On June 22, the Agencies announced a joint final rule that implements certain provisions of the both the Homeowner Flood Insurance Affordability Act and Biggert-Waters Flood Insurance Reform Act. A few of the highlights include:
- Requires institutions to provide borrowers of residential loans outstanding as of January 1, 2016, the option to escrow flood insurance premiums and fees.
- New and revised sample notice forms and clauses concerning the escrow requirement and the option.
- An exemption from the requirement to purchase flood insurance for a structure that is a part of a residential property if that structure is detached from the primary residence and does not also serve as a residence. One significant clarification: To be eligible for the exemption, the detached structure must be used for “consumer” purposes and cannot be used for commercial or agricultural purposes.
- Clarified that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage beginning on the date on which the borrower’s coverage lapses or becomes insufficient.
- Stipulates the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.
One thing not addressed in this final rule was private flood insurance. The Agencies stated that they plan to address this at another time.
We hope this final rule will answer many of the outstanding questions. We have already started dissecting the final rule and will have more in our August Newsletter. We are also working on a webinar to address these changes. Stay tuned!