5530 Federal Register / Vol. 62, No. 25 / Thursday, February 6, 1997 / Rules and Regulations

widower’’ and adding, in their place,

‘‘surviving spouse’’; and paragraph (f) is

amended by removing ‘‘widow or

widower’’ and adding, in their place,

‘‘surviving spouse’’ and by removing

‘‘wife or husband’’ and adding, in their

place, ‘‘spouse’’.

[FR Doc. 97–2903 Filed 2–5–97; 8:45 am]

BILLING CODE 8320–01–P

38 CFR Part 36

RIN 2900–AH63

Loan Guaranty: Flood Insurance

Requirements

AGENCY: Veterans Benefits

Administration, Department of Veterans

Affairs.

ACTION: Final rule.

SUMMARY: The Department of Veterans

Affairs (VA) is amending its loan

guaranty regulations regarding loans in

areas having special flood hazards. This

action is required by statute to

implement the provisions of the

National Flood Insurance Reform Act of

1994, Title V of Public Law 103–325.

VA is amending its regulations to

strengthen requirements for procuring

and maintaining flood insurance on

properties in areas having special flood

hazards which secure loans guaranteed

by VA, and to include new requirements

for VA as a ‘‘Federal agency lender.’’

The new requirements include escrow

requirements for flood insurance

premiums, the requirement to ‘‘force

place’’ flood insurance under certain

circumstances, enhanced flood hazard

notice requirements, new authority for

VA to charge fees for determining

whether a property is located in a

special flood hazard area, and various

other provisions necessary to implement

the National Flood Insurance Reform

Act of 1994.

EFFECTIVE DATE: This final rule is

effective February 6, 1997.

FOR FURTHER INFORMATION CONTACT: Ms.

Judith Caden, Assistant Director for

Loan Policy (264), Loan Guaranty

Service, Veterans Benefits

Administration, Department of Veterans

Affairs, Washington, DC 20420, (202)

273–7368.

SUPPLEMENTARY INFORMATION: Title V of

the Riegle Community Development and

Regulatory Improvement Act of 1994,

which is called the National Flood

Insurance Reform Act of 1994 (Reform

Act), comprehensively revised existing

Federal flood insurance statutes. The

Reform Act was intended to increase

compliance with flood insurance

requirements and participation in the

National Flood Insurance Program in

order to provide additional income to

the National Flood Insurance Fund and

to decrease the financial burden of

flooding on the Federal government,

taxpayers, and flood victims. The

Reform Act requires the Federal entities

for lending regulation to issue

regulations fulfilling its statutory

requirements, and Federal agency

lenders to issue regulations consistent

with and substantially identical to the

regulations issued by the Federal

entities for lending regulation. The

Federal entities for lending regulation

published a joint final rule on August

29, 1996.

VA is amending its regulations in

order to set forth the requirement of

flood insurance coverage on properties

located in special flood hazard areas

which secure loans made or guaranteed

by VA, and to fulfill the statutory

requirement that VA issue regulations

consistent with and substantially

identical to the regulations issued by the

Federal entities for lending regulation.

Existing VA regulations regarding

flood insurance requirements are based

on several provisions of Title 42 U.S.C.,

Chapter 50, which were in place prior

to the enactment of the Reform Act. 42

U.S.C. 4106(a) provides that no Federal

agency shall approve any financial

assistance (guarantee or make a loan) for

acquisition or construction purposes on

and after July 1, 1975, for use in any

area that has been identified by the

Director of the Federal Emergency

Management Agency (FEMA) as an area

having special flood hazards unless the

community in which such area is

situated is then participating in the

National Flood Insurance Program. 42

U.S.C. 4012a(a) provides that no Federal

agency shall approve any financial

assistance for acquisition or

construction purposes for use in any

area that has been identified by the

Director of FEMA as having special

flood hazards and in which the sale of

flood insurance is available under the

National Flood Insurance Act of 1968

unless the building or manufactured

home and any personal property to

which such financial assistance relates

is covered by flood insurance.

The Reform Act added 42 U.S.C.

4012a(b) which provides that regulated

lending institutions and Federal agency

lenders cannot make, increase, extend,

or renew any loan secured by improved

real estate or a manufactured home

located or to be located in an area that

has been identified by the Director of

FEMA 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 manufactured

home and any personal property

securing such loan is covered by flood

insurance. Further, lenders selling loans

to the Federal National Mortgage

Association or the Federal Home Loan

Mortgage Corporation must ensure that

any loan secured by improved real

estate or a manufactured home

identified as being in a special flood

hazard area at the time of origination or

any time during the term of the loan is

covered by flood insurance.

One significant impact of the new

provisions on VA is a greater emphasis

on ensuring flood insurance coverage

during the entire term of loans

guaranteed or made by VA which

require such insurance, taking into

account any remapping of special flood

hazard areas by FEMA. VA is amending

38 CFR 36.4222 regarding hazard

insurance coverage for manufactured

home loans guaranteed by VA, 38 CFR

36.4326 regarding hazard insurance

coverage for other loans guaranteed by

VA, and 38 CFR 36.4600(c)(3) regarding

hazard insurance coverage for loans sold

by VA subject to guaranty, by adding

language to emphasize that the flood

insurance requirement applies any time

during the term of the loan that the

security is located in a special flood

hazard area, not just when the loan is

made. VA is adding language to 38 CFR

36.4512(b) which provides that it cannot

make, increase, extend, or renew any

loan secured by improved real estate or

a manufactured home located or to be

located in a special flood hazard area

unless the security is covered by flood

insurance for the term of the loan.

Under 42 U.S.C. 4106(a), Federal

agencies are prohibited from providing

financial assistance for acquisition or

construction purposes for use in any

area that has been identified by FEMA

as an area having special flood hazards

unless the community in which such

area is situated is then participating in

the National Flood Insurance Program.

Although this is not a new provision of

the law, VA is using this opportunity to

ensure program participants are aware

of the prohibition. VA is incorporating

the prohibition into 38 CFR 36.4222,

36.4326, 36.4402 and 36.4512.

In 38 CFR 36.4326 and 36.4402(a)(6),

the reference to the Secretary of Housing

and Urban Development is replaced by

a reference to the FEMA.

38 CFR 36.4500(b) is amended to

make the provisions of 38 CFR 36.4512

applicable to Native American veteran

direct loans. Editorial changes are also

made to 38 CFR 36.4512.

The Reform Act requires that VA

issue regulations consistent with and

substantially identical to those issued
Federal Register / Vol. 62, No. 25 / Thursday, February 6, 1997 / Rules and Regulations 5531

by the Federal entities for lending

regulation. The regulations issued by

the Federal entities for lending

regulation restate the requirements of

the law as applied to regulated lending

institutions. VA is adding this language,

as applied to its role as a Federal agency

lender, to its regulations as sections 38

CFR 36.4700 through 36.4709. These

regulations apply whenever VA makes,

increases, extends or renews, and, in

some cases, sells a loan secured by

improved real estate or a manufactured

home located in an area identified by

FEMA as having special flood hazards.

The regulations include the following

requirements: VA will maintain the

required amount of flood insurance for

the term of the loan; VA will escrow for

flood insurance premiums if it requires

the escrow of taxes, insurance, or other

charges; VA will use the standard flood

hazard determination form prescribed

by FEMA, retain a copy of each

completed form, and may charge a fee

for flood determinations under certain

circumstances; VA will force placement

of flood insurance under certain

circumstances; VA will provide notice

of special flood hazards and availability

of Federal disaster relief assistance, in a

specific written format, to the borrower

and servicer of the loan, and retain a

record of receipt of the notices by these

parties; and VA will notify the Director

of FEMA, or the Director’s designee, of

the identity of the servicer of the loan

and of any change in the servicer. VA

is omitting the references to table

funding contained in the regulations

issued by the Federal entities for

lending regulation from its amendments

because they are not applicable to its

role as a Federal agency lender.

The Secretary hereby certifies that

this final rule will not have a significant

economic impact on a substantial

number of small entities as they are

defined in the Regulatory Flexibility

Act, 5 U.S.C. 601–612. The final rule

essentially restates statutory provisions

and reflects statutory requirements.

Therefore, pursuant to 5 U.S.C. 605(b),

this final rule is exempt from the initial

and final regulatory flexibility analysis

requirements of sections 603 and 604.

The Catalog of Federal Domestic

Assistance Program numbers are 64.106,

64.114, 64.118, 64.119 and 64.126.

List of Subjects in 38 CFR Part 36

Condominiums, Handicapped,

Housing Loan programs—housing and

community development, Manufactured

homes, Veterans.

Approved: January 24, 1997.

Jesse Brown,

Secretary of Veterans Affairs.

For the reasons set out in the

preamble, 38 CFR part 36 is amended as

set forth below.

PART 36—LOAN GUARANTY

1. An authority citation for part 36 is

added to read as follows:

Authority: 38 U.S.C. 501, 3701–3704, 3707,

3710–3714, 3719, 3720, 3729, 3762, unless

otherwise noted.

2. In § 36.4222, paragraph (a)(1) is

revised to read as follows:

§ 36.4222 Hazard insurance.

(a) * * *

(1) Flood insurance will be required

on any manufactured home, building or

personal property securing a loan at any

time during the term of the loan that

such security is located in an area

identified by the Federal Emergency

Management Agency as having special

flood hazards and in which flood

insurance has been made available

under the National Flood Insurance Act,

as amended. The amount of flood

insurance must be at least equal to the

lesser of the outstanding principal

balance of the loan or the maximum

limit of coverage available for the

particular type of property under the

National Flood Insurance Act, as

amended. The Secretary cannot

guarantee a loan for the acquisition or

construction of property located in an

area identified by the Federal

Emergency Management Agency as

having special flood hazards unless the

community in which such area is

situated is then participating in the

National Flood Insurance Program.

(Authority: 42 U.S.C. 4012a, 4106(a))

* * * * *

3. Section 36.4326 is revised to read

as follows:

§ 36.4326 Hazard insurance.

The holder shall require insurance

policies to be procured and maintained

in an amount sufficient to protect the

security against the risks or hazards to

which it may be subjected to the extent

customary in the locality. All moneys

received under such policies covering

payment of insured losses shall be

applied to restoration of the security or

to the loan balance. Flood insurance

will be required on any building or

personal property securing a loan at any

time during the term of the loan that

such security is located in an area

identified by the Federal Emergency

Management Agency as having special

flood hazards and in which flood

insurance has been made available

under the National Flood Insurance Act,

as amended. The amount of flood

insurance must be at least equal to the

lesser of the outstanding principal

balance of the loan or the maximum

limit of coverage available for the

particular type of property under the

National Flood Insurance Act, as

amended. The Secretary cannot

guarantee a loan for the acquisition or

construction of property located in an

area identified by the Federal

Emergency Management Agency as

having special flood hazards unless the

community in which such area is

situated is then participating in the

National Flood Insurance Program.

(Authority: 42 U.S.C. 4012a, 4106(a))

4. In § 36.4402, paragraph (a)(6) is

revised to read as follows:

§ 36.4402 Eligibility.

(a) * * *

(6) The housing unit, if it is located

or becomes located in an area identified

by the Federal Emergency Management

Agency as having special flood hazards

and in which flood insurance has been

made available under the National

Flood Insurance Act, as amended, is or

will be covered by flood insurance. The

amount of flood insurance must be at

least equal to the lesser of the full

insurable value of the property or the

maximum limit of coverage available for

the particular type of property under the

National Flood Insurance Act, as

amended. The Secretary cannot approve

any financial assistance for the

acquisition or construction of property

located in an area identified by the

Federal Emergency Management Agency

as having special flood hazards unless

the community in which such area is

situated is then participating in the

National Flood Insurance Program.

(Authority: 42 U.S.C. 4012a, 4106(a))

* * * * *

5. In § 36.4500, paragraph (b) is

revised to read as follows:

§ 36.4500 Applicability.

* * * * *

(b) Sections 36.4501, 36.4512, and

36.4527, which concern direct loans to

Native American veterans shall be

applicable to loans made by the

Secretary pursuant to 38 U.S.C. 3761

through 3764.

(Authority: 42 U.S.C. 4012a)

* * * * *

6. Section 36.4512 is revised to read

as follows:

§ 36.4512 Taxes and insurance.

(a) In addition to the monthly

installment payments of principal and
5532 Federal Register / Vol. 62, No. 25 / Thursday, February 6, 1997 / Rules and Regulations

interest payable under the terms of the

loan agreement, the borrower will be

required to make payments monthly to

the Secretary in such amounts as may be

determined by the Secretary from time

to time to be necessary for the purpose

of accumulating funds sufficient for the

payment of taxes and assessments,

ground rents, insurance premiums, and

similar levies or charges on the security

property. The borrower at loan closing

shall pay in cash to the Secretary such

sum as it estimates may be necessary as

the initial deposit to the borrower’s tax

and insurance reserve account.

(Authority: 38 U.S.C. 3720)

(b) The borrower shall procure and

maintain insurance of a type or types

and in such amounts as may be required

by the Secretary to protect the security

against fire and other hazards. The

Secretary cannot make a loan for the

acquisition or construction of property

located in an area identified by the

Federal Emergency Management Agency

as having special flood hazards unless

the community in which such area is

situated is then participating in the

National Flood Insurance Program. The

Secretary shall not make, increase,

extend, or renew a loan secured by a

building or manufactured home that is

located or to be located in an area

identified by the Federal Emergency

Management Agency as having special

flood hazards and in which flood

insurance has been made available

under the National Flood Insurance Act,

as amended, unless the building or

manufactured home and any personal

property securing the loan is covered by

flood insurance for the term of the loan.

The amount of flood insurance must be

at least equal to the lesser of the

outstanding principal balance of the

loan or the maximum limit of coverage

available for the particular type of

property under the National Flood

Insurance Act, as amended. The

requirements of 38 CFR 36.4700 through

36.4709 shall apply to direct loans made

pursuant to 38 U.S.C. 3711 and 3761

through 3764. All hazard and flood

insurance shall be carried with a

company or companies satisfactory to

the Secretary and the policies and

renewals thereof shall be held in the

possession of the Secretary and contain

a mortgagee loss payable clause in favor

of and in a form satisfactory to the

Secretary.

(Authority: 42 U.S.C. 4012a, 4106(a))

7. In § 36.4600, paragraph (c)(3) is

revised to read as follows:

§ 36.4600 Sale of loans, guarantee of

payment.

* * * * *

(c) * * *

(3) To maintain insurance in an

amount sufficient to protect the security

against risks or hazards to which it may

be subjected to the extent customary in

the locality, and to apply the proceeds

of loss payments to the loan balance or

the restoration of the security, as the

holder may in the holder’s discretion

deem proper. Flood insurance will be

required on any building or personal

property securing a loan at any time

during the term of the loan that such

security is located in an area identified

by the Federal Emergency Management

Agency as having special flood hazards

and in which flood insurance has been

made available under the National

Flood Insurance Act, as amended. The

amount of flood insurance must be at

least equal to the lesser of the

outstanding principal balance of the

loan or the maximum limit of coverage

available for the particular type of

property under the National Flood

Insurance Act, as amended. The notice

requirements of 38 CFR 36.4709 shall

apply to loans sold pursuant to this

section.

(Authority: 42 U.S.C. 4012a, 4104a)

* * * * *

8. Sections 36.4700 through 36.4709

are added to read as follows:

§ 36.4700 Authority, purpose, and scope.

(a) Authority. Sections 36.4700

through 36.4709 of this part are issued

pursuant to 42 U.S.C. 4012a, 4104a,

4104b, 4106, and 4128.

(b) Purpose. The purpose of sections

36.4700 through 36.4709 of this part is

to implement the requirements of the

National Flood Insurance Act of 1968

and the Flood Disaster Protection Act of

1973, as amended (42 U.S.C. 4001–

4129).

(c) Scope. Sections 36.4700 through

36.4709 of this part, except for

§§ 36.4705 and 36.4707, apply to loans

secured by buildings or mobile homes

located or to be located in areas

determined by the Director of the

Federal Emergency Management Agency

to have special flood hazards. Sections

36.4705 and 36.4707 apply to loans

secured by buildings or mobile homes,

regardless of location.

(Authority: 42 U.S.C. 4012a, 4104a, 4104b,

4106, and 4128)

§ 36.4701 Definitions.

(a) Act means the National Flood

Insurance Act of 1968, as amended (42

U.S.C. 4001–4129).

(b) Secretary means the Secretary of

Veterans Affairs.

(c) Building means a walled and

roofed structure, other than a gas or

liquid storage tank, that is principally

above ground and affixed to a

permanent site, and a walled and roofed

structure while in the course of

construction, alteration, or repair.

(d) Community means a State or a

political subdivision of a State that has

zoning and building code jurisdiction

over a particular area having special

flood hazards.

(e) Designated loan means a loan

secured by a building or mobile home

that is located or to be located in a

special flood hazard area in which flood

insurance is available under the Act.

(f) Director of FEMA means the

Director of the Federal Emergency

Management Agency.

(g) Mobile home means a structure,

transportable in one or more sections,

that is built on a permanent chassis and

designed for use with or without a

permanent foundation when attached to

the required utilities. The term mobile

home does not include a recreational

vehicle. For purposes of this part, the

term mobile home means a mobile home

on a permanent foundation. The term

mobile home includes a manufactured

home as that term is used in the NFIP.

(h) NFIP means the National Flood

Insurance Program authorized under the

Act.

(i) Residential improved real estate

means real estate upon which a home or

other residential building is located or

to be located.

(j) Servicer means the person

responsible for:

(1) Receiving any scheduled, periodic

payments from a borrower under the

terms of a loan, including amounts for

taxes, insurance premiums, and other

charges with respect to the property

securing the loan; and

(2) Making payments of principal and

interest and any other payments from

the amounts received from the borrower

as may be required under the terms of

the loan.

(k) Special flood hazard area means

the land in the flood plain within a

community having at least a one percent

chance of flooding in any given year, as

designated by the Director of FEMA.

(Authority: 42 U.S.C. 4012a, 4104a, 4104b,

4106 and 4128)

§ 36.4702 Requirement to purchase flood

insurance where available.

In general. The Secretary shall not

make, increase, extend, or renew any

designated loan unless the building or

mobile home and any personal property

securing the loan is covered by flood

insurance for the term of the loan. The

amount of insurance must be at least
Federal Register / Vol. 62, No. 25 / Thursday, February 6, 1997 / Rules and Regulations 5533

equal to the lesser of the outstanding

principal balance of the designated loan

or the maximum limit of coverage

available for the particular type of

property under the Act. Flood insurance

coverage under the Act is limited to the

overall value of the property securing

the designated loan minus the value of

the land on which the property is

located.

(Authority: 42 U.S.C. 4012a)

§ 36.4703 Exemptions.

The flood insurance requirement

prescribed by 38 CFR 36.4702 does not

apply with respect to:

(a) Any State-owned property covered

under a policy of self-insurance

satisfactory to the Director of FEMA,

who publishes and periodically revises

the list of States falling within this

exemption; or

(b) Property securing any loan with an

original principal balance of $5,000 or

less and a repayment term of one year

or less.

(Authority: 42 U.S.C. 4012a(c))

§ 36.4704 Escrow requirement.

If the Secretary requires the escrow of

taxes, insurance premiums, fees, or any

other charges for a loan secured by

residential improved real estate or a

mobile home that is made, increased,

extended, or renewed on or after

October 1, 1996, the Secretary shall also

require the escrow of all premiums and

fees for any flood insurance required

under 38 CFR 36.4702. The Secretary, or

a servicer acting on behalf of the

Secretary, shall deposit the flood

insurance premiums on behalf of the

borrower in an escrow account. This

escrow account will be subject to

escrow requirements adopted pursuant

to section 10 of the Real Estate

Settlement Procedures Act of 1974 (12

U.S.C. 2609) (RESPA), which generally

limits the amount that may be

maintained in escrow accounts for

certain types of loans and requires

escrow account statements for those

accounts, only if the loan is otherwise

subject to RESPA. Following receipt of

a notice from the Director of FEMA or

other provider of flood insurance that

premiums are due, the Secretary, or a

servicer acting on behalf of the

Secretary, shall pay the amount owed to

the insurance provider from the escrow

account by the date when such

premiums are due.

(Authority: 42 U.S.C. 4012a(d))

§ 36.4705 Required use of standard flood

hazard determination form.

(a) Use of form. The Secretary shall

use the standard flood hazard

determination form developed by the

Director of FEMA (as set forth in

appendix A of 44 CFR part 65) when

determining whether the building or

mobile home offered as collateral

security for a loan is or will be located

in a special flood hazard area in which

flood insurance is available under the

Act. The standard flood hazard

determination form may be used in a

printed, computerized, or electronic

manner.

(b) Retention of form. The Secretary

shall retain a copy of the completed

standard flood hazard determination

form, in either hard copy or electronic

form, for the period of time the

Secretary owns the loan.

(Authority: 42 U.S.C. 4104b)

§ 36.4706 Forced placement of flood

insurance.

If the Secretary, or a servicer acting on

behalf of the Secretary, determines at

any time during the term of a designated

loan that the building or mobile home

and any personal property securing the

designated loan is not covered by flood

insurance or is covered by flood

insurance in an amount less than the

amount required under 38 CFR 36.4702,

then the Secretary or a servicer acting

on behalf of the Secretary, shall notify

the borrower that the borrower should

obtain flood insurance, at the borrower’s

expense, in an amount at least equal to

the amount required under 38 CFR

36.4702, for the remaining term of the

loan. If the borrower fails to obtain flood

insurance within 45 days after

notification, then the Secretary or a

servicer acting on behalf of the

Secretary, shall purchase insurance on

the borrower’s behalf. The Secretary or

a servicer acting on behalf of the

Secretary, may charge the borrower for

the cost of premiums and fees incurred

in purchasing the insurance.

(Authority: 42 U.S.C. 4012a(e))

§ 36.4707 Determination fees.

(a) General. Notwithstanding any

Federal or State law other than the

Flood Disaster Protection Act of 1973 as

amended (42 U.S.C. 4001–4129), the

Secretary, or a servicer acting on behalf

of the Secretary, may charge a

reasonable fee for determining whether

the building or mobile home securing

the loan is located or will be located in

a special flood hazard area. A

determination fee may also include, but

is not limited to, a fee for life-of-loan

monitoring.

(b) Borrower fee. The determination

fee authorized by paragraph (a) of this

section may be charged to the borrower

if the determination:

(1) Is made in connection with a

making, increasing, extending, or

renewing of the loan that is initiated by

the borrower;

(2) Reflects the Director of FEMA’s

revision or updating of floodplain areas

or flood-risk zones;

(3) Reflects the Director of FEMA’s

publication of a notice or compendium

that:

(i) Affects the area in which the

building or mobile home securing the

loan is located; or

(ii) By determination of the Director of

FEMA, may reasonably require a

determination whether the building or

mobile home securing the loan is

located in a special flood hazard area; or

(4) Results in the purchase of flood

insurance coverage by the Secretary or

a servicer acting on behalf of the

Secretary, on behalf of the borrower

under 38 CFR 36.4706.

(c) Purchaser or transferee fee. The

determination fee authorized by

paragraph (a) of this section may be

charged to the purchaser or transferee of

a loan in the case of the sale or transfer

of the loan.

(Authority: 42 U.S.C. 4012a(h))

§ 36.4708 Notice of special flood hazards

and availability of Federal disaster relief

assistance.

(a) Notice requirement. When the

Secretary makes, increases, extends, or

renews a loan secured by a building or

a mobile home located or to be located

in a special flood hazard area, the

Secretary shall mail or deliver a written

notice to the borrower and to the

servicer in all cases whether or not flood

insurance is available under the Act for

the collateral securing the loan.

(b) Contents of notice. The written

notice must include the following

information:

(1) A warning, in a form approved by

the Director of FEMA, that the building

or the mobile home is or will be located

in a special flood hazard area;

(2) A description of the flood

insurance purchase requirements set

forth in section 102(b) of the Flood

Disaster Protection Act of 1973, as

amended (42 U.S.C. 4012a(b));

(3) A statement, where applicable,

that flood insurance coverage is

available under the NFIP and may also

be available from private insurers; and

(4) A statement whether Federal

disaster relief assistance may be

available in the event of damage to the

building or mobile home caused by

flooding in a Federally declared

disaster.

(c) Timing of notice. The Secretary

shall provide the notice required by

paragraph (a) of this section to the
5534 Federal Register / Vol. 62, No. 25 / Thursday, February 6, 1997 / Rules and Regulations

borrower within a reasonable time

before the completion of the transaction,

and to the servicer as promptly as

practicable after the Secretary provides

notice to the borrower and in any event

no later than the time the Secretary

provides other similar notices to the

servicer concerning hazard insurance

and taxes. Notice to the servicer may be

made electronically or may take the

form of a copy of the notice to the

borrower.

(d) Record of receipt. The Secretary

shall retain a record of the receipt of the

notices by the borrower and the servicer

for the period of time the Secretary

owns the loan.

(e) Alternate method of notice. Instead

of providing the notice to the borrower

required by paragraph (a) of this section,

the Secretary may obtain satisfactory

written assurance from a seller or lessor

that, within a reasonable time before the

completion of the sale or lease

transaction, the seller or lessor has

provided such notice to the purchaser or

lessee. The Secretary shall retain a

record of the written assurance from the

seller or lessor for the period of time the

Secretary owns the loan.

(f) Use of prescribed form of notice.

The Secretary will be considered to be

in compliance with the requirement for

notice to the borrower of this section by

providing written notice to the borrower

containing the language presented in

appendix A to this part within a

reasonable time before the completion

of the transaction. The notice presented

in appendix A to this part satisfies the

borrower notice requirements of the Act.

(Authority: 42 U.S.C. 4104a)

§ 36.4709 Notice of servicer’s identity.

(a) Notice requirement. When the

Secretary makes, increases, extends,

renews, sells, or transfers a loan secured

by a building or mobile home located or

to be located in a special flood hazard

area, the Secretary shall notify the

Director of FEMA (or the Director’s

designee) in writing of the identity of

the servicer of the loan. The Director of

FEMA has designated the insurance

provider to receive the Secretary’s

notice of the servicer’s identity. This

notice may be provided electronically if

electronic transmission is satisfactory to

the Director of FEMA’s designee.

(b) Transfer of servicing rights. The

Secretary shall notify the Director of

FEMA (or the Director’s designee) of any

change in the servicer of a loan

described in paragraph (a) of this

section within 60 days after the effective

date of the change. This notice may be

provided electronically if electronic

transmission is satisfactory to the

Director of FEMA’s designee. Upon any

change in the servicing of a loan

described in paragraph (a) of this

section, the duty to provide notice

under this paragraph (b) shall transfer to

the transferee servicer.

(Authority: 42 U.S.C. 4104a)

9. Appendix A to part 36 is added to

read as follows:

Appendix A to Part 36—Sample Form

of Notice of Special Flood Hazards and

Availability of Federal Disaster Relief

Assistance

We are giving you this notice to inform you

that:

The building or mobile home securing the

loan for which you have applied is or will

be located in an area with special flood

hazards. The area has been identified by the

Director of the Federal Emergency

Management Agency (FEMA) as a special

flood hazard area using FEMA’s Flood

Insurance Rate Map or the Flood Hazard

Boundary Map for the following community:

llll. This area has at least a one percent

(1%) chance of a flood equal to or exceeding

the base flood elevation (a 100-year flood) in

any given year. During the life of a 30-year

mortgage loan, the risk of a 100-year flood in

a special flood hazard area is 26 percent

(26%).

Federal law allows a lender and borrower

jointly to request the Director of FEMA to

review the determination of whether the

property securing the loan is located in a

special flood hazard area. If you would like

to make such a request, please contact us for

further information.

ll The community in which the property

securing the loan is located participates in

the National Flood Insurance Program

(NFIP). Federal law will not allow us to make

you the loan that you have applied for if you

do not purchase flood insurance. The flood

insurance must be maintained for the life of

the loan. If you fail to purchase or renew

flood insurance on the property, Federal law

authorizes and requires us to purchase the

flood insurance for you at your expense.

• Flood insurance coverage under the

NFIP may be purchased through an insurance

agent who will obtain the policy either

directly through the NFIP or through an

insurance company that participates in the

NFIP. Flood insurance also may be available

from private insurers that do not participate

in the NFIP.

• At a minimum, flood insurance

purchased must cover the lesser of:

(1) the outstanding principal balance of the

loan; or

(2) the maximum amount of coverage

allowed for the type of property under the

NFIP.

Flood insurance coverage under the NFIP

is limited to the overall value of the property

securing the loan minus the value of the land

on which the property is located.

• Federal disaster relief assistance (usually

in the form of a low-interest loan) may be

available for damages incurred in excess of

your flood insurance if your community’s

participation in the NFIP is in accordance

with NFIP requirements.

ll Flood insurance coverage under the

NFIP is not available for the property

securing the loan because the community in

which the property is located does not

participate in the NFIP. In addition, if the

non-participating community has been

identified for at least one year as containing

a special flood hazard area, properties

located in the community will not be eligible

for Federal disaster relief assistance in the

event of a Federally-declared flood disaster.

(Authority: 42 U.S.C. 4104a)

[FR Doc. 97–2902 Filed 2–5–97; 8:45 am]

BILLING CODE 8320–01–P

FEDERAL EMERGENCY

MANAGEMENT AGENCY

44 CFR Part 64

[Docket No. FEMA–7657]

List of Communities Eligible for the

Sale of Flood Insurance

AGENCY: Federal Emergency

Management Agency (FEMA).

ACTION: Final rule.

SUMMARY: This rule identifies

communities participating in the

National Flood Insurance Program

(NFIP). These communities have

applied to the program and have agreed

to enact certain floodplain management

measures. The communities’

participation in the program authorizes

the sale of flood insurance to owners of

property located in the communities

listed.

EFFECTIVE DATES: The dates listed in the

third column of the table.

ADDRESSES: Flood insurance policies for

property located in the communities

listed can be obtained from any licensed

property insurance agent or broker

serving the eligible community, or from

the NFIP at: Post Office Box 6464,

Rockville, MD 20849, (800) 638–6620.

FOR FURTHER INFORMATION CONTACT:

Robert F. Shea, Jr., Division Director,

Program Implementation Division,

Mitigation Directorate, 500 C Street SW.,

room 417, Washington, DC 20472, (202)

646–3619.

SUPPLEMENTARY INFORMATION: The NFIP

enables property owners to purchase

flood insurance which is generally not

otherwise available. In return,

communities agree to adopt and

administer local floodplain management

measures aimed at protecting lives and

new construction from future flooding.

Since the communities on the attached

list have recently entered the NFIP,

subsidized flood insurance is now

available for property in the community.

In addition, the Executive Associate

Director of the Federal Emergency