64518 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

content, the public meeting will not 

address any deliberative issues related 

to that specific rulemaking docket. DOE 

will hold a public meeting to solicit 

comment on any proposal to amend 

standards for residential nonweatherized gas furnaces and mobile 

home gas furnaces after a proposed rule 

concerning those furnaces has been 

issued. A court reporter will be present 

at the meeting to record the proceedings 

and to prepare a transcript. A transcript 

of the public meeting will be posted on 

the DOE Web site and will be included 

in the docket for this rulemaking. In 

addition, any person may buy a copy of 

the transcript from the transcribing 

reporter. 

Issued in Washington, DC, on October 23, 

2014. 

Kathleen B. Hogan, 

Deputy Assistant Secretary for Energy 

Efficiency, Energy Efficiency and Renewable 

Energy. 

[FR Doc. 2014–25814 Filed 10–29–14; 8:45 am] 

BILLING CODE 6450–01–P 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Parts 22, 172 

[Docket ID OCC–2014–0016] 

RIN 1557–AD84 

FEDERAL RESERVE SYSTEM 

12 CFR Part 208 

[Regulation H, Docket No. R–1498] 

RIN 7100–AE22 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 339 

RIN 3064–AE27 

FARM CREDIT ADMINISTRATION 

12 CFR Part 614 

RIN 3052–AC93 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 760 

RIN 3133–AE40 

Loans in Areas Having Special Flood 

Hazards 

AGENCY: Office of the Comptroller of the 

Currency, Treasury; Board of Governors 

of the Federal Reserve System; Federal 

Deposit Insurance Corporation; Farm 

Credit Administration; National Credit 

Union Administration. 

ACTION: Joint notice of proposed 

rulemaking. 

SUMMARY: The Office of the Comptroller 

of the Currency (OCC), Board of 

Governors of the Federal Reserve 

System (Board), Federal Deposit 

Insurance Corporation (FDIC), the Farm 

Credit Administration (FCA), and the 

National Credit Union Administration 

(NCUA) (collectively, the Agencies) are 

proposing to amend their regulations 

regarding loans in areas having special 

flood hazards to implement certain 

provisions of the Homeowner Flood 

Insurance Affordability Act of 2014 

(HFIAA), which amends some of the 

changes to the Flood Disaster Protection 

Act of 1973 mandated by the BiggertWaters Flood Insurance Reform Act of 

2012 (Biggert-Waters). Specifically, the 

proposal would establish requirements 

with respect to the escrow of flood 

insurance payments, consistent with the 

changes set forth in HFIAA. The 

proposal also would incorporate an 

exemption in HFIAA for certain 

detached structures from the mandatory 

flood insurance purchase requirement. 

The Agencies plan to address in a 

separate rulemaking other provisions of 

Biggert-Waters over which the Agencies 

have jurisdiction that have not been 

affected by HFIAA. 

DATES: Comments must be received on 

or before December 29, 2014. 

ADDRESSES: Interested parties are 

encouraged to submit written comments 

jointly to all of the Agencies. 

Commenters are encouraged to use the 

title ‘‘Loans in Areas Having Special 

Flood Hazards’’ to facilitate the 

organization and distribution of 

comments among the Agencies. 

Interested parties are invited to submit 

written comments to: 

OCC: Because paper mail in the 

Washington, DC area and at the OCC is 

subject to delay, commenters are 

encouraged to submit comments 

through the Federal eRulemaking Portal 

or email, if possible. Please use the title 

‘‘Loans in Areas Having Special Flood 

Hazards’’ to facilitate the organization 

and distribution of the comments. You 

may submit comments by any of the 

following methods: 

• Federal eRulemaking Portal— 

‘‘Regulations.gov’’: Go to 

www.regulations.gov. Enter ‘‘Docket ID 

OCC–2014–0016’’ in the Search Box and 

click ‘‘Search.’’ Results can be filtered 

using the filtering tools on the left side 

of the screen. Click on ‘‘Comment Now’’ 

to submit public comments. Click on the 

‘‘Help’’ tab on the Regulations.gov home 

page to get information on using 

Regulations.gov, including instructions 

for submitting public comments. 

• Email: regs.comments@

occ.treas.gov. 

• Mail: Legislative and Regulatory 

Activities Division, Office of the 

Comptroller of the Currency, 400 7th 

Street SW., Suite 3E–218, Mail Stop 

9W–11, Washington, DC 20219. 

• Hand Delivery/Courier: 400 7th 

Street SW., Suite 3E–218, Mail Stop 

9W–11, Washington, DC 20219. 

• Fax: (571) 465–4326. 

Instructions: You must include 

‘‘OCC’’ as the agency name and ‘‘Docket 

ID OCC–2014–0016’’ in your comment. 

In general, OCC will enter all comments 

received into the docket and publish 

them on the Regulations.gov Web site 

without change, including any business 

or personal information that you 

provide such as name and address 

information, email addresses, or phone 

numbers. Comments received, including 

attachments and other supporting 

materials, are part of the public record 

and subject to public disclosure. Do not 

enclose any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

You may review comments and other 

related materials that pertain to this 

rulemaking action by any of the 

following methods: 

• Viewing Comments Electronically: 

Go to www.regulations.gov. Enter 

‘‘Docket ID OCC–2014–0016’’ in the 

Search box and click ‘‘Search.’’ 

Comments can be filtered by Agency 

using the filtering tools on the left side 

of the screen. Click on the ‘‘Help’’ tab 

on the Regulations.gov home page to get 

information on using Regulations.gov, 

including instructions for viewing 

public comments, viewing other 

supporting and related materials, and 

viewing the docket after the close of the 

comment period. 

• Viewing Comments Personally: You 

may personally inspect and photocopy 

comments at the OCC, 400 7th Street 

SW., Washington, DC. For security 

reasons, the OCC requires that visitors 

make an appointment to inspect 

comments. You may do so by calling 

(202) 649–6700. Upon arrival, visitors 

will be required to present valid 

government-issued photo identification 

and to submit to security screening in 

order to inspect and photocopy 

comments. 

• Docket: You may also view or 

request available background 

documents and project summaries using 

the methods described above. 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64519 

1Public Law 112–141, 126 Stat. 916 (2012). 

2 78 FR 65108 (Oct. 30, 2013). 

3The National Flood Insurance Reform Act of 

1994 defines ‘‘regulated lending institution’’ to 

Continued 

Board: You may submit comments, 

identified by Docket No. R–1498 or RIN 

7100–AE22, by any of the following 

methods: 

• Agency Web site: http://

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: regs.comments@

federalreserve.gov. Include the docket 

number in the subject line of the 

message. 

• Fax: (202) 452–3819 or (202) 452– 

3102. 

• Mail: Address to Robert deV. 

Frierson, Secretary, Board of Governors 

of the Federal Reserve System, 20th 

Street and Constitution Avenue NW., 

Washington, DC 20551. 

All public comments will be made 

available on the Board’s Web site at 

http://www.federalreserve.gov/

generalinfo/foia/ProposedRegs.cfm as 

submitted, unless modified for technical 

reasons. Accordingly, comments will 

not be edited to remove any identifying 

or contact information. Public 

comments may also be viewed 

electronically or in paper in Room MP– 

500 of the Board’s Martin Building (20th 

and C Streets NW.) between 9:00 a.m. 

and 5:00 p.m. on weekdays. 

FDIC: You may submit comments by 

any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web site: http://

www.fdic.gov/regulations/laws/federal/. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments/Legal 

ESS, Federal Deposit Insurance 

Corporation, 550 17th Street NW., 

Washington, DC 20429. 

• Hand Delivered/Courier: The guard 

station at the rear of the 550 17th Street 

Building (located on F Street), on 

business days between 7:00 a.m. and 

5:00 p.m. 

• Email: comments@FDIC.gov. 

Comments submitted must include 

‘‘FDIC’’ and ‘‘Loans in Areas Having 

Special Flood Hazards.’’ Comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal/, including any personal 

information provided. 

FCA: We offer a variety of methods for 

you to submit your comments. For 

accuracy and efficiency reasons, 

commenters are encouraged to submit 

comments by email or through the 

FCA’s Web site. As facsimiles (fax) are 

difficult for us to process and achieve 

compliance with section 508 of the 

Rehabilitation Act, we are no longer 

accepting comments submitted by fax. 

Regardless of the method you use, 

please do not submit your comments 

multiple times via different methods. 

You may submit comments by any of 

the following methods: 

• Email: Send us an email at regcomm@fca.gov. 

• Agency Web site: http://

www.fca.gov. Select ‘‘Law & 

Regulations,’’ then ‘‘FCA Regulations,’’ 

then ‘‘Public Comments,’’ and follow 

the directions for ‘‘Submitting a 

Comment.’’ 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Barry F. Mardock, Deputy 

Director, Office of Regulatory Policy, 

Farm Credit Administration, 1501 Farm 

Credit Drive, McLean, VA 22102–5090. 

You may review copies of all comments 

we receive at our office in McLean, 

Virginia or on our Web site at http://

www.fca.gov. Once you are in the Web 

site, Select ‘‘Law & Regulations,’’ then 

‘‘FCA Regulations,’’ then ‘‘Public 

Comments,’’ and follow the directions 

for ‘‘Reading Submitted Public 

Comments.’’ We will show your 

comments as submitted, including any 

supporting data provided, but for 

technical reasons we may omit items 

such as logos and special characters. 

Identifying information that you 

provide, such as phone numbers and 

addresses, will be publicly available. 

However, we will attempt to remove 

email addresses to help reduce Internet 

spam. 

NCUA: You may submit comments, 

identified by RIN 3133–AE40 by any of 

the following methods (Please send 

comments by one method only): 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web site: http://

www.ncua.gov/Legal/Regs/Pages/

PropRegs.aspx. Follow the instructions 

for submitting comments. 

• Email: Address to regcomments@

ncua.gov. Include [Your name] 

Comments on ‘‘Loans in Areas Having 

Special Flood Hazards’’ in the email 

subject line. 

• Fax: (703) 518–6319. Use the 

subject line described above for email. 

• Mail: Address to Gerard Poliquin, 

Secretary of the Board, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314– 

3428. 

• Hand Delivery/Courier: Same as 

mail address. 

You can view all public comments on 

NCUA’s Web site at http://

www.ncua.gov/Legal/Regs/Pages/

PropRegs.aspx as submitted, except for 

those we cannot post for technical 

reasons. NCUA will not edit or remove 

any identifying or contact information 

from the public comments submitted. 

You may inspect paper copies of 

comments in NCUA’s law library at 

1775 Duke Street, Alexandria, Virginia 

22314, by appointment weekdays 

between 9:00 a.m. and 3:00 p.m. To 

make an appointment, call (703) 518– 

6546 or send an email to OGCMail@

ncua.gov. 

FOR FURTHER INFORMATION CONTACT: 

OCC: Rhonda L. Daniels, Compliance 

Specialist, Compliance Policy Division, 

(202) 649–5405; Margaret C. Hesse, 

Senior Counsel, Community and 

Consumer Law Division, (202) 649– 

6350; or Heidi M. Thomas, Special 

Counsel, Legislative and Regulatory 

Activities Division, (202) 649–5490, for 

persons who are deaf or hard of hearing, 

TTY, (202) 649–5597, Office of the Chief 

Counsel. 

Board: Lanette Meister, Senior 

Supervisory Consumer Financial 

Services Analyst (202) 452–2705; Vivian 

W. Wong, Counsel (202) 452–3667, 

Division of Consumer and Community 

Affairs; or Daniel Ericson, Counsel (202) 

452–3359, Legal Division; for users of 

Telecommunications Device for the Deaf 

(TDD) only, contact (202) 263–4869. 

FDIC: Navid Choudhury, Counsel, 

Consumer Compliance Section, (202) 

898–6526, Legal Division; or John 

Jackwood, Senior Policy Analyst, (202) 

898–3991, Division of Depositor and 

Consumer Protection. 

FCA: Paul K. Gibbs, Senior 

Accountant, Office of Regulatory Policy 

(703) 883–4203, TTY (703) 883–4056; or 

Mary Alice Donner, Senior Counsel, 

Office of General Counsel (703) 883– 

4020, TTY (703) 883–4056. 

NCUA: Frank Kressman, Associate 

General Counsel, Office of General 

Counsel, (703) 518–6540. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Introduction 

In October 2013, the Agencies jointly 

issued a proposal to implement certain 

provisions of the Biggert-Waters Flood 

Insurance Reform Act of 2012 1 (BiggertWaters) over which the Agencies have 

jurisdiction (the October 2013 Proposed 

Rule).2 Specifically, the October 2013 

Proposed Rule would have required 

regulated lending institutions 3 to 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64520 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

mean any bank, savings and loan association, credit 

union, farm credit bank, Federal land bank 

association, production credit association, or 

similar institution subject to the supervision of a 

Federal entity for lending regulation. 42 U.S.C. 

4003(a)(1). 

4Public Law 113–89; 128 Stat. 1020 (2014). 

5Public Law 93–234, 87 Stat. 975 (1973). 

6See 42 U.S.C. 4012a(b)(1). The heads of four of 

the five Agencies (OCC, Board, FDIC, and NCUA) 

are members of the FFIEC. 

7Public Law 90–448, 82 Stat. 572 (1968). 

8These statutes are codified at 42 U.S.C. 4001– 

4129. The Federal Emergency Management Agency 

(FEMA) administers the NFIP; its regulations 

implementing the NFIP appear at 44 CFR parts 59– 

77. 

9 44 CFR 59.1. 

10 44 CFR part 65. 

11 44 CFR part 60. 

12Title III of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, Public Law 111–203, 

124 Stat. 1376 (2010), (Dodd-Frank Act), transferred 

the powers, duties, and functions formerly 

performed by the OTS to the FDIC, as to State 

savings associations, the OCC, as to Federal savings 

associations, and the Board as to savings and loan 

holding companies. The transfer took effect on July 

21, 2011, and the OTS was abolished 90 days after 

that date. 

13Public Law 103–325, 108 Stat. 2255 (1994) 

(codified as amended at 42 U.S.C. 4001 et seq. 

(1994)). 

14 61 FR 45684 (Aug. 29, 1996). 

15The Agencies note, for example, that section 

100222 of Biggert-Waters mandates a revision to the 

Special Information Booklet required under section 

5 of the Real Estate Settlement Procedures Act of 

1974 (RESPA) (12 U.S.C. 2604(b)) to include a 

notice to the borrower of the availability of flood 

insurance under the NFIP or from a private 

insurance company, whether or not the real estate 

is located in an area having special flood hazards. 

The requirement to revise the Special Information 

Booklet is the responsibility of the Bureau of 

Consumer Financial Protection (CFPB) under 

RESPA. In addition, section 100204 of the Act 

directs the Administrator of FEMA to make flood 

insurance available to cover residential properties 

of five or more residences. The maximum coverage 

made available to such residential properties is now 

equal to the coverage made available to commercial 

properties. Policies for such properties have been 

made available by FEMA as of June 1, 2014. See 

‘‘Interagency Statement on Increased Maximum 

Flood Insurance Coverage for Other Residential 

Buildings,’’ May 30, 2014 (Board: CA 14–3; OCC: 

Bulletin 2014–26; FDIC: FIL 28–2014, FCA: 

Informational Memorandum, May 30, 2014; NCUA: 

http://www.ncua.gov/Legal/Documents/

InteragencyIncreasedCoverageGuidance.pdf). 

escrow flood insurance premiums and 

fees on residential improved real estate, 

unless the regulated lending institution 

meets the statutory small institution 

exception. The October 2013 Proposed 

Rule also would have required regulated 

lending institutions to accept private 

flood insurance coverage, as defined in 

Biggert-Waters, to satisfy the mandatory 

flood insurance purchase requirement. 

The October 2013 Proposed Rule also 

contained provisions to implement the 

Biggert-Waters changes related to forceplaced flood insurance. 

On March 21, 2014, the President 

signed into law the Homeowner Flood 

Insurance Affordability Act of 2014 4

(HFIAA), which amends some of the 

changes made by Biggert-Waters to the 

Flood Disaster Protection Act (FDPA).5

Among these changes are amendments 

relating to the escrow requirement. 

HFIAA also includes a new exclusion 

from the mandatory flood insurance 

purchase requirement for certain 

detached structures. The Agencies are 

issuing this proposal to implement the 

escrow provisions and incorporate the 

detached structures provision. The 

Agencies are requesting comments on 

these proposed amendments. In 

connection with the issuance of this 

proposal, the Agencies have coordinated 

and consulted with the Federal 

Financial Institutions Examination 

Council (FFIEC), as is required by 

certain provisions of the flood insurance 

statutes.6 Because HFIAA leaves 

untouched the provisions in BiggertWaters related to private flood 

insurance and force-placed flood 

insurance, this proposal does not 

address those provisions. 

As the Agencies stated in the October 

2013 Proposed Rule with respect to 

Biggert-Waters, this proposal would 

implement only certain provisions of 

HFIAA over which the Agencies have 

jurisdiction. Accordingly, the Agencies 

encourage lenders to consult BiggertWaters and HFIAA for further 

information about revisions to the flood 

insurance statutes that will not be 

implemented through the Agencies’ 

rulemakings. 

B. Flood Insurance Statutes 

The National Flood Insurance Act of 

1968 (1968 Act) 7 and the FDPA govern 

the National Flood Insurance Program 

(NFIP).8 The 1968 Act made Federally 

subsidized flood insurance available to 

owners of improved real estate or 

mobile homes located in special flood 

hazard areas if the community where 

the improved real estate or mobile home 

is located participates in the NFIP. A 

special flood hazard area (SFHA) is an 

area within a floodplain having a one 

percent or greater chance of flood 

occurrence in any given year.9 SFHAs 

are delineated on maps issued by FEMA 

for individual communities.10 A 

community establishes its eligibility to 

participate in the NFIP by adopting and 

enforcing floodplain management 

measures that regulate new construction 

and by making substantial 

improvements within its SFHAs to 

eliminate or minimize future flood 

damage.11

Until the adoption of the FDPA in 

1973, the purchase of flood insurance 

was voluntary. The FDPA made the 

purchase of flood insurance mandatory 

in connection with loans made by 

regulated lending institutions when the 

loans are secured by improved real 

estate or mobile homes located in a 

SFHA in a participating community. 

The FDPA directed the OCC, Board, 

FDIC, NCUA, and the former Office of 

Thrift Supervision (OTS) 12 to issue 

regulations governing the lending 

institutions that they supervised. The 

regulations also require lenders to notify 

borrowers that the secured property is 

located in a SFHA and whether Federal 

disaster assistance is available with 

respect to the property in the event of 

a flood. 

Title V of the Riegle Community 

Development and Regulatory 

Improvement Act of 1994, also known 

as the National Flood Insurance Reform 

Act of 1994 (Reform Act), 

comprehensively amended the Federal 

flood insurance statutes.13 The Reform 

Act established new requirements for 

Federally regulated lending institutions, 

such as the escrow for flood insurance 

premiums under certain conditions and 

mandatory force-placed flood insurance 

coverage. The Reform Act was intended 

to increase compliance with the 

mandatory flood insurance purchase 

requirements and participation in the 

NFIP 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. In 

addition, the Reform Act broadened the 

mandatory flood insurance purchase 

requirement to include lenders 

regulated by the FCA. 

The Reform Act required the Agencies 

to revise their flood insurance 

regulations and required the FCA to 

promulgate flood insurance regulations 

for the first time. The Agencies fulfilled 

these requirements by issuing a joint 

final rule in August 1996.14

C. The Biggert-Waters and HFIAA 

Amendments 

Among other changes,15 BiggertWaters significantly amended the NFIP 

requirements over which the Agencies 

have jurisdiction. Specifically, BiggertWaters: (i) Increased the maximum civil 

money penalty (CMP) that the Agencies 

may impose per violation when there is 

a pattern or practice of flood violations 

and eliminated the limit on the total 

amount of penalties that the Agencies 

may assess against a regulated lending 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64521 

16Section 100208 of Biggert-Waters, amending 

section 102(f)(5) of the FDPA (42 U.S.C. 

4012a(f)(5)). 

17Section 100209 of Biggert-Waters, amending 

section 102(d) of the FDPA (42 U.S.C. 4012a(d)). 

Congress further amended section 42 U.S.C. 

4012a(d) subsequent to the enactment of BiggertWaters to clarify that the flood insurance escrow 

requirement applies only to loans secured by 

residential improved real estate. See Public Law 

112–281, 125 Stat. 2485 (Jan. 14, 2013). 

18Section 100239 of Biggert-Waters, amending 

section 102(b) of the FDPA (42 U.S.C. 4012a(b)) and 

section 1364(a)(3)(C) of the 1968 Act (42 U.S.C. 

4104a(a)(3)(C)). 

19Section 100244 of the Act, amending section 

102(e) of the FDPA (42 U.S.C. 4012a(e)). 

20Section 25 of HFIAA, amending section 102(d) 

of the FDPA (42 U.S.C. 4012a(d)). 

21Section 13 of HFIAA, amending section 102(c) 

of the FDPA (42 U.S.C. 4012a(c)). The Agencies 

note that Section 13 of HFIAA also amends section 

5(b) of RESPA (12 U.S.C. 2604(b)) to require 

language related to detached structures be included 

in the required Special Information Booklet. The 

requirement to revise the Special Information 

Booklet under RESPA falls under the jurisdiction of 

the CFPB. 

22 ‘‘Interagency Statement on the Impact of 

Biggert-Waters Act,’’ March 29, 2013 (Board: CA 

13–2; OCC: Bulletin 2013–10; FDIC: FIL 14–2013, 

FCA: Informational Memorandum, March 29, 2013; 

NCUA: 13–RA–03). 

23Some of the Agencies have revised their 

regulations to incorporate these increased CMPs. 

See OCC: 77 FR 66529 (Nov. 11, 2012) and 77 FR 

76354 (Dec. 28, 2012); Board: 77 FR 68680 (Nov. 16, 

2012); FDIC: 77 FR 74573 (Dec. 17, 2012); and FCA: 

78 FR 24336 (April 25, 2013). The NCUA is in the 

process of updating its rule to reflect this CMP 

change. 

institution during any calendar year; 16

(ii) required the Agencies to issue a rule 

to direct regulated lending institutions 

to escrow premiums and fees for flood 

insurance on residential improved real 

estate, unless the regulated lending 

institution meets the statutory small 

institution exception; 17 (iii) required 

the Agencies to issue a rule to direct 

regulated lending institutions to accept 

private flood insurance, as defined by 

Biggert-Waters, and to notify borrowers 

of the availability of private flood 

insurance; 18 and (iv) amended the 

force-placed insurance requirement to 

clarify that regulated lending 

institutions may charge a borrower for 

the cost of premiums and fees incurred 

for coverage beginning on the date on 

which the flood insurance coverage 

lapsed or did not provide sufficient 

coverage and to prescribe the 

procedures for terminating force-placed 

insurance.19

HFIAA further amends the changes 

set forth in Biggert-Waters. Among these 

changes are amendments that tie the 

escrow requirement to the origination, 

refinance, increase, extension, or 

renewal of a loan on or after January 1, 

2016 and provide additional exceptions 

to the escrow requirement.20 HFIAA 

also mandates that regulated lending 

institutions provide an option to 

borrowers to escrow flood insurance 

premiums and fees for loans that are 

outstanding as of January 1, 2016. In 

addition, HFIAA provides a new 

exemption to the mandatory flood 

insurance purchase requirements for a 

structure that is part of a residential 

property but is detached from the 

primary residential structure and does 

not serve as a residence.21

As previously discussed in guidance 

issued by the Agencies,22 the CMP 

provisions 23 and the force-placed 

insurance requirements in BiggertWaters were effective upon enactment 

of Biggert-Waters. Similarly, the 

provision in HFIAA excluding certain 

detached structures from the mandatory 

flood insurance purchase requirement 

became effective upon the enactment of 

HFIAA. In contrast, Biggert-Waters and 

HFIAA require the Agencies to issue 

regulations implementing both the 

escrow and private flood insurance 

provisions. The compliance date for 

these provisions will be determined on 

the issuance of the final rule 

implementing them, consistent with the 

statute. The statute provides that the 

escrow provisions will apply to loans 

with a triggering event on or after 

January 1, 2016. The private flood 

insurance provisions, as well as 

regulations incorporating the forceplaced insurance requirement, will be 

included in a separate rulemaking. 

II. Summary of the Proposal 

The Agencies propose to revise their 

respective flood insurance regulations to 

incorporate HFIAA’s provisions 

exempting certain detached structures 

on residential property from the 

mandatory flood insurance purchase 

requirement and to implement the 

statute’s provisions requiring the escrow 

of flood insurance premiums and fees. 

In connection with the October 2013 

Proposed Rule, the Agencies received 

numerous comment letters addressing 

the regulations proposed to implement 

the escrow provisions set forth in 

Biggert-Waters. To the extent that there 

were comments concerning the escrow 

provisions as proposed in the October 

2013 Proposed Rule that have not been 

otherwise addressed by the amendments 

in HFIAA, the Agencies have 

considered such comments in this 

proposal. 

The amendments proposed by this 

rulemaking are summarized below and 

more specifically described in IV. 

Section-by-Section Analysis of this 

SUPPLEMENTARY INFORMATION. Although 

the Agencies’ proposals are 

substantively consistent, the format of 

the regulatory text varies to conform to 

each Agency’s current regulation. 

Furthermore, the OCC and the FDIC 

note that the proposed amendments to 

12 CFR part 22 would apply to both 

national banks and Federal savings 

associations, and the proposed 

amendments to 12 CFR part 339 would 

apply to both State non-member banks 

and State savings associations. This is 

consistent with the October 2013 

Proposed Rule, which proposed to 

integrate all of the OCC’s and FDIC’s 

respective bank and savings association 

flood insurance rules. This proposal 

also includes conforming amendments 

to the current OCC flood insurance rules 

for Federal savings associations, 12 CFR 

part 172, that are necessary until the 

integration included in the October 

2013 Proposed Rule is finalized. The 

FDIC will integrate its flood insurance 

rules for state savings associations, 12 

CFR part 391 subpart D, into part 339 

prior to finalizing this proposed rule by 

means of a separate, individual agency 

rulemaking. 

Consistent with HFIAA, the Agencies’ 

proposal would include a new 

exemption to the general mandatory 

flood insurance requirement. 

Specifically, the proposed rule would 

provide that flood insurance is not 

required for any structure that is part of 

any residential property but is detached 

from the primary residential structure of 

such property and does not serve as a 

residence. 

In addition, the Agencies’ proposal 

generally would require regulated 

lending institutions, or servicers acting 

on their behalf, to escrow premiums and 

fees for flood insurance for any loans 

secured by residential improved real 

estate or a mobile home that is made, 

increased, extended, or renewed on or 

after January 1, 2016. The FDPA, as 

amended by Biggert-Waters, also 

provides that except as may be required 

under applicable State law, a regulated 

lending institution would not be 

required to escrow if it has total assets 

of less than $1 billion and, as of the date 

of enactment of Biggert-Waters, July 6, 

2012, was not required by Federal or 

State law to escrow taxes or insurance 

for the term of the loan and did not have 

a policy to require escrow of taxes and 

insurance. The Agencies are proposing 

to implement this exception with some 

clarifications. Furthermore, consistent 

with the Agencies’ October 2013 

Proposed Rule, the proposed rule would 

provide transition rules for regulated 

lending institutions that have a change 

in status and no longer qualify for this 

exception. 

Moreover, the proposed rule would 

implement the following additional 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64522 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

24Each Agency’s escrow provision provides that 

a regulated lending institution must escrow all 

premiums and fees for required flood insurance if 

the institution requires the escrow of taxes, 

insurance premiums, fees or other charges. See 12 

CFR 22.5 and 172.5 (OCC); 12 CFR 208.25(e) 

(Board); 12 CFR 339.5 (FDIC); 12 CFR 614.4935 

(FCA); and 12 CFR 760.5 (NCUA). 

exceptions from the escrow 

requirement, as amended by HFIAA: (i) 

Loans that are in a subordinate position 

to a senior lien secured by the same 

property for which flood insurance is 

being provided; (ii) loans secured by 

residential improved real estate or a 

mobile home that is part of a 

condominium, cooperative, or other 

project development, provided certain 

conditions are met; (iii) loans that are 

extensions of credit primarily for a 

business, commercial, or agricultural 

purpose; (iv) home equity lines of 

credit; (v) nonperforming loans; and (vi) 

loans with terms not longer than twelve 

months. 

The proposal also would implement 

the requirement under HFIAA that 

regulated lending institutions offer and 

make available to a borrower the option 

to escrow flood insurance premiums 

and fees for loans that are outstanding 

as of January 1, 2016. The proposal 

would implement this provision 

generally as provided in the statute with 

additional clarifications to provide more 

specific guidance to regulated lending 

institutions in administering this 

requirement, including a proposal to 

mail or deliver information to borrowers 

about the option to escrow by March 31, 

2016 and requiring lenders to 

implement the escrow as soon as 

reasonably practicable after receiving a 

borrower’s request to escrow. The 

Agencies are using their authority to 

implement the escrow provision to 

propose that regulated lending 

institutions that no longer qualify for 

the small lender exception also be 

required to offer and make available to 

a borrower the option to escrow flood 

insurance premiums and fees for loans 

outstanding after they lose the 

exception. 

The Agencies’ proposal includes new 

and revised sample notice forms and 

clauses. Specifically, the proposal 

amends the current Sample Form of 

Notice of Special Flood Hazards and 

Availability of Federal Disaster Relief 

Assistance, set forth as Appendix A in 

the Agencies’ respective regulations, to 

add language concerning the escrow 

requirement. The proposal also adds an 

additional sample clause, Sample 

Clause for Option to Escrow for 

Outstanding Loans, as Appendix B to 

assist institutions in complying with the 

proposal’s requirement to inform 

borrowers of outstanding loans about 

their option to escrow flood insurance 

premiums and fees. 

The Agencies note that the 

amendments made by section 25 of 

HFIAA to the FDPA regarding the 

escrow requirement will not supersede 

the current escrow provisions during 

the period beginning on July 6, 2012 

and ending on December 31, 2015. 

Therefore, as provided under section 

25(b)(3) of HFIAA, the escrow 

requirements under section 102(d)(1) of 

the FDPA in effect on July 5, 2012, the 

day before Biggert-Waters was enacted, 

will continue to be enforced by the 

Agencies until December 31, 2015.24

III. Legal Authority 

Section 102(b) of the FDPA (42 U.S.C. 

4012a(b)), as amended, provides that the 

Agencies (after consultation and 

coordination with the FFIEC) 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 

of FEMA as an area having special flood 

hazards and in which flood insurance 

has been made available under the 

NFIP, unless the building or mobile 

home and any personal property 

securing such loan is covered for the 

term of the loan by flood insurance. 

Thus, section 102(b) of the FDPA grants 

the Agencies rulemaking authority to 

implement this mandatory flood 

insurance purchase requirement as it 

pertains to regulated lending 

institutions. 

Section 102(c) of the FDPA (42 U.S.C. 

4012a(c)) sets forth specific exceptions 

to the mandatory flood insurance 

purchase requirement. The Agencies are 

authorized to implement these 

exceptions. 

Finally, section 102(d) of the FDPA 

(42 U.S.C. 4012a(d)), as amended by 

section 25 of HFIAA, states that the 

Agencies (after consultation and 

coordination with the FFIEC) must by 

regulation require all premiums and fees 

for flood insurance under the 1968 Act 

for residential improved real estate or a 

mobile home be paid to the regulated 

lending institution or servicer for any 

loan secured by the improved real estate 

or mobile home with the same 

frequency as payments on the loan are 

made for the duration of the loan. The 

statute requires that such funds be 

deposited in an escrow account on 

behalf of the borrower and used to pay 

the flood insurance provider when 

premiums are due. Section 25(b) of 

HFIAA applies these requirements to 

loans that are originated, refinanced, 

increased, extended, or renewed on or 

after January 1, 2016. 

Section 102(d) of the FDPA, as 

amended by HFIAA, also authorizes the 

Agencies to implement the seven 

exceptions to this requirement that are 

set forth in the statute. Section 25(b) of 

HFIAA further states that the Agencies 

(after consultation and coordination 

with the FFIEC) shall by regulation 

direct that each regulated lending 

institution offer and make available to a 

borrower of an outstanding loan the 

option to have the borrower’s payment 

of flood insurance premiums and fees 

escrowed. 

IV. Section-by-Section Analysis 

l.lExemptions 

Section 13 of HFIAA, which amends 

section 102(c) of the FDPA (42 U.S.C. 

4012a(c)), includes a new exemption to 

the mandatory flood insurance purchase 

requirement. Specifically, the statute 

provides that flood insurance is not 

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 and 

does not serve as a residence. The 

Agencies’ proposed rule would 

incorporate this exemption as provided 

in the statute into the Agencies’ 

regulations. 

The exemption would address an area 

of concern for borrowers and lenders by 

excluding relatively low-value 

structures, for example, detached sheds 

and garages, from mandatory flood 

insurance coverage if they secure a 

designated loan. The Agencies 

understand, however, that some 

detached structures might be of 

relatively high value, such as a detached 

greenhouse. While the statute does not 

require flood insurance for such 

structures, as a matter of safety and 

soundness, lenders may nevertheless 

require flood insurance on these 

detached structures. Requiring flood 

insurance even when the statute does 

not mandate it may also be in the 

borrower’s interest. The Agencies note 

that section 13(b) of HFIAA, which the 

CFPB is expected to implement, amends 

section 5(b) of RESPA to require a 

related disclosure to borrowers 

informing them that they may still wish 

to obtain, and mortgage lenders may 

still require borrowers to maintain, 

flood insurance even when it is not 

required by the FDPA. 

The Agencies solicit comment on 

whether this section should be clarified. 

For instance, there may be some 

ambiguity as to when such structures 

serve as a ‘‘residence,’’ but may not 

meet certain State or local definitions of 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64523 

25 In the October 2013 Proposed Rule, the 

Agencies proposed a technical amendment in this 

section to change the reference to the head of FEMA 

from Director to Administrator, consistent with the 

change in Biggert-Waters. That issue will be 

addressed in the final rule that will be published 

by the Agencies. 

26As discussed above, the Agencies note that 

section 25(b)(3) of HFIAA provides that these new 

escrow requirements will not supersede the current 

escrow provisions during the period beginning on 

July 6, 2012 and ending on December 31, 2015. 

Therefore, as provided under section 25(b)(3) of 

HFIAA, the escrow requirements under section 

102(d)(1) of the FDPA in effect on July 5, 2012 will 

continue to be enforced by the Agencies until 

December 31, 2015. 

27As the Agencies noted in the October 2013 

Proposed Rule, the CFPB’s mortgage servicing rule 

promulgated escrow requirements set forth in 

section 6 of RESPA, which were enacted in the 

Dodd-Frank Act. The CFPB’s rule excludes flood 

insurance that is required under the FDPA from the 

new escrow requirements. 78 FR 10696, 10880 (Feb. 

14, 2013). That is, the CFPB rule exempts from the 

definition of force-placed insurance, insurance 

required by the FDPA. Ibid. The CFPB’s rule 

requires a servicer to advance funds to a borrower’s 

escrow account and to disburse such funds in a 

timely manner to pay the premium charge on a 

borrower’s hazard insurance (unless the servicer 

has a reasonable basis to believe that a borrower’s 

hazard insurance has been canceled or not renewed 

for reasons other than nonpayment of premium 

charges). Thus, even if a borrower were delinquent 

by more than 31 days, a servicer would be required 

under the CFPB’s rule to advance funds to continue 

the borrower’s hazard insurance policy. In 

promulgating this rule, the CFPB relied on its 

authority under section 19(a) of RESPA to prescribe 

such rules and to make such interpretations as may 

be necessary to achieve the consumer protection 

purposes of RESPA. The Agencies note that the 

Federal flood statutes do not contain a provision 

similar to the provision relied upon by the CFPB 

to require a servicer to advance funds to a 

borrower’s escrow account. 

28See, e.g., 12 CFR 22.3(a) (OCC); 12 CFR 

208.25(c)(1) (Board); 12 CFR 339.3(a) (FDIC); 12 

CFR 614.4930(a) (FCA); and 12 CFR 760.3(a) 

(NCUA). 

29See 12 U.S.C. 2606(a). 

30See 15 U.S.C. 1603(1). 

‘‘residence,’’ or when a detached 

structure that was not initially a 

residence becomes a residence. 

Furthermore, the Agencies note that the 

statute applies the exemption to 

‘‘residential property.’’ The Agencies 

specifically request comment on 

whether or how the Agencies should 

define ‘‘residential property.’’ For 

example, the term ‘‘residential’’ may 

refer not only to the type of property 

securing the loan, but also to the 

purpose of the loan. Thus, the Agencies 

could clarify that the exemption is only 

available if the detached structure does 

not secure a loan that is an extension of 

credit for a primarily business, 

commercial, or agricultural purpose.25

l.l Escrow requirement 

In General 

Pursuant to section 102(d) of the 

FDPA (42 U.S.C. 4012a(d)), as amended 

by section 25 of HFIAA,26 the Agencies 

are proposing to revise their regulations 

to require a regulated lending 

institution, or a servicer acting on behalf 

of a regulated lending institution, to 

escrow all premiums and fees for flood 

insurance required for loans secured by 

residential improved real estate or a 

mobile home unless the loan or the 

lending institution qualifies for one of 

the statutory exceptions.27 In addition, 

these premiums and fees must be 

payable with the same frequency as 

payments on the loan are made for the 

duration of the loan. 

Consistent with section 25(b) of 

HFIAA, the proposed provision applies 

to any loan secured by residential 

improved real estate or a mobile home 

that is made, increased, extended, or 

renewed on or after January 1, 2016. The 

Agencies note that while section 25(b) 

of HFIAA applies the escrow 

requirement to loans ‘‘originated, 

refinanced, increased, extended, or 

renewed,’’ the Agencies are proposing 

regulatory language that applies the 

requirement to loans ‘‘made, increased, 

extended, or renewed’’ to be consistent 

with the way these triggering events are 

referenced elsewhere in the 

regulation.28 The Agencies have long 

understood the term ‘‘made’’ to 

encompass both a loan origination and 

a loan refinance. 

Section 102(d) of the FDPA, as 

amended by section 25 of HFIAA, 

contains several exceptions to the 

general escrow requirement. These 

exceptions are in addition to a small 

lender exception for certain regulated 

lending institutions that have total 

assets of less than $1 billion set forth in 

section 102(d) of the FDPA, as amended 

by section 100209 of Biggert-Waters, 

discussed below. One of these 

exceptions is for loans secured by 

residential improved real estate or a 

mobile home that is used as collateral 

for a business purpose. In implementing 

this exception, the Agencies are 

proposing that regulated lending 

institutions need not escrow flood 

insurance premiums and fees if they 

have determined that the loan is an 

extension of credit primarily for a 

business, commercial, or agricultural 

purpose. This is identical to language 

the Agencies initially proposed in the 

October 2013 Proposed Rule, which 

commenters to the October 2013 

Proposed Rule supported. As discussed 

in the October 2013 Proposed Rule, the 

Agencies are proposing this language to 

be consistent with similar exceptions in 

the Real Estate Settlement Procedures 

Act of 1974 (RESPA) 29 and the Truth in 

Lending Act (TILA).30 Moreover, the 

Agencies believe the proposed language 

further clarifies that the statutory 

language referring to business loans 

includes commercial loans and 

agricultural loans, which are a subset of 

business loans. 

Section 102(d) of the FDPA, as 

amended by section 25 of HFIAA, also 

includes an exception for a loan 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. The Agencies are 

proposing language in their regulations 

similar to the language in the statute for 

this exception, with some changes to 

improve readability and clarity. The 

Agencies note that this statutory 

exception and the proposed regulation 

are broader than a similar exception the 

Agencies proposed in the October 2013 

Proposed Rule, which would have only 

provided an exception when the lender 

has determined that the borrower is 

currently paying premiums and fees 

into an escrow account that has been 

established by another lender. 

Furthermore, under the amended 

statute, loans secured by residential 

improved real estate or a mobile home 

that is part of a condominium, 

cooperative, or other project 

development are also excepted from the 

escrow requirements provided the 

property is covered by a flood insurance 

policy that: (i) Meets the mandatory 

flood insurance purchase requirement; 

(ii) is provided by the condominium 

association, cooperative, homeowners 

association or other applicable group; 

and (iii) the premium for which is paid 

by the condominium association, 

cooperative, homeowners association, or 

other applicable group as a common 

expense. The Agencies are proposing to 

implement this exception substantially 

as stated in the statute. The Agencies 

note that the October 2013 Proposed 

Rule proposed a similar, though 

differently worded, exception. 

It is the Agencies’ understanding that 

this proposed exception would include 

instances when the property is covered, 

by, for example, an NFIP Residential 

Condominium Building Association 

Policy (RCBAP) that meets the 

mandatory flood insurance purchase 

requirement, including coverage for the 

proper amount. As the Agencies 

discussed in the October 2013 Proposed 

Rule, if the amount of the policy 

purchased by the condominium 

association, cooperative, homeowners 

association, or other applicable group is 

insufficient to meet the mandatory flood 

insurance purchase requirement, the 

borrower would be required to obtain a 

supplemental policy to cover the 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64524 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

deficiency. The Agencies would expect 

that the regulated lending institution 

escrow the premiums and fees for the 

supplemental policy unless the small 

lender exception applies. For example, 

if a condominium association purchases 

an RCBAP or a private flood insurance 

policy for less than the amount of 

insurance required by the mandatory 

purchase requirement under the FDPA, 

the borrower would need to obtain a 

dwelling policy for supplemental 

coverage. If the borrower is required to 

obtain a dwelling policy at the time the 

loan is made, increased, extended, or 

renewed, under the proposed rule, the 

regulated lending institution would be 

required to escrow the premiums and 

fees for such policy. 

Section 102(d) of the FDPA, as 

amended by section 25 of HFIAA, 

includes an exception from the escrow 

requirement for home equity lines of 

credit, which was an exception 

requested by many commenters to the 

October 2013 Proposed Rule. The 

Agencies are including this exception in 

the proposed rule. 

Another exception included in 

section 102(d) of the FDPA, as amended 

by section 25 of HFIAA, is for 

nonperforming loans. The Agencies are 

proposing to implement this exception 

with a clarification that the exception is 

available for a nonperforming loan that 

is 90 or more days past due. Although 

there does not appear to be a standard 

definition for what constitutes a 

‘‘nonperforming’’ loan, it is the 

Agencies’ understanding that lenders 

generally categorize loans that are 90 or 

more days past due as nonperforming. 

Consequently, the Agencies believe the 

proposed clarification is consistent with 

many lenders’ current practices and will 

ensure that all regulated lending 

institutions use the same standard in 

determining when a loan is 

nonperforming for purposes of this 

provision. The Agencies solicit 

comment on whether the Agencies’ 

proposed definition of ‘‘nonperforming’’ 

loan is appropriate. 

Finally, under section 102(d) of the 

FDPA, as amended by section 25 of 

HFIAA, a regulated lending institution 

need not escrow flood insurance 

payments and fees for a loan that has a 

term of not longer than 12 months. 

Several commenters to the October 2013 

Proposed Rule requested an exception 

for loans with short maturities. The 

Agencies are proposing this exception 

as provided in the statute. 

As mentioned above, section 102(d) of 

the FDPA, as amended by BiggertWaters, also contains a small lender 

exception from the escrow requirement 

for certain regulated lending institutions 

that have total assets of less than $1 

billion. The Agencies’ proposal for this 

statutory exception is discussed further 

below. 

Notice 

In order to ensure that borrowers are 

informed about the requirement to 

escrow premiums and fees for 

mandatory flood insurance, the 

Agencies are proposing that regulated 

lending institutions provide borrowers 

with a written notice. This proposal is 

similar to the notice requirement 

proposed in the October 2013 Proposed 

Rule. As in the October 2013 Proposed 

Rule, the Agencies propose in this 

rulemaking to mandate that a regulated 

lending institution, or a servicer acting 

on its behalf, mail or deliver a written 

notice informing a borrower that it is 

required to escrow all premiums and 

fees for required flood insurance on 

residential improved real estate. 

To minimize the burden to regulated 

lending institutions of providing this 

notice and to ensure that borrowers 

receive the notice at a time when they 

are considering the purchase of flood 

insurance, the proposal would require 

that a regulated lending institution, or a 

servicer acting on its behalf, provide a 

notice on the escrow requirement with, 

or in, a notice the lender is already 

required to provide: The Notice of 

Special Flood Hazards and Availability 

of Federal Disaster Relief Assistance. 

The Agencies’ current rules provide a 

sample form of this notice as Appendix 

A. Because the HFIAA amendments tie 

the escrow requirement to a triggering 

event (i.e., when a loan is made, 

increased, extended, or renewed), 

borrowers already will be receiving the 

Notice of Special Flood Hazards and 

Availability of Federal Disaster Relief 

Assistance, which is mandated by the 

Agencies’ regulations, at the same time 

that the escrow of flood insurance 

premiums and fees will be required. 

As in the October 2013 Proposed 

Rule, the Agencies are proposing model 

language for the escrow notice, as 

discussed in more detail in the 

SUPPLEMENTARY INFORMATION

accompanying the discussion on 

proposed changes to Appendix A. Thus, 

under the proposed rule, regulated 

lending institutions would be required 

to use language substantially similar to 

model clauses on the escrow 

requirement in the revised sample 

notice provided in Appendix A. 

HFIAA’s application of the escrow 

requirement to loans upon a triggering 

event (i.e., when a loan is made, 

increased, extended, or renewed) 

addresses comments the Agencies 

received in connection with the October 

2013 Proposed Rule that discussed the 

timing of the escrow notice for 

outstanding loans. The Agencies 

received one comment to the October 

2013 Proposed Rule, however, 

suggesting that electronic delivery of the 

notice be allowed. The Agencies note 

that written disclosures always may be 

provided to the consumer in electronic 

form, subject to compliance with the 

consumer consent and other applicable 

provisions of the Electronic Signatures 

in Global and National Commerce Act 

(E-Sign Act) (15 U.S.C. 7001, et. seq.). 

Small Lender Exception 

In addition to the exceptions to the 

escrow requirement discussed above, 

section 102(d) of the FDPA, as amended 

by section 100209 of Biggert-Waters, 

contains an exception for certain small 

lenders. As with the October 2013 

Proposed Rule, the Agencies are 

proposing to implement this statutory 

exception to the escrow requirement 

substantially as provided in the statute 

with some clarifications. The statute 

states that, except as provided by State 

law, regulated lending institutions that 

have total assets of less than $1 billion 

are excepted from this escrow 

requirement if, on or before July 6, 2012, 

the institution: (i) 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 (ii) 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. 

Because the statute does not specify a 

point in time to measure the asset size 

of an institution to determine whether 

such institution qualifies for the 

exception, the Agencies are proposing 

that a regulated lending institution may 

qualify for the exception if it has total 

assets of less than $1 billion as of 

December 31 of either of the two prior 

calendar years. This is identical to the 

proposal the Agencies put forth in the 

October 2013 Proposed Rule. 

Consequently, with the statutory 

effective date of January 1, 2016, 

regulated lending institutions with 

assets of $1 billion or more as of both 

December 31, 2014, and December 31, 

2015, would not qualify for the 

exception. In contrast, a regulated 

lending institution with assets of less 

than $1 billion as of either December 31, 

2014 or December 31, 2015, may qualify 

for the exception, provided the other 

conditions for the exception are met. 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64525 

31See 12 CFR 25.12(u); 12 CFR 195.12(u); 12 CFR 

228.12(u); and 12 CFR 345.12(u). 

32See 12 CFR 1026.35(b)(2)(iii)(C). 

33See 12 CFR 1026.41(e)(4). 

34See 12 CFR 235.5(a)(3). 

As the Agencies explained in the 

October 2013 Proposed Rule, this 

measurement method is similar to how 

the OCC, the Board, and the FDIC have 

measured asset size in relation to the 

definitions for small entities under the 

Community Reinvestment Act (CRA).31

The Agencies believe the asset 

measurement method these agencies 

have used with respect to CRA is an 

appropriate model in this case as it 

ensures an institution remains over the 

size threshold for a substantial period 

before requiring the institution to 

expend the resources needed to 

establish a new escrow program. 

Commenters to the October 2013 

Proposed Rule were generally 

supportive of the Agencies’ proposal on 

when and how to measure the asset size 

for purposes of the exception. A couple 

of commenters requested that the 

Agencies review other asset threshold 

exceptions, such as the CFPB escrow 

rules under Regulation Z for higherpriced mortgage loans,32 which set the 

threshold for small creditors at $2 

billion in assets (adjusted by the annual 

percentage change in the Consumer 

Price Index for Urban Wage Earners and 

Clerical Workers), and the CFPB’s 

mortgage servicing rules under 

Regulation Z and Regulation X, which 

define a small servicer by the number of 

mortgages serviced.33 The Agencies note 

that the $1 billion asset size threshold 

for the exception from the escrow 

requirements is specified in the FDPA, 

as amended, and the Agencies are 

therefore proposing the $1 billion asset 

size threshold consistent with the 

statute. 

Moreover, as in the October 2013 

Proposed Rule, the Agencies are 

proposing transition rules for a change 

in status of a regulated lending 

institution that may initially qualify for 

the exception, but later grows to exceed 

the $1 billion asset size threshold. As 

discussed in the October 2013 Proposed 

Rule, the Agencies propose to give 

regulated lending institutions 

approximately six months to begin 

complying with the escrow requirement, 

which is similar to the Board’s 

Regulation II change in status rules.34

Therefore, under the proposal, a 

regulated lending institution would be 

required to escrow flood insurance 

premiums and fees for any loans made, 

increased, extended, or renewed on or 

after July 1 of the succeeding calendar 

year after a regulated lending institution 

has a change in status. 

For example, assume a regulated 

lending institution qualified for the 

exception in 2016, but had assets of $1 

billion or more as of December 31, 2016, 

and December 31, 2017. In that case, 

under the proposal, such regulated 

lending institution would be required to 

begin escrowing for any loans made, 

increased, extended, or renewed on or 

after July 1, 2018. 

As noted above, the statute provides 

that the small lender exception will be 

available only if, on or before July 6, 

2012, the institution: (i) 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 (ii) 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. 

Some commenters to the October 

2013 Proposed Rule requested 

clarification on these conditions. In 

particular, one consumer group 

commenter asked whether having a 

policy of consistently and uniformly 

requiring the deposit of taxes, insurance 

premiums, fees, or any other charges in 

an escrow account meant that a lender 

must have had this policy for its entire 

portfolio of residential loans. The 

Agencies read the statutory condition to 

provide that if a regulated lending 

institution had a policy of consistently 

and uniformly requiring the deposit of 

taxes, insurance premiums, fees, or any 

other charges in an escrow account for 

even a portion of its portfolio of 

residential loans, such a lender would 

not be eligible for the exception, 

consistent with the statutory language. 

In light of this comment, the Agencies 

are proposing to clarify the statute by 

providing the exception is unavailable if 

either statutory condition applies to any 

residential loans originated by the 

lender on or before July 6, 2012. 

Therefore, if on or before July 6, 2012, 

the institution: (i) 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 any loan secured by 

residential improved real estate or a 

mobile home; and (ii) 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 any loans secured 

by residential improved real estate or a 

mobile home, the institution may be 

eligible for the small lender exception 

provided it meets the size threshold. 

Another individual commenter 

questioned the logic of tying the 

conditions to the lender’s practice as of 

July 6, 2012. As noted above, this date 

is specified in the statute. 

Option to Escrow 

Section 25(b) of HFIAA requires 

regulated lending institutions to offer 

and make available to a borrower the 

option to escrow flood insurance 

premiums and fees for loans that are 

outstanding as of January 1, 2016. The 

Agencies are implementing this 

provision generally as provided in the 

statute with changes to the language for 

clarity and organization. In addition, the 

Agencies believe that for regulated 

lending institutions that have a change 

in status and no longer qualify for the 

small lender exception, the lender 

should be required to offer borrowers on 

existing loans the option to escrow 

because the lenders will now be in a 

position to escrow flood insurance 

premiums and fees for new borrowers. 

For example, suppose a loan is made 

on March 1, 2016, by a regulated 

lending institution that qualifies for the 

exception for small lenders. If the lender 

then no longer qualifies for the 

exception for small lenders as of January 

1, 2018, under the Agencies’ proposal 

the lender would be required to escrow 

flood insurance premiums and fees for 

loans made, increased, extended, or 

renewed on or after July 1, 2018. The 

borrower of the loan made on March 1, 

2016 would now have a lender that has 

the capability to escrow flood insurance 

premiums and fees on July 1, 2018. 

Consequently, the borrower for a loan 

made by a regulated lending institution 

with a change in status that no longer 

qualifies for the small lender exception 

should be provided with the option to 

escrow until the loan experiences a 

triggering event on or after July 1, 2018. 

Therefore, the Agencies are proposing to 

use their authority to implement the 

escrow requirement to mandate that 

regulated lending institutions that no 

longer qualify for the small lender 

exception should be required to provide 

the option to escrow for borrowers of 

loans outstanding on July 1 of the 

succeeding calendar year following the 

lender’s change in status. The Agencies 

solicit comment on this approach. 

In addition, the Agencies propose 

additional clarifications to provide more 

specific guidance to regulated lending 

institutions in administering this 

requirement. First, the statute requires 

that regulated lending institutions ‘‘offer 

and make available’’ the option to 

escrow flood insurance premiums and 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64526 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

35See 12 CFR 1005.17(f). 

36See 12 CFR 1026.56(i). 

37See 5 U.S.C. 601 et seq. 

38We base our estimate of the number of active 

small entities on the SBA’s size thresholds for 

commercial banks and savings institutions, and 

trust companies, which are $550 million and $38.5 

million, respectively. Consistent with the General 

Principles of Affiliation 13 CFR 121.103(a), we 

count the assets of affiliated financial institutions 

when determining if we should classify a bank we 

supervise as a small entity. We use December 31, 

2013, to determine size because a ‘‘financial 

institution’s assets are determined by averaging the 

assets reported on its four quarterly financial 

statements for the preceding year.’’ See footnote 8 

of the U.S. Small Business Administration’s Table 

of Size Standards. 

39To determine the number of banks that may be 

affected if the NPRM is implemented, we 

determined the number of banks that self-identified 

by reporting mortgage servicing assets or other 

activity associated with 1–4 family residential 

mortgage loans on the Q1 2014 Call Report or were 

identified by OCC examiners as a Home Mortgage 

Disclosure Act (HMDA) filer. 

fees. The Agencies are proposing to 

implement this provision by requiring 

that for outstanding loans, a lender, or 

its servicer, mail or deliver, or provide 

electronically if the borrower agrees, a 

notice informing borrowers of the 

option to escrow by March 31, 2016. For 

lenders that no longer qualify for the 

small lender exception, the Agencies are 

proposing that the notice informing 

borrowers of the option to escrow be 

provided by September 30 of the 

succeeding calendar year following the 

lender’s change in status. The proposed 

timing of this notice would give 

regulated lending institutions up to 

three months to determine which loans 

are outstanding as of the designated day 

and to provide the notice for those 

loans. The Agencies solicit comment on 

whether the proposed timelines for 

providing the notice are appropriate. To 

facilitate compliance, the Agencies are 

proposing a model clause for this notice 

in Appendix B, as discussed in more 

detail below. The Agencies solicit 

comment on whether this model clause 

would be an effective way for regulated 

lending institutions to offer and make 

available to borrowers the option to 

escrow flood insurance premiums and 

fees. 

The proposal would not require that 

the notice be provided in conjunction 

with any other disclosure or that it be 

segregated from other information 

provided to the borrower. As a result, 

under the proposed rule, regulated 

lending institutions may choose 

whether to provide the notice as a 

separate notice or add it to any other 

disclosures the lender provides the 

borrower on or before the proposed 

deadline, such as a periodic statement. 

Second, the Agencies are proposing to 

require a lender or its servicer to begin 

escrowing premiums and fees for flood 

insurance as soon as reasonably 

practicable after the lender or servicer 

receives the borrower’s request to 

escrow. The requirement is similar to 

requirements in Regulation E 35 and 

Regulation Z36 regarding how soon a 

financial institution or credit card issuer 

must implement the revocation of an 

opt-in for overdraft services or an overthe-limit feature of a credit card, 

respectively. The Agencies request 

comment on whether any further 

guidance on this proposed requirement 

is needed. 

l.l Required use of standard flood 

hazard determination form 

In connection with the amendment of 

section 102(c) of the FDPA by section 13 

of HFIAA to exempt from the mandatory 

flood insurance purchase requirement 

any structure that is a part of a 

residential property but is detached 

from the primary residential structure of 

such property and does not serve as a 

residence, the Agencies are proposing 

an amendment to their regulations on 

the use of the standard flood hazard 

determination form. Specifically, the 

proposed amendment would clarify that 

a regulated lending institution need not 

perform a flood hazard determination 

for any properties or structures that are 

exempt from the mandatory flood 

insurance purchase requirement. 

Because flood insurance is not required 

on such properties and structures, 

determination of whether such 

properties or structures are located in an 

SFHA is unnecessary, which will, in 

turn, prevent borrowers being charged 

unnecessary flood hazard determination 

fees. 

Appendices A & B 

As discussed in the SUPPLEMENTARY

INFORMATION accompanying the 

revisions to l.l Escrow requirement 

above, the Agencies are proposing that 

regulated lending institutions mail or 

deliver a written notice informing 

borrowers about the requirement to 

escrow premiums and fees for required 

flood insurance. To facilitate 

compliance with the proposed notice 

requirement, the Agencies are proposing 

model language that may be included, if 

applicable, in the Notice of Special 

Flood Hazards and Availability of 

Federal Disaster Relief Assistance as set 

forth in the sample form of notice 

contained in Appendix A. 

Also, as discussed above, the 

Agencies are proposing that lenders 

must provide a notice of the option to 

escrow to borrowers of loans 

outstanding as of January 1, 2016, or 

July 1 of the succeeding calendar year 

after a lender no longer qualifies for the 

small lender exception as applicable. 

The Agencies are proposing an 

additional sample clause, Sample 

Clause for Option to Escrow for 

Outstanding Loans, as Appendix B to 

facilitate regulated lending institutions 

in complying with this proposed 

requirement. 

V. Regulatory Analysis 

Regulatory Flexibility Act 

OCC: In general, the Regulatory 

Flexibility Act (RFA) requires that, in 

connection with a notice of proposed 

rulemaking, an agency prepare and 

make available for public comment an 

initial regulatory flexibility analysis that 

describes the impact of a proposed rule 

on small entities.37 Under section 605(b) 

of the RFA, this analysis is not required 

if an agency certifies that the rule would 

not have a significant economic impact 

on a substantial number of small entities 

and publishes its certification and a 

short explanatory statement in the 

Federal Register along with its rule. We 

have concluded that the proposed rule 

does not have a significant economic 

impact on a substantial number of small 

entities supervised by the OCC. 

The OCC currently supervises 

approximately 1,200 small national 

banks, Federal savings associations, 

trust companies, and Federal branches 

and agencies.38 If implemented, the 

draft NPRM would impact 

approximately 1,149 of these small 

institutions.39 Thus, the proposed rule 

impacts a substantial number of small 

banks. The OCC classifies the economic 

impact of total costs on a bank as 

significant if the total costs in a single 

year are greater than 5 percent of total 

salaries and benefits or greater than 2.5 

percent of total non-interest expense. 

The OCC estimates that the average cost 

per small bank is approximately $6 

thousand in 2015. Using this cost 

estimate, we believe the proposed rule 

will have a significant economic impact 

on two small banks, which is not a 

substantial number. Therefore, we 

believe the proposed rule will not have 

a significant economic impact on a 

substantial number of small entities. 

Therefore, pursuant to section 605(b) 

of the RFA, the OCC hereby certifies 

that this proposal would not have a 

significant economic impact on a 

substantial number of small entities. 

Accordingly, an initial regulatory 

flexibility analysis is not required. 

Board: The RFA requires an agency to 

publish an initial regulatory flexibility 

analysis with a proposed rule or certify 

that the proposed rule will not have a 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64527 

40 5 U.S.C. 603(a). 

41 Interpretive Ruling and Policy Statement 03–2, 

68 FR 31949 (May 29, 2003), as amended by 

Interpretative Ruling and Policy Statement 13–1, 78 

FR 4032 (Jan. 18, 2013). 

significant economic impact on a 

substantial number of small entities. 

The Board is publishing an initial 

regulatory flexibility analysis and 

requests public comment on all aspects 

of its analysis. The Board will conduct 

a final regulatory flexibility analysis 

after considering the comments received 

during the public comment period. 

1. Statement of the need for, and 

objectives of, the proposed rule. The 

Board is proposing revisions to 

Regulation H to implement certain 

provisions of HFIAA over which the 

Agencies, including the Board, have 

jurisdiction. Consistent with HFIAA, the 

proposal would exempt any structure 

that is a part of residential property but 

is detached from the primary residential 

structure of such property and does not 

serve as a residence from the mandatory 

flood insurance purchase requirement. 

The proposal would also implement 

the provisions in the FDPA, as amended 

by the Biggert-Waters Act and HFIAA, 

requiring a regulated lending institution 

(or its servicer) to escrow the premiums 

and fees for required flood insurance for 

any loan secured by residential 

improved real estate or a mobile home 

that is made, increased, extended, or 

renewed on or after January 1, 2016, 

unless the lender or the loan qualifies 

for exceptions set forth in the statute, 

including an exception for certain small 

lenders with assets less than $1 billion. 

Furthermore, the proposal would 

implement the requirement in HFIAA 

that regulated lending institutions offer 

and make available to a borrower the 

option to escrow flood insurance 

premiums and fees for loans that are 

outstanding as of January 1, 2016. The 

proposal would also extend the 

requirement to offer and make available 

an option to escrow to a borrower when 

a regulated lending institution no longer 

qualifies for the exception for small 

lenders. 

2. Small entities affected by the 

proposed rule. All State member banks 

that are subject to Regulation H would 

be subject to the proposed rule. As of 

October 21, 2014, there were 858 State 

member banks. Under regulations 

issued by the Small Business 

Administration (SBA), banks and other 

depository institutions with total assets 

of $550 million or less are considered 

small. Of the 858 State member banks 

subject to Regulation H, approximately 

652 State member banks would be 

considered small entities by the SBA. 

3. Recordkeeping, reporting, and 

compliance requirements. The proposed 

rule would provide an exemption from 

a requirement for certain detached 

structures, but would also impose new 

compliance requirements with the 

proposed escrow provisions. With 

respect to the proposed rules exempting 

certain detached structures from the 

mandatory flood insurance purchase 

requirement, the Board believes the 

rules will not have a significant impact 

on small entities. First, not all 

designated loans are secured by 

detached structures that are eligible for 

the exemption. The proposed rule 

would have no impact with respect to 

such loans. Second, for designated loans 

that are secured by detached structures 

eligible for the exemption, lenders, 

including small lenders, may choose to 

continue requiring flood insurance on 

such structures as they currently do 

even though the FDPA does not 

mandate it, as discussed above in the 

SUPPLEMENTARY INFORMATION. As a 

result, the proposed rule would not 

have any impact in such instances. If a 

lender does choose to exempt detached 

structures that secure a designated loan 

from the mandatory flood insurance 

purchase requirement, the Board 

expects that the impact would be 

minimal because these types of 

structures typically constitute a small 

portion of the collateral securing 

designated loans. 

Furthermore, as discussed in detail 

above in the SUPPLEMENTARY

INFORMATION, regulated lending 

institutions with total assets less than $1 

billion would generally be excepted 

from the proposed rules implementing 

the escrow provisions of HFIAA. 

Therefore, the escrow provisions of the 

proposed rule generally would not affect 

small entities. 

4. Other Federal rules. The Board has 

not identified any likely duplication, 

overlap and/or potential conflict 

between the proposed rule and any 

Federal rule. 

5. Significant alternatives to the 

proposed revisions. The Board solicits 

comment on any significant alternatives 

that would reduce the regulatory burden 

associated with this proposed rule on 

small entities. 

FDIC: The RFA generally requires 

that, in connection with a notice of 

proposed rulemaking, an agency prepare 

and make available for public comment 

an initial regulatory flexibility analysis 

that describes the impact of a proposed 

rule on small entities. A regulatory 

flexibility analysis is not required, 

however, if the agency certifies that the 

rule will not have a significant 

economic impact on a substantial 

number of small entities (defined in 

regulations promulgated by the SBA to 

include banking organizations with total 

assets of less than or equal to $550 

million) and publishes its certification 

and a short, explanatory statement in 

the Federal Register together with the 

rule. As of August 27, 2014, there were 

approximately 3,482 small FDICsupervised banks which include 3,192 

State nonmember banks and 241 Statechartered savings banks, and 49 savings 

associations. 

It is the opinion of the FDIC that the 

proposed rule will not have a significant 

economic impact on a substantial 

number of the small entities, which the 

FDIC supervises. The FDPA, as 

amended by the Biggert Waters Act, 

provides that generally a depository 

institution with assets of less than $1 

billion is not required to comply with 

the escrow requirement. As a result, due 

to this statutory exclusion, by law the 

escrow requirement cannot have a 

significant economic impact on a 

substantial number of small entities. For 

this reason, the FDIC certifies that this 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities that it 

supervises. 

FCA: 

Pursuant to section 605(b) of the RFA, 

the FCA hereby certifies that the 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. Each of the 

banks in the Farm Credit System, 

considered together with its affiliated 

associations, has assets and annual 

income in excess of the amounts that 

would qualify them as small entities. 

Therefore, Farm Credit System 

institutions are not ‘‘small entities’’ as 

defined in the RFA. 

NCUA: 

The RFA requires NCUA to prepare 

an analysis to describe any significant 

economic impact a regulation may have 

on a substantial number of small 

entities.40 For purposes of this analysis, 

NCUA considers small credit unions to 

be those having under $50 million in 

assets.41 As of December 31, 2013, there 

are 4,295 small, federally insured credit 

unions, and only about 1,970 of these 

credit unions originate real estate loans. 

The proposed rule would require a 

credit union or servicer to escrow the 

premiums and fees for required flood 

insurance for any loans secured by 

residential improved real estate or a 

mobile home that is made, increased, 

extended, or renewed on or after 

January 1, 2016. The proposed rule 

would implement additional exceptions 

from the escrow requirement, as 

amended by HFIAA. 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64528 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

42We note that our UMRA cost estimate for the 

October 2013 Proposed Rule was $0. We have 

reevaluated our impact of the escrow provision, as 

amended, in light of the public comments received 

in response to that proposal that described the 

anticipated costs associated with the escrow 

requirement. 

43The FCA has determined that the proposed rule 

does not involve a collection of information 

pursuant to the PRA for System institutions because 

System institutions are Federally chartered 

instrumentalities of the United States and 

instrumentalities of the United States are 

specifically excepted from the definition of 

‘‘collection of information’’ contained in 44 U.S.C. 

3502(3). 

44OCC’s and NCUA’s burden estimates have been 

slightly adjusted from the October 2013 Proposed 

Rule. 

Under this proposed rule, credit 

unions with total assets less than $1 

billion would generally be excepted 

from the escrow provisions. Therefore, 

the escrow provisions of the proposed 

rule would not affect small credit 

unions. NCUA finds that this proposed 

rule would affect relatively few 

federally insured, small credit unions 

and the associated cost is minimal. 

Accordingly, NCUA certifies that this 

rule will not have a significant 

economic impact on small entities. 

Unfunded Mandates Reform Act of 1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(2 U.S.C. 1501 et seq.) requires certain 

agencies, including the OCC, to prepare 

a budgetary impact statement before 

promulgating a rule that includes a 

Federal mandate that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector of $100 million or more 

in any one year. If a budgetary impact 

statement is required, section 205 of 

UMRA also requires an agency to 

identify and consider a reasonable 

number of regulatory alternatives before 

promulgating a rule. 

The OCC has estimated that the total 

cost associated with this NPRM, if 

implemented, would be approximately 

$33 million per year. However, pursuant 

to section 201 of the UMRA, a 

regulation does not impose a mandate to 

the extent it incorporates requirements 

‘‘specifically set forth in the law.’’ 

Therefore, we exclude from our UMRA 

estimate costs specifically related to 

requirements set forth in Biggert-Waters 

and HFIAA, such as direct costs 

associated with establishing escrow 

accounts. Furthermore, under Title II of 

the UMRA, indirect costs, foregone 

revenues and opportunity costs are not 

included when determining if a 

mandate meets or exceeds UMRA’s cost 

threshold. Therefore, based on these 

exclusions, our UMRA cost estimate for 

the NPRM, if implemented, is 

approximately $24 million.42

Accordingly, because the OCC has 

determined that this proposed rule 

would not result in expenditures by 

State, local, and tribal governments, or 

by the private sector, of $100 million or 

more, we have not prepared a budgetary 

impact statement or specifically 

addressed the regulatory alternatives 

considered. 

Paperwork Reduction Act of 1995 

The OCC, Board, FDIC, and NCUA 

(the PRA Agencies) 43 have determined 

that this proposed rule involves a 

collection of information pursuant to 

the provisions of the Paperwork 

Reduction Act of 1995 (the PRA) (44 

U.S.C. 3501 et seq.). 

In accordance with the PRA (44 

U.S.C. 3506; 5 CFR 1320 Appendix A.1), 

the Board reviewed the proposed rule 

under the authority delegated to the 

Board by the Office of Management and 

Budget (OMB). The collection of 

information that is subject to the PRA by 

this proposed rule is found in 12 CFR 

22.5, 208.25(e), 339.5, and 760.5. In 

addition, as permitted by the PRA, the 

Board also proposes to extend for three 

years its respective information 

collection. 

The PRA Agencies may not conduct 

or sponsor, and an organization is not 

required to respond to, this information 

collection unless the information 

collection displays a currently valid 

OMB control number. The Board’s OMB 

control number is 7100–0280. The FDIC, 

the NCUA, and the OCC will seek new 

OMB control numbers. 

Biggert-Waters required escrow for all 

new and outstanding loans in a SFHA, 

unless certain exceptions applied. 

HFIAA added several new exceptions, 

and most notably, ties the escrow 

requirement to a tripwire event (the 

origination, refinance, increase, 

extension, or renewal of a loan on or 

after January 1, 2016). While a regulated 

lending institution is not required to 

escrow until a tripwire event occurs, 

such institution is still required to offer 

and make available the option to escrow 

for all outstanding designated loans. 

This requirement is identical to the 

prior PRA burden in the October 2013 

Proposed Rule, which required an 

escrow notice for all outstanding 

designated loans. However, there may 

be fewer notices because of the 

additional exceptions under HFIAA. 

The PRA Agencies believe the 

paperwork burden estimates remain 

unchanged from the prior PRA burden 

estimated in the October 2013 Proposed 

Rule.44

This information collection is 

required to evidence compliance with 

the requirements of the Federal flood 

insurance statutes with respect to 

lenders and servicers. Because the PRA 

Agencies do not collect any information, 

no issue of confidentiality arises. The 

respondents are for-profit and non-profit 

financial institutions, including small 

businesses. 

Entities subject to the PRA Agencies’ 

existing flood insurance rules will have 

to review and revise disclosures that are 

currently provided to ensure that such 

disclosures accurately reflect the 

disclosure requirements in this 

proposed rule. Entities subject to the 

rule may also need to develop new 

disclosures to meet the proposed rule’s 

timing requirements. 

The total estimated burden represents 

averages for all respondents regulated 

by the PRA Agencies. The PRA 

Agencies expect that the amount of time 

required to implement each of the 

proposed changes for a given institution 

may vary based on the size and 

complexity of the respondent. 

The PRA Agencies estimate that 

respondents would take, on average, 40 

hours to update their systems in order 

to comply with the disclosure 

requirements and the one-time escrow 

notice under the proposed rule. In an 

effort to minimize the compliance cost 

and burden, particularly for small 

entities that do not meet the 

requirement for the statutory exception, 

the proposed rule contains model 

disclosures in Appendices A and B that 

may be used to satisfy the requirements. 

Burden Estimates 

OCC: 

Number of Respondents: 1,550. 

Burden for Existing Recordkeeping 

Requirements: 196,907 hours. 

Burden for Existing Disclosure 

Requirements: 244,208 hours. 

Burden for Proposed Rule: 62,000 

hours. 

Total Burden for Collection: 503,115 

hours. 

Board: 

Number of Respondents: 843. 

Burden for Existing Recordkeeping 

Requirements: 14,191 hours. 

Burden for Existing Disclosure 

Requirements: 17,632 hours. 

Burden for Proposed Rule: 33,720 

hours. 

Total Burden for Collection: 65,543 

hours. 

FDIC: 

Number of Respondents: 4,421. 

Burden for Existing Recordkeeping 

Requirements: 61,894 hours. 

Burden for Existing Disclosure 

Requirements: 76,999 hours. 

Burden for Proposed Rule: 176,840 

hours. 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64529 

Total Burden for Collection: 315,733 

hours. 

NCUA: 

Number of Respondents: 4,192. 

Burden for Existing Recordkeeping 

Requirements: 57,236.52 hours. 

Burden for Existing Disclosure 

Requirements: 70,981.02 hours. 

Burden for Proposed Rule: 167,680 

hours. 

Total Burden for Collection: 

295,897.54 hours. 

These collections are available to the 

public at www.reginfo.gov. 

Comments are invited on: (1) Whether 

the proposed collection of information 

is necessary for the proper performance 

of the PRA Agencies’ functions; 

including whether the information has 

practical utility; (2) the accuracy of the 

PRA Agencies’ estimate of the burden of 

the proposed information collection, 

including the cost of compliance; (3) 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; and (4) ways to minimize the 

burden of information collection on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

Comments on the collection of 

information should be sent to: 

OCC: Because paper mail in the 

Washington, DC area and at the OCC is 

subject to delay, commenters are 

encouraged to submit comments by 

email if possible. Comments may be 

sent to: Legislative and Regulatory 

Activities Division, Office of the 

Comptroller of the Currency, Attention: 

1557–ESCROW, 400 7th Street SW., 

Suite 3E–218, Mail Stop 9W–11, 

Washington, DC 20219. In addition, 

comments may be sent by fax to (571) 

465–4326 or by electronic mail to 

regs.comments@occ.treas.gov. You may 

personally inspect and photocopy 

comments at the OCC, 400 7th Street 

SW., Washington, DC 20219. For 

security reasons, the OCC requires that 

visitors make an appointment to inspect 

comments. You may do so by calling 

(202) 649–6700. Upon arrival, visitors 

will be required to present valid 

government-issued photo identification 

and to submit to security screening in 

order to inspect and photocopy 

comments. 

All comments received, including 

attachments and other supporting 

materials, are part of the public record 

and subject to public disclosure. Do not 

enclose any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

Board: Cynthia Ayouch, Federal 

Reserve Clearance Officer, Office of the 

Chief Data Officer, Mail Stop 95, Board 

of Governors of the Federal Reserve 

System, Washington, DC 20551, with 

copies of such comments sent to the 

Office of Management and Budget, 

Paperwork Reduction Project (7100– 

0280), Washington, DC 20503. 

FDIC: You may submit comments, 

which should refer to ‘‘Interagency 

Flood Insurance, 3064–ESCROW’’ by 

any of the following methods: 

• Agency Web site: http://

www.fdic.gov/regulations/laws/federal/. 

Follow the instructions for submitting 

comments on the FDIC Web site. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: comments@FDIC.gov. 

Include ‘‘Interagency Flood Insurance, 

3064–ESCROW’’ in the subject line of 

the message. 

• Mail: Gary A. Kuiper, Counsel, 

Attn: Comments, Room NYA–5046, 

Federal Deposit Insurance Corporation, 

550 17th Street NW., Washington, DC 

20429. 

• Hand Delivery: Comments may be 

hand delivered to the guard station at 

the rear of the 550 17th Street Building 

(located on F Street) on business days 

between 7 a.m. and 5 p.m. 

Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal/ including any personal 

information provided. 

NCUA: Tracy Crews, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314– 

3428, Fax No. 703–837–2861, Email: 

OCIOPRA@ncua.gov. 

Additionally, commenters may send a 

copy of their comments to the OMB 

desk officer for the PRA Agencies by 

mail to the Office of Information and 

Regulatory Affairs, U.S. Office of 

Management and Budget, New 

Executive Office Building, Room 10235, 

725 17th Street NW., Washington, DC 

20503; by fax to (202) 395–6974; or by 

email to oira_submission@omb.eop.gov. 

List of Subjects 

12 CFR Part 22 

Flood insurance, Mortgages, National 

banks, Reporting and recordkeeping 

requirements, Savings associations. 

12 CFR Part 172 

Flood insurance, Reporting and 

recordkeeping requirements, Savings 

associations. 

12 CFR Part 208 

Accounting, Agriculture, Banks, 

banking, Confidential business 

information, Crime, Currency, Federal 

Reserve System, Flood insurance, 

Mortgages, Reporting and recordkeeping 

requirements, Securities. 

12 CFR Part 339 

Flood insurance, Reporting and 

recordkeeping requirements, Savings 

associations. 

12 CFR Part 614 

Agriculture, Banks, banking, Flood 

insurance, Foreign trade, Reporting and 

recordkeeping requirements, Rural 

areas. 

12 CFR Part 760 

Credit unions, Mortgages, Flood 

insurance, Reporting and Recordkeeping 

requirements. 

Office of the Comptroller of the 

Currency 

12 CFR CHAPTER I 

Authority and Issuance 

For the reasons set forth in the joint 

preamble and under the authority of 12 

U.S.C. 93a, chapter I of title 12 of the 

Code of Federal Regulations is proposed 

to be amended as follows: 

PART 22—LOANS IN AREAS HAVING 

SPECIAL FLOOD HAZARDS 

■ 1. The authority citation for part 22 is 

revised to read as follows: 

Authority: 12 U.S.C. 93a, 1462a, 1463, 

1464, and 5412(b)(2)(B); 42 U.S.C. 4012a, 

4104a, 4104b, 4106, and 4128. 

■ 2. Revise § 22.4 to read as follows: 

§ 22.4 Exemptions. 

The flood insurance requirement 

prescribed by § 22.3, with respect to 

national banks, and § 172.3, with 

respect to Federal savings associations, 

does not apply with respect to: 

(a) Any State-owned property covered 

under a policy of self-insurance 

satisfactory to the Administrator of 

FEMA, who publishes and periodically 

revises the list of States falling within 

this exemption; 

(b) Property securing any loan with an 

original principal balance of $5,000 or 

less and a repayment term of one year 

or less; or 

(c) Any structure that is a part of any 

residential property but is detached 

from the primary residential structure of 

such property and does not serve as a 

residence. 

■ 3. Revise § 22.5 to read as follows: 

§ 22.5 Escrow requirement. 

(a) In general—(1) Applicability. 

Except as provided in paragraph (a)(2) 

or (c) of this section, a national bank or 

Federal savings association, or a servicer 

acting on its behalf, shall require the 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64530 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

escrow of all premiums and fees for any 

flood insurance required under § 22.3, 

with respect to national banks, or 

§ 172.3, with respect to Federal savings 

associations, for any loan secured by 

residential improved real estate or a 

mobile home that is made, increased, 

extended, or renewed on or after 

January 1, 2016, payable with the same 

frequency as payments on the loan are 

made for the duration of the loan. 

(2) Exceptions. Paragraph (a)(1) of this 

section does not apply if: 

(i) The loan is an extension of credit 

primarily for business, commercial, or 

agricultural purposes; 

(ii) The loan is in a subordinate 

position to a senior lien secured by the 

same residential improved real estate or 

mobile home for which the borrower 

has obtained flood insurance coverage 

that meets the requirements of § 22.3, 

with respect to national banks, or 

§ 172.3, with respect to Federal savings 

associations; 

(iii) Flood insurance coverage for the 

residential improved real estate or 

mobile home is provided by a policy 

that: 

(A) Meets the requirements of § 22.3, 

with respect to national banks or 

§ 172.3, with respect to Federal savings 

associations; 

(B) Is provided by a condominium 

association, cooperative, homeowners 

association, or other applicable group; 

and 

(C) The premium for which is paid by 

the condominium association, 

cooperative, homeowners association, or 

other applicable group as a common 

expense; 

(iv) The loan is a home equity line of 

credit; 

(v) The loan is a nonperforming loan 

that is 90 or more days past due; or 

(vi) The loan has a term of not longer 

than 12 months. 

(3) Escrow account. The national bank 

or Federal savings association, or a 

servicer acting on its behalf, shall 

deposit the flood insurance premiums 

and fees 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 Administrator of 

FEMA or other provider of flood 

insurance that premiums are due, the 

national bank or Federal savings 

association, or a servicer acting on its 

behalf, shall pay the amount owed to 

the insurance provider from the escrow 

account by the date when such 

premiums are due. 

(b) Notice. For any loan for which a 

national bank or Federal savings 

association is required to escrow under 

paragraph (a)(1) or of this section, the 

national bank or Federal savings 

association, or a servicer acting on its 

behalf, shall mail or deliver a written 

notice with the notice provided under 

§ 22.9, with respect to national banks, or 

§ 172.9, with respect to Federal savings 

associations, informing the borrower 

that the national bank or Federal savings 

association is required to escrow all 

premiums and fees for required flood 

insurance, using language that is 

substantially similar to model clauses 

on the escrow requirement in appendix 

A. 

(c) Small lender exception—(1) 

Qualification. Except as may be 

required under applicable State law, 

paragraphs (a), (b), and (d) of this 

section do not apply to a national bank 

or Federal savings association: 

(i) That has total assets of less than $1 

billion as of December 31 of either of the 

two prior calendar years; and 

(ii) On or before July 6, 2012: 

(A) 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 

any loan secured by residential 

improved real estate or a mobile home; 

and 

(B) 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 any loans secured by 

residential improved real estate or a 

mobile home. 

(2) Change in status. If a national bank 

or Federal savings association 

previously qualified for the exception in 

paragraph (c)(1) of this section, but no 

longer qualifies for the exception 

because it had assets of $1 billion or 

more for two consecutive calendar year 

ends, the national bank or Federal 

savings association must escrow 

premiums and fees for flood insurance 

pursuant to paragraph (a) of this section 

for any designated loan made, 

increased, extended, or renewed on or 

after July 1 of the succeeding calendar 

year. 

(d) Option to escrow—(1) In general. 

Except as provided in paragraph (a)(2) 

or (c) of this section, a national bank or 

Federal savings association, or a servicer 

acting on its behalf, shall offer and make 

available to the borrower the option to 

escrow all premiums and fees for any 

flood insurance required under § 22.3 of 

this section, with respect to national 

banks, or § 172.3 with respect to Federal 

savings associations, for any loan 

secured by residential improved real 

estate or a mobile home that is 

outstanding on January 1, 2016, or July 

1 of the calendar year succeeding the 

calendar year the national bank or 

Federal savings association has a change 

in status pursuant to paragraph (c)(2) of 

this section until the national bank or 

Federal savings association is required 

to escrow pursuant to paragraph (a) of 

this section. 

(2) Notice. For any loan subject to 

paragraph (d)(1) of this section, the 

national bank or Federal savings 

association, or a servicer acting on its 

behalf, shall mail or deliver to the 

borrower no later than March 31, 2016, 

or September 30 of the calendar year 

succeeding the calendar year the 

national bank or Federal savings 

association has a change in status 

pursuant to paragraph (c)(2) of this 

section, a notice in writing, or if the 

borrower agrees, electronically, 

informing the borrower of the option to 

escrow all premiums and fees for any 

required flood insurance and the 

method(s) by which the borrower may 

request the escrow, using language 

similar to the model clauses in 

appendix B. 

(3) Timing. The national bank or 

Federal savings association or servicer 

must begin escrowing premiums and 

fees for flood insurance as soon as 

reasonably practicable after the national 

bank or Federal savings association or 

servicer receives the borrower’s request 

to escrow. 

■ 4. Revise § 22.6 to read as follows: 

§ 22.6 Required use of standard flood 

hazard determination form. 

(a) Use of form. Except for properties 

or structures that are exempt under 

§ 22.4, a national bank or Federal 

savings association shall use the 

standard flood hazard determination 

form developed by the Administrator of 

FEMA 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. A national bank or Federal 

savings association may obtain the 

standard flood hazard determination 

form from FEMA’s Web site at 

www.fema.gov. 

(b) Retention of form. A national bank 

or Federal savings association shall 

retain a copy of the completed standard 

flood hazard determination form, in 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64531 

either hard copy or electronic form, for 

the period of time the national bank or 

Federal savings association owns the 

loan. 

■ 5. Revise Appendix A to Part 22 to 

read as follows: 

Appendix A to Part 22—Sample Form 

of Notice of Special Flood Hazards and 

Availability of Federal Disaster Relief 

Assistance 

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 

Administrator 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: 

lll. This area has 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 Administrator 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. 

• 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 building or mobile home and 

any personal property that secures your loan 

and not the land itself. 

• 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. 

Availability of Private Flood Insurance 

Coverage 

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 that provides the same 

level of coverage as a standard flood 

insurance policy under the NFIP may be 

available from private insurers that do not 

participate in the NFIP. You should compare 

the flood insurance coverage, deductibles, 

exclusions, conditions, and premiums 

associated with flood insurance policies 

issued on behalf of the NFIP and policies 

issued on behalf of private insurance 

companies and ask an insurance agent as to 

the availability, cost, and comparisons of 

flood insurance coverage. 

[Escrow Requirement for Residential Loans 

Federal law requires a lender or its servicer 

to escrow all premiums and fees for flood 

insurance that covers any residential 

building or mobile home securing a loan that 

is located in an area with special flood 

hazards. These premiums and fees must be 

paid to the lender or its servicer with the 

same frequency as your loan payments for 

the duration of your loan and will be 

deposited in an escrow account on your 

behalf to be paid to the flood insurance 

provider. Upon receipt of a notice from the 

flood insurance provider that the premiums 

are due, the premiums shall be paid from the 

escrow account to the insurance provider.] 

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. 

■ 6. Add Appendix B to part 22 to read 

as follows: 

Appendix B to Part 22—Sample Clause 

for Option To Escrow for Outstanding 

Loans 

Escrow Option Clause 

You have the option to escrow all 

premiums and fees for flood insurance that 

covers any residential building or mobile 

home securing a loan that is located in an 

area with special flood hazards. If you choose 

this option, your payments will be deposited 

in an escrow account to be paid to the flood 

insurance provider. The escrow amount for 

flood insurance will be added to your 

existing periodic mortgage payment. The 

payments you make into the escrow account 

will accumulate over time and the funds will 

be used to pay your flood insurance policy 

upon receipt of a notice from the flood 

insurance provider that the flood insurance 

premium is due. To choose this option, 

follow the instructions below. If you have 

any questions about the option, contact 

[Insert Name of Lender or Servicer] at [Insert 

Contact Information]. 

[Instructions for Selecting to Escrow] 

PART 172—LOANS IN AREAS HAVING 

SPECIAL FLOOD HAZARDS 

■ 7. The authority citation for part 172 

continues to read as follows: 

Authority: 12 U.S.C. 1462a, 1463, 1464 

and 42 U.S.C. 4012a, 4104a, 4104b, 4106, 

4128 and 5412(b)(2)(B). 

■ 8. Revise § 172.4 to read as follows: 

§ 172.4 Exemptions. 

Exemptions to the flood insurance 

requirement prescribed by § 172.3 are 

set forth at 12 CFR 22.3. 

■ 9. Revise § 172.5 to read as follows: 

§ 172.5 Escrow requirement. 

Requirements for the escrow of all 

premiums and fees for any flood 

insurance required under § 172.3 are set 

forth at 12 CFR 22.5. 

■ 10. Revise § 172.6 to read as follows: 

§ 172.6 Required use of standard flood 

hazard determination form. 

Requirements for the use the standard 

flood hazard determination form are set 

forth at 12 CFR 22.6. 

§ 172.9 [Amended] 

■ 11. Section § 172.9 is amended by 

removing ‘‘this part’’ each time it 

appears in paragraph (f) and adding in 

its place ‘‘12 CFR part 22’’. 

■ 12. Revise appendix A to part 172 to 

read as follows: 

Appendix A to Part 172—Sample Form 

of Notice of Special Flood Hazards and 

Availability of Federal Disaster Relief 

Assistance 

The Sample Form of Notice of Special 

Flood hazards and Availability of Federal 

Disaster Relief Assistance is set forth in 

Appendix A to 12 CFR part 22. 

Federal Reserve System 

12 CFR CHAPTER II 

Authority and Issuance 

For the reasons set forth in the joint 

preamble, part 208 of chapter II of title 

12 of the Code of Federal Regulations is 

proposed to be amended as set forth 

below: 

PART 208—MEMBERSHIP OF STATE 

BANKING INSTITUTIONS IN THE 

FEDERAL RESERVE SYSTEM 

(REGULATION H) 

■ 13. The authority citation for part 208 

continues to read as follows: 

Authority: 12 U.S.C. 36, 248(a), 248(c), 

321–338a, 371d, 461, 481–486, 601, 611, 

1814, 1823(j), 1828(o), 1831o, 1831p–1, 3105, 

3310, 3331–3351, and 3906–3909; 15 U.S.C. 

78b, 781(b), 781(g), 781(i), 78o–4(c)(5), 78q, 

78q–1, and 78w; 31 U.S.C. 5318; 42 U.S.C. 

4012a, 4104a, 4104b, 4106, and 4128. 

■ 14. Amend § 208.25 by revising 

paragraphs (d), (e), and (f), revising 

appendix A to § 208.25, and adding 

appendix B to § 208.25 to read as 

follows: 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64532 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

§ 208.25 Loans in areas having special 

flood hazards. 

* * * * * 

(d) Exemptions. The flood insurance 

requirement prescribed by paragraph (c) 

of this section does not apply with 

respect to: 

(1) Any State-owned property covered 

under a policy of self-insurance 

satisfactory to the Administrator of 

FEMA, who publishes and periodically 

revises the list of States falling within 

this exemption; 

(2) Property securing any loan with an 

original principal balance of $5,000 or 

less and a repayment term of one year 

or less; or 

(3) Any structure that is a part of any 

residential property but is detached 

from the primary residential structure of 

such property and does not serve as a 

residence. 

(e) Escrow requirement—(1) In 

general—(i) Applicability. Except as 

provided in paragraph (e)(1)(ii) or (e)(3) 

of this section, a member bank, or a 

servicer acting on its behalf, shall 

require the escrow of all premiums and 

fees for any flood insurance required 

under paragraph (c) of this section for 

any loan secured by residential 

improved real estate or a mobile home 

that is made, increased, extended, or 

renewed on or after January 1, 2016, 

payable with the same frequency as 

payments on the loan are made for the 

duration of the loan. 

(ii) Exceptions. Paragraph (e)(1)(i) of 

this section does not apply if: 

(A) The loan is an extension of credit 

primarily for business, commercial, or 

agricultural purposes; 

(B) The loan is in a subordinate 

position to a senior lien secured by the 

same residential improved real estate or 

mobile home for which the borrower 

has obtained flood insurance coverage 

that meets the requirements of 

paragraph (c) of this section; 

(C) Flood insurance coverage for the 

residential improved real estate or 

mobile home is provided by a policy 

that: 

(1) Meets the requirements of 

paragraph (c) of this section; 

(2) Is provided by a condominium 

association, cooperative, homeowners 

association, or other applicable group; 

and 

(3) The premium for which is paid by 

the condominium association, 

cooperative, homeowners association, or 

other applicable group as a common 

expense; 

(D) The loan is a home equity line of 

credit; 

(E) The loan is a nonperforming loan 

that is 90 or more days past due; or 

(F) The loan has a term of not longer 

than 12 months. 

(iii) Escrow account. The member 

bank, or a servicer acting on its behalf, 

shall deposit the flood insurance 

premiums and fees 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 Administrator of 

FEMA or other provider of flood 

insurance that premiums are due, the 

member bank, or a servicer acting on its 

behalf, shall pay the amount owed to 

the insurance provider from the escrow 

account by the date when such 

premiums are due. 

(2) Notice. For any loan for which a 

member bank is required to escrow 

under paragraph (e)(1) or (e)(3)(ii) of this 

section, the member bank, or a servicer 

acting on its behalf, shall mail or deliver 

a written notice with the notice 

provided under paragraph (i) of this 

section informing the borrower that the 

member bank is required to escrow all 

premiums and fees for required flood 

insurance, using language that is 

substantially similar to model clauses 

on the escrow requirement in appendix 

A. 

(3) Small lender exception—(i) 

Qualification. Except as may be 

required under applicable State law, 

paragraphs (e)(1), (2), and (4) of this 

section do not apply to a member bank: 

(A) That has total assets of less than 

$1 billion as of December 31 of either 

of the two prior calendar years; and 

(B) On or before July 6, 2012: 

(1) 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 

any loan secured by residential 

improved real estate or a mobile home; 

and 

(2) 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 any loans secured by 

residential improved real estate or a 

mobile home. 

(ii) Change in status. If a member 

bank previously qualified for the 

exception in paragraph (e)(3)(i) of this 

section, but no longer qualifies for the 

exception because it had assets of $1 

billion or more for two consecutive 

calendar year ends, the member bank 

must escrow premiums and fees for 

flood insurance pursuant to paragraph 

(e)(1) of this section for any designated 

loan made, increased, extended, or 

renewed on or after July 1 of the 

succeeding calendar year. 

(4) Option to escrow—(i) In general. 

Except as provided in paragraph 

(e)(1)(ii) or (e)(3) of this section, a 

member bank, or a servicer acting on its 

behalf, shall offer and make available to 

the borrower the option to escrow all 

premiums and fees for any flood 

insurance required under paragraph (c) 

of this section for any loan secured by 

residential improved real estate or a 

mobile home that is outstanding on 

January 1, 2016, or July 1 of the calendar 

year succeeding the calendar year the 

member bank has a change in status 

pursuant to paragraph (e)(3)(ii) of this 

section until the member bank is 

required to escrow pursuant to 

paragraph (e)(1) of this section. 

(ii) Notice. For any loan subject to 

paragraph (e)(4)(i) of this section, the 

member bank, or a servicer acting on its 

behalf, shall mail or deliver to the 

borrower no later than March 31, 2016, 

or September 30 of the calendar year 

succeeding the calendar year the 

member bank has a change in status 

pursuant to paragraph (e)(3)(ii) of this 

section, a notice in writing, or if the 

borrower agrees, electronically, 

informing the borrower of the option to 

escrow all premiums and fees for any 

required flood insurance and the 

method(s) by which the borrower may 

request the escrow, using language 

similar to the model clauses in 

appendix B. 

(iii) Timing. The member bank or 

servicer must begin escrowing 

premiums and fees for flood insurance 

as soon as reasonably practicable after 

the member bank or servicer receives 

the borrower’s request to escrow. 

(f) Required use of standard flood 

hazard determination form—(1) Use of 

form. Except for properties or structures 

that are exempt under paragraph (d) of 

this section, a state member bank shall 

use the standard flood hazard 

determination form developed by the 

Administrator of FEMA 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. A state member bank may 

obtain the standard flood hazard 

determination form from FEMA’s Web 

site at www.fema.gov. 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64533 

(2) Retention of form. A state member 

bank 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 state member bank owns the loan. 

* * * * * 

Appendix A to § 208.25—Sample Form 

of Notice of Special Flood Hazards and 

Availability of Federal Disaster Relief 

Assistance 

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 

Administrator 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:lll. This area has 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 Administrator 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. 

• 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 building or mobile home and 

any personal property that secures your loan 

and not the land itself. 

• 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. 

Availability of Private Flood Insurance 

Coverage 

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 that provides the same 

level of coverage as a standard flood 

insurance policy under the NFIP may be 

available from private insurers that do not 

participate in the NFIP. You should compare 

the flood insurance coverage, deductibles, 

exclusions, conditions, and premiums 

associated with flood insurance policies 

issued on behalf of the NFIP and policies 

issued on behalf of private insurance 

companies and ask an insurance agent as to 

the availability, cost, and comparisons of 

flood insurance coverage. 

[Escrow Requirement for Residential Loans 

Federal law requires a lender or its servicer 

to escrow all premiums and fees for flood 

insurance that covers any residential 

building or mobile home securing a loan that 

is located in an area with special flood 

hazards. These premiums and fees must be 

paid to the lender or its servicer with the 

same frequency as your loan payments for 

the duration of your loan and will be 

deposited in an escrow account on your 

behalf to be paid to the flood insurance 

provider. Upon receipt of a notice from the 

flood insurance provider that the premiums 

are due, the premiums shall be paid from the 

escrow account to the insurance provider.] 

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. 

Appendix B to § 208.25—Sample Clause 

for Option To Escrow for Outstanding 

Loans 

Escrow Option Clause 

You have the option to escrow all 

premiums and fees for flood insurance that 

covers any residential building or mobile 

home securing a loan that is located in an 

area with special flood hazards. If you choose 

this option, your payments will be deposited 

in an escrow account to be paid to the flood 

insurance provider. The escrow amount for 

flood insurance will be added to your 

existing periodic mortgage payment. The 

payments you make into the escrow account 

will accumulate over time and the funds will 

be used to pay your flood insurance policy 

upon receipt of a notice from the flood 

insurance provider that the flood insurance 

premium is due. To choose this option, 

follow the instructions below. If you have 

any questions about the option, contact 

[Insert Name of Lender or Servicer] at [Insert 

Contact Information]. 

[Instructions for Selecting to Escrow] 

Federal Deposit Insurance Corporation 

12 CFR CHAPTER III 

Authority and Issuance 

For the reasons set forth in the joint 

preamble, the Board of Directors of the 

FDIC proposes to amend part 339 of 

chapter III of title 12 of the Code of 

Federal Regulations as follows: 

PART 339—LOANS IN AREAS HAVING 

SPECIAL FLOOD HAZARDS 

■ 15. The authority citation for part 339 

is revised to read as follows: 

Authority: 12 U.S.C. 1462, 1462a, 1463, 

1464, 1819 (Tenth), 5412(b)(2)(C) and 42 

U.S.C. 4012a, 4104a, 4104b, 4106, and 4128. 

■ 16. In § 339.4, add paragraph (c) to 

read as follows: 

§ 339.4 Exemptions. 

* * * * * 

(c) Any structure that is a part of any 

residential property but is detached 

from the primary residential structure of 

such property and does not serve as a 

residence. 

■ 17. Revise § 339.5 to read as follows: 

§ 339.5 Escrow requirement. 

(a) In general—(1) Applicability. 

Except as provided in paragraph (a)(2) 

or (c) of this section, an FDICsupervised institution, or a servicer 

acting on its behalf, shall require the 

escrow of all premiums and fees for any 

flood insurance required under 

§ 339.3(a) for any loan secured by 

residential improved real estate or a 

mobile home that is made, increased, 

extended, or renewed on or after 

January 1, 2016, payable with the same 

frequency as payments on the loan are 

made for the duration of the loan. 

(2) Exceptions. Paragraph (a)(1) of this 

section does not apply if: 

(i) The loan is an extension of credit 

primarily for business, commercial, or 

agricultural purposes; 

(ii) The loan is in a subordinate 

position to a senior lien secured by the 

same residential improved real estate or 

mobile home for which the borrower 

has obtained flood insurance coverage 

that meets the requirements of 

§ 339.3(a); 

(iii) Flood insurance coverage for the 

residential improved real estate or 

mobile home is provided by a policy 

that: 

(A) Meets the requirements of 

§ 339.3(a); 

(B) Is provided by a condominium 

association, cooperative, homeowners 

association, or other applicable group; 

and 

(C) The premium for which is paid by 

the condominium association, 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64534 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

cooperative, homeowners association, or 

other applicable group as a common 

expense; 

(iv) The loan is a home equity line of 

credit; 

(v) The loan is a nonperforming loan 

that is 90 or more days past due; or 

(vi) The loan has a term of not longer 

than 12 months. 

(3) Escrow account. The FDICsupervised institution, or a servicer 

acting on its behalf, shall deposit the 

flood insurance premiums and fees 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 Administrator of 

FEMA or other provider of flood 

insurance that premiums are due, the 

FDIC-supervised institution, or a 

servicer acting on its behalf, shall pay 

the amount owed to the insurance 

provider from the escrow account by the 

date when such premiums are due. 

(b) Notice. For any loan for which an 

FDIC-supervised institution is required 

to escrow under paragraph (a) of this 

section or paragraph (c)(2) of this 

section, the FDIC-supervised institution, 

or a servicer acting on its behalf, shall 

mail or deliver a written notice with the 

notice provided under § 339.9 informing 

the borrower that the FDIC-supervised 

institution is required to escrow all 

premiums and fees for required flood 

insurance, using language that is 

substantially similar to model clauses 

on the escrow requirement in appendix 

A. 

(c) Small lender exception—(1) 

Qualification. Except as may be 

required under applicable State law, 

paragraphs (a), (b), and (d) of this 

section do not apply to an FDICsupervised institution: 

(i) That has total assets of less than $1 

billion as of December 31 of either of the 

two prior calendar years; and 

(ii) On or before July 6, 2012: 

(A) 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 

any loan secured by residential 

improved real estate or a mobile home; 

and 

(B) 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 any loans secured by 

residential improved real estate or a 

mobile home. 

(2) Change in status. If an FDICsupervised institution previously 

qualified for the exception in paragraph 

(c)(1) of this section, but no longer 

qualifies for the exception because it 

had assets of $1 billion or more for two 

consecutive calendar year ends, the 

FDIC-supervised institution must 

escrow premiums and fees for flood 

insurance pursuant to paragraph (a) for 

any designated loan made, increased, 

extended, or renewed on or after July 1 

of the succeeding calendar year. 

(d) Option to escrow—(1) In general. 

Except as provided in paragraphs (a)(2) 

or (c) of this section, an FDICsupervised institution, or a servicer 

acting on its behalf, shall offer and make 

available to the borrower the option to 

escrow all premiums and fees for any 

flood insurance required under § 339.3 

for any loan secured by residential 

improved real estate or a mobile home 

that is outstanding on January 1, 2016, 

or July 1 of the calendar year succeeding 

the calendar year the FDIC-supervised 

institution has a change in status 

pursuant to paragraph (c)(2) of this 

section until the FDIC-supervised 

institution is required to escrow 

pursuant to paragraph (a) of this section. 

(2) Notice. For any loan subject to 

paragraph (d) of this section, the FDICsupervised institution, or a servicer 

acting on its behalf, shall mail or deliver 

to the borrower no later than March 31, 

2016, or September 30 of the calendar 

year succeeding the calendar year the 

FDIC-supervised institution has a 

change in status pursuant to paragraph 

(c)(2) of this section, a notice in writing, 

or if the borrower agrees, electronically, 

informing the borrower of the option to 

escrow all premiums and fees for any 

required flood insurance and the 

method(s) by which the borrower may 

request the escrow, using language 

similar to the model clauses in 

appendix B. 

(3) Timing. The FDIC-supervised 

institution or servicer must begin 

escrowing premiums and fees for flood 

insurance as soon as reasonably 

practicable after the FDIC-supervised 

institution or servicer receives the 

borrower’s request to escrow. 

■ 18. Revise § 339.6 to read as follows: 

§ 339.6 Required use of standard flood 

hazard determination form. 

(a) Use of form. Except for properties 

or structures that are exempt under 

§ 339.4, an FDIC-supervised institution 

shall use the standard flood hazard 

determination form developed by the 

Administrator of FEMA 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. An FDIC-supervised institution 

may obtain the standard flood hazard 

determination form from FEMA’s Web 

site at www.fema.gov. 

(b) Retention of form. An FDICsupervised institution 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 FDIC-supervised 

institution owns the loan. 

■ 19. Revise appendix A to part 339 to 

read as follows: 

Appendix A to Part 339—Sample Form 

of Notice of Special Flood Hazards and 

Availability of Federal Disaster Relief 

Assistance 

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 

Administrator 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: 

lll. This area has 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 Administrator 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. 

• 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. 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64535 

Flood insurance coverage under the NFIP 

is limited to the building or mobile home and 

any personal property that secures your loan 

and not the land itself. 

• 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. 

Availability of Private Flood Insurance 

Coverage 

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 that provides the same 

level of coverage as a standard flood 

insurance policy under the NFIP may be 

available from private insurers that do not 

participate in the NFIP. You should compare 

the flood insurance coverage, deductibles, 

exclusions, conditions, and premiums 

associated with flood insurance policies 

issued on behalf of the NFIP and policies 

issued on behalf of private insurance 

companies and ask an insurance agent as to 

the availability, cost, and comparisons of 

flood insurance coverage. 

[Escrow Requirement for Residential Loans 

Federal law requires a lender or its servicer 

to escrow all premiums and fees for flood 

insurance that covers any residential 

building or mobile home securing a loan that 

is located in an area with special flood 

hazards. These premiums and fees must be 

paid to the lender or its servicer with the 

same frequency as your loan payments for 

the duration of your loan and will be 

deposited in an escrow account on your 

behalf to be paid to the flood insurance 

provider. Upon receipt of a notice from the 

flood insurance provider that the premiums 

are due, the premiums shall be paid from the 

escrow account to the insurance provider. ] 

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. 

■ 20. Add appendix B to part 339 to 

read as follows: 

Appendix B to Part 339—Sample 

Clause for Option To Escrow for 

Outstanding Loans 

Escrow Option Clause 

You have the option to escrow all 

premiums and fees for flood insurance that 

covers any residential building or mobile 

home securing a loan that is located in an 

area with special flood hazards. If you choose 

this option, your payments will be deposited 

in an escrow account to be paid to the flood 

insurance provider. The escrow amount for 

flood insurance will be added to your 

existing periodic mortgage payment. The 

payments you make into the escrow account 

will accumulate over time and the funds will 

be used to pay your flood insurance policy 

upon receipt of a notice from the flood 

insurance provider that the flood insurance 

premium is due. To choose this option, 

follow the instructions below. If you have 

any questions about the option, contact 

[Insert Name of Lender or Servicer] at [Insert 

Contact Information]. 

[Instructions for Selecting to Escrow] 

Farm Credit Administration 

12 CFR CHAPTER VI 

Authority and Issuance 

For the reasons stated in the 

preamble, part 614 of chapter VI, title 12 

of the Code of Federal Regulations is 

proposed to be amended as follows: 

PART 614—LOAN POLICIES AND 

OPERATIONS 

■ 21. The authority citation for part 614 

continues to read as follows: 

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

4106, and 4128; secs. 1.3, 1.5, 1.6, 1.7, 1.9, 

1.10, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13, 2.15, 

3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12, 

4.12A, 4.13, 4.13B, 4.14, 4.14A, 4.14C, 4.14D, 

4.14E, 4.18, 4.19, 4.36, 4.37, 5.9, 5.10, 5.17, 

7.0, 7.2, 7.6, 7.7, 7.8, 7.12, 7.13, 8.0, 8.5 of 

the Farm Credit Act (12 U.S.C. 2011, 2013, 

2014, 2015, 2017, 2018, 2071, 2073, 2074, 

2075, 2091, 2093, 2094, 2096, 2121, 2122, 

2124, 2128, 2129, 2131, 2141, 2149, 2183, 

2184, 2199, 2201, 2202, 2202a, 2202c, 2202d, 

2202e, 2206, 2207, 2219a, 2219b, 2243, 2244, 

2252, 2279a, 2279a–2, 2279b, 2279b–1, 

2279b–2, 2279f, 2279f–1, 2279aa, 2279aa–5); 

sec. 413 of Pub. L. 100–233, 101 Stat. 1568, 

1639. 

■ 22. Amend § 614.4930 by adding 

paragraph (c)(3) to read as follows: 

§ 614.4930 Requirement to purchase flood 

insurance where available. 

* * * * * 

(c) * * * 

(3) Any structure that is a part of any 

residential property but is detached 

from the primary residential structure of 

such property and does not serve as a 

residence. 

■ 23. Revise § 614.4935 to read as 

follows: 

§ 614.4935 Escrow requirement. 

(a) In general—(1) Applicability. 

Except as provided in paragraph (a)(2) 

or (c) of this section, a System 

institution, or a servicer acting on its 

behalf, shall require the escrow of all 

premiums and fees for any flood 

insurance required under § 614.4930 for 

any loan secured by residential 

improved real estate or a mobile home 

that is made, increased, extended, or 

renewed on or after January 1, 2016, 

payable with the same frequency as 

payments on the loan are made for the 

duration of the loan. 

(2) Exceptions. Paragraph (a)(1) of this 

section does not apply if: 

(i) The loan is an extension of credit 

primarily for business, commercial, or 

agricultural purposes; 

(ii) The loan is in a subordinate 

position to a senior lien secured by the 

same residential improved real estate or 

mobile home for which the borrower 

has obtained flood insurance coverage 

that meets the requirements of 

§ 614.4930; 

(iii) Flood insurance coverage for the 

residential improved real estate or 

mobile home is provided by a policy 

that: 

(A) Meets the requirements of 

§ 614.4930; 

(B) Is provided by a condominium 

association, cooperative, homeowners 

association, or other applicable group; 

and 

(C) The premium for which is paid by 

the condominium association, 

cooperative, homeowners association, or 

other applicable group as a common 

expense; 

(iv) The loan is a home equity line of 

credit; 

(v) The loan is a nonperforming loan 

that is 90 or more days past due; or 

(vi) The loan has a term of not longer 

than 12 months. 

(3) Escrow account. The System 

institution, or a servicer acting on its 

behalf, shall deposit the flood insurance 

premiums and fees 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 Administrator of 

FEMA or other provider of flood 

insurance that premiums are due, the 

System institution, or a servicer acting 

on its behalf, shall pay the amount owed 

to the insurance provider from the 

escrow account by the date when such 

premiums are due. 

(b) Notice. For any loan for which a 

System institution is required to escrow 

under paragraph (a) of this section or 

paragraph (c)(2) of this section, the 

System institution, or a servicer acting 

on its behalf, shall mail or deliver a 

written notice with the notice provided 

under Appendix A informing the 

borrower that the System institution is 

required to escrow all premiums and 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64536 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

fees for required flood insurance, using 

language that is substantially similar to 

model clauses on the escrow 

requirement in appendix A. 

(c) Small lender exception—(1) 

Qualification. Except as may be 

required under applicable State law, 

paragraphs (a), (b), and (d) of this 

section do not apply to a System 

institution: 

(i) That has total assets of less than $1 

billion as of December 31 of either of the 

two prior calendar years; and 

(ii) On or before July 6, 2012: 

(A) 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 

any loan secured by residential 

improved real estate or a mobile home; 

and 

(B) 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 any loans secured by 

residential improved real estate or a 

mobile home. 

(2) Change in status. If a System 

institution previously qualified for the 

exception in paragraph (c)(1) of this 

section, but no longer qualifies for the 

exception because it had assets of $1 

billion or more for two consecutive 

calendar year ends, the System 

institution must escrow premiums and 

fees for flood insurance pursuant to 

paragraph (a) for any designated loan 

made, increased, extended, or renewed 

on or after July 1 of the succeeding 

calendar year. 

(d) Option to escrow—(1) In general. 

Except as provided in paragraph (a)(2) 

or (c) of this section, a System 

institution, or a servicer acting on its 

behalf, shall offer and make available to 

the borrower the option to escrow all 

premiums and fees for any flood 

insurance required under § 614.4930 for 

any loan secured by residential 

improved real estate or a mobile home 

that is outstanding on January 1, 2016, 

or July 1 of the calendar year succeeding 

the calendar year the System institution 

has a change in status pursuant to 

paragraph (c)(2) of this section until the 

System institution is required to escrow 

pursuant to paragraph (a) of this section. 

(2) Notice. For any loan subject to 

paragraph (d) of this section, the System 

institution, or a servicer acting on its 

behalf, shall mail or deliver to the 

borrower no later than March 31, 2016, 

or September 30 of the calendar year 

succeeding the calendar year the System 

institution has a change in status 

pursuant to paragraph (c)(2) of this 

section, a notice in writing, or if the 

borrower agrees, electronically, 

informing the borrower of the option to 

escrow all premiums and fees for any 

required flood insurance and the 

method(s) by which the borrower may 

request the escrow, using language 

similar to the model clauses in 

Appendix B. 

(3) Timing. The System institution or 

servicer must begin escrowing 

premiums and fees for flood insurance 

as soon as reasonably practicable after 

the System institution or servicer 

receives the borrower’s request to 

escrow. 

■ 24. Revise § 614.4940 to read as 

follows: 

§ 614.4940 Required use of standard flood 

hazard determination form. 

(a) Use of form. Except for properties 

or structures that are exempt under 

§ 614.4930(c), a System institution shall 

use the standard flood hazard 

determination form developed by the 

Administrator of FEMA 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. A System institution may 

obtain the standard flood hazard 

determination form from FEMA’s Web 

site at www.fema.gov. 

(b) Retention of form. A System 

institution 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 System institution owns the loan. 

■ 25. Revise Appendix A to part 614 to 

read as follows: 

Appendix A to Part 614—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 

Administrator 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: 

lll. This area has 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 Administrator 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. 

• 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 building or mobile home and 

any personal property that secures your loan 

and not the land itself. 

• 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. 

Availability of Private Flood Insurance 

Coverage 

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 that provides the same 

level of coverage as a standard flood 

insurance policy under the NFIP may be 

available from private insurers that do not 

participate in the NFIP. You should compare 

the flood insurance coverage, deductibles, 

exclusions, conditions, and premiums 

associated with flood insurance policies 

issued on behalf of the NFIP and policies 

issued on behalf of private insurance 

companies and ask an insurance agent as to 

the availability, cost, and comparisons of 

flood insurance coverage. 

[Escrow Requirement for Residential Loans 

Federal law requires a lender or its servicer 

to escrow all premiums and fees for flood 

insurance that covers any residential 

building or mobile home securing a loan that 

is located in an area with special flood 

hazards. These premiums and fees must be 

paid to the lender or its servicer with the 

same frequency as your loan payments for 

the duration of your loan and will be 

deposited in an escrow account on your 

behalf to be paid to the flood insurance 

provider. Upon receipt of a notice from the 

flood insurance provider that the premiums 

are due, the premiums shall be paid from the 

escrow account to the insurance provider.] 

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 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 64537 

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. 

■ 26. Add Appendix B to part 614 to 

read as follows: 

Appendix B to Part 614—Sample 

Clause for Option To Escrow for 

Outstanding Loans 

Escrow Option Clause 

You have the option to escrow all 

premiums and fees for flood insurance that 

covers any residential building or mobile 

home securing a loan that is located in an 

area with special flood hazards. If you choose 

this option, your payments will be deposited 

in an escrow account to be paid to the flood 

insurance provider. The escrow amount for 

flood insurance will be added to your 

existing periodic mortgage payment. The 

payments you make into the escrow account 

will accumulate over time and the funds will 

be used to pay your flood insurance policy 

upon receipt of a notice from the flood 

insurance provider that the flood insurance 

premium is due. To choose this option, 

follow the instructions below. If you have 

any questions about the option, contact 

[Insert Name of Lender or Servicer] at [Insert 

Contact Information]. 

[Instructions for Selecting to Escrow] 

National Credit Union Administration 

12 CFR CHAPTER VII 

Authority and Issuance 

For the reasons set forth in the joint 

preamble, the NCUA Board proposes to 

amend part 760 of chapter VII of title 12 

of the Code of Federal Regulations as 

follows: 

PART 760—LOANS IN AREAS HAVING 

SPECIAL FLOOD HAZARDS 

■ 27. The authority citation for part 760 

continues to read as follows: 

Authority: 12 U.S.C. 1757, 1789; 42 U.S.C. 

4012a, 4104a, 4104b, 4106, and 4128. 

■ 28. In § 760.4, add paragraph (c) to 

read as follows: 

§ 760.4 Exemptions. 

* * * * * 

(c) Any structure that is a part of any 

residential property but is detached 

from the primary residential structure of 

such property and does not serve as a 

residence. 

■ 29. Revise § 760.5 to read as follows: 

§ 760.5 Escrow requirement. 

(a) In general—(1) Applicability. 

Except as provided in paragraph (a)(2) 

or (c) of this section, a credit union, or 

a servicer acting on its behalf, shall 

require the escrow of all premiums and 

fees for any flood insurance required 

under § 760.3(a) for any loan secured by 

residential improved real estate or a 

mobile home that is made, increased, 

extended, or renewed on or after 

January 1, 2016, payable with the same 

frequency as payments on the loan are 

made for the duration of the loan. 

(2) Exceptions. Paragraph (a)(1) of this 

section does not apply if: 

(i) The loan is an extension of credit 

primarily for business, commercial, or 

agricultural purposes; 

(ii) The loan is in a subordinate 

position to a senior lien secured by the 

same residential improved real estate or 

mobile home for which the borrower 

has obtained flood insurance coverage 

that meets the requirements of 

§ 760.3(a); 

(iii) Flood insurance coverage for the 

residential improved real estate or 

mobile home is provided by a policy 

that: 

(A) Meets the requirements of 

§ 760.3(a); 

(B) Is provided by a condominium 

association, cooperative, homeowners 

association, or other applicable group; 

and 

(C) The premium for which is paid by 

the condominium association, 

cooperative, homeowners association, or 

other applicable group as a common 

expense; 

(iv) The loan is a home equity line of 

credit; 

(v) The loan is a nonperforming loan 

that is 90 or more days past due; or 

(vi) The loan has a term of not longer 

than 12 months. 

(3) Escrow account. The credit union, 

or a servicer acting on its behalf, shall 

deposit the flood insurance premiums 

and fees 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 Administrator of 

FEMA or other provider of flood 

insurance that premiums are due, the 

credit union, or a servicer acting on its 

behalf, shall pay the amount owed to 

the insurance provider from the escrow 

account by the date when such 

premiums are due. 

(b) Notice. For any loan for which a 

credit union is required to escrow under 

paragraph (a) of this section or 

paragraph (c)(2) of this section, the 

credit union, or a servicer acting on its 

behalf, shall mail or deliver a written 

notice with the notice provided under 

§ 760.9 informing the borrower that the 

credit union is required to escrow all 

premiums and fees for required flood 

insurance, using language that is 

substantially similar to model clauses 

on the escrow requirement in appendix 

A. 

(c) Small lender exception—(1) 

Qualification. Except as may be 

required under applicable State law, 

paragraphs (a), (b), and (d) of this 

section do not apply to a credit union: 

(i) That has total assets of less than $1 

billion as of December 31 of either of the 

two prior calendar years; and 

(ii) On or before July 6, 2012: 

(A) 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 

any loan secured by residential 

improved real estate or a mobile home; 

and 

(B) 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 any loans secured by 

residential improved real estate or a 

mobile home. 

(2) Change in status. If a credit union 

previously qualified for the exception in 

paragraph (c)(1) of this section, but no 

longer qualifies for the exception 

because it had assets of $1 billion or 

more for two consecutive calendar year 

ends, the credit union must escrow 

premiums and fees for flood insurance 

pursuant to paragraph (a) for any 

designated loan made, increased, 

extended, or renewed on or after July 1 

of the succeeding calendar year. 

(d) Option to escrow—(1) In general. 

Except as provided in paragraph (a)(2) 

or (c) of this section, a credit union, or 

a servicer acting on its behalf, shall offer 

and make available to the borrower the 

option to escrow all premiums and fees 

for any flood insurance required under 

§ 760.3 for any loan secured by 

residential improved real estate or a 

mobile home that is outstanding on 

January 1, 2016, or July 1 of the calendar 

year succeeding the calendar year the 

credit union has a change in status 

pursuant to paragraph (c)(2) of this 

section until the credit union is required 

to escrow pursuant to paragraph (a) of 

this section. 

(2) Notice. For any loan subject to 

paragraph (d) of this section, the credit 

union, or a servicer acting on its behalf, 

shall mail or deliver to the borrower no 

later than March 31, 2016, or September 

30 of the calendar year succeeding the 

calendar year the credit union has a 

change in status pursuant to paragraph 

(c)(2) of this section, a notice in writing, 

or if the borrower agrees, electronically, 


tkelley on DSK3SPTVN1PROD with PROPOSALS
64538 Federal Register / Vol. 79, No. 210 / Thursday, October 30, 2014 / Proposed Rules 

informing the borrower of the option to 

escrow all premiums and fees for any 

required flood insurance and the 

method(s) by which the borrower may 

request the escrow, using language 

similar to the model clauses in 

appendix B. 

(3) Timing. The credit union or 

servicer must begin escrowing 

premiums and fees for flood insurance 

as soon as reasonably practicable after 

the credit union or servicer receives the 

borrower’s request to escrow. 

■ 30. Revise § 760.6 to read as follows: 

§ 760.6 Required use of standard flood 

hazard determination form. 

(a) Use of form. Except for properties 

or structures that are exempt under 

§ 760.4, a credit union shall use the 

standard flood hazard determination 

form developed by the Administrator of 

FEMA 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. A credit union may obtain the 

standard flood hazard determination 

form from FEMA’s Web site at 

www.fema.gov. 

(b) Retention of form. A credit union 

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 credit 

union owns the loan. 

■ 31. Revise Appendix A to part 760 to 

read as follows: 

Appendix A to Part 760—Sample Form 

of Notice of Special Flood Hazards and 

Availability of Federal Disaster Relief 

Assistance 

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 

Administrator 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: 

lll. This area has 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 Administrator 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. 

• 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 building or mobile home and 

any personal property that secures your loan 

and not the land itself. 

• 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. 

Availability of Private Flood Insurance 

Coverage 

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 that provides the same 

level of coverage as a standard flood 

insurance policy under the NFIP may be 

available from private insurers that do not 

participate in the NFIP. You should compare 

the flood insurance coverage, deductibles, 

exclusions, conditions, and premiums 

associated with flood insurance policies 

issued on behalf of the NFIP and policies 

issued on behalf of private insurance 

companies and ask an insurance agent as to 

the availability, cost, and comparisons of 

flood insurance coverage. 

[Escrow Requirement for Residential Loans 

Federal law requires a lender or its servicer 

to escrow all premiums and fees for flood 

insurance that covers any residential 

building or mobile home securing a loan that 

is located in an area with special flood 

hazards. These premiums and fees must be 

paid to the lender or its servicer with the 

same frequency as your loan payments for 

the duration of your loan and will be 

deposited in an escrow account on your 

behalf to be paid to the flood insurance 

provider. Upon receipt of a notice from the 

flood insurance provider that the premiums 

are due, the premiums shall be paid from the 

escrow account to the insurance provider. ] 

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. 

■ 32. Add Appendix B to part 760 to 

read as follows: 

Appendix B to Part 760—Sample 

Clause for Option To Escrow for 

Outstanding Loans 

Escrow Option Clause 

You have the option to escrow all 

premiums and fees for flood insurance that 

covers any residential building or mobile 

home securing a loan that is located in an 

area with special flood hazards. If you choose 

this option, your payments will be deposited 

in an escrow account to be paid to the flood 

insurance provider. The escrow amount for 

flood insurance will be added to your 

existing periodic mortgage payment. The 

payments you make into the escrow account 

will accumulate over time and the funds will 

be used to pay your flood insurance policy 

upon receipt of a notice from the flood 

insurance provider that the flood insurance 

premium is due. To choose this option, 

follow the instructions below. If you have 

any questions about the option, contact 

[Insert Name of Lender or Servicer] at [Insert 

Contact Information]. 

[Instructions for Selecting to Escrow] 

Dated: October 20, 2014. 

Thomas J. Curry, 

Comptroller of the Currency. 

By order of the Board of Governors of the 

Federal Reserve System, October 23, 2014. 

Robert deV. Frierson, 

Secretary of the Board. 

Dated at Washington, DC, this 21st day of 

October, 2014. 

By order of the Board of Directors of the 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

Dated at Alexandria, VA, this 23rd day of 

October, 2014. 

By order of the Board of the Farm Credit 

Administration. 

Dale L. Aultman, 

Secretary. 

Dated at McLean, VA, this 22nd day of 

October, 2014. 

By order of the Board of the National 

Credit Union Administration. 

Gerard Poliquin, 

Secretary of the Board. 

[FR Doc. 2014–25722 Filed 10–29–14; 8:45 am] 

BILLING CODE 4810–33–P; 6210–01–P; 7535–01–P; 

6714–01–P; 6705–01–P 


tkelley on DSK3SPTVN1PROD with PROPOSALS