COMPLIANCE UPDATE: Flood Insurance Compliance Hardly Water under the Bridge



Credit unions extending credit secured by structures in special flood hazard areas better familiarize themselves with NCUA’s new flood insurance requirements. Read on for a succinct, section-by-section breakdown of all the most pertinent rule changes. Knowing their responsibilities will help keep your lending and compliance teams’ head above the waters.

It’s hard to find an area of financial services that has undergone more transformation in the last five years than mortgage lending. And it isn’t over yet. This fall, your cooperative’s responsibilities when it comes to flood insurance are getting a makeover of their own. Let’s take a closer look.

At its monthly board meeting in June, the National Credit Union Association (NCUA) approved a joint agency rule implementing changes to its flood insurance requirements. These changes came as a result of the Homeowner Flood Insurance Affordability Act of 2014, which intended to rectify increases consumers were experiencing in their insurance premiums. Most components of the rule will be effective October 1, 2015.

If your credit union is extending credit secured by buildings or mobile homes located in special flood hazard areas, it’s important for you to become familiar with these new requirements. What follows is a breakdown of each section of the rule, including your lending and compliance teams’ responsibilities.

Requirement to Purchase Flood Insurance
The rule clarifies flood insurance is not required for land. Specifically, it reads: “Flood insurance coverage under the Act is limited to the building or mobile home and any personal property that secures a loan and not the land itself.” Exemptions from Flood Insurance Coverage The rule adds the following exemption from mandatory flood insurance coverage: “Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence.”

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