PART ONE.
Today I submitted Comments to proposed joint rulemaking by five (5) Federal agencies. Flood Insurance is the topic of their proposed Rules. The period for public Comments closes one week from today, on December 29, 2014.
Specifically, the five agencies jointly requested Comments on their proposed Rules regarding “Loans in Areas Having Special Flood Hazards”. What follows is the first of my Comments.
If you agree with my Comments I urge you to tell the agencies so, by leaving your own Comments. If you disagree with my Comments I urge you to tell the agencies so, by leaving your own Comments.
Everything you need is here. You can leave your Comments at the Federal eRulemaking Portal. The web address is given below. Or you can send a joint EMail to the five agencies. Their EM Addresses are listed below too. In either case, the “subject line” or “re clause” information that you need for your Comments is also set out below for your ease of use.
December 22, 2014
BY FEDERAL eRULEMAKING PORTAL AND VIA EMAIL
Federal eRulemaking Portal:
OCC EMail Add.: regs.comments@occ.treas.gov
Board EM Add.: regs.comments@federalreserve.gov
FDIC EM Add.: comments@FDIC.gov
FCA EM Add.: reg-comm@fca.gov
NCUA EM Add.: regcomments@ncua.gov
Re: “Loans in Areas Having Special Flood Hazards”.
OCC: Docket ID OCC-2014-0016
Board: Docket No. R-1498
RIN 7100-AE22
FDIC: “Loans in Areas Having
Special Flood Hazards”.
FCA: “Law & Regulations”/“FCA Regulations”
/“Public Comments”
NCUA: RIN 3133-AE40
To the Agencies:
SUMMARY OF MY COMMENTS IN THIS LETTER:
(1) The Agencies’ Joint Notice of Proposed Rulemaking makes clear that flood insurance required under the National Flood Insurance Act and Flood Disaster Protection Act, as amended by the Homeowner Flood Insurance Affordability Act of 2014, is not required for any structure that is part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence. This is not clear in the Agencies’ Joint Proposed Rule however. The proposal in my first Comment would make this clear in the proposed Rule and, since compliance with the Act and Rule does not require flood insurance for such structures, then a lender’s or servicer’s requirement that a borrower obtain flood insurance for such structures is not immunized either by the Act or by the Rule.
* * *
These Comments are in response to your Joint Notice of Proposed Rulemaking published beginning at 79 Federal Register 64518 (Oct. 30, 2014).
(1) My first Comment is in response in particular to your joint solicitation for comment on whether Section 13 of HFIAA should be clarified. Section 13(a) of HFIAA in particular amends Section 102 of the Flood Disaster Protection Act of 1973 (found at 42 USC § 4012a(c)), by adding the new paragraph which appears in the proposed Rule at this time. In order to clarify the proposed Rule, I would also add the following language which is consistent with Section 13 of HFIAA in this regard. I have printed the language I propose in boldfaced type for your ease of reference:
Borrowers may still wish to obtain, and mortgage lenders may still require borrowers to maintain, flood insurance even when it is not required by the National Flood Insurance Act or National Flood Insurance Plan or Flood Disaster Protection Act, all as amended. However, if a mortgage lender requires a borrower to maintain flood insurance even when it is not required, the mortgage lender is not immunized from liability in that respect since flood insurance is not required by the NFIA or by the NFIP or by the FDPA and no basis for extending immunity from any liability exists in the event that a mortgage lender requires a borrower to maintain flood insurance even when it is not required.
The Agencies’ Joint Notice of Proposed Rulemaking makes it clear that flood insurance is not required for any structure that is part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence, as do the Agencies’ proposed Rules. The Agencies’ Joint Notice of Proposed Rulemaking also makes it clear that mortgage lenders may require borrowers to obtain additional flood insurance even when it is not required by the Act, but the proposed Rules do not make this clear. Consistent with both of the two Subsections of Section 13, Subsections 13(a) and (b) of HFIAA, the language proposed above clarifies that mortgage lenders may require borrowers to obtain additional flood insurance even when it is not required by the Act.
Further, where the Act, as amended, does not apply, of course neither do its provisions or authorizations for immunity regarding compliance with its provisions apply, since the Act by definition does not require any conduct in that situation. The proposed language makes that equally clear to borrowers and mortgage lenders alike.
This provision would set forth a new subparagraph in the following Rules of the five (5) respective joint Agencies involved:
- OCC: This would add a new 12 CFR § 22.4(d).
- Board: This would add a new 12 CFR § 208.25(d)(4).
- FDIC: This would add a new 12 CFR § 339.4(d).
- FCA: This would add a new 12 CFR § 614.4930(c)(4).
- NCUA: This would add a new 12 CFR § 760.4(d).
Part Two of “A Modest Proposal: Comments to New Flood Insurance Rules” will be published tomorrow on Insurance Claims and Bad Faith Law Blog. Please Read The Disclaimer. ©2014 by Dennis J. Wall. All rights reserved.