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 Increased Maximum Flood Insurance Coverage 

for Other Residential Buildings

Under Section 100204 of the Biggert-Waters Flood Insurance Reform Act of 2012, the 

maximum limit of building coverage available for non-condominium residential buildings 

designed for use for five or more families, classified as “Other Residential Buildings” by the 

National Flood Insurance Program (NFIP), has been increased from $250,000 per building to 

$500,000. The maximum contents coverage for all policies covering Other Residential Buildings 

will remain $100,000 per policy. The new coverage limits are available for new policies, policy 

renewals, or existing policies with change endorsements1 effective on or after June 1, 2014.2

 

The Board of Governors of the Federal Reserve System, the Farm Credit Administration, the 

Federal Deposit Insurance Corporation, the National Credit Union Administration, and the 

Office of the Comptroller of the Currency (the Agencies) have issued flood insurance regulations

requiring that, when a lender makes, increases, extends, or renews a loan secured by property 

located in a Special Flood Hazard Area (a “designated loan”), the property must be covered by 

flood insurance for the term of the loan.3 The amount of insurance required is the lesser of: 

• the outstanding principal balance of the loan(s); or 

• the maximum amount of insurance available under the NFIP, which is the lesser of:

o the maximum limit available for the particular type of structure; or

o the “insurable value” of the structure.

Considering the Agencies’ flood insurance coverage requirements, the increase in the maximum 

amount of flood insurance coverage available under the NFIP pursuant to the Biggert-Waters Act 

could affect the minimum amount of flood insurance required for both existing and future loans 

secured by Other Residential Buildings.

The Federal Emergency Management Agency (FEMA) has directed insurers that issue NFIP 

policies to provide all Other Residential policyholders with a letter informing them prior to June 

1, 2014, of the new policy limits.

4 This letter is intended to notify building owners who may be 

affected by the increased limits. The Agencies understand that insurers may provide notification 

of the new policy limits to any lender named on the borrower’s flood insurance policy at the 

 1 An endorsement is a written document attached to an insurance policy that modifies the policy by changing the 

coverage afforded under the policy.

2 FEMA Memorandum W-13070, http://nfipiservice.com/Stakeholder/FEMA2/w-13070_Full.pdf (Dec. 16, 2013), 

Attachment A, page 1. 3 See 12 C.F.R. § 22.3 (Office of the Comptroller of the Currency); 12 C.F.R. § 208.25(c) (Federal Reserve Board);

12 C.F.R. § 339.3 (Federal Deposit Insurance Corporation); 12 C.F.R. § 614.4930 (Farm Credit Administration); 12 

C.F.R. § 760.3 (National Credit Union Administration). 4 FEMA Memorandum W-13070, Attachment A, page 1.
same time the policyholder is notified. Additionally, FEMA has instructed insurers to include a 

message on the Renewal Notice advising affected policyholders that higher limits are available. 

A policyholder may purchase increased coverage through a change endorsement on an existing 

policy as of May 1, 2014, to ensure that the increased coverage amount goes into effect as of 

June 1, 2014.5

If a financial institution or its servicer receives notification of the increased flood insurance 

limits available for an Other Residential Building securing a designated loan, the Agencies 

expect supervised institutions to take any steps necessary to determine whether the property will 

require increased flood insurance coverage. Although a lender is not required to perform an 

immediate full file search of its loan portfolio, for safety and soundness purposes a lender may 

want to review its loan portfolio to determine whether additional flood insurance coverage is 

required for certain properties in light of the availability of increased flood insurance coverage 

for Other Residential Buildings. The Agencies have explained previously in Interagency 

Questions and Answers Regarding Flood Insurance:

Apart from the requirements mandated when a loan is made, increased, extended or 

renewed, a regulated lender need only review and take action on any part of its existing 

portfolio for safety and soundness purposes, or if it knows or has reason to know of the 

need for NFIP coverage. Regardless of the lack of such requirement in the Act and 

Regulation, however, sound risk management practices may lead a lender to conduct 

scheduled periodic reviews that track the need for flood insurance on a loan portfolio.

6

If, as a result of the increase in the maximum limit of building coverage for Other Residential 

Buildings, the lender or its servicer makes a determination on or after June 1, 2014, that the 

building securing the designated loan is now covered by flood insurance in an amount less than 

required, it should take steps to ensure that the borrower obtains sufficient coverage. If an 

affected borrower has not provided evidence of the increased flood insurance, the lender or its 

servicer must notify the borrower that the borrower should obtain additional flood insurance at 

the borrower’s expense for the remaining term of the loan. If the borrower fails to obtain 

sufficient coverage within 45 days after notification, the lender or its servicer must purchase 

coverage on the borrower’s behalf. The lender or its servicer may charge the borrower for the 

cost of premiums and fees incurred in purchasing the insurance, including premiums and fees 

incurred for coverage beginning on the date on which flood insurance coverage did not provide a 

sufficient coverage amount. 

 5 Ibid. 6 Interagency Questions and Answers Regarding Flood Insurance, 74 Fed. Reg. 35914, 35935 (July 21, 2009)

(Question and Answer No. 7).