Federal financial regulators have issued a reminder to lenders regarding their obligations when the National Flood Insurance Program (NFIP) is not available. The agencies stated that lenders may continue to make loans subject to federal flood insurance statutes during periods when the NFIP is unavailable, and these loans can be made without requiring federal flood insurance.
According to the Interagency Questions and Answers Regarding Flood Insurance, specifically Q&A Applicability 12, lenders are permitted to issue loans without flood insurance coverage in such situations. However, they must still perform flood determinations, provide timely and accurate notices to borrowers, and comply with other applicable sections of flood insurance regulations. Lenders are also expected to assess safety, soundness, and legal risks and manage those risks prudently during any lapse in NFIP availability. The guidance further addresses considerations related to private flood insurance options.
The National Credit Union Administration (NCUA) is among the agencies involved in this reminder. The NCUA is an independent federal agency established by Congress that regulates, charters, and supervises federal credit unions. It manages the National Credit Union Share Insurance Fund, which insures deposits for more than 143 million account holders across all federal credit unions and most state-chartered credit unions in the United States.
For additional information on regulatory guidance for lending practices during lapses in NFIP availability, refer to the Interagency Questions and Answers Regarding Flood Insurance at https://www.federalregister.gov/documents/2022/05/11/2022-10016/interagency-questions-and-answers-regarding-flood-insurance.
Media contacts for further inquiries include representatives from several regulatory agencies: Ben Mosely (FCA), LaJuan Williams-Young (FDIC), Chelsea Grate (FRB), Sierra Robinson (NCUA), and Monica McCoy (OCC).