§ 4012a.
(a)
Amount and term of coverage
After the expiration of sixty days following December 31, 1973, no Federal officer or agency shall approve any financial assistance for acquisition or construction purposes for use in any area that has been identified by the Administrator as an area having special flood hazards and in which the sale of flood insurance has been made available under the National Flood Insurance Act of 1968 [42 U.S.C. 4001 et seq.], unless the building or mobile home and any personal property to which such financial assistance relates is covered by flood insurance in an amount at least equal to its development or project cost (less estimated land cost) or to the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less: Provided, That if the financial assistance provided is in the form of a loan or an insurance or guaranty of a loan, the amount of flood insurance required need not exceed the outstanding principal balance of the loan and need not be required beyond the term of the loan. The requirement of maintaining flood insurance shall apply during the life of the property, regardless of transfer of ownership of such property.
(b)
Requirement for mortgage loans
(1)
Regulated lending institutions
Each Federal entity for lending regulation (after consultation and coordination with the Financial Institutions Examination Council established under the Federal Financial Institutions Examination Council Act of 1974 [
12 U.S.C. 3301 et seq.]) shall by regulation direct regulated lending institutions—
(A)
not to make, increase, extend, or renew any loan secured by improved real estate or a mobile home located or to be located in an area that has been identified by the Administrator as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 [
42 U.S.C. 4001 et seq.], unless the building or mobile home and any personal property securing such loan is covered for the term of the loan by flood insurance in an amount at least equal to the outstanding principal balance of the loan or the maximum limit of coverage made available under the Act with respect to the particular type of property, whichever is less; and
(B)
to accept private flood insurance as satisfaction of the flood insurance coverage requirement under subparagraph (A) if the coverage provided by such private flood insurance meets the requirements for coverage under such subparagraph.
(2)
Federal agency lenders
A Federal agency lender may not make, increase, extend, or renew any loan secured by improved real estate or a mobile home located or to be located in an area that has been identified by the Administrator as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, unless the building or mobile home and any personal property securing such loan is covered for the term of the loan by flood insurance in the amount provided in paragraph (1)(A). Each Federal agency lender shall accept private flood insurance as satisfaction of the flood insurance coverage requirement under the preceding sentence if the flood insurance coverage provided by such private flood insurance meets the requirements for coverage under such sentence. Each Federal agency lender shall issue any regulations necessary to carry out this paragraph. Such regulations shall be consistent with and substantially identical to the regulations issued under paragraph (1)(A).
(3)
Government-sponsored enterprises for housing
The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall implement procedures reasonably designed to ensure that, for any loan that is—
(A)
secured by improved real estate or a mobile home located in an area that has been identified, at the time of the origination of the loan or at any time during the term of the loan, by the Administrator as an area having special flood hazards and in which flood insurance is available under the National Flood Insurance Act of 1968, and
(B)
purchased by such entity,
the building or mobile home and any personal property securing the loan is covered for the term of the loan by flood insurance in the amount provided in paragraph (1)(A). The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall accept private flood insurance as satisfaction of the flood insurance coverage requirement under paragraph (1)(A) if the flood insurance coverage provided by such private flood insurance meets the requirements for coverage under such paragraph and any requirements established by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, respectively, relating to the financial solvency, strength, or claims-paying ability of private insurance companies from which the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation will accept private flood insurance.
(4)
Applicability
(A)
Existing coverage
Except as provided in subparagraph (B), paragraph (1) shall apply on September 23, 1994.
(B)
New coverage
Paragraphs (2) and (3) shall apply only with respect to any loan made, increased, extended, or renewed after the expiration of the 1-year period beginning on September 23, 1994. Paragraph (1) shall apply with respect to any loan made, increased, extended, or renewed by any lender supervised by the Farm Credit Administration only after the expiration of the period under this subparagraph.
(C)
Continued effect of regulations
Notwithstanding any other provision of this subsection, the regulations to carry out paragraph (1), as in effect immediately before September 23, 1994, shall continue to apply until the regulations issued to carry out paragraph (1) as amended by [section 522(a) of Public Law 103–325] take effect.
(5)
Rule of construction
Nothing in this subsection shall be construed to supersede or limit the authority of a Federal entity for lending regulation, the Federal Housing Finance Agency, a Federal agency lender, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation to establish requirements relating to the financial solvency, strength, or claims-paying ability of private insurance companies from which the entity or agency will accept private flood insurance.
(6)
Notice
(A)
In general
Each lender shall disclose to a borrower that is subject to this subsection that—
(i)
flood insurance is available from private insurance companies that issue standard flood insurance policies on behalf of the national flood insurance program or directly from the national flood insurance program;
(ii)
flood insurance that provides the same level of coverage as a standard flood insurance policy under the national flood insurance program may be available from a private insurance company that issues policies on behalf of the company; and
(iii)
the borrower is encouraged to compare the flood insurance coverage, deductibles, exclusions, conditions and premiums associated with flood insurance policies issued on behalf of the national flood insurance program and policies issued on behalf of private insurance companies and to direct inquiries regarding the availability, cost, and comparisons of flood insurance coverage to an insurance agent.
(B)
Rule of construction
Nothing in this paragraph shall be construed as affecting or otherwise limiting the authority of a Federal entity for lending regulation to approve any disclosure made by a regulated lending institution for purposes of complying with subparagraph (A).
(7)
Private flood insurance defined
In this subsection, the term “private flood insurance” means an insurance policy that—
(A)
is issued by an insurance company that is—
(i)
licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of that State or jurisdiction; or
(ii)
in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property, is
1
So in original. The word “is” probably should not appear.
recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the State or jurisdiction where the property to be insured is located;
(B)
provides flood insurance coverage which is at least as broad as the coverage provided under a standard flood insurance policy under the national flood insurance program, including when considering deductibles, exclusions, and conditions offered by the insurer;
(C)
includes—
(i)
a requirement for the insurer to give 45 days’ written notice of cancellation or non-renewal of flood insurance coverage to—
(I)
the insured; and
(II)
the regulated lending institution or Federal agency lender;
(ii)
information about the availability of flood insurance coverage under the national flood insurance program;
(iii)
a mortgage interest clause similar to the clause contained in a standard flood insurance policy under the national flood insurance program; and
(iv)
a provision requiring an insured to file suit not later than 1 year after date of a written denial of all or part of a claim under the policy; and
(D)
contains cancellation provisions that are as restrictive as the provisions contained in a standard flood insurance policy under the national flood insurance program.
(e)
Placement of flood insurance by lender
(1)
Notification to borrower of lack of coverage
If, at the time of origination or at any time during the term of a loan secured by improved real estate or by a mobile home located in an area that has been identified by the Administrator (at the time of the origination of the loan or at any time during the term of the loan) as an area having special flood hazards and in which flood insurance is available under the National Flood Insurance Act of 1968 [42 U.S.C. 4001 et seq.], the lender or servicer for the loan determines that the building or mobile home and any personal property securing the loan is not covered by flood insurance or is covered by such insurance in an amount less than the amount required for the property pursuant to paragraph (1), (2), or (3) of subsection (b), the lender or servicer shall notify the borrower under the loan that the borrower should obtain, at the borrower’s expense, an amount of flood insurance for the building or mobile home and such personal property that is not less than the amount under subsection (b)(1), for the term of the loan.
(2)
Purchase of coverage on behalf of borrower
If the borrower fails to purchase such flood insurance within 45 days after notification under paragraph (1), the lender or servicer for the loan shall purchase the insurance on behalf of the borrower and may charge the borrower for the cost of premiums and fees incurred by the lender or servicer for the loan in purchasing the insurance, including premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.
(3)
Termination of force-placed insurance
Within 30 days of receipt by the lender or servicer of a confirmation of a borrower’s existing flood insurance coverage, the lender or servicer shall—
(A)
terminate any insurance purchased by the lender or servicer under paragraph (2); and
(B)
refund to the borrower all premiums paid by the borrower for any insurance purchased by the lender or servicer under paragraph (2) during any period during which the borrower’s flood insurance coverage and the insurance coverage purchased by the lender or servicer were each in effect, and any related fees charged to the borrower with respect to the insurance purchased by the lender or servicer during such period.
(4)
Sufficiency of demonstration
For purposes of confirming a borrower’s existing flood insurance coverage, a lender or servicer for a loan shall accept from the borrower an insurance policy declarations page that includes the existing flood insurance policy number and the identity of, and contact information for, the insurance company or agent.
(5)
Review of determination regarding required purchase
(A)
In general
The borrower and lender for a loan secured by improved real estate or a mobile home may jointly request the Administrator to review a determination of whether the building or mobile home is located in an area having special flood hazards. Such request shall be supported by technical information relating to the improved real estate or mobile home. Not later than 45 days after the Administrator receives the request, the Administrator shall review the determination and provide to the borrower and the lender with a letter stating whether or not the building or mobile home is in an area having special flood hazards. The determination of the Administrator shall be final.
(B)
Effect of determination
Any person to whom a borrower provides a letter issued by the Administrator pursuant to subparagraph (A), stating that the building or mobile home securing the loan of the borrower is not in an area having special flood hazards, shall have no obligation under this title
2
See References in Text note below.
to require the purchase of flood insurance for such building or mobile home during the period determined by the Administrator, which shall be specified in the letter and shall begin on the date on which such letter is provided.
(C)
Effect of failure to respond
If a request under subparagraph (A) is made in connection with the origination of a loan and the Administrator fails to provide a letter under subparagraph (A) before the later of (i) the expiration of the 45-day period under such subparagraph, or (ii) the closing of the loan, no person shall have an obligation under this title 2 to require the purchase of flood insurance for the building or mobile home securing the loan until such letter is provided.
(6)
Applicability
This subsection shall apply to all loans outstanding on or after September 23, 1994.
(f)
Civil monetary penalties for failure to require flood insurance or notify
(1)
Civil monetary penalties against regulated lenders
Any regulated lending institution that is found to have a pattern or practice of committing violations under paragraph (2) shall be assessed a civil penalty by the appropriate Federal entity for lending regulation in the amount provided under paragraph (5).
(2)
Lender violations
The violations referred to in paragraph (1) shall include—
(A)
making, increasing, extending, or renewing loans in violation of—
(i)
the regulations issued pursuant to subsection (b) of this section;
(ii)
the escrow requirements under subsection (d) of this section; or
(iii)
the notice requirements under section 1364 of the National Flood Insurance Act of 1968 [
42 U.S.C. 4104a]; or
(B)
failure to provide notice or purchase flood insurance coverage in violation of subsection (e) of this section.
(3)
Civil monetary penalties against GSE’s
(A)
In general
If the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation is found by the Director of the Federal Housing Finance Agency to have a pattern or practice of purchasing loans in violation of the procedures established pursuant to subsection (b)(3), the Director of such Office
3
So in original. Probably should be “Agency”.
shall assess a civil penalty against such enterprise in the amount provided under paragraph (5) of this subsection.
(B)
“Enterprise” defined
For purposes of this subsection, the term “enterprise” means the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.
(4)
Notice and hearing
A penalty under this subsection may be issued only after notice and an opportunity for a hearing on the record.
(5)
Amount
A civil monetary penalty under this subsection may not exceed $2,000 for each violation under paragraph (2) or paragraph (3).
(6)
Lender compliance
Notwithstanding any State or local law, for purposes of this subsection, any regulated lending institution that purchases flood insurance or renews a contract for flood insurance on behalf of or as an agent of a borrower of a loan for which flood insurance is required shall be considered to have complied with the regulations issued under subsection (b).
(7)
Effect of transfer on liability
Any sale or other transfer of a loan by a regulated lending institution that has committed a violation under paragraph (1), that occurs subsequent to the violation, shall not affect the liability of the transferring lender with respect to any penalty under this subsection. A lender shall not be liable for any violations relating to a loan committed by another regulated lending institution that previously held the loan.
(8)
Deposit of penalties
Any penalties collected under this subsection shall be paid into the National Flood Mitigation Fund under section 1367 of the National Flood Insurance Act of 1968 [42 U.S.C. 4104d].
(9)
Additional penalties
Any penalty under this subsection shall be in addition to any civil remedy or criminal penalty otherwise available.
(10)
Statute of limitations
No penalty may be imposed under this subsection after the expiration of the 4-year period beginning on the date of the occurrence of the violation for which the penalty is authorized under this subsection.
(h)
Fee for determining location
Notwithstanding any other Federal or State law, any person who makes a loan secured by improved real estate or a mobile home or any servicer for such a loan may charge a reasonable fee for the costs of determining whether the building or mobile home securing the loan is located in an area having special flood hazards, but only in accordance with the following requirements:
(1)
Borrower fee
The borrower under such a loan may be charged the fee, but only if the determination—
(A)
is made pursuant to the making, increasing, extending, or renewing of the loan that is initiated by the borrower;
(B)
is made pursuant to a revision or updating under section 1360(f)
4
So in original. Probably should be followed by “of the National Flood Insurance Act of 1968”.
[
42 U.S.C. 4101(f)] of the floodplain areas and flood-risk zones or publication of a notice or compendia under subsection (h) or (i) of section 1360 [
42 U.S.C. 4101(h), (i)] that affects the area in which the improved real estate or mobile home securing the loan is located or that, in the determination of the Administrator, may reasonably be considered to require a determination under this subsection; or
(C)
results in the purchase of flood insurance coverage pursuant to the requirement under subsection (e)(2).
(2)
Purchaser or transferee fee
The purchaser or transferee of such a loan may be charged the fee in the case of sale or transfer of the loan.
([Pub. L. 93–234, title I, § 102], Dec. 31, 1973, [87 Stat. 978]; [Pub. L. 98–181, title I] [title IV, § 451(e)(1)], Nov. 30, 1983, [97 Stat. 1229]; [Pub. L. 103–325, title V], §§ 522–526, 531, 582(c), Sept. 23, 1994, [108 Stat. 2257–2262], 2267, 2287; [Pub. L. 110–289, div. A, title I, § 1161(e)], July 30, 2008, [122 Stat. 2780]; [Pub. L. 112–141, div. F, title II], §§ 100208, 100209(a), 100238(a)(1), 100239(a), 100244(a), July 6, 2012, [126 Stat. 919], 920, 958, 966; [Pub. L. 112–281, § 1], Jan. 14, 2013, [126 Stat. 2485]; [Pub. L. 113–89], §§ 13(a), 25(a), Mar. 21, 2014, [128 Stat. 1026], 1030.)