The Federal Deposit Insurance Corporation (FDIC) joined the OCC and Federal Reserve in issuing guidance providing regulated lending institutions direction on how to handle lender placement of flood insurance in response to FEMA’s WYO Bulletin extending the NFIP policy payment grace period from 30 to 120 days. The guidance is in the form of FAQs issued to address general COVID-19 relief and also addresses how lenders should deal with possible COVID-19 related triggers of MIRE events.
FEMA Grace Period
Similar to guidance previously released by the OCC and the Federal Reserve, the FDIC is providing lenders with flexibility on how to handle force placement during the 120-day grace period. According to the FDIC, “a lender may provide the required notice to the borrower after determining the policy has expired with an indication that the NFIP grace period has been extended for 120 days.” Regardless of the method chosen by lenders with respect to force placement, the FDIC mandates that in all instances a lender must force place flood insurance if the borrower does not pay the premium by the end of the extended FEMA grace period.
As a proactive measure, if Proctor is providing flood insurance borrower notification services for your institution, a disclosure informing the borrower of the extended grace period for NFIP flood insurance premium payments will be included with lender placement notifications. No other changes will be made to your institution’s notification cycle. If Proctor does not provide flood insurance borrower notifications for your institution, please review the OCC, Federal Reserve and FDIC guidance to determine if any changes need to be made to your flood compliance notifications or procedures.
COVID-19 Related MIRE Events
Upon making, increasing, renewing, or extending (MIRE) of any loan, federal flood insurance requirements may be implicated. For COVID-19 emergency triggers of a MIRE event, lenders may:
- Rely on a previous flood hazard determination on file, even if the flood determination was made outside of the typically allowed seven year time period or if the flood map has been revised;
- Delay establishment of escrow accounts for applicable loans until after the COVID-19 emergency; and
- Delay providing written flood notice to a borrower until after the COVID-19 emergency.
The FDIC also clarifies that payment holidays and skip-a-payment programs are not MIRE events for purposes of flood insurance mandatory purchase requirements because the term of the loan is not extended. However, if the lender extends the term of the loan or increases the loan amount, this will constitute a MIRE event.
To review the FDIC’s COVID-19 FAQs pertaining to flood insurance, follow this link to Questions 26-28 and 30.
Please contact your account representative if you have any questions.