Flood Insurance Issue Update

ABA' congressional flood advocacy is focused on timely and long term reauthorization, as well as reforms to address the program's sustainability, affordability, and availability, including providing lenders with the tools needed to better serve their customers.

Lack of guidance has complicated banker efforts to comply with flood insurance requirements.

In June 2020, the regulatory agencies released draft Questions and Answers, the first substantial update to this resource since 2009. In August 2019, the regulatory agencies released updated examination procedures on the implementing regulation for private flood insurance acceptance that went into effect on July 1, 2019. The regulators have not yet released draft Interagency Questions and Answers pertaining to private flood insurance, even though the private flood provisions have been in place since 2012 Biggert Waters Act and the 2019 Joint Private Rule.

Bankers continue to report to ABA that examiners are citing violations for matters not covered by the regulations. Additionally, conflicts between the requirements for the Government Sponsored Enterprise (GSE) secondary market, the federal housing agencies, and the banking regulators' private flood rule have presented challenges to bankers seeking to use the rule's Compliance Aid provision.

Recommended Action Items

Timely Reauthorization

Tell your member of Congress that it is critical for the NFIP to continue with no lapse.

Coordination and consistency in requirements between federal agencies

. Currently, private flood requirements vary between the Government Sponsored Enterprises, prudential regulators, and other housing agencies such as the Department of Veterans Affairs and Federal Housing Authority. Urge Congress to direct these agencies to be consistent with their requirements to ease lenders' compliance burden.

Issue the private flood compliance Questions and Answers

Flood compliance is often complicated, with rules and standards that can be interpreted in varying ways, but still carry civil money penalties if deemed non compliant. Encourage the banking agencies to answer questions raised during the implementation of the new private rule.