchase of flood
insurance coverage under § 572.7.
(c) P urchaser or tran sferee fe e . The fee
may be charged to the purchaser or

(a) N otice requirem ent. When a
savings association makes, increases,
extends, or renews a loan secured by a
building or a mobile home located or to
be located in a special flood hazard area,
the association shall mail or deliver a
written notice to the borrower and to the
servicer in all cases whether or not flood
insurance is available under the Act for
the collateral securing the loan.
(b) Contents o f n otice. The written
notice must include the following
information:
(1) A warning, in a form approved by
the Director of FEMA, that the building
or the mobile home is or will be located
in a special flood hazard area;
(2) A description of the flood
insurance purchase requirements set
forth in section 102(b) of the Flood
Disaster Protection Act of 1973, as
amended (42 U.S.C. 4012a(b));
(3) A statement, where applicable,
that flood insurance coverage is
available under the NFIP and may also
be available from private insurers; and
(4) A statement whether Federal
disaster relief assistance may be
available in the event of damage to the
building or mobile home caused by
flooding in a Fede rally-declared
disaster.
(c) Timing o f notice. The savings
association shall provide the notice
required by paragraph (a) of this section
to the borrower and the servicer within
a reasonable time before the completion
of the transaction.
(d) R ecord o f receipt. The savings
association shall retain a record of the
receipt of the notices by the borrower
and the servicer for the period of time
the savings association owns the loan.
(e) A lternate m eth o d o f n otice. Instead
of providing the notice to the borrower
required by paragraph (a) of this section,
a savings association may obtain
satisfactory written assurance from the
seller or lessor that, within a reasonable
time before the completion of the sale or
lease transaction, the seller or lessor has
notified the borrower that the building
or mobile home is or will be located in
a special flood hazard area. The savings
association shall retain a record of the
written assurance from the seller or
lessor for the period of time the savings
association owns the loan.
(f) Use o f p rescrib ed form o f notice. A
savings association may comply with
the notice requirements of this section
by providing written notice to a
borrower and to the servicer containing

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
the language presented in appendix A to
this part not less than ten days before
the completion of the transaction (or not
later than the savings association’s
commitment if the period between the
commitment and the completion of the
transaction is less than ten days).
§ 572.10 Notice of servicer’s identity.

(a) N otice requirem ent. When a
savings association makes, increases,
extends, renews, sells, or transfers a
loan secured by a building or mobile
home located or to be located in a
special flood hazard area, the savings
association shall notify the Director of
FEMA (or the Director of FEMA’s
designee) in writing of the identity of
the servicer of the loan.
(b) Transfer o f servicing rights. The
savings association shall notify the
Director of FEMA (or the Director of
FEMA’s designee) of any change in the
servicer of a loan described in paragraph
(a) of this section within 60 days after
the effective date of the change. Upon
any change in the servicing of a loan
described in paragraph (a) of this
section, the duty to provide notice
under this paragraph (b) shall transfer to
the transferee servicer.
Appendix A to Part 572—Sample Form
of Notice of Special Flood Hazards and
Availability of Federal Disaster Relief
Assistance
We are giving you this notice to inform you
that:
_____ The building securing the loan for
which you have applied is or will be located
in an area with special flood hazards.
_____ The mobile home securing the loan
for which you have applied is or will be
located in an area with special flood hazards.
The area has been identified by the
Director of the Federal Emergency
Management Agency (FEMA) as a special,
flood hazard area using FEMA’s Flood
Insurance Rate Map or the Flood Hazard
Boundary Map for the following community:
This area has at least a one percent (1%)
chance of being flooded in any given year.
The risk grows each year. For example,
during the life of a 30-year mortgage loan, the
risk of a flood in a special flood hazard area
is at least 26%.
Federal law allows a lender and borrower
jointly to request the Director of FEMA to
review the determination of whether the
property securing the loan is located in a
special flood hazard area. If you would like
to make such a request, please contact us for
further information.
__ _ The community in which the
_
property securing the loan isiocated
participates in the National Flood Insurance
Program (NFIP). Federal law will not allow
us to make you the loan that you have
applied for if you do not purchase flood
insurance. The flood insurance must be
maintained for the life oi the loan.

• Flood insurance coverage under the
NFIP may be purchased through an insurance
agent who will obtain the policy either
directly through the NFIP or through an
insurance company that participates in the
NFIP. Flood insurance also may be available
from private insurers that do not participate
in the NFIP.
• At a minimum, flood insurance
purchased must cover the lesser of.
(1) The outstanding principal amount of
the loan; or
(2) The maximum amount of coverage
allowed for the type of property under the
NFIP.
• Federal disaster relief assistance (usually
in the form of a low-interest loan) may be
available for damages incurred in excess of
your flood insurance if your community’s
participation in the NFIP is in accordance
with NFIP requirements.
_____ Flood insurance coverage under the
NFIP is not available for the property
securing the loan because the community in
which the property is located does not
participate in the NFIP. In addition, if the
non-participating community has been
identified for at least one year as containing
a special flood hazard area, properties
located in the community will not be eligible
for Federal disaster relief assistance in the
event of a Federally-declared flood disaster.
Dated: September 30,1995.
By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
Farm Credit Administration
12 CFR CHAPTER VI

Authority and Issuance
For the reasons stated in the
preamble, part 614 of chapter VI, title 12
of the Code of Federal Regulations is
proposed to be amended as follows:
PART 614— LOAN POLICIES AND
OPERATIONS
1. The authority citation for part 614
continues to read as follows:
Authority: 42 U.S.C. 4012a, 4104a, 4104b,
4106, and 4128; secs. 1.3, 1.5,1.6, 1.7, 1.9,
1.10, 2.0, 2.2. 2.3, 2.4, 2.10, 2.12, 2.13, 2.15,
3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12,
4.12A, 4.13, 4.13B, 4.14, 4.14A, 4.14C, 4.14D,
4.14E, 4.18, 4.19, 4.36, 4.37, 5.9, 5.10, 5.17,
7.0, 7.2, 7.6, 7.7, 7.8, 7.12, 7.13, 8.0, 8.5 of
the Farm Credit Act (12 U.S.C. 2011. 2013,
2014, 2015, 2017, 2018, 2071, 2073, 2074,
2075, 2091, 2093, 2094, 2096, 2121, 2122,
2124, 2128, 2129, 2131, 2141, 2149', 2183,
2184, 2199, 2201, 2202, 2202a, 2202c, 2202d,
2202e, 2206, 2207, 2219a, 2219b, 2243, 2244,
2252, 2279a, 2279a-2, 2279b, 2279b-l, 2279b2, 2279f, 2279f-l, 2279aa, 2279aa-5); sec. 413
of Pub. L. 100-233, 101 Stat. 1568, 1639.
2. Part 614 is amended by revising
subpart S to read as follows:
Subpart S— Flood Insurance Requirements

Sec.
6 1 4 .4 9 2 0
6 1 4 .4 9 2 5

Purpose and scope.
Definitions.

53981

614.4930 Requirement to purchase flood
insurance where available.
614.4935 Escrow requirement.
614.4940 Required use of Standard Flood
Hazard Determination Form.
614.4945 Forced placement of flood
insurance.
614.4950 Determination fees.
614.4955 Notice of special flood hazards
and availability of Federal disaster relief
assistance.
614.4960 Notice of servicer’s identity.
Appendix A to Subpart S of Part 614—
Sample Form of Notice of Special Flood
Hazards and Availability of Federal Disaster
Relief Assistance
Subpart S— Flood Insurance
Requirements
§ 614.4920

Purpose and scope.

(a) Purpose. This subpart implements
the requirements of the National Flood
Insurance Act of 1968 (1968 Act) and
the Flood Disaster Protection Act of
1973 (1973 Act), as amended (42 U.S.C.
4001—
4129).
(b) S cop e. This subpart, except for
§§ 614.4940 and 614.4950, applies to
loans of Farm Credit System (Systom)
institutions that are secured by
buildings or mobile homes located or to
be located in areas determined by the
Director of the Federal Emergency
Management Agency to have special
flooc1 hazards. Sections 614.4940 and
614.4950 apply to loans secured by
buildings or mobile homes, regardless of
location.
§614.4925

Definitions.

(a) B uilding means a walled and
roofed structure, other than a gas or
liquid storage tank, that is principally
above ground and affixed to a
permanent site, and a walled and roofed
structure while in the course of
construction, alteration, or repair.
(b) Com m unity means a State or a
political subdivision of a State that has
zoning and building code jurisdiction
over a particular area having special
flood hazards.
(c) D esignated loan means a loan
secured by a building or a mobile home
that is located or to be located in a
special flood hazard area in which flood
insurance is available under the 1968
Act.
(d) D irector means the Director of the
Federal Emergency Management
Agency.
(e) M obile h om e means a structure,
transportable in one or more sections,
that is built on a permanent chassis and
designed for use with or without a
permanent foundation when attached to
the required utilities. The term m o bile
h om e does not include a recreational
vehicle. For purposes of this subpart.

53982

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

the term m o b ile h o m e means a mobile
home on a permanent foundation.
(f) NFIP means the National Flood
Insurance Program authorized under the
1968 Act.
(g) R esiden tial im proved rea l estate
means real estate upon which a home or
other residential building is located or
to be located.
(h) S ervicer means the person
responsible for:
(1) Receiving any scheduled, periodic
payments from a borrower under the
terms of a loan, including amounts for
taxes, insurance premiums, and other
charges with respect to the property
securing the loan; and
(2) Making payments of principal and
interest and any other payments from
the amounts received from the borrower
as may be required under the terms of
the loan.
(i) S p ecial flo o d h azard area means
the land in the flood plain within a
community having at least a one percent
chance of flooding in any given year, as
designated by the Director.
§ 614.4930 Requirement to purchase flood
insurance where available.

(a) G eneral requirem ent. A System
institution shall not make, increase,
extend or renew any designated loan
unless the building or mobile home and
any personal property securing the lc an
are covered by flood insurance for the
term of the loan. The amount of
insurance must be at least equal to the
lesser of the outstanding principal
balance of the designated loan or the
maximum limit of coverage available for
the particular type of property under the
1968 Act.
(b) Exem ptions. The flood insurance
requirement of paragraph (a) of this
section d oesaot apply with respect to:
(1) Any State-owned property covered
under a policy of self-insurance
satisfactory to the Director, who
publishes and periodically revises the
list of States falling within this
exemption; or
(2) Property securing any loan with an
original principal balance of $5000 or
less and a repayment term of one year
or less.
§ 614.4935

Escrow requirement.

If a System institution requires the
escrow of taxes, insurance premiums,
fees, or any other charges for a loan
secured by resid en tial improved real
estate or a mobile home that is made,
increased, extended or renewed after
[effective date of final regulation], then
the institution also shall require the
escrow of all premiums and fees for any
flood insurance required under
§ 614.4930. The institution, or a servicer

acting on behalf of the institution, shall
deposit the flood insurance premiums
on behalf of the borrower in an escrow
account. Depending upon the type of
loan, such escrow account may be
subject to escrow requirements adopted
pursuant to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12
U.S.C. 2609), which generally limits the
amount that may be maintained in
escrow accounts for certain types of
loans and requires escrow account
statements for those accounts. Upon
receipt of a notice from the Director or
other provider of flood insurance that
premiums are due, the institution or its
servicer shall pay the amount owed to
the insurance provider from the escrow
account.
§614.4940 Required use of Standard
Flood Hazard Determination Form.

(a) Use o f form . System institutions
shall use the Standard Flood Hazard
Determination Form developed by the
Director (as set forth in Appendix A of
44 CFR part 65) when determining
whether a building or mobile home
offered as collateral security for a loan
is or will be located in a special flood
hazard area in which flood insurance is
available under the 1968 Act. The
Standard Flood Hazard Determination
Form may be used in a printed,
computerized, or electronic manner.
(b) Retention o f form . System
institutions shall retain a copy of the
completed Standard Flood Hazard
Determination Form, in either hard copy
or electronic form, for the period of time
the institution owns the loan.
§ 614.4945 Forced placement of flood
insurance.

If a System institution, or a servicer
acting on behalf of the institution,
determines, at the time of origination or
at any time during the term of a
designated loan, that the building or
mobile home and any personal property
securing the designated loan are not
covered by flood insurance or are
covered by flood insurance in an
amount less than the amount required
under § 614.4930(a), then the institution
or its servicer shall notify the borrower
that the borrower should obtain flood
insurance, at the borrower’s expense, in
an amount at least equal to the amount
required under § 614.4930(a), for the
term of the loan. If the borrower fails to
obtain flood insurance within 45 days
after notification, then the institution or
its servicer shall purchase insurance on
the borrower’s behalf. The institution or
its servicer may charge the borrower for
the premiums and fees incurred in
purchasing the insurance.

§ 614.4950 Determination fees.

(a) General. Notwithstanding any
Federal or State law other than the 1973
Act, any System institution, or a
servicer acting on behalf of the
institution, may charge a reasonable fee
for determining whether the building or
mobile home securing the loan is
located or will be located in a special
flood hazard area.
(b) B orrow er fe e . The determination
fee may be charged to the borrower if
the determination:
(1) Is made in connection with a
making, increasing, extending, or
renewing of the loan that is initiated by
the borrower;
(2) Reflects the Director’s revision or
updating of floodplain areas or floodrisk zones;
(3) Reflects the Director’s publication
of a notice or compendium that:
(i) Affects the area in which the
building or mobile home securing the
loan is located; or
(ii) By determination of the Director,
may reasonably require a determination
whether the building or mobile home
securing the loan is located in a special
flood hazard area; or
(4) Results in the purchase of flood
insurance coverage under § 614.4945.
(c) P urchaser o r tran sferee fe e . The fee
may be charged to the purchaser or
transferee of a loan in the case of the
sale or transfer of the loan.
§ 614.4955 Notice of special flood hazards
and availability of Federal disaster relief
assistance.

(a) N otice requirem ent. When a
System institution makes, increases,
extends, or renews a loan secured by a
building or a mobile home located or to
be located in a special flood hazard area,
the institution shall mail or deliver a
written notice containing the
information specified in paragraph (b) of
this section to the borrower and to the
servicer of the loan. Notice is required
whether or not flood insurance is
available under the 1968 Act for the
collateral securing the loan.
(b) Contents o f notice. The written
notice must include the following
information:
(1) A warning, in a form approved by
the Director, that the building or the
mobile home is or will be located in a
special flood hazard area;
(2) A description of the flood
insurance purchase requirements set
forth in section 102(b) of the 1973 Act
(42 U.S.C. 4012a|b));
(3) A statement, where applicable,
that flood insurance coverage is
available under the NFIP and also may
be available from private insurers; and
(4) A statement whether Federal
disaster relief assistance may be

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
available in the event of damage to the
building or the mobile home caused by
flooding in a Federally declared
disaster.

Appendix A to Subpart S of Part 614—
Sample Form of Notice of Special Flood
Hazards and Availability of Federal
Disaster Relief Assistance

(c) Timing o f notice. The institution
shall provide the notice required by
paragraph (a) of this section to the
borrower and the servicer within a
reasonable time before the completion
of the transaction.

We are giving you this notice to inform you
that:
The building securing the loan for
which you have applied is or will be located
in an area with special flood hazards.
_____ The mobile home securing the loan
for which you have applied is or will be
located in an area with special flood hazards.
The area has been identified by the
Director of the Federal Emergency
Management Agency (FEMA) as a special
flood hazard area using FEMA’s Flood
Insurance Bate Map or the Flood Hazard
Boundary Map for the following community:

(d) R ecord o f receipt. Each institution
shall retain a record of the receipt of the
notices by the borrower and the servicer
for the period of time the institution
owns the loan.
(e) A lternate m eth o d o f notice. Instead
of providing the notice to the borrower
required by paragraph (a) of this section,
an institution may obtain satisfactory
written assurance from the seller or
lessor that, within a reasonable time
before the completion of the sale or
lease transaction, the seller or lessor has
notified the borrower that the building
or mobile home is or will be located in
a special flood hazard area. The
institution shall retain a record of the
written assurance from the seller or
lessor for the period of time the
institution owns the loan.
(f) Use o f p rescrib ed form o f notice.
An institution may comply with the
notice requirements of this section by
providing written notice to a borrower
and to the servicer containing the
language presented in appendix A to
this subpart not less than 10 days before
the completion of the transaction (or not
later than the institution’s commitment
if the period between the commitment
and the completion of the transaction is
less than 10 days).
§ 614.4960

Notice of servicer’s identity.

(a) N otice requirem ent. When a
System institution makes, increases,
extends, renews, sells, or transfers a
loan secured by a building or a mobile
home located or to be located in a
special flood hazard area, the institution
shall notify the Director (or the
Director’s designee) in writing of the
identity of the servicer of the loan.
(b) Transfer o f servicing rights. The
institution shall notify the Director (or
the Director’s designee) of any change in
the servicer of a loan described in
paragraph (a) of this section within 60
days after the effective date of the
change. Upon any change in the
servicing of a loan described in
paragraph (a) of this section, the duty to
provide notice under this paragraph (b)
shall transfer to the transferee servicer.

This area has at least a 1-percent chance of
being flooded in any given year. The risk
grows each year.
For example, during the life of a 30-year
mortgage loan, the risk of a flood in a special
flood hazard area is at least 26 percent.
Federal law allows a lender and borrower
jointly to request the Director of FEMA to
review the determination of whether the
property securing the loan is located in a
special flood hazard area. If you would like
to make such a request, please contact us for
further information.
_____ The community in which the
property securing the loan is located
participates in the National Flood Insurance
Program (NFIP). Federal law will not allow
us to make you the loan that you have
applied for if you do not purchase flood
insurance. The flood insurance must be
maintained for the life of the loan.
• Flood insurance coverage under the
NFIP may be purchased through an insurance
agent who will obtain the policy either
directly through the NFIP or through an
insurance company that participates in the
NFIP. Flood insurance also may be available
from private insurers that do not participate
in the NFIP.
• At a minimum, flood insurance
purchased must cover the lesser of.
(1) The outstanding principal amount of
the loan; or
(2) The maximum amount of coverage
allowed for the type of property under the
NFIP.
• Federal disaster relief assistance (usually
in the form of a low interest loan) may be
available for damages incurred in excess of
your flood insurance if your community’s
participation in the NFIP is in accordance
with NFIP requirements.
_____ Flood insurance coverage under the
NFIP is not available for the property
securing the loan because the community in
which the property is located does not
participate in the NFIP. In addition, if the
non-participating community has been
identified for at least 1 year as containing a
special flood hazard area, properties located
in the community will not be eligible for
Federal disaster relief assistance in the event
of a Federally declared flood disaster.

53983

Dated: September 8, 1995.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
National Credit Union Administration
12 CFR CHAPTER VII

Authority and Issuance
For the reasons set forth in the joint
preamble, part 760 of chapter VII of title
12 of the Code of Federal Regulations is
proposed to be revised to read as
follows:
PART 760— LOANS IN AREAS HAVING
SPECIAL FLOOD HAZARDS
Sec.
760.1 Authority, purpose, and scope.
760.2 Definitions.
760.3 Requirement to purchase flood
insurance where available.
760.4 Exemptions.
760.5 Escrow requirement.
760.6 Required use of standard flood hazard
determination form.
760.7 Forced placement of flood insurance.
760.8 Determination fees.
760.9 Notice of special flood hazards and
availability of Federal disaster relief
'
assistance. .
760.10 Notice of servicer’s identity.
Appendix A to Part 760—Sample Form of
Notice of Special Flood Hazards and
Availability of Federal Disaster Relief
Assistance
Authority: 12 U.S.C. 1757, 1789; 42 U.S.C.
4012a, 4104a, 4104b, 4106, and 4128.
§ 760.1

Authority, purpose, and scope.

(a) Authority. This part is issued
pursuant to 12 U.S.C. 1757,1789 and 42
U.S.C. 4012a, 4104a, 4104b, 4106, 4128.
(b) Purpose. The purpose of this part
is to implement the requirements of the
National Flood Insurance Act of 1968
and the Flood Disaster Prqtection Act of
1973, as amended (42 U.S.C. 4 0 0 1 4129).
(c) Scope. This part, except for
§§ 760.6 and 760.8, applies to loans
secured by buildings or mobile homes
located or to be located in areas
determined by the Director of the
Federal Emergency Management Agency
to have special flood hazards. Sections
760.6 and 760.8 apply to loans secured
by buildings or mobile homes,
regardless of location.
§760.2

Definitions.

(a) A ct mean j the National Flood
Insurance Act of 1968, as amended (42
U.S.C. 4001-4129).
(b) Credit union means a Federal or
State-chartered credit union that is
insured by the National Credit Union
Share Insurance Fund.
(c) Building means a walled and
roofed structure, other than a gas or
liquid storage tank, that is principally

53984

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules

above ground and affixed to a
permanent site, and a walled and roofed
structure while in the course of
construction, alteration, or repair.
(d) Com m unity means a State or a
political subdivision of a State that has
zoning and building code jurisdiction
over a particular area having special
flood hazards.
(e) D esignated loan means a loan
secured by a building or mobile home
that is located or to be located in a
special flood hazard area in which flood
insurance is available under the Act.
(f) D irector means the Director of the
Federal Emergency Management
Agency.
(g) M obile h o m e means a structure,
transportable in one or more sections,
that is built on a permanent chassis and
designed for use with or without a
permanent foundation when attached to
the required utilities. The term m o bile
h o m e does not include a recreational
vehicle. For purposes of this part, the
term m o b ile h o m e means a mobile home
on a permanent foundation.
(h) NFIP means the National Flood
Insurance Program authorized under the
Act.
(i) R esiden tial im proved rea l estate
means real estate upon which a home or
other residential building is located or
to be located.
(j) S ervicer means the person
responsible for:
[1) Receiving any scheduled, periodic
payments from a borrower under the
terms of a loan, including amounts for
taxes, insurance premiums, and other
charges with respect to the property
securing the loan; and
(2) Making payments of principal and
interest and any other payments from
the amounts received from the borrower
as may be required under the terms of
the loan.
(k) S p ecia l flo o d h a z a rd area means
the land in the flood plain within a
community having at least a one percent
chance of flooding in any given year, as
designated by the Director.
§ 760.3 Requirement to purchase flood
insurance where available.

A credit union shall not make,
increase, extend, or renew any
designated loan unless the building or
mobile home and any personal property
securing the loan is covered by flood
insurance for the term of the loan. The
amount of insurance must be at least
equal to the lesser of the outstanding
principal balance of the designated ioan
or the maximum limit of coverage
available for the particular type of
property under the Act.

§760.4

Exemptions.

The flood insurance requirement
prescribed by § 760.3 does not apply
with respect to:
(a) Any State-owned property covered
under a policy of self-insurance
satisfactory to the Director, who
publishes and periodically revises the
list of States falling within this
exemption; or
(b) Property securing any loan with an
original principal balance of $5,000 or
less and a repayment term of one year
or less.
§ 760.5 Escrow requirement.

If a credit union requires the escrow
of taxes, insurance premiums, fees, or
any other charges for a loan secured by
resid en tial improved real estate or a
mobile home that is made, increased,
extended, or renewed after [effective
date of final regulation], then the credit
union shall also require the escrow of
all premiums and ffies for any flood
insurance required under § 760.3. The
credit union, or a servicer acting on
behalf of the credit union, shall deposit
the flood insurance premiums on behalf
of the borrower in an escrow account.
Depending upon the type of loan, such
escrow account may be subject to
escrow requirements adopted pursuant
to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12
U.S.C. 2609), which generally limits the
amount that may be maintained in
escrow accounts for certain types of
loans and requires escrow account
statements for those accounts. Upon
receipt of a notice from the Director or
other provider of flood insurance that
premiums are due, the credit union or
its servicer shall pay the amount owed
to the insurance provider from the
escrow account.
§ 760.6 Required use of standard flood
hazard determination form.

(a) Use o f form . A credit union shall
use the standard flood hazard
determination form developed by the
Director (as set forth in Appendix A of
44 CFR part 65) when determining
whether the building or mobile home
offered as collateral security for a loan
is or will be located in a special flood
hazard area in which flood insurance is
available under the Act. The standard
flood hazard determination form may be
used in a printed, computerized, or
electronic manner.
(b) Retention o f form . A credit union
shall retain a copy of the completed
standard flood hazard determination
form, in either hard copy or electronic
form, for the period of time the credit
union owns the loan.

§ 760.7 Forced placement of flood
insurance.

If a credit union, or a servicer acting
on behalf of the credit union,
determines, at the time of origination or
at any time during the term of a
designated loan, that the building or
mobile home and any personal property
securing the designated loan is not
covered by flood insurance or is covered
by flood insurance in an amount less
than the amount required under § 760.3,
then the credit union or its servicer
shall notify the borrower that the
borrower should obtain flood insurance,
at the borrower’s expense, in an amount
at least equal to the amount required
under § 760.3, for the term of the loan.
If the borrower fails to obtain flood
insurance within 45 days after
notification, then the credit union or its
servicer shall purchase insurance on the
borrower’s behalf. The credit union or
its servicer may charge the borrower for
the cost of premiums and fees incurred
in purchasing the insurance.
§ 760.8 Determination fees.
(a) G eneral. Notwithstanding any
Federal or State law other than the
Flood Disaster Protection Act of 1973, as
amended (42 U.S.C. 4001-4129), any
credit union, or a servicer acting on
behalf of the credit union, may charge
a reasonable fee for determining
whether the building or mobile home
securing the loan is located or will be
located in a special flood hazard area.
(b) B orrow er fe e . The determination
fee may be charged to the borrower if
the determination:
(1) Is made in connection with a
making, increasing, extending, or
renewing of the loan that is initiated by
the borrower;
(2) Reflects the Director’s revision or
updating of floodplain areas or floodrisk zones;
(3) Reflects the Director’s publication
of a notice or compendium that:
(i) Affects the area in which the
building or mobile home securing the
loan is located; or
(ii) By determination of the Director,
may reasonably require a determination
whether the building or mobile home
securing the loan is located in a special
flood hazard area; or
(4) Results in the purchase of flood
insurance coverage under § 760.7.
(c) P urchaser or transferee fe e . The fee
may be charged to the purchaser or
transferee of a loan in the case of the
sale or transfer of the loan.
§ 760.9 Notice of special flood hazards and
availability of Federal disaster relief
assistance.

fa) N otice requirem ent. When a credit
union makes, increases, extends, or

Federal Register / Vol. 60, No. 201 / Wednesday, October 18, 1995 / Proposed Rules
renews a loan secured by a building or
a mobile home located or to be located
in a special flood hazard area, the credit
union shall mail or deliver a written '
notice to the borrower and to the
servicer in all cases whether or not flood
insurance is available under the Act for
the collateral securing the loan.
(b) Contents o f n otice. The written
notice must include the following
information:
(1) A warning, in a form approved by
the Director, that the building or the
mobile home is or will be located in a
special flood hazard area;
(2) A description of the flood
insurance purchase requirements set
forth in section 102(b) of the Flood
Disaster Protection Act of 1973, as
amended (42 U.S.C. 4012a(b));
(3) A statement, where applicable,
that flood insurance coverage is
available under the NFIP and may also
be available from private insurers; and
(4) A statement whether Federal
disaster relief assistance may be
available in the event of damage to the
building or mobile home caused by
flooding in a Federally-declared
disaster.
(c) Timing o f n otice. The credit union
shall provide the notice required by
paragraph (a) of this section to the
borrower and the servicer within a
reasonable time before the completion
of the transaction.
(d) R ecord o f receipt. The credit union
shall retain a record of the receipt of the
notices by the borrower and the servicer
for the period of time the credit union
owns the loan.
(e) A lternate m eth o d o f n otice. Instead
of providing the notice to the borrower
required by paragraph (a) of this section,
a credit union may obtain satisfactory
written assurance from the seller or
lessor that, within a reasonable time
before the completion of the sale or
lease transaction, the seller or lessor has
notified the borrower that the building
or mobile home is or will be located in
a special flood hazard area. The credit
union shall retain a record of the written
assurance from the seller or lessor for

53985

the period of time the credit union owns chance of being flooded in any given year.
The risk grows each year. For example,
the loan.
(f)
Use o f p rescrib ed fo rm o f notice. A during the life of a 30-year mortgage loan, the
risk of a flood in a special flood hazard area
credit union may comply with the
is at least 26%.
notice requirements of this section by
Federal law allows a lender and borrower
providing written notice to a borrower
jointly to request the Director of FEMA to
and to the servicer containing the
review the determination of whether the
language presented in appendix A to
property securing the loan is located in a
this part not less than ten days before
special flood hazard area. If you would like
the completion of the transaction (or not to make such a request, please contact us for
later than the credit union’s
further information.
commitment if the period between the
____ The community in which the
property securing the loan is located
commitment and the completion of the
participates in the National Flood Insurance
transaction is less than ten days).
Program (NFIP). Federal law will not allow
§ 760.10 Notice of servicer’s identity.
us to make you the loan that you have
applied for if you do not purchase flood
(a) N otice requirem ent. When a credit
insurance. The flood insurance must be
union makes, increases, extends,
renews, sells, or transfers a loan secured maintained for the life of the loan.
• Flood insurance coverage under the
by a building or mobile home located or
NFIP may be purchased through an insurance
to be located in a special flood hazard
agent who will obtain the policy either
area, the credit union shall notify the
directly through the NFIP or through an
Director (or the Director’s designee) in
insurance company that participates in the
writing of the identity of the r.ervicer of
NFIP. Flood insurance also may be available
the loan.
from private insurers that do not participate
(b) Transfer o f servicing rights. The
in the NFIP.
credit union shall notify the Director (or
• At a minimum, flood insurance
the Director’s designee) of any change in purchased must cover the lesser of:
(1) The outstanding principal amount of
the servicer of a loan described in
the loan; or
paragraph (a) of this section within 60
(2) The maximum amount of coverage
days after the effective date of the
allowed for the type of property under the
change. Upon any change in the
NFIP.
servicing of a loan described in
• Federal disaster relief assistance (usually
paragraph (a) of this section, the duty to in the form of a low-interest loan) may be
provide notice under this paragraph (b)
available for damages incurred in excess of
shall transfer to the transferee servicer.
your flood insurance if your community’s
participation in the NFIP is in accordance
Appendix A to Part 760— Sample Form
with NFIP requirements.
of Notice of Special Flood Hazards and
_____ Flood insurance coverage under the
Availability of Federal Disaster Relief
NFIP is not available for the property
Assistance
securing the loan because the community in
We are giving you this notice to inform you which the property is located does not
participate in the NFIP. In addition, if the
that:
non-participating community has been
_____ The building securing the loan for
identified for at least one year as containing
which you have applied is or will be located
a special flood hazard area, properties
in an area with special flood hazards.
located in the community will not be eligible
_____ The mobile home securing the loan
for Federal disaster relief assistance in the
for which you have applied is or will be
located in an area with special flood hazards. event of a Federally-declared flood disaster.
The area has been identified by the
Dated: September 28, 1995.
Director of the Federal Emergency
Becky Baker,
Management Agency (FEMA) as a special
Secretary o f the Board, National Credit Union
flood hazard area using FEMA’s Flood
Administration.
Insurance Rate Map or the Flood Hazard
[FR Doc. 95-25257 Filed 10-17-95; 8:45 am)
Boundary Map for the following community:
This area has at least a one percent (1%)

BILLING CODE 4 8 1 0 -3 3 -P , 6 2 1 0 -0 1 -P , 6 7 1 4 -0 1 -P ,
6 7 2 0 -0 1 - P , 6705— P , 7 5 3 5 -0 1 -P
01-


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102