Compliance Alert
On April 7, 2016, the Board of Governors of the Federal Reserve System issued Consumer Affairs (CA) Letter 16-1 to address the new examination procedures for the Flood Disaster Protection Act.
The Task Force on Consumer Compliance of the Federal Financial Institutions Examination Council recently developed interagency examination procedures for the Flood Disaster Protection Act (FDPA). The revised procedures supersede the prior procedures transmitted in CA 97-1.
The procedures were updated to reflect a July 2015 interagency rulemaking addressing force placement of flood insurance, escrow of flood insurance premiums and fees, and exemption to the mandatory purchase of flood insurance requirement for certain detached structures. This rulemaking was the subject of the article “Agencies Issue Final Rule for New Flood Insurance Requirements” in the Third/Fourth Quarter 2015 issue of Consumer Compliance Outlook. The agencies also conducted a webinar on the new requirements in October 2015. A follow-up Q&A article from the webinar begins on page 1 in this issue of Outlook.
With the implemented changes in the July 2015 rulemaking, the procedures require examiners to verify that the institution provides a refund to the borrower of all force-placed insurance premiums and any fees that the borrower paid during any period of overlap between the borrower’s policy and the force-placed policy. The examination objectives in the new procedures include a requirement to determine whether the institution’s flood insurance premiums need to be escrowed if mandated by law. In addition, the procedures include a requirement that, if a detached structure is not covered by flood insurance, the examiner must review the institution’s documentation for this conclusion and verify that the structure meets the exemption.