FIL-28-2014
May 30, 2014
Interagency Statement on Increased Maximum Flood Insurance Coverage for “Other Residential Buildings”
Printable Format:
Summary:
The FDIC, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the National Credit Union Administration, and the Farm Credit Administration (collectively, the agencies) are issuing an interagency statement regarding the new National Flood Insurance Program (NFIP) maximum limit of flood insurance coverage for non-condominium residential buildings designed for use for five or more families (classified by the NFIP as “Other Residential Buildings”). The guidance discusses the agencies’ expectations and a financial institution’s responsibilities when, as a result of the increase in the maximum limit of building coverage for such properties, a financial institution determines that a building securing a designated loan is covered by flood insurance in an amount less than the amount required under federal flood insurance law.
Statement of Applicability to Institutions With Less Than $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised financial institutions.
Highlights:
- Under Section 100204 of the Biggert-Waters Flood Insurance Reform Act of 2012, the maximum limit of building coverage available for non-condominium residential buildings designed for use for five or more families, classified as “Other Residential Buildings” by the NFIP, has been increased from $250,000 per building to $500,000. The maximum contents coverage for all policies covering Other Residential Buildings will remain $100,000 per policy.
- The new coverage limits are available for new policies, policy renewals, or existing policies with change endorsements that are effective on or after June 1, 2014. The Federal Emergency Management Agency has directed insurers that issue NFIP policies to provide all Other Residential policyholders with a letter informing them prior to June 1, 2014, of the new policy limits.
- The increase in the maximum amount of flood insurance coverage available under the NFIP could affect the minimum amount of flood insurance required for both existing and future loans secured by these Other Residential Buildings.
- If, as a result of the increase in the maximum limit of building coverage for these buildings, a lender or its servicer determines on or after June 1, 2014, that the building securing the designated loan is now covered by flood insurance in an amount less than required by federal flood insurance regulation, it should take steps to ensure that the borrower obtains sufficient coverage, including force placing insurance pursuant to federal law.