WASHINGTON (12/12/13)--Federal regulators should be mindful of placing additional burdens on credit unions as they develop regulations that would implement provisions in the Biggert-Waters Flood Insurance Reform Act of 2012 that require a lending institution to accept private flood insurance, the Credit Union National Association said this week.
The CUNA comments follow the October release of a joint agency proposal co-signed by the National Credit Union Administration, the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
The joint agency proposal would also require that regulated lending institutions satisfy mandatory purchase requirements outlined in that bill. The proposal would impose new escrow rules, create new and revised sample notice forms and clauses, and outline the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.
In the CUNA letter, Deputy General Counsel Mary Dunn requested that the agencies extend compliance dates or provide waivers when an institution is unable to meet a compliance date due to circumstances beyond its control.
Dunn said CUNA supports the private flood insurance provision in the proposal, but noted it should be at a lender's discretion whether to accept this insurance. Further, state insurance regulators should be required to provide documentation similar to what is required for statutory private insurance, she wrote.
CUNA also supports the proposed escrow requirements, but also requested additional clarification for home equity lines of credit and other second liens, which CUNA believes should not be covered. The comment letter also asked regulators to compare escrow requirement exceptions contained in the Biggert-Waters Act with Regulation Z to ensure consistency.
"We are concerned that the proposal complicates the new statutory escrow exception by creating multiple escrow schemes under which credit unions will be required to establish escrow accounts for flood insurance but possibly not for taxes and other related items," Dunn wrote.
For the full CUNA comment letter, use the resource link.