You Could Be Fined Millions of Dollars in Flood Insurance Violations
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What you NEED to Know
NFIP (National Flood Insurance Program): Provides insurance to help reduce the socia-economic impact of flood. Congress established NFIP under the National Flood Insurance Act of 1968.
Flood Insurance Rate Maps (FIRMs): Maps used by lenders to determine properties in high-risk flood areas, designated Special Flood Hazard Area (SFHA).
FDPA (Flood Disaster Protection Act of 1973): Provides penalties for lender violations of mandatory flood purchase requirements, escrow requirements, notice requirements and force placement requirements for up to $2,000 per violation.
Biggert-Waters Reform Act: This Act states that an institution may force place and charge for insurance beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.
This bank was fined $3.6M by the OCC over flood violations
We Can Help
NEWBOLD Can Clean up your
Flood Insurance Program in
3 Easy Steps:
1) Assess your flood insurance plan
2) Identify compliance gaps
3) Remediate to avoid risk and penalities
Avoid these common lender violations:
Failing to verify flood insurance is in place before a loan closes
-Confirming proof of policy purchase vs. estimate
-Being loose with borrower about proof of insurance deadline
-Waiting until last minute to provide flood insurance binder to borrower
Failing to follow the requirements for force-placed insurance
-No process to verify borrower insurance lapses
-Lenders playing loose with coverage requirements
-Clearly communicating to borrower the need for coverage of outbuildings
-Lack of follow-up with third-party vendors who enforce force-placed insurance
-Failure to update flood insurance when loans are refinanced or extended, or a new loan is issued
“Regulators are tightening the screws on lenders and their compliance to flood insurance regulations. You’re much better off to self-identify your compliance issues and start remediating before regulators come knocking on your door for a compliance audit.”
-Robert Simpson, Partner & Default Expert at Newbold Advisors
Get Started Today
Contact Robert Simpson
Newbold Advisors, LLC is a consulting and professional services company serving institutional clients in the private and public sectors.
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