OCC BULLETIN 2015-33
Subject: Flood Insurance
Date: July 21, 2015
To: Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Final Rule
The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the National Credit Union Administration (collectively, the agencies) have issued a final rule that implements certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) and the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA).
The final rule amends existing regulations to: (1) incorporate a statutory exemption to the general mandatory flood insurance purchase requirement for detached structures; (2) establish requirements for national banks and federal savings associations (collectively, banks) to escrow flood insurance payments on residential improved real estate securing a loan; and (3) incorporate statutory amendments related to the force placement of flood insurance. The final rule also integrates the OCC’s flood insurance regulations by adding federal savings associations to 12 CFR 22 and removing 12 CFR 172.
The statutory force-placed insurance provision took effect upon the enactment of the Biggert-Waters Act on July 6, 2012. The statutory detached structure exemption took effect upon enactment of the HFIAA on March 21, 2014. The regulatory changes made by this final rule to incorporate these provisions are effective on October 1, 2015. The statutory and regulatory escrow-related provisions are effective on January 1, 2016, as required by the HFIAA.
This bulletin rescinds OCC Bulletin 2014-56, “Flood Insurance: Notice of Proposed Rulemaking” (Nov. 14, 2014), which announced the proposed rule.
Detached Structures Exemption
Escrow of Flood Insurance Payments
Force Placement of Flood Insurance
The National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973 (FDPA), as amended, govern the National Flood Insurance Program (NFIP). Among other things, these statutes require the purchase of flood insurance on certain properties and make available federally subsidized flood insurance to owners of improved real estate or mobile homes located in special flood hazard areas if the community where the improved real estate or mobile home is located participates in the NFIP.
The Biggert-Waters Act significantly amended the FDPA’s requirements including by revising the escrow and force placement provisions and by directing regulated lending institutions to accept private flood insurance as defined by the Biggert-Waters Act. On October 30, 2013, the agencies jointly issued a proposed rule to implement these provisions.1
On March 21, 2014, President Obama signed into law the HFIAA, which amended the Biggert-Waters Act, including the escrow provisions. The HFIAA also provided a new exemption to the mandatory flood insurance purchase requirements for structures that are part of, but detached from, a primary residential structure and do not serve as a residence. On October 30, 2014, the agencies jointly issued a notice of proposed rulemaking to implement these changes.2
This final rule implements the force-placed insurance provisions of the Biggert-Waters Act and the escrow and detached structure provisions of the HFIAA.3
Please contact Rhonda L. Daniels, Compliance Specialist, Compliance Policy Division, (202) 649-5470; Margaret C. Hesse, Senior Counsel, Community and Consumer Law Division, (202) 649-6350; or Heidi M. Thomas, Special Counsel, Legislative and Regulatory Activities Division, (202) 649-5490.
Amy S. Friend