ARLINGTON, Va.—What do credit unions need to know about forced-placed insurance under the NCUA's flood insurance rules?
“The National Flood Insurance Act of 1968 (NFIA), as amended and implemented by Part 760 of NCUA’s regulations, generally requires that credit unions escrow premiums and fees for flood insurance when making, increasing, extending or renewing loans secured by residential improved real estate or mobile homes, unless the credit union or a loan qualifies for a statutory exception,” NAFCU Regulatory Compliance Counsel Reginald Watson explained.
The NFIP's authorization was extended to Sept. 30 in the government funding package passed in December.
‘Good Opportunity for Review’
News of the Office of the Comptroller of the Currency’s (OCC) recent $18 million consent order against Citibank provides a “good opportunity to review your credit union’s policies and procedures for force-placing flood insurance,” said Watson, noting that a spike of enforcement in this area is not expected.
“The OCC found that Citibank in some cases did not force-place flood insurance on designated loans in a timely manner,” Watson said. “This may be a helpful reminder that credit unions may be held responsible for the compliance failures of its servicers and third-parties. Further, NCUA expects credit unions engaging in third-party relationships to implement certain internal control measures and policies to verify the activities of a credit union’s servicers, which may help mitigate some of these risks.”
For more information on this topic, Watson points to FEMA’s Interagency Flood Insurance Frequently Asked Questions and an issue of the Federal Reserve’s Consumer Compliance Outlook that was dedicated to the requirements when they were first issued in 2015.