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Board of Governors of the Federal Reserve System

Federal Deposit Insurance Corporation

Office of the Comptroller of the Currency

 National Credit Union Administration

Farm Credit Administration

Interagency Statement on the Impact of Biggert-Waters Act

March 29, 2013

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance 

Corporation, the Office of the Comptroller of the Currency, the National Credit Union 

Administration, and the Farm Credit Administration (the Agencies) developed this guidance to 

inform financial institutions about revisions to the Flood Disaster Protection Act of 1973 (the 

FDPA). This guidance discusses the effective dates of certain provisions of the Biggert-Waters 

Flood Insurance Reform Act of 2012 (the Act), enacted July 6, 2012, and the impact of the Act 

on the Agencies’ proposed Interagency Questions and Answers.

Biggert-Waters Act Amendments

• Force Placement: The FDPA provides that a lender or its servicer must notify a borrower 

if it determines that the flood insurance coverage on the improved real estate or mobile 

home serving as collateral for the borrower’s loan has expired or is less than the amount 

required for that particular property (42 USC 4012a(e)). The notice must inform the 

borrower of the need to purchase flood insurance. If the borrower fails to purchase flood 

insurance within 45 days after notification, the lender or servicer must purchase flood 

insurance on behalf of the borrower and may charge the borrower for the cost of 

premiums and fees incurred by the lender or servicer. The Act amends the FDPA to: 

o Provide that the premiums and fees that a lender or servicer may charge the 

borrower include premiums or fees incurred for coverage beginning on the date 

on which flood insurance coverage lapsed or did not provide sufficient coverage 

amount;

o Require the lender or servicer, within 30 days of receiving a confirmation of a 

borrower’s existing flood insurance coverage, to terminate any force-placed 

insurance and refund to the borrower all force-placed insurance premiums and 

any related fees paid for by the borrower during any period of overlap between 

the borrower’s policy and the force-placed policy; and

o Require a lender or servicer to accept as confirmation of a borrower’s existing 

flood insurance policy a declarations page that includes the existing flood 

insurance policy number and the identity and contact information for the 

insurance company or agent.
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It is the Agencies’ position that the force placement provisions of the Act described 

above became effective upon enactment.

• Civil Money Penalties: The maximum civil money penalty for a FDPA violation has been 

increased to $2,000. In addition, the penalty cap per year has been deleted. It is the 

Agencies’ position that this provision became effective upon enactment.

• Private Flood Insurance: The mandatory purchase requirement has been amended to 

require lenders to accept private flood insurance policies as satisfaction of the mandatory 

purchase requirement if the coverage provided by the private flood insurance satisfies the 

standards specified in the Act. In addition, regulated lenders are required to disclose to 

borrowers that:

o Flood insurance under the National Flood Insurance Program (NFIP) is available

from private insurance companies or from the NFIP directly;

o Flood insurance that provides the same level of coverage as an NFIP policy may 

be available from private insurance companies; and

o Borrowers are encouraged to compare policies.

This provision will be implemented by the Agencies through notice and comment 

rulemaking. It is the Agencies’ position that this provision of the Act is not effective 

until regulations are issued.

● Escrow of Flood Insurance Payments: Lenders and servicers must establish escrow 

accounts for flood insurance premiums and fees for residential improved real estate or a 

mobile home, for any loan secured by such residential improved real estate or mobile 

home1 outstanding or entered into after July 6, 2014. Except as may be required under 

applicable state law, a lender is exempt from the escrow requirement if: (1) the institution 

has less than $1 billion in assets; and (2) as of July 6, 2012, the institution was not 

required by federal or state law to escrow taxes or insurance for the term of the loan, and 

it did not have a policy to require escrow of taxes and insurance.

This provision also will be implemented through notice and comment rulemaking. It is 

the Agencies’ position that this provision of the Act is not effective until regulations are 

issued. The Agencies intend to publish escrow regulations in sufficient time for the 

industry to implement them prior to July 2014.

 1 The Act was recently amended by Public Law No. 112-281 to clarify that these provisions apply to residential

improved real estate. 
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Biggert-Waters Act and Impact on Agency Guidance

The Agencies proposed question and answer 62 to address whether a borrower may be charged 

for the cost of flood insurance that provides coverage for the 45-day force placement period 

(2009 Interagency Questions and Answers, 74 FR 35914 (July 21, 2009) and 2011 Interagency 

Questions and Answers, 76 FR 64175 (Oct. 17, 2011)).2 Because the Act addresses this issue, 

proposed question and answer 62 is no longer necessary.

In addition, the Agencies proposed revised question and answer 60 and proposed revisions to 

previously finalized question and answer 57. The Agencies do not intend to finalize proposed 

questions and answers 57 and 60 at this time. After final regulations have been promulgated, the

Agencies expect to undertake a review of the Interagency Questions and Answers and may 

propose changes as appropriate.

 2 http://www.gpo.gov/fdsys/pkg/FR-2009-07-21/pdf/E9-17129.pdf and http://www.gpo.gov/fdsys/pkg/FR-2011-10-

17/pdf/2011-26749.pdf.