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Financial Services Law Insights and Observations

OCC Updates Comptroller’s Licensing Manual to Provide Revised Guidance on Flood Insurance Requirements

Agency Rule-Making & Guidance OCC Flood Insurance Licensing Department of Treasury Force-placed Insurance Escrow Mortgages Biggert-Waters Act

Agency Rule-Making & Guidance

On September 7, the OCC released OCC Bulletin 2017-35 announcing a replacement of its handbook titled “Flood Disaster Protection Act” (FDPA)—last issued in 1999—to reflect recent amendments to the FDPA and implement regulations that resulted from the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) and the Homeowner Flood Insurance Affordability Act of 2014. The booklet, which is part of the Comptroller’s Licensing Manual, clarifies the following changes, among other things:

  • flood insurance requirement exemptions for certain detached nonresidential structures;
  • a requirement that banks—or servicers acting on behalf of a bank—escrow flood insurance premiums and fees for “any loan secured by a residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016,” and also lists exemptions to the requirement;
  • a requirement that banks and servicers “subject to the escrow requirement” must provide borrowers the option to escrow flood insurance premiums and fees and are required to implement the escrow “as soon as reasonably practicable” after the request has been received;
  • FDPA provisions on force-placed insurance, including termination and refund requirements; and
  • “examination procedures for determining compliance with the detached structure, escrow, and force placement provisions.”

Notably, the OCC stated that the Biggert-Waters Act provision, which requires the acceptance of private flood insurance policies that meets specified criteria to satisfy the mandatory purchase requirement, has not yet been adopted and will be addressed separately.

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