On September 7, 2017, the Office of the Comptroller of the Currency (“OCC”) issued the revised Flood Disaster Protection Act (“FDPA”) booklet (the “Booklet”) of the Comptroller’s Handbook, which replaces a similarly titled booklet that the OCC released in 1999.
The FDPA Booklet was updated to reflect the changes made to the flood insurance requirements as a result of the prior amendments to the FDPA and its implementing regulations. Specifically, the revised Booklet was updated to include, in part, the following:
- The exemption for certain detached structures from the requirement to purchase flood insurance. Under this exemption, a structure that is part of a residential property but is detached from the primary residential structure of the property and does not serve as a residence is not required to be covered by flood insurance. A bank may choose, however, to require flood insurance on the detached structure to protect the collateral securing the loan.
- The requirement for a bank, or a servicer acting on its behalf, to escrow premiums and fees for flood insurance for any loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016. Note that certain loans are excepted from this requirement. In addition, small lenders that have total assets of less than $1 billion and, as of July 6, 2012, (1) were not required by applicable federal or state law to escrow taxes or insurance for the entire term of the loan, and (2) did not have a policy of consistently requiring escrow of taxes or insurance, are also excepted from this requirement.
- The requirement for a bank that is subject to the escrow requirement to offer and make available to borrowers the option to escrow flood insurance premiums and fees for loans that are outstanding as of January 1, 2016. Banks were required to deliver information to borrowers on the escrow option by June 30, 2016, and to implement the escrow as soon as reasonably practicable after receiving a borrower’s request to escrow.
- The revisions to the force placement provision of the FDPA clarifying that a bank, or a servicer acting on its behalf, has authority to charge a borrower for the cost of force-placed flood insurance coverage beginning on the date the borrower-purchased coverage lapsed or became insufficient. In addition, the bank must terminate force-placed insurance coverage within 30 days of receipt of confirmation of a borrower’s existing policy and must refund to the borrower all premiums and fees for force-placed insurance paid by the borrower during any period of overlap between the borrower’s policy and the force-placed policy.
The OCC’s revised FDPA Booklet can be found at: https://www.occ.treas.gov/publications/publications-by-type/comptrollers-handbook/flood-disaster-protection-act/pub-ch-flood-disaster-protection-act.pdf.