69–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–220 

PRIVATE FLOOD INSURANCE MARKET DEVELOPMENT 

ACT OF 2017 

JULY 14, 2017.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 1422] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 1422) to amend the Flood Disaster Protection Act of 1973 

to require that certain buildings and personal property be covered 

by flood insurance, and for other purposes, having considered the 

same, report favorably thereon with an amendment and recommend that the bill as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Private Flood Insurance Market Development Act 

of 2017’’. 

SEC. 2. PRIVATE FLOOD INSURANCE. 

(a) MANDATORY PURCHASE REQUIREMENT.— 

(1) AMOUNT AND TERM OF COVERAGE.—Section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) is amended by striking ‘‘Sec. 102. (a)’’ and 

all that follows through the end of subsection (a) and inserting the following: 

‘‘SEC. 102. (a) AMOUNT AND TERM OF COVERAGE.—After the expiration of sixty 

days following the date of the enactment of this Act, no Federal officer or agency 

shall approve any financial assistance for acquisition or construction purposes for 

use in any area that has been identified by the Administrator as an area having 

special flood hazards and in which the sale of flood insurance has been made available under the National Flood Insurance Act of 1968, unless the building or mobile 

home and any personal property to which such financial assistance relates is covered by flood insurance: Provided, That the amount of flood insurance (1) in the case 

of Federal flood insurance, is at least equal to the development or project cost of 

the building, mobile home, or personal property (less estimated land cost), the outstanding principal balance of the loan, or the maximum limit of Federal flood insurance coverage made available with respect to the particular type of property, whichever is less; or (2) in the case of private flood insurance, is at least equal to the 

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development or project cost of the building, mobile home, or personal property (less 

estimated land cost), the outstanding principal balance of the loan, or the maximum 

limit of Federal flood insurance coverage made available with respect to the particular type of property, whichever is less: Provided further, That if the financial assistance provided is in the form of a loan or an insurance or guaranty of a loan, 

the amount of flood insurance required need not exceed the outstanding principal 

balance of the loan and need not be required beyond the term of the loan. The requirement of maintaining flood insurance shall apply during the life of the property, 

regardless of transfer of ownership of such property.’’. 

(2) REQUIREMENT FOR MORTGAGE LOANS.—Subsection (b) of section 102 of the 

Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(b)) is amended— 

(A) by striking paragraph (7); 

(B) by redesignating paragraph (6) as paragraph (7); 

(C) by striking the subsection designation and all that follows through 

the end of paragraph (5) and inserting the following: 

‘‘(b) REQUIREMENT FOR MORTGAGE LOANS.— ‘‘(1) REGULATED LENDING INSTITUTIONS.—Each Federal entity for lending regulation (after consultation and coordination with the Financial Institutions Examination Council established under the Federal Financial Institutions Examination Council Act of 1974) shall by regulation direct regulated lending institutions not to make, increase, extend, or renew any loan secured by improved real 

estate or a mobile home located or to be located in an area that has been identified by the Administrator as an area having special flood hazards and in which 

flood insurance has been made available under the National Flood Insurance 

Act of 1968, unless the building or mobile home and any personal property securing such loan is covered for the term of the loan by flood insurance: Provided, That the amount of flood insurance (A) in the case of Federal flood insurance, is at least equal to the outstanding principal balance of the loan or the 

maximum limit of Federal flood insurance coverage made available with respect 

to the particular type of property, whichever is less; or (B) in the case of private 

flood insurance, is at least equal to the outstanding principal balance of the 

loan or the maximum limit of Federal flood insurance coverage made available 

with respect to the particular type of property, whichever is less. 

‘‘(2) FEDERAL AGENCY LENDERS AND MORTGAGE INSURANCE AND GUARANTEE

AGENCIES.— 

‘‘(A) FEDERAL AGENCY LENDERS.—A Federal agency lender may not make, 

increase, extend, or renew any loan secured by improved real estate or a 

mobile home located or to be located in an area that has been identified 

by the Administrator as an area having special flood hazards and in which 

flood insurance has been made available under the National Flood Insurance Act of 1968, unless the building or mobile home and any personal 

property securing such loan is covered for the term of the loan by flood insurance in accordance with paragraph (1). Each Federal agency lender may 

issue any regulations necessary to carry out this paragraph. Such regulations shall be consistent with and substantially identical to the regulations 

issued under paragraph (1). 

‘‘(B) OTHER FEDERAL MORTGAGE ENTITIES.— 

‘‘(i) COVERAGE REQUIREMENTS.—Each covered Federal mortgage entity shall implement procedures reasonably designed to ensure that, for 

any loan that— 

‘‘(I) is secured by improved real estate or a mobile home located 

in an area that has been identified, at the time of the origination 

of the loan or at any time during the term of the loan, by the Administrator as an area having special flood hazards and in which 

flood insurance is available under the National Flood Insurance 

Act of 1968, and 

‘‘(II) is made, insured, held, or guaranteed by such entity, or 

backs or on which is based any trust certificate or other security 

for which such entity guarantees the timely payment of principal 

and interest, 

the building or mobile home and any personal property securing the 

loan is covered for the term of the loan by flood insurance in the 

amount provided in paragraph (1). 

‘‘(ii) DEFINITION.—For purposes of this subparagraph, the term ‘covered Federal mortgage entity’ means— 

‘‘(I) the Secretary of Housing and Urban Development, with respect to mortgages insured under the National Housing Act; 

‘‘(II) the Secretary of Agriculture, with respect to loans made, insured, or guaranteed under title V of the Housing Act of 1949; and 

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‘‘(III) the Government National Mortgage Association. 

‘‘(C) REQUIREMENT TO ACCEPT FLOOD INSURANCE.—Each Federal agency 

lender and each covered Federal mortgage entity shall accept flood insurance as satisfaction of the flood insurance coverage requirement under subparagraph (A) or (B), respectively, if the flood insurance coverage meets the 

requirements for coverage under such subparagraph and the requirements 

relating to financial strength issued pursuant to paragraph (4). 

‘‘(3) GOVERNMENT-SPONSORED ENTERPRISES FOR HOUSING.—The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation 

shall implement procedures reasonably designed to ensure that, for any loan 

that is— 

‘‘(A) secured by improved real estate or a mobile home located in an area 

that has been identified, at the time of the origination of the loan or at any 

time during the term of the loan, by the Administrator as an area having 

special flood hazards and in which flood insurance is available under the 

National Flood Insurance Act of 1968, and 

‘‘(B) purchased or guaranteed by such entity, 

the building or mobile home and any personal property securing the loan is covered for the term of the loan by flood insurance in the amount provided in paragraph (1). The Federal National Mortgage Association and the Federal Home 

Loan Mortgage Corporation shall accept flood insurance as satisfaction of the 

flood insurance coverage requirement under paragraph (1) if the flood insurance 

coverage provided meets the requirements for coverage under that paragraph 

and the requirements relating to financial strength issued pursuant to paragraph (4). 

‘‘(4) REQUIREMENTS REGARDING FINANCIAL STRENGTH.—The Director of the 

Federal Housing Finance Agency, in consultation with the Federal National 

Mortgage Association, the Federal Home Loan Mortgage Corporation, the Secretary of Housing and Urban Development, the Government National Mortgage 

Association, and the Secretary of Agriculture shall develop and implement requirements relating to the financial strength of private insurance companies 

from which such entities and agencies will accept private flood insurance, provided that such requirements shall not affect or conflict with any State law, regulation, or procedure concerning the regulation of the business of insurance. 

‘‘(5) APPLICABILITY.— 

‘‘(A) EXISTING COVERAGE.—Except as provided in subparagraph (B), paragraph (1) shall apply on the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994. 

‘‘(B) NEW COVERAGE.—Paragraphs (2) and (3) shall apply only with respect to any loan made, increased, extended, or renewed after the expiration of the 1-year period beginning on the date of enactment of the Riegle 

Community Development and Regulatory Improvement Act of 1994. Paragraph (1) shall apply with respect to any loan made, increased, extended, 

or renewed by any lender supervised by the Farm Credit Administration 

only after the expiration of the period under this subparagraph. 

‘‘(C) CONTINUED EFFECT OF REGULATIONS.—Notwithstanding any other 

provision of this subsection, the regulations to carry out paragraph (1), as 

in effect immediately before the date of enactment of the Riegle Community 

Development and Regulatory Improvement Act of 1994, shall continue to 

apply until the regulations issued to carry out paragraph (1) as amended 

by section 522(a) of such Act take effect. 

‘‘(6) RULE OF CONSTRUCTION.—Except as otherwise specified, any reference to 

flood insurance in this section shall be considered to include Federal flood insurance and private flood insurance. Nothing in this subsection shall be construed 

to supersede or limit the authority of a Federal entity for lending regulation, 

the Federal Housing Finance Agency, a Federal agency lender, a covered Federal mortgage entity (as such term is defined in paragraph (2)(B)(ii)), the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation to establish requirements relating to the financial strength of private 

insurance companies from which the entity or agency will accept private flood 

insurance, provided that such requirements shall not affect or conflict with any 

State law, regulation, or procedure concerning the regulation of the business of 

insurance.’’; and 

(D) by adding at the end the following new paragraphs: 

‘‘(8) DEFINITIONS.—In this section: 

‘‘(A) FLOOD INSURANCE.—The term ‘flood insurance’ means— 

‘‘(i) Federal flood insurance; and 

‘‘(ii) private flood insurance. 

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‘‘(B) FEDERAL FLOOD INSURANCE.—The term ‘Federal flood insurance’ 

means an insurance policy made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.). 

‘‘(C) PRIVATE FLOOD INSURANCE.—The term ‘private flood insurance’ 

means an insurance policy that— 

‘‘(i) is issued by an insurance company that is— 

‘‘(I) licensed, admitted, or otherwise approved to engage in the 

business of insurance in the State in which the insured building is 

located, by the insurance regulator of that State; or 

‘‘(II) eligible as a nonadmitted insurer to provide insurance in the 

home State of the insured, in accordance with sections 521 through 

527 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8201 through 8206); 

‘‘(ii) is issued by an insurance company that is not otherwise disapproved as a surplus lines insurer by the insurance regulator of the 

State in which the property to be insured is located; and 

‘‘(iii) provides flood insurance coverage that complies with the laws 

and regulations of that State. 

‘‘(D) STATE.—The term ‘State’ means any State of the United States, the 

District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.’’. 

(b) EFFECT OF PRIVATE FLOOD INSURANCE COVERAGE ON CONTINUOUS COVERAGE

REQUIREMENTS.—Section 1308 of the National Flood Insurance Act of 1968 (42 

U.S.C. 4015) is amended by adding at the end the following: 

‘‘(n) EFFECT OF PRIVATE FLOOD INSURANCE COVERAGE ON CONTINUOUS COVERAGE

REQUIREMENTS.—For purposes of applying any statutory, regulatory, or administrative continuous coverage requirement, including under section 1307(g)(1), the Administrator shall consider any period during which a property was continuously covered by private flood insurance (as defined in section 102(b)(8) of the Flood Disaster 

Protection Act of 1973 (42 U.S.C. 4012a(b)(8))) to be a period of continuous coverage.’’. 

PURPOSE AND SUMMARY

Introduced by Representatives Dennis Ross and Kathy Castor on 

March 8, 2017, H.R. 1422, the ‘‘Flood Insurance Market Parity and 

Modernization Act’’, amends the Flood Disaster Protection Act of 

1973 to clarify that flood insurance offered by a private carrier outside of the National Flood Insurance Program (NFIP) can satisfy 

the Act’s mandatory purchase requirement. H.R. 1422 defines acceptable private flood insurance as a policy providing flood insurance coverage that is issued by an insurance company that is licensed, admitted, or otherwise approved to engage in the business 

of insurance in the state or jurisdiction in which the insured property is located. Under H.R. 1422, an acceptable private flood insurance policy may also be issued by an insurance company that is eligible as a non-admitted insurer to provide insurance in the state 

or jurisdiction where the property to be insured is located. 

BACKGROUND AND NEED FOR LEGISLATION

Floods are among the most frequently occurring and costly natural disasters. Most declarations of federal disasters by the Federal 

Emergency Management Agency (FEMA) are related to flooding. 

Yet despite the frequency and severity of losses that result from 

flooding, the private insurance market generally did not provide insurance for flooding; when it did, insurance for flood-related damage can be expensive because the properties most at-risk tend to 

be highly concentrated geographically and the potential risk of economic losses is extremely high. 

To supplement the availability of flood insurance in the private 

market, Congress, in 1968, created the National Flood Insurance 

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Program (NFIP), which is administered by FEMA and provides 

flood insurance to approximately 5.1 million policyholders across 

the country. In exchange for premiums paid by policyholders, NFIP 

makes federally backed flood insurance available to homeowners 

and other property owners (for example, businesses, churches, and 

farmers) in these communities. 

Homeowners with mortgages held by federally regulated lenders 

on property in participating communities identified by FEMA to be 

in Special Flood Hazard Areas are required to purchase flood insurance (mandatory purchase requirement). NFIP coverage limits vary 

by program (regular or emergency) and property type (for example, 

residential or nonresidential). In NFIP’s regular program, the maximum coverage limits for residential policyholders are $250,000 for 

buildings and $100,000 for contents. For commercial policyholders 

(that is, those with policies for nonresidential properties), the maximum coverage limit is $500,000 per building and $500,000 for contents owned by the building owner. There is additional coverage for 

contents owned by the tenants. 

Residents and business owners in over 22,000 participating communities across the United States and its territories are able to 

buy NFIP flood insurance policies through insurance agents and 

companies that participate as third-party administrators in the 

‘‘Write Your Own’’ (WYO) program. The WYO program allows private insurance carriers to issue and service government underwritten and taxpayer backed NFIP policies with no private financial liability from the insurer. Insurance companies that participate 

in the WYO program receive an expense allowance for policies they 

write and the claims they process. In addition, their agents earn 

a commission for the policies they sell. The federal government, 

however, retains responsibility for managing the risk and paying 

claims, as well as covering any litigation costs should a WYO insurer be sued in court. 

Property owners can purchase flood insurance through the NFIP 

only if their communities participate in the NFIP. To participate in 

the NFIP, a community must agree to abide by certain statutory 

provisions intended to mitigate the risk of flooding, such as building codes that require new structures built in floodplains (high-risk 

areas) to be protected against flooding or to be elevated above the 

100-year floodplain. 

As of June 5, 2017, the NFIP has an outstanding debt of $24.6 

billion borrowed from taxpayers, with roughly $1.1 billion available 

cash-on-hand and $5.825 billion remaining of its total temporary 

$30.425 billion Treasury borrowing authority. The NFIP’s debt results primarily from its borrowing to pay claims relating to the 

Gulf Coast hurricanes in 2005 and Superstorm Sandy in October 

2012. This borrowing stems from a structural imbalance in how the 

NFIP measures and prices for risk, resulting in only 46 percent of 

premium dollars collected in 2016 being available for the payments 

of claims. With such a low portion of premiums available to pay 

claims, the pressure on the NFIP to borrow from taxpayers increases. The NFIP’s structural budget crisis has required periodic 

legislation to increase its borrowing authority, the most recent example of which occurred in January 2013 when Congress increased 

the NFIP’s borrowing authority by $9.7 billion—from $20.725 billion to its current $30.425 billion level. 

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In 1973, Congress passed the Flood Disaster Protection Act, 

under which federally regulated or insured lenders must require 

the purchase of flood insurance on properties in high-risk flooding 

areas if the U.S. government backs the mortgage thereon. While 

this Act does not require that coverage be provided under the 

NFIP, its effect, over time, has been to discourage private sector 

participation in the flood insurance market and funnel virtually all 

flood risk through the NFIP. 

H.R. 1422 would encourage the development of a robust private 

market by allowing insurers to work directly with their state commissioners to write policies that work for their customers’ pricing 

and coverage needs. Choice and competition will lead to better 

products, pricing, and innovation and would give consumers another place to turn besides the Federal government for this important safeguard. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Housing 

and Insurance held two hearings examining matters relating to 

H.R. 1422 on March 9, 2017 and March 16, 2017. The Committee 

on Financial Services held a hearing examining matters relating to 

H.R. 1422 on June 7, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

June 21, 2017 to consider H.R. 1422. The Committee ordered H.R. 

1422 to be reported favorably to the House, as amended, by a recorded vote of 58 ayes to 0 nays (Recorded vote no. FC–65), a 

quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. An amendment in 

the nature of a substitute offered by Mr. Ross was agreed to by 

voice vote. The sole recorded vote was on a motion by Chairman 

Hensarling to report the bill favorably to the House, as amended. 

The motion was agreed to by a recorded vote of 58 ayes to 0 nays 

(Recorded vote no. FC–65), a quorum being present. 

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Insert graphic folio 8 HR220.001
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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 1422 will reduce federal regulatory barriers for private insurance carriers to 

enter the flood insurance market. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, July 14, 2017. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1422, the Private Flood 

Insurance Market Development Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Aurora Swanson. 

Sincerely, 

MARK P. HADLEY

(For Keith Hall). 

Enclosure. 

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H.R. 1422—Private Flood Insurance Market Development Act of 

2017 

Under current law homeowners with mortgages held by federally 

regulated financial institutions or that are guaranteed by the federal government must maintain a flood insurance policy if the 

home is located in a flood zone. H.R. 1422 would clarify that flood 

insurance provided by private firms satisfies that requirement. 

Today, private flood insurance options are not widely available but 

some insurance companies are developing analytical tools to underwrite flood insurance policies. Additionally, regulatory agencies are 

developing rules to clarify that private flood coverage meets the requirement for homeowners to maintain flood insurance. The private market for flood insurance is likely to continue to evolve and 

some homeowners may obtain private flood coverage. 

About 80 percent of the National Flood Insurance Program 

(NFIP) policies have premiums that equal the expected cost of flood 

insurance, known as actuarial premiums; such policyholders also 

pay fees and surcharges to the NFIP that help cover the cost of the 

program. To the extent that NFIP policyholders that pay actuarial 

premiums leave the program and obtain private coverage under the 

bill, there would be a loss of budgetary receipts to the program. 

CBO cannot determine whether enacting H.R. 1422 would lead to 

the development of a robust private insurance market that would 

not otherwise occur, but as the private market for flood insurance 

policies continues to evolve, the NFIP will probably realize reduced 

receipts as some policyholders leave the program. 

The bill also would direct the Federal Emergency Management 

Agency to consider policyholders who drop an NFIP policy and then 

later return to the NFIP as having continuous coverage if they can 

demonstrate that a flood insurance policy from a private firm was 

maintained throughout the interim period. That provision would 

permit policyholders paying a subsidized rate for an NFIP policy— 

about 20 percent of existing policyholders—to be eligible for subsidized rates if they return to NFIP and have maintained continuous coverage. Because such policyholders are not eligible for subsidized rates if they do not maintain continuous NFIP coverage, enacting that provision would increase direct spending by effectively 

reducing premiums for those policyholders. 

Pay-as-you-go procedures apply because enacting the bill could 

affect direct spending. However, CBO estimates those effects would 

not be significant. Enacting the bill would not affect revenues. 

CBO estimates that enacting H.R. 1422 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2028. 

H.R. 1422 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

The CBO staff contact for this estimate is Aurora Swanson. The 

estimate was approved by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

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FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 1422 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(c)(5) of rule XIII, the Committee states 

that no provision of H.R. 1422 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included in any report 

from the Government Accountability Office to Congress pursuant to 

section 21 of Public Law 111–139, or a program related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 115th Cong. (2017), the 

Committee states that H.R. 1422 contains no directed rulemaking. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Sec. 1 Short title 

This Act may be cited as the ‘‘Flood Insurance Market Parity and 

Modernization Act’’. 

Sec. 2 Private flood insurance 

Updates current law to reinforce and strengthen requirements 

that flood insurance provided by private sector insurance carriers 

shall be accepted and considered similar to those policies offered by 

the National Flood Insurance Program (NFIP), provided certain 

conditions are met. Strikes and restates, in part, the current statute with updated language to reflect the recognition of flood policies offered by the NFIP and the private flood insurance market. 

Identical to current law, restates the mandatory insurance requirement that any building, mobile home or personal property that 

would be financed by a federally-backed mortgage must have flood 

insurance if the property is located in an area designated as a special flood hazard. 

11 

Clarifies that the coverage amount of flood insurance provided 

under either a Federal or private policy must be at least equal to 

the lesser of: the development or project cost of the building, mobile 

home, or personal property (less estimated land cost); the outstanding principal balance of the federally insured loan secured by 

the property; or the maximum limit of Federal flood insurance coverage made available with respect to the particular type of property. If the financial assistance provided is in the form of a loan 

or an insurance or guaranty of a loan, the amount of required flood 

insurance need not exceed the outstanding principal balance of the 

loan and need not be required beyond the term of the loan. 

Consistent with current law, Federal banking regulators are required to instruct, by regulation, that regulated institutions not 

make loans secured by real property located in flood zones unless 

the property is covered by ‘‘flood insurance’’ (Federal or private). 

This section clarifies that each Federal banking regulator must require regulated financial institutions to accept Federal (National 

Flood Insurance Program) and private flood insurance as satisfaction of the flood insurance coverage requirement. 

Updates current law to require the Government Sponsored Enterprises (GSEs), known as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, to require 

flood insurance for any real estate or mobile home located in a special flood hazard area and purchased or guaranteed by such entity. 

This section would also add a new requirement that GSEs accept 

Federal (National Flood Insurance Program) and private flood insurance as satisfaction of the mandatory flood insurance coverage 

requirement, provided that the flood insurance coverage meets the 

requirements under this bill and any requirements established by 

the Federal Housing Finance Agency, in consultation with the Federal National Mortgage Association, the Federal Home Loan Corporation, the Secretary of Housing and Urban Development, the 

Government National Mortgage Association and the Secretary of 

Agriculture relating to the financial strength of such private insurance companies. Such requirements developed by the GSEs shall 

not affect or conflict with any state law, regulation, or procedure 

concerning the regulation of the business of insurance. 

This section also clarifies that mortgages offered, insured, or 

guaranteed by the Department of Housing and Urban Development, or under Title V of the Housing Act of 1949 related to Rural 

Housing Service programs, or the Government National Mortgage 

Association would be required to accept private flood insurance 

policies. 

Defines flood insurance as either ‘‘Federal flood insurance’’ or 

‘‘private flood insurance.’’ ‘‘Federal flood insurance’’ is defined as a 

policy available through the NFIP. ‘‘Private flood insurance’’ is defined as a flood insurance policy that is issued by a state-licensed 

insurer, or a non-admitted insurer that is not disapproved by the 

state as a surplus lines insurer, and that complies with the laws 

and regulations of the state in which the insured property is located. The term ‘‘State’’ means any State of the United States, the 

District of Columbia, the Commonwealth of Puerto Rico, Guam, the 

Northern Mariana Islands, the Virgin Islands, and American 

Samoa. 

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Clarifies that the Administrator of the Federal Emergency Management Agency shall consider any period during which a property 

was continuously covered by private flood insurance to be a period 

of continuous coverage. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, 

and existing law in which no change is proposed is shown in 

roman): 

FLOOD DISASTER PROTECTION ACT OF 1973 

* * * * * * * 

TITLE I—EXPANSION OF NATIONAL FLOOD INSURANCE 

PROGRAM 

* * * * * * * 

FLOOD INSURANCE PURCHASE AND COMPLIANCE REQUIREMENTS AND

ESCROW ACCOUNTS

SEC. 102. ø(a) After the expiration of sixty days following the 

date of enactment of this Act, no Federal officer or agency shall approve any financial assistance for acquisition or construction purposes for use in any area that has been identified by the Administrator as an area having special flood hazards and in which the 

sale of flood insurance has been made available under the National 

Flood Insurance Act of 1968, unless the building or mobile home 

and any personal property to which such financial assistance relates is covered by flood insurance in an amount at least equal to 

its development or project cost (less estimated land cost) or to the 

maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 

1968, whichever is less: Provided, That if the financial assistance 

provided is in the form of a loan or an insurance or guaranty of 

a loan, the amount of flood insurance required need not exceed the 

outstanding principal balance of the loan and need not be required 

beyond the term of the loan. The requirement of maintaining flood 

insurance shall apply during the life of the property, regardless of 

transfer of ownership of such property.¿ 

(a) AMOUNT AND TERM OF COVERAGE.—After the expiration of 

sixty days following the date of the enactment of this Act, no Federal 

officer or agency shall approve any financial assistance for acquisition or construction purposes for use in any area that has been identified by the Administrator as an area having special flood hazards 

and in which the sale of flood insurance has been made available 

under the National Flood Insurance Act of 1968, unless the building 

or mobile home and any personal property to which such financial 

assistance relates is covered by flood insurance: Provided, That the 

amount of flood insurance (1) in the case of Federal flood insurance, 

is at least equal to the development or project cost of the building, 

mobile home, or personal property (less estimated land cost), the 

outstanding principal balance of the loan, or the maximum limit of 

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Federal flood insurance coverage made available with respect to the 

particular type of property, whichever is less; or (2) in the case of 

private flood insurance, is at least equal to the development or 

project cost of the building, mobile home, or personal property (less 

estimated land cost), the outstanding principal balance of the loan, 

or the maximum limit of Federal flood insurance coverage made 

available with respect to the particular type of property, whichever 

is less: Provided further, That if the financial assistance provided 

is in the form of a loan or an insurance or guaranty of a loan, the 

amount of flood insurance required need not exceed the outstanding 

principal balance of the loan and need not be required beyond the 

term of the loan. The requirement of maintaining flood insurance 

shall apply during the life of the property, regardless of transfer of 

ownership of such property. 

ø(b) REQUIREMENT FOR MORTGAGE LOANS.— 

ø(1) REGULATED LENDING INSTITUTIONS.—Each Federal entity for lending regulation (after consultation and coordination 

with the Financial Institutions Examination Council established under the Federal Financial Institutions Examination 

Council Act of 1974) shall by regulation direct regulated lending institutions— 

ø(A) not to make, increase, extend, or renew any loan secured by improved real estate or a mobile home located or 

to be located in an area that has been identified by the Administrator as an area having special flood hazards and in 

which flood insurance has been made available under the 

National Flood Insurance Act of 1968, unless the building 

or mobile home and any personal property securing such 

loan is covered for the term of the loan by flood insurance 

in an amount at least equal to the outstanding principal 

balance of the loan or the maximum limit of coverage 

made available under the Act with respect to the particular type of property, whichever is less; and 

ø(B) to accept private flood insurance as satisfaction of 

the flood insurance coverage requirement under subparagraph (A) if the coverage provided by such private flood insurance meets the requirements for coverage under such 

subparagraph. 

ø(2) FEDERAL AGENCY LENDERS.—A Federal agency lender 

may not make, increase, extend, or renew any loan secured by 

improved real estate or a mobile home located or to be located 

in an area that has been identified by the Administrator as an 

area having special flood hazards and in which flood insurance 

has been made available under the National Flood Insurance 

Act of 1968, unless the building or mobile home and any personal property securing such loan is covered for the term of the 

loan by flood insurance in the amount provided in paragraph 

(1)(A). Each Federal agency lender shall accept private flood 

insurance as satisfaction of the flood insurance coverage requirement under the preceding sentence if the flood insurance 

coverage provided by such private flood insurance meets the 

requirements for coverage under such sentence. Each Federal 

agency lender shall issue any regulations necessary to carry 

out this paragraph. Such regulations shall be consistent with 

14 

and substantially identical to the regulations issued under 

paragraph (1)(A). 

ø(3) GOVERNMENT-SPONSORED ENTERPRISES FOR HOUSING.— The Federal National Mortgage Association and the Federal 

Home Loan Mortgage Corporation shall implement procedures 

reasonably designed to ensure that, for any loan that is— 

ø(A) secured by improved real estate or a mobile home 

located in an area that has been identified, at the time of 

the origination of the loan or at any time during the term 

of the loan, by the Administrator as an area having special 

flood hazards and in which flood insurance is available 

under the National Flood Insurance Act of 1968, and 

ø(B) purchased by such entity, 

the building or mobile home and any personal property securing the loan is covered for the term of the loan by flood insurance in the amount provided in paragraph (1)(A). The Federal 

National Mortgage Association and the Federal Home Loan 

Mortgage Corporation shall accept private flood insurance as 

satisfaction of the flood insurance coverage requirement under 

paragraph (1)(A) if the flood insurance coverage provided by 

such private flood insurance meets the requirements for coverage under such paragraph and any requirements established 

by the Federal National Mortgage Association or the Federal 

Home Loan Mortgage Corporation, respectively, relating to the 

financial solvency, strength, or claims-paying ability of private 

insurance companies from which the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation will accept private flood insurance. 

ø(4) APPLICABILITY.— 

ø(A) EXISTING COVERAGE.—Except as provided in subparagraph (B), paragraph (1) shall apply on the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994. 

ø(B) NEW COVERAGE.—Paragraphs (2) and (3) shall 

apply only with respect to any loan made, increased, extended, or renewed after the expiration of the 1-year period beginning on the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 

1994. Paragraph (1) shall apply with respect to any loan 

made, increased, extended, or renewed by any lender supervised by the Farm Credit Administration only after the 

expiration of the period under this subparagraph. 

ø(C) CONTINUED EFFECT OF REGULATIONS.—Notwithstanding any other provision of this subsection, the regulations to carry out paragraph (1), as in effect immediately 

before the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994, shall 

continue to apply until the regulations issued to carry out 

paragraph (1) as amended by section 522(a) of such Act 

take effect. 

ø(5) RULE OF CONSTRUCTION.—Nothing in this subsection 

shall be construed to supersede or limit the authority of a Federal entity for lending regulation, the Federal Housing Finance 

Agency, a Federal agency lender, the Federal National Mortgage Association, or the Federal Home Loan Mortgage CorVerDate Sep 11 2014 05:17 Jul 21, 2017 Jkt 069006 PO 00000 Frm 00014 Fmt 6659 Sfmt 6602 E:\HR\OC\HR220.XXX HR220
15 

poration to establish requirements relating to the financial solvency, strength, or claims-paying ability of private insurance 

companies from which the entity or agency will accept private 

flood insurance.¿ 

(b) REQUIREMENT FOR MORTGAGE LOANS.— 

(1) REGULATED LENDING INSTITUTIONS.—Each Federal entity 

for lending regulation (after consultation and coordination with 

the Financial Institutions Examination Council established 

under the Federal Financial Institutions Examination Council 

Act of 1974) shall by regulation direct regulated lending institutions not to make, increase, extend, or renew any loan secured 

by improved real estate or a mobile home located or to be located in an area that has been identified by the Administrator 

as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, unless the building or mobile home and 

any personal property securing such loan is covered for the term 

of the loan by flood insurance: Provided, That the amount of 

flood insurance (A) in the case of Federal flood insurance, is at 

least equal to the outstanding principal balance of the loan or 

the maximum limit of Federal flood insurance coverage made 

available with respect to the particular type of property, whichever is less; or (B) in the case of private flood insurance, is at 

least equal to the outstanding principal balance of the loan or 

the maximum limit of Federal flood insurance coverage made 

available with respect to the particular type of property, whichever is less. 

(2) FEDERAL AGENCY LENDERS AND MORTGAGE INSURANCE

AND GUARANTEE AGENCIES.— 

(A) FEDERAL AGENCY LENDERS.—A Federal agency lender 

may not make, increase, extend, or renew any loan secured 

by improved real estate or a mobile home located or to be 

located in an area that has been identified by the Administrator as an area having special flood hazards and in 

which flood insurance has been made available under the 

National Flood Insurance Act of 1968, unless the building 

or mobile home and any personal property securing such 

loan is covered for the term of the loan by flood insurance 

in accordance with paragraph (1). Each Federal agency 

lender may issue any regulations necessary to carry out this 

paragraph. Such regulations shall be consistent with and 

substantially identical to the regulations issued under 

paragraph (1). 

(B) OTHER FEDERAL MORTGAGE ENTITIES.— 

(i) COVERAGE REQUIREMENTS.—Each covered Federal 

mortgage entity shall implement procedures reasonably 

designed to ensure that, for any loan that— 

(I) is secured by improved real estate or a mobile 

home located in an area that has been identified, 

at the time of the origination of the loan or at any 

time during the term of the loan, by the Administrator as an area having special flood hazards and 

in which flood insurance is available under the 

National Flood Insurance Act of 1968, and 

16 

(II) is made, insured, held, or guaranteed by 

such entity, or backs or on which is based any 

trust certificate or other security for which such entity guarantees the timely payment of principal 

and interest, 

the building or mobile home and any personal property 

securing the loan is covered for the term of the loan by 

flood insurance in the amount provided in paragraph 

(1). 

(ii) DEFINITION.—For purposes of this subparagraph, 

the term ‘‘covered Federal mortgage entity’’ means— 

(I) the Secretary of Housing and Urban Development, with respect to mortgages insured under the 

National Housing Act; 

(II) the Secretary of Agriculture, with respect to 

loans made, insured, or guaranteed under title V 

of the Housing Act of 1949; and 

(III) the Government National Mortgage Association. 

(C) REQUIREMENT TO ACCEPT FLOOD INSURANCE.—Each 

Federal agency lender and each covered Federal mortgage 

entity shall accept flood insurance as satisfaction of the 

flood insurance coverage requirement under subparagraph 

(A) or (B), respectively, if the flood insurance coverage 

meets the requirements for coverage under such subparagraph and the requirements relating to financial strength 

issued pursuant to paragraph (4). 

(3) GOVERNMENT-SPONSORED ENTERPRISES FOR HOUSING.— The Federal National Mortgage Association and the Federal 

Home Loan Mortgage Corporation shall implement procedures 

reasonably designed to ensure that, for any loan that is— 

(A) secured by improved real estate or a mobile home located in an area that has been identified, at the time of the 

origination of the loan or at any time during the term of 

the loan, by the Administrator as an area having special 

flood hazards and in which flood insurance is available 

under the National Flood Insurance Act of 1968, and 

(B) purchased or guaranteed by such entity, 

the building or mobile home and any personal property securing the loan is covered for the term of the loan by flood insurance in the amount provided in paragraph (1). The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall accept flood insurance as satisfaction of 

the flood insurance coverage requirement under paragraph (1) 

if the flood insurance coverage provided meets the requirements 

for coverage under that paragraph and the requirements relating to financial strength issued pursuant to paragraph (4). 

(4) REQUIREMENTS REGARDING FINANCIAL STRENGTH.—The 

Director of the Federal Housing Finance Agency, in consultation with the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Secretary of Housing and Urban Development, the Government National Mortgage Association, and the Secretary of Agriculture shall develop 

and implement requirements relating to the financial strength 

of private insurance companies from which such entities and 

17 

agencies will accept private flood insurance, provided that such 

requirements shall not affect or conflict with any State law, regulation, or procedure concerning the regulation of the business 

of insurance. 

(5) APPLICABILITY.— 

(A) EXISTING COVERAGE.—Except as provided in subparagraph (B), paragraph (1) shall apply on the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994. 

(B) NEW COVERAGE.—Paragraphs (2) and (3) shall apply 

only with respect to any loan made, increased, extended, or 

renewed after the expiration of the 1-year period beginning 

on the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994. Paragraph 

(1) shall apply with respect to any loan made, increased, 

extended, or renewed by any lender supervised by the Farm 

Credit Administration only after the expiration of the period under this subparagraph. 

(C) CONTINUED EFFECT OF REGULATIONS.—Notwithstanding any other provision of this subsection, the regulations to carry out paragraph (1), as in effect immediately 

before the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994, shall 

continue to apply until the regulations issued to carry out 

paragraph (1) as amended by section 522(a) of such Act 

take effect. 

(6) RULE OF CONSTRUCTION.—Except as otherwise specified, 

any reference to flood insurance in this section shall be considered to include Federal flood insurance and private flood insurance. Nothing in this subsection shall be construed to supersede 

or limit the authority of a Federal entity for lending regulation, 

the Federal Housing Finance Agency, a Federal agency lender, 

a covered Federal mortgage entity (as such term is defined in 

paragraph (2)(B)(ii)), the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation to establish requirements relating to the financial strength of private 

insurance companies from which the entity or agency will accept private flood insurance, provided that such requirements 

shall not affect or conflict with any State law, regulation, or 

procedure concerning the regulation of the business of insurance. 

ø(6)¿ (7) NOTICE.— 

(A) IN GENERAL.—Each lender shall disclose to a borrower that is subject to this subsection that— 

(i) flood insurance is available from private insurance companies that issue standard flood insurance 

policies on behalf of the national flood insurance program or directly from the national flood insurance program; 

(ii) flood insurance that provides the same level of 

coverage as a standard flood insurance policy under 

the national flood insurance program may be available 

from a private insurance company that issues policies 

on behalf of the company; and 

18 

(iii) the borrower is encouraged to compare the flood 

insurance coverage, deductibles, exclusions, conditions 

and premiums associated with flood insurance policies 

issued on behalf of the national flood insurance program and policies issued on behalf of private insurance companies and to direct inquiries regarding the 

availability, cost, and comparisons of flood insurance 

coverage to an insurance agent. 

(B) RULE OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed as affecting or otherwise limiting the 

authority of a Federal entity for lending regulation to approve any disclosure made by a regulated lending institution for purposes of complying with subparagraph (A). 

ø(7) PRIVATE FLOOD INSURANCE DEFINED.—In this subsection, 

the term ‘‘private flood insurance’’ means an insurance policy 

that— 

ø(A) is issued by an insurance company that is— 

ø(i) licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the 

insurance regulator of that State or jurisdiction; or 

ø(ii) in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage 

insuring nonresidential commercial property, is recognized, or not disapproved, as a surplus lines insurer by 

the insurance regulator of the State or jurisdiction 

where the property to be insured is located; 

ø(B) provides flood insurance coverage which is at least 

as broad as the coverage provided under a standard flood 

insurance policy under the national flood insurance program, including when considering deductibles, exclusions, 

and conditions offered by the insurer; 

ø(C) includes— 

ø(i) a requirement for the insurer to give 45 days’ 

written notice of cancellation or non-renewal of flood 

insurance coverage to— 

ø(I) the insured; and 

ø(II) the regulated lending institution or Federal agency lender; 

ø(ii) information about the availability of flood insurance coverage under the national flood insurance 

program; 

ø(iii) a mortgage interest clause similar to the clause 

contained in a standard flood insurance policy under 

the national flood insurance program; and 

ø(iv) a provision requiring an insured to file suit not 

later than 1 year after date of a written denial of all 

or part of a claim under the policy; and 

ø(D) contains cancellation provisions that are as restrictive as the provisions contained in a standard flood insurance policy under the national flood insurance program.¿ 

(8) DEFINITIONS.—In this section: 

(A) FLOOD INSURANCE.—The term ‘‘flood insurance’’ 

means— 

(i) Federal flood insurance; and 

19 

(ii) private flood insurance. 

(B) FEDERAL FLOOD INSURANCE.—The term ‘‘Federal 

flood insurance’’ means an insurance policy made available 

under the National Flood Insurance Act of 1968 (42 U.S.C. 

4001 et seq.). 

(C) PRIVATE FLOOD INSURANCE.—The term ‘‘private flood 

insurance’’ means an insurance policy that— 

(i) is issued by an insurance company that is— 

(I) licensed, admitted, or otherwise approved to 

engage in the business of insurance in the State in 

which the insured building is located, by the insurance regulator of that State; or 

(II) eligible as a nonadmitted insurer to provide 

insurance in the home State of the insured, in accordance with sections 521 through 527 of the 

Dodd-Frank Wall Street Reform and Consumer 

Protection Act (15 U.S.C. 8201 through 8206); 

(ii) is issued by an insurance company that is not 

otherwise disapproved as a surplus lines insurer by the 

insurance regulator of the State in which the property 

to be insured is located; and 

(iii) provides flood insurance coverage that complies 

with the laws and regulations of that State. 

(D) STATE.—The term ‘‘State’’ means any State of the 

United States, the District of Columbia, the Commonwealth 

of Puerto Rico, Guam, the Northern Mariana Islands, the 

Virgin Islands, and American Samoa. 

(c) EXCEPTIONS TO PURCHASE REQUIREMENTS.— (1) STATE-OWNED PROPERTY.—Notwithstanding the other provisions of this section, flood insurance shall not be required on 

any State-owned property that is covered under an adequate 

State policy of self-insurance satisfactory to the Administrator. 

The Administrator shall publish and periodically revise the list 

of States to which this subsection applies. 

(2) SMALL LOANS.—Notwithstanding any other provision of 

this section, subsections (a) and (b) shall not apply to any loan 

having— (A) an original outstanding principal balance of $5,000 

or less; and 

(B) a repayment term of 1 year or less. 

(3) DETACHED STRUCTURES.—Notwithstanding any other provision of this section, flood insurance shall not be required, in 

the case of any residential property, for any structure that is 

a part of such property but is detached from the primary residential structure of such property and does not serve as a residence. 

(d) ESCROW OF FLOOD INSURANCE PAYMENTS.— 

(1) REGULATED LENDING INSTITUTIONS.— 

(A) FEDERAL ENTITIES RESPONSIBLE FOR LENDING REGU- LATIONS.—Each Federal entity for lending regulation (after 

consultation and coordination with the Federal Financial 

Institutions Examination Council) shall, by regulation, direct that all premiums and fees for flood insurance under 

the National Flood Insurance Act of 1968, for residential 

improved real estate or a mobile home, shall be paid to the 

20 

regulated lending institution or servicer for any loan secured by the residential improved real estate or mobile 

home, with the same frequency as payments on the loan 

are made, for the duration of the loan. Except as provided 

in subparagraph (B), upon receipt of any premiums or fees, 

the regulated lending institution or servicer shall deposit 

such premiums and fees in an escrow account on behalf of 

the borrower. Upon receipt of a notice from the Administrator or the provider of the flood insurance that insurance 

premiums are due, the premiums deposited in the escrow 

account shall be paid to the provider of the flood insurance. 

(B) LIMITATION.—Except as may be required under applicable State law, a Federal entity for lending regulation 

may not direct or require a regulated lending institution to 

deposit premiums or fees for flood insurance under the National Flood Insurance Act of 1968 in an escrow account on 

behalf of a borrower under subparagraph (A)— 

(i) if— 

(I) the regulated lending institution has total 

assets of less than $1,000,000,000; and 

(II) on or before the date of enactment of the 

Biggert-Waters Flood Insurance Reform Act of 

2012, the regulated lending institution— 

(aa) in the case of a loan secured by residential improved real estate or a mobile 

home, was not required under Federal or 

State law to deposit taxes, insurance premiums, fees, or any other charges in an escrow account for the entire term of the loan; 

and 

(bb) did not have a policy of consistently 

and uniformly requiring the deposit of taxes, 

insurance premiums, fees, or any other 

charges in an escrow account for loans secured by residential improved real estate or a 

mobile home; or 

(ii) in the case of a loan that— 

(I) is in a junior or subordinate position to a 

senior lien secured by the same residential improved real estate or mobile home for which flood 

insurance is being provided at the time of the 

origination of the loan; 

(II) is secured by residential improved real estate or a mobile home that is part of a condominium, cooperative, or other project development, 

if the residential improved real estate or mobile 

home is covered by a flood insurance policy that— 

(aa) meets the requirements that the regulated lending institution is required to enforce 

under subsection (b)(1); 

(bb) is provided by the condominium association, cooperative, homeowners association, 

or other applicable group; and 

21 

(cc) the premium for which is paid by the 

condominium association, cooperative, homeowners association, or other applicable group 

as a common expense; 

(III) is secured by residential improved real estate or a mobile home that is used as collateral for 

a business purpose; 

(IV) is a home equity line of credit; 

(V) is a nonperforming loan; or 

(VI) has a term of not longer than 12 months. 

(2) FEDERAL AGENCY LENDERS.—Each Federal agency lender 

shall by regulation require and provide for escrow and payment of any flood insurance premiums and fees relating to residential improved real estate and mobile homes securing loans 

made by the Federal agency lender under the circumstances 

and in the manner provided under paragraph (1). Any regulations issued under this paragraph shall be consistent with and 

substantially identical to the regulations issued under paragraph (1). 

(3) APPLICABILITY OF RESPA.—Escrow accounts established 

pursuant to this subsection shall be subject to the provisions 

of section 10 of the Real Estate Settlement Procedures Act of 

1974. 

(4) DEFINITION.—For purposes of this subsection, the term 

‘‘residential improved real estate’’ means improved real estate 

for which the improvement is a residential building. 

(5) APPLICABILITY.—This subsection shall apply only with respect to any loan made, increased, extended, or renewed after 

the expiration of the 1-year period beginning on the date of enactment of the Riegle Community Development and Regulatory 

Improvement Act of 1994. 

(e) PLACEMENT OF FLOOD INSURANCE BY LENDER.— 

(1) NOTIFICATION TO BORROWER OF LACK OF COVERAGE.—If, 

at the time of origination or at any time during the term of a 

loan secured by improved real estate or by a mobile home located in an area that has been identified by the Administrator 

(at the time of the origination of the loan or at any time during 

the term of the loan) as an area having special flood hazards 

and in which flood insurance is available under the National 

Flood Insurance Act of 1968, the lender or servicer for the loan 

determines that the building or mobile home and any personal 

property securing the loan is not covered by flood insurance or 

is covered by such insurance in an amount less than the 

amount required for the property pursuant to paragraph (1), 

(2), or (3) of subsection (b), the lender or servicer shall notify 

the borrower under the loan that the borrower should obtain, 

at the borrower’s expense, an amount of flood insurance for the 

building or mobile home and such personal property that is not 

less than the amount under subsection (b)(1), for the term of 

the loan. 

(2) PURCHASE OF COVERAGE ON BEHALF OF BORROWER.—If 

the borrower fails to purchase such flood insurance within 45 

days after notification under paragraph (1), the lender or 

servicer for the loan shall purchase the insurance on behalf of 

the borrower and may charge the borrower for the cost of preVerDate Sep 11 2014 05:17 Jul 21, 2017 Jkt 069006 PO 00000 Frm 00021 Fmt 6659 Sfmt 6602 E:\HR\OC\HR220.XXX HR220
22 

miums and fees incurred by the lender or servicer for the loan 

in purchasing the insurance, including premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage 

amount. 

(3) TERMINATION OF FORCE-PLACED INSURANCE.—Within 30 

days of receipt by the lender or servicer of a confirmation of 

a borrower’s existing flood insurance coverage, the lender or 

servicer shall— 

(A) terminate any insurance purchased by the lender or 

servicer under paragraph (2); and 

(B) refund to the borrower all premiums paid by the borrower for any insurance purchased by the lender or 

servicer under paragraph (2) during any period during 

which the borrower’s flood insurance coverage and the insurance coverage purchased by the lender or servicer were 

each in effect, and any related fees charged to the borrower with respect to the insurance purchased by the lender or servicer during such period. 

(4) SUFFICIENCY OF DEMONSTRATION.—For purposes of confirming a borrower’s existing flood insurance coverage, a lender 

or servicer for a loan shall accept from the borrower an insurance policy declarations page that includes the existing flood 

insurance policy number and the identity of, and contact information for, the insurance company or agent. 

(5) REVIEW OF DETERMINATION REGARDING REQUIRED PUR- CHASE.— 

(A) IN GENERAL.—The borrower and lender for a loan secured by improved real estate or a mobile home may jointly request the Administrator to review a determination of 

whether the building or mobile home is located in an area 

having special flood hazards. Such request shall be supported by technical information relating to the improved 

real estate or mobile home. Not later than 45 days after 

the Administrator receives the request, the Administrator 

shall review the determination and provide to the borrower and the lender with a letter stating whether or not 

the building or mobile home is in an area having special 

flood hazards. The determination of the Administrator 

shall be final. 

(B) EFFECT OF DETERMINATION.—Any person to whom a 

borrower provides a letter issued by the Administrator 

pursuant to subparagraph (A), stating that the building or 

mobile home securing the loan of the borrower is not in an 

area having special flood hazards, shall have no obligation 

under this title to require the purchase of flood insurance 

for such building or mobile home during the period determined by the Administratorwhich shall be specified in the 

letter and shall begin on the date on which such letter is 

provided. 

(C) EFFECT OF FAILURE TO RESPOND.—If a request under 

subparagraph (A) is made in connection with the origination of a loan and the Administrator fails to provide a letter under subparagraph (A) before the later of (i) the expiration of the 45-day period under such subparagraph, or 

23 

(ii) the closing of the loan, no person shall have an obligation under this title to require the purchase of flood insurance for the building or mobile home securing the loan 

until such letter is provided. 

(6) APPLICABILITY.—This subsection shall apply to all loans 

outstanding on or after the date of enactment of the Riegle 

Community Development and Regulatory Improvement Act of 

1994. 

(f) CIVIL MONETARY PENALTIES FOR FAILURE TO REQUIRE FLOOD

INSURANCE OR NOTIFY.— 

(1) CIVIL MONETARY PENALTIES AGAINST REGULATED LENDERS.—Any regulated lending institution that is found to have 

a pattern or practice of committing violations under paragraph 

(2) shall be assessed a civil penalty by the appropriate Federal 

entity for lending regulation in the amount provided under 

paragraph (5). 

(2) LENDER VIOLATIONS.—The violations referred to in paragraph (1) shall include— 

(A) making, increasing, extending, or renewing loans in 

violation of— 

(i) the regulations issued pursuant to subsection (b) 

of this section; 

(ii) the escrow requirements under subsection (d) of 

this section; or 

(iii) the notice requirements under section 1364 of 

the National Flood Insurance Act of 1968; or 

(B) failure to provide notice or purchase flood insurance 

coverage in violation of subsection (e) of this section. 

(3) CIVIL MONETARY PENALTIES AGAINST GSE’S.— 

(A) IN GENERAL.—If the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation 

is found by the Director of the Federal Housing Finance 

Agency to have a pattern or practice of purchasing loans 

in violation of the procedures established pursuant to subsection (b)(3), the Director of such Office shall assess a 

civil penalty against such enterprise in the amount provided under paragraph (5) of this subsection. 

(B) DEFINITION.—For purposes of this subsection, the 

term ‘‘enterprise’’ means the Federal National Mortgage 

Association or the Federal Home Loan Mortgage Corporation. 

(4) NOTICE AND HEARING.—A penalty under this subsection 

may be issued only after notice and an opportunity for a hearing on the record. 

(5) AMOUNT.—A civil monetary penalty under this subsection 

may not exceed $2,000 for each violation under paragraph (2) 

or paragraph (3). 

(6) LENDER COMPLIANCE.—Notwithstanding any State or 

local law, for purposes of this subsection, any regulated lending 

institution that purchases flood insurance or renews a contract 

for flood insurance on behalf of or as an agent of a borrower 

of a loan for which flood insurance is required shall be considered to have complied with the regulations issued under subsection (b). 

24 

(7) EFFECT OF TRANSFER ON LIABILITY.—Any sale or other 

transfer of a loan by a regulated lending institution that has 

committed a violation under paragraph (1), that occurs subsequent to the violation, shall not affect the liability of the transferring lender with respect to any penalty under this subsection. A lender shall not be liable for any violations relating 

to a loan committed by another regulated lending institution 

that previously held the loan. 

(8) DEPOSIT OF PENALTIES.—Any penalties collected under 

this subsection shall be paid into the National Flood Mitigation 

Fund under section 1367 of the National Flood Insurance Act 

of 1968. 

(9) ADDITIONAL PENALTIES.—Any penalty under this subsection shall be in addition to any civil remedy or criminal penalty otherwise available. 

(10) STATUTE OF LIMITATIONS.—No penalty may be imposed 

under this subsection after the expiration of the 4-year period 

beginning on the date of the occurrence of the violation for 

which the penalty is authorized under this subsection. 

(g) OTHER ACTIONS TO REMEDY PATTERN OF NONCOMPLIANCE.— 

(1) AUTHORITY OF FEDERAL ENTITIES FOR LENDING REGULA- TION.—A Federal entity for lending regulation may require a 

regulated lending institution to take such remedial actions as 

are necessary to ensure that the regulated lending institution 

complies with the requirements of the national flood insurance 

program if the Federal agency for lending regulation makes a 

determination under paragraph (2) regarding the regulated 

lending institution. 

(2) DETERMINATION OF VIOLATIONS.—A determination under 

this paragraph shall be a finding that— 

(A) the regulated lending institution has engaged in a 

pattern and practice of noncompliance in violation of the 

regulations issued pursuant to subsection (b), (d), or (e) or 

the notice requirements under section 1364 of the National 

Flood Insurance Act of 1968; and 

(B) the regulated lending institution has not demonstrated measurable improvement in compliance despite 

the assessment of civil monetary penalties under subsection (f). 

(h) FEE FOR DETERMINING LOCATION.—Notwithstanding any 

other Federal or State law, any person who makes a loan secured 

by improved real estate or a mobile home or any servicer for such 

a loan may charge a reasonable fee for the costs of determining 

whether the building or mobile home securing the loan is located 

in an area having special flood hazards, but only in accordance 

with the following requirements: 

(1) BORROWER FEE.—The borrower under such a loan may be 

charged the fee, but only if the determination— 

(A) is made pursuant to the making, increasing, extending, or renewing of the loan that is initiated by the borrower; 

(B) is made pursuant to a revision or updating under 

section 1360(f) of the floodplain areas and flood-risk zones 

or publication of a notice or compendia under subsection 

(h) or (i) of section 1360 that affects the area in which the 

25 

improved real estate or mobile home securing the loan is 

located or that, in the determination of the Administrator, 

may reasonably be considered to require a determination 

under this subsection; or 

(C) results in the purchase of flood insurance coverage 

pursuant to the requirement under subsection (e)(2). 

(2) PURCHASER OR TRANSFEREE FEE.—The purchaser or 

transferee of such a loan may be charged the fee in the case 

of sale or transfer of the loan. 

* * * * * * * 

NATIONAL FLOOD INSURANCE ACT OF 1968 

* * * * * * * 

TITLE XIII—NATIONAL FLOOD INSURANCE 

* * * * * * * 

CHAPTER I—THE NATIONAL FLOOD INSURANCE PROGRAM 

* * * * * * * 

ESTABLISHMENT OF CHARGEABLE PREMIUM RATES

SEC. 1308. (a) On the basis of estimates made under section 1307 

and such other information as may be necessary, the Administrator 

shall from time to time prescribe, after providing notice— 

(1) chargeable premium rates for any types and classes of 

properties for which insurance coverage shall be available 

under section 1305 (at less than the estimated risk premium 

rates under section 1307(a)(1), where necessary), and 

(2) the terms and conditions under which, and the areas (including subdivisions thereof) within which such rates shall 

apply. 

(b) Such rates shall, insofar as practicable, be— 

(1) based on a consideration of the respective risks involved, 

including differences in risks due to land use measures, floodproofing, flood forecasting, and similar measures; 

(2) adequate, on the basis of accepted actuarial principles, to 

provide reserves for anticipated losses, or if less than such 

amount consistent with the objective of making flood insurance 

available where necessary at reasonable rates so as to encourage prospective insureds to purchase such insurance and with 

the purposes of this title; 

(3) adequate, together with the fee under paragraph 

(1)(B)(iii) or (2) of section 1307(a), to provide for any administrative expenses of the flood insurance and floodplain management programs (including the costs of mapping activities under 

section 1360); 

(4) stated so as to reflect the basis for such rates, including 

the differences (if any) between the estimated risk premium 

rates under section 1307(a)(1) and the estimated rates under 

section 1307(a)(2); and 

26 

(5) adequate, on the basis of accepted actuarial principles, to 

cover the average historical loss year obligations incurred by 

the National Flood Insurance Fund. 

(c) ACTUARIAL RATE PROPERTIES.—Subject only to the limitations 

provided under paragraphs (1) and (2), the chargeable rate shall 

not be less than the applicable estimated risk premium rate for 

such area (or subdivision thereof) under section 1307(a)(1) with respect to the following properties: 

(1) POST-FIRM PROPERTIES.—Any property the construction or 

substantial improvement of which the Administrator determines has been started after December 31, 1974, or started 

after the effective date of the initial rate map published by the 

Administrator under paragraph (2) of section 1360 for the area 

in which such property is located, whichever is later, except 

that the chargeable rate for properties under this paragraph 

shall be subject to the limitation under subsection (e). 

(2) CERTAIN LEASED COASTAL AND RIVER PROPERTIES.—Any 

property leased from the Federal Government (including residential and nonresidential properties) that the Administrator 

determines is located on the river-facing side of any dike, levee, 

or other riverine flood control structure, or seaward of any seawall or other coastal flood control structure. 

(d) With respect to any chargeable premium rate prescribed 

under this section, a sum equal to the portion of the rate that covers any administrative expenses of carrying out the flood insurance 

and floodplain management programs which have been estimated 

under paragraphs (1)(B)(ii) and (1)(B)(iii) of section 1307(a) or paragraph (2) of such section (including the fees under such paragraphs), shall be paid to the Administrator. The Administrator 

shall deposit the sum in the National Flood Insurance Fund established under section 1310. 

(e) ANNUAL LIMITATION ON PREMIUM INCREASES.—Except with 

respect to properties described under paragraph (2) of subsection 

(c), and notwithstanding any other provision of this title— 

(1) the chargeable risk premium rate for flood insurance 

under this title for any property may not be increased by more 

than 18 percent each year, except— 

(A) as provided in paragraph (4); 

(B) in the case of property identified under section 

1307(g); or 

(C) in the case of a property that— 

(i) is located in a community that has experienced a 

rating downgrade under the community rating system 

program carried out under section 1315(b); 

(ii) is covered by a policy with respect to which the 

policyholder has— 

(I) decreased the amount of the deductible; or 

(II) increased the amount of coverage; or 

(iii) was misrated; 

(2) the chargeable risk premium rates for flood insurance 

under this title for any properties initially rated under section 

1307(a)(2) within any single risk classification, excluding properties for which the chargeable risk premium rate is not less 

than the applicable estimated risk premium rate under section 

1307(a)(1), shall be increased by an amount that results in an 

27 

average of such rate increases for properties within the risk 

classification during any 12-month period of not less than 5 

percent of the average of the risk premium rates for such properties within the risk classification upon the commencement of 

such 12-month period; 

(3) the chargeable risk premium rates for flood insurance 

under this title for any properties within any single risk classification may not be increased by an amount that would result 

in the average of such rate increases for properties within the 

risk classification during any 12-month period exceeding 15 

percent of the average of the risk premium rates for properties 

within the risk classification upon the commencement of such 

12-month period; and 

(4) the chargeable risk premium rates for flood insurance 

under this title for any properties described in subparagraphs 

(A) through (E) of section 1307(a)(2) shall be increased by 25 

percent each year, until the average risk premium rate for 

such properties is equal to the average of the risk premium 

rates for properties described under paragraph (3). 

(f) ADJUSTMENT OF PREMIUM.—Notwithstanding any other provision of law, if the Administrator determines that the holder of a 

flood insurance policy issued under this Act is paying a lower premium than is required under this section due to an error in the 

flood plain determination, the Administrator may only prospectively charge the higher premium rate. 

(g) FREQUENCY OF PREMIUM COLLECTION.—With respect to any 

chargeable premium rate prescribed under this section, the Administrator shall provide policyholders that are not required to escrow 

their premiums and fees for flood insurance as set forth under section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 

4012a) with the option of paying their premiums annually or 

monthly. 

(h) RULE OF CONSTRUCTION.—For purposes of this section, the 

calculation of an ‘‘average historical loss year’’— 

(1) includes catastrophic loss years; and 

(2) shall be computed in accordance with generally accepted 

actuarial principles. 

(i) RATES FOR PROPERTIES NEWLY MAPPED INTO AREAS WITH SPE- CIAL FLOOD HAZARDS.—Notwithstanding subsection (f), the premium rate for flood insurance under this title that is purchased on 

or after the date of the enactment of this subsection— 

(1) on a property located in an area not previously designated as having special flood hazards and that, pursuant to 

any issuance, revision, updating, or other change in a flood insurance map, becomes designated as such an area; and 

(2) where such flood insurance premium rate is calculated 

under subsection (a)(1) of section 1307 (42 U.S.C. 4014(a)(1)), 

shall for the first policy year be the preferred risk premium for the 

property and upon renewal shall be calculated in accordance with 

subsection (e) of this section until the rate reaches the rate calculated under subsection (a)(1) of section 1307. 

(j) PREMIUMS AND REPORTS.—In setting premium risk rates, in 

addition to striving to achieve the objectives of this title the Administrator shall also strive to minimize the number of policies with 

annual premiums that exceed one percent of the total coverage proVerDate Sep 11 2014 05:17 Jul 21, 2017 Jkt 069006 PO 00000 Frm 00027 Fmt 6659 Sfmt 6602 E:\HR\OC\HR220.XXX HR220
28 

vided by the policy. For any policies premiums that exceed this one 

percent threshold, the Administrator shall report such exceptions 

to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs 

of the Senate. 

(k) CONSIDERATION OF MITIGATION METHODS.—In calculating the 

risk premium rate charged for flood insurance for a property under 

this section, the Administrator shall take into account the implementation of any mitigation method identified by the Administrator in the guidance issued under section 1361(d) (42 U.S.C. 

4102(d)). 

(l) CLEAR COMMUNICATIONS.—The Administrator shall clearly 

communicate full flood risk determinations to individual property 

owners regardless of whether their premium rates are full actuarial rates. 

(m) PROTECTION OF SMALL BUSINESSES, NON-PROFITS, HOUSES

OF WORSHIP, AND RESIDENCES.— 

(1) REPORT.—Not later than 18 months after the date of the 

enactment of this section and semiannually thereafter, the Administrator shall monitor and report to Committee on Financial Services of the House Representatives and the Committee 

on Banking, Housing, and Urban Affairs of the Senate, the Administrator’s assessment of the impact, if any, of the rate increases required under subparagraphs (A) and (D) of section 

1307(a)(2) and the surcharges required under section 1308A on 

the affordability of flood insurance for— 

(A) small businesses with less than 100 employees; 

(B) non-profit entities; 

(C) houses of worship; and 

(D) residences with a value equal to or less than 25 percent of the median home value of properties in the State 

in which the property is located. 

(2) RECOMMENDATIONS.—If the Administrator determines 

that the rate increases or surcharges described in paragraph 

(1) are having a detrimental effect on affordability, including 

resulting in lapsed policies, late payments, or other criteria related to affordability as identified by the Administrator, for 

any of the properties identified in subparagraphs (A) through 

(D) of such paragraph, the Administrator shall, not later than 

3 months after making such a determination, make such recommendations as the Administrator considers appropriate to 

improve affordability to the Committee on Financial Services of 

the House of Representatives and the Committee on Banking, 

Housing, and Urban Affairs of the Senate. 

(n) EFFECT OF PRIVATE FLOOD INSURANCE COVERAGE ON CONTINUOUS COVERAGE REQUIREMENTS.—For purposes of applying any 

statutory, regulatory, or administrative continuous coverage requirement, including under section 1307(g)(1), the Administrator shall 

consider any period during which a property was continuously covered by private flood insurance (as defined in section 102(b)(8) of 

29 

the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(b)(8))) 

to be a period of continuous coverage. 

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