Congress Scales Back Flood Insurance Reform

March 5, 2014 at 8:37 am 1 comment

It took a little longer than anticipated but the House of Representatives passed legislation on Tuesday delaying flood insurance rate increases previously mandated by bipartisan legislation passed in 2012.  The legislation, which passed with Democratic support, was a nice victory for New York’s Staten island Congressman Michael Grimm. 

As I explained in a recent blog, the 2012 reforms have resulted in sharp increases in flood insurance rates and Congressmen were justifiably concerned that without delaying these rate increases many homeowners in flood zones would find it unaffordable to live in these communities.  As Representative Shelley Moore Caputo (R-West Virginia) said during last evening’s debate:  in some cases, the choice of homeowners “was to either spend life savings on their flood insurance bills or walk away from their house, ruining their credit.” 

However, the bill still leaves credit unions in compliance limbo.  Specifically, the federal agencies have proposed regulations mandated by the 2012 bill requiring that institutions with $1 billion or more in assets establish escrow accounts for the payment of flood insurance premiums (12 U.S.C.A 4012a).  The NCUA and other regulators issued a joint guidance opining that the escrow provision doesn’t take effect until the regulations are promulgated, which they anticipate will be finalized in sufficient time to allow lenders to implement them prior to July 2014. 

Based on my reading of the bill passed by the House, the escrow requirement, as well as other mandates regarding the acceptance of private flood insurance, remain intact.  But we won’t know this for sure until the Senate acts on the House bill, which it is expected to do shortly.  I would hope that at that point federal regulators would issue a subsequent guidance to clarify the status of flood insurance regulations.


Entry filed under: Compliance, Regulatory. Tags: , , .

Credit Unions Put Their Money Where Their Mouths Are A Regulatory Dictatorship?

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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