WASHINGTON (6/2/14)--Several federal agencies, including the National Credit Union Administration, have released a statement raising the National Flood Insurance Program (NFIP) maximum limit of building coverage available to $500,000 from the previous amount of $250,000.
Coinciding with Sunday being the official start of hurricane season, this rule applies to non-condominium residential buildings designed for use for five or more families. The maximum content coverage for policies covering such buildings will remain at $100,000 per policy.
The Federal Deposit Insurance Corp. (FDIC), Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve,Farm Credit Administration and NCUA jointly issued the statement.
The change comes as a result of the Biggert-Waters Flood Insurance Reform Act of 2012, which extended the NFIP's authority through September 2017, and mandated major flood insurance reforms, including phasing out subsidies for many properties and raising the cap on annual premium increases.
The new coverage limits are available for new policies, policy renewals, or existing policies with change endorsements effective on or after June 1. The increase in the maximum amount of coverage available under the NFIP could affect the minimum amount of flood insurance required for both existing and future loans secured by buildings.
The release also states that "if, as a result of the increase in the maximum limit of building coverage for these buildings, a lender or its servicer determines on or after June 1, 2014, that the building securing the designated loan is now covered by flood insurance in an amount less than required by federal flood insurance regulation, it should take steps to ensure that the borrower obtains sufficient coverage, including force placing insurance pursuant to federal law."
If the borrower fails to obtain sufficient coverage within 45 days of notification, the lender or purchaser must purchase coverage on the borrower's behalf. The lender or its servicer may charge the borrower for the cost of premiums and fees incurred, including premiums and fees incurred for coverage beginning on the date on which flood insurance coverage did not provide a sufficient coverage amount.
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