ALEXANDRIA, Va. (6/19/15)--The National Credit Union Administration board approved a final interagency rule to amend regulations covering loans in areas with special flood hazards.
The NCUA, Office of the Comptroller of the Currency, board of governors of the Federal Reserve System, Federal Deposit Insurance Corp. and Farm Credit Administration are working to implement certain provisions of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), which amends some of the changes to the Flood Disaster Protection Act of 1973 mandated by the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters).
Specifically, the final rule requires the escrow of flood insurance payments on residential improved real estate securing a loan, consistent with the changes set forth in HFIAA.
The final rule also incorporates an exemption in HFIAA for certain detached structures from the mandatory flood insurance purchase requirement. It also implements the provisions of Biggert-Waters related to the force placement of flood insurance when homeowners’ policies lapse or are insufficient.
Parts of the final rule, become effective Oct. 1, and others have an effective date of Jan. 1, 2016.
The rule’s flood insurance escrow provisions apply only to credit unions with more than $1 billion in assets.
In a December 2014 letter to the agency, CUNA expressed concerns about additional regulations on credit unions.
"We request that the agencies be mindful of placing additional regulatory requirements on credit unions," CUNA's letter said. "Some credit unions remain concerned that they do not have the capability to escrow flood insurance premiums on loans processed by their core processing systems. For these credit unions, upgrades to facilitate escrowing flood insurance premiums will be costly and time consuming, with these costs eventually borne by members."