This is the third installment in a series of blogs covering the sessions I attended at this year’s American Banker’s Association (ABA) Regulatory Compliance Conference (RCC) in New Orleans.
This session was all about flood reform. It covered most of the major compliance related issues related to Biggert Waters 2012 and the Homeowner Flood Insurance Affordability Act of 2014 (HFIA). It was a great session with a lot of case studies and discussion points.
Many attendees, including myself, were hoping for further clarification on a specific provision within the 2014 HFIA related to detached residential structures. Unfortunately, the panel didn’t have anything new on this and simply confirmed that we need clarification. The good news is that they did send a strong hint to the regulatory agencies in attendance that more guidance and clarification are needed sooner than later. As to the issues surrounding the detached residential structure provision, here are the takeaways:
• The 2014 Act uses the phrase “shall not be required”. We aren’t sure what this means. Does this mean you aren’t allowed to require flood insurance on certain detached residential (non-dwelling) structures? The panel seemed particularly concerned with that language in light of some of the ongoing class action lawsuits related to flood insurance. If true, the language seems to fly in the face of safety and soundness.
• What exactly IS a “residential” structure? This is especially important when it comes to an acreage property (specifically something that used to be a farm but isn’t anymore), farm or ranch with outbuildings.
• When is this provision effective? Is it effective now or will it require regulatory agency regulation? It sounds like there are some banks that are already following this provision (to some degree). It’s my opinion that we should probably apply the “wait and see” approach.