‘‘(4) GOVERNMENT-SPONSORED
ENTERPRISES
FOR HOUSING.—The Federal National Mortgage As-
sociation and the Federal Home Loan Mortgage
Corporation shall implement procedures reasonably
designed to ensure that any loan that is—
‘‘(A) secured by improved real estate or a
mobile home located in an area that has been
identified at the time of the origination of the
loan by the Director as an area of special flood
hazards and in which flood insurance is avail-
able under the National Flood Insurance Act of
1968, and
‘‘(B) purchased by either such entity,
is covered for the term of the loan by flood insur-
ance in the amount provided in paragraph (1).
‘‘(5) CONTESTED DETERMINATIONS.—If a bor-
rower under a loan disputes or challenges the deter-
mination of the lender that the improved real estate
or mobile home securing the loan is located in an
area of special flood hazards, the lender shall review
and consider any relevant information, as deter-
mined by the Director, submitted to the lender by
the borrower.
‘‘(6) APPLICABILITY.—Paragraphs (2) through
(4) shall apply only with respect to any loan made,
increased, extended, or renewed after the expiration
of the 1-year period beginning on the date of the en-
actment of the Flood Insurance Risk Management
Act of 1994.’’.
SEC. 103. ESCROW OF FLOOD INSURANCE PAYMENTS.
Section 102 of the Flood Disaster Protection Act of
1973 (42 U.S.C. 4012a) is amended by adding at the end
the following new subsection:
‘‘(d) ESCROW OF FLOOD INSURANCE PAYMENTS.—
‘‘(1) PRIVATE LENDERS.—For loans secured by
residential real estate, each Federal entity for lend-
ing regulation (with respect to any loans of regu-
lated lending institutions) and the Secretary of
Housing and Urban Development (with respect to
any loans of other lending institutions), after con-
sultation and coordination with the Financial Insti-
tutions Examination Council, shall by regulation re-
quire that, if a lender or other servicer of the loan
requires the escrowing of taxes, insurance premiums,
fees, or any other charges for a loan secured by resi-
dential real estate or a mobile home, then all pre-
miums and fees for flood insurance under the Na-
tional Flood Insurance Act of 1968 for the residen-
tial real estate or mobile home shall be paid to the
lender or servicer of the loan. Premiums and fees
paid to the lender or servicer shall be paid in a man-
ner sufficient to make payments as due for the dura-
tion of the loan. Upon receipt of the premiums, the
lender or servicer of the loan shall deposit the pre-
miums in an escrow account on behalf of the bor-
rower. Upon receipt of a notice from the Director or
the provider of the insurance that insurance pre-
miums are due, the lender or servicer shall pay from
the escrow account to the provider of the insurance
the amount of insurance premiums owed.
‘‘(2) FEDERAL AGENCY LENDERS.—The appro-
priate head of each Federal agency lender shall by
regulation require and provide for escrow and pay-
ment of any flood insurance premiums and fees re-
lating to residential property securing loans made by
the Federal agency lender under the circumstances
and in the manner provided under paragraph (1).
Any regulations issued under this paragraph shall be
consistent with and substantially identical to the
regulations issued under paragraph (1).
‘‘(3) APPLICABILITY
OF
RESPA.—Escrow ac-
counts established pursuant to this subsection shall
be subject to the provisions of section 10 of the Real
Estate Settlement Procedures Act of 1974.
‘‘(4) APPLICABILITY.—This subsection shall
apply only with respect to any loan made, increased,
extended, or renewed after the expiration of the 1-
year period beginning on the date of the enactment
of the Flood Insurance Risk Management Act of
1994.’’.
SEC. 104. PLACEMENT OF FLOOD INSURANCE BY LENDERS.
(a) ACTIONS REQUIRED BY LENDER.—Section 102
of the Flood Disaster Protection Act of 1973 (42 U.S.C.
4012a), as amended by the preceding provisions of this
Act, is further amended by adding at the end the following
new subsection:
‘‘(e) PLACEMENT OF FLOOD INSURANCE BY LEND-
ER.—
‘‘(1) NOTIFICATION TO BORROWER OF LACK OF
COVERAGE.—If, at any time during the term of a
loan secured by improved real estate or by a mobile
home located in an area that has been identified by
the Director as an area having special flood hazards
and in which flood insurance is available under the
National Flood Insurance Act of 1968, the lender or
servicer for the loan determines that the building or
mobile home and any personal property securing the
loan is covered by flood insurance in an amount less
than the amount required for the property pursuant
to subsection (b), the lender or servicer shall notify
the borrower under the loan that the borrower
should obtain, at the borrower’s expense, an amount
of flood insurance for the property that is not less
than the amount under subsection (b)(1), for the
term of the loan.
‘‘(2) PURCHASE OF COVERAGE ON BEHALF OF
BORROWER.—If the borrower fails to purchase such
flood insurance within 60 days after such notifica-
tion, the lender or servicer for the loan shall pur-
chase the insurance on behalf of the borrower and
may charge the borrower for the cost of premiums
and fees incurred by the lender or servicer for the
loan in purchasing the insurance.
‘‘(3) REVIEW OF DETERMINATION REGARDING
REQUIRED PURCHASE.—
‘‘(A) IN GENERAL.—A borrower may re-
quest that the Director review a determination
that the improved real estate or mobile home
securing the loan is located in an area of special
flood hazards. Not later than 45 days after the
Director receives the request, the Director shall
review the determination and provide the bor-
rower with a letter stating whether or not the
property is in a special flood hazards area. The
determination of the Director shall be final.
‘‘(B) EFFECT OF DETERMINATION.—Any
person to whom a borrower provides a letter is-
sued by the Director pursuant to subparagraph
(A), stating that the property of the borrower
is not in an area of special flood hazards, shall
have no obligation under this title to require the
purchase of flood insurance on the property
during the 1-year period beginning upon the
date that such letter is provided.
‘‘(4) APPLICABILITY.—This subsection shall
apply to all loans outstanding on or after the date
of enactment of the Flood Insurance Risk Manage-
ment Act of 1994.’’.
SEC. 105. PENALTIES FOR FAILURE TO REQUIRE FLOOD IN-
SURANCE OR NOTIFY.
(a) AUTHORITY.—Section 102 of the Flood Disaster
Protection Act of 1973 (42 U.S.C. 4012a), as amended
by the preceding provisions of this Act, is further amended
by adding at the end the following new subsections:
‘‘(f) CIVIL MONETARY PENALTIES FOR FAILURE TO
REQUIRE FLOOD INSURANCE OR NOTIFY.—
‘‘(1) CIVIL
MONETARY
PENALTIES
AGAINST
LENDERS.—Any regulated or other lending institu-
tion that is found to have a pattern or practice of
committing violations under paragraph (2) shall be
assessed a civil penalty by the appropriate Federal
entity for lending regulation (with respect to regu-
lated lending institutions) or the Secretary of Hous-
ing and Urban Development (with respect to other
lending institutions) in the amount provided under
paragraph (5).
‘‘(2) LENDER VIOLATIONS.—The violations re-
ferred to in paragraph (1) shall be—
‘‘(A) making, increasing, extending, or re-
newing loans in violation of—
‘‘(i) the regulations issued pursuant to
subsection (b) of this section;
‘‘(ii) the escrow requirements under
subsection (d) of this section; or
‘‘(iii) the notice requirements under
section 1364 of the National Flood Insur-
ance Act of 1968; or
‘‘(B) failure to provide notice or purchase
flood insurance coverage in violation of sub-
section (e) of this section.
‘‘(3) CIVIL
MONETARY
PENALTIES
AGAINST
GSE’S.—If the Federal National Mortgage Associa-
tion or the Federal Home Loan Mortgage Corpora-
tion is found by the Director of the Office of Federal
Housing Enterprise Oversight of the Department of
Housing and Urban Development to have a pattern
or practice of purchasing loans in violation of the
procedures established pursuant to subsection (b)(4)
of this section, the Director of such Office shall as-
sess a civil penalty against such enterprise in the
amount provided under paragraph (5) of this sub-
section. For purposes of this subsection, the term
‘enterprise’ means the Federal National Mortgage
Association or the Federal Home Loan Mortgage
Corporation.
‘‘(4) NOTICE AND HEARING.—A penalty under
this subsection may be issued only after notice and
an opportunity for a hearing on the record.
‘‘(5) AMOUNT.—A civil monetary penalty under
this subsection may not exceed $350 for each viola-
tion under paragraph (2) or paragraph (3). The
total amount of penalties assessed under this sub-
section against any single regulated lending institu-
tion, other lending institution, or enterprise for any
calendar year may not exceed $100,000.
‘‘(6) LENDER
COMPLIANCE.—Notwithstanding
any State or local law, for purposes of this sub-
section, any lender that purchases flood insurance or
renews a contract for flood insurance on behalf of or
as an agent of a borrower of a loan for which flood
insurance is required shall be considered to have
complied with the regulations issued under sub-
section (b).
‘‘(7) EFFECT OF TRANSFER ON LIABILITY.—
Any sale or other transfer of a loan by a lender who
has committed a violation under paragraph (1), that
occurs subsequent to the violation, shall not affect
the liability of the transferring lender with respect to
any penalty under this subsection. A lender shall not
be liable for any violations relating to a loan com-
mitted by another lender who previously held the
loan.
‘‘(8) DEPOSIT OF PENALTIES.—Any penalties
collected under this subsection shall be paid into the
National Flood Insurance Fund established under
section 1310 of the National Flood Insurance Act of
1968.
‘‘(9) ADDITIONAL
PENALTIES.—Any penalty
under this subsection shall be in addition to any civil
remedy or criminal penalty otherwise available.
‘‘(10) STATUTE OF LIMITATIONS.—No penalty
may be imposed under this subsection after the expi-
ration of the 5-year period beginning on the date of
the occurrence of the violation for which the penalty
is authorized under this subsection.
‘‘(g) OTHER ACTIONS
TO REMEDY PATTERN
OF
NONCOMPLIANCE.—
‘‘(1) AUTHORITY OF FEDERAL ENTITIES FOR
LENDING REGULATION.—The head of the applicable
Federal entity for lending regulation may require a
regulated lending institution to take such remedial
actions as are necessary to ensure that the regulated
lending institution complies with the requirements of
the national flood insurance program if the Federal
agency for lending regulation makes a determination
under paragraph (3) regarding the regulated lending
institution.
‘‘(2) AUTHORITY OF SECRETARY OF HUD.—The
Secretary of Housing and Urban Development may
require an other lending institution to take such re-
medial actions as are necessary to ensure that the
other lending institution complies with the require-
ments of the national flood insurance program if
such Secretary makes a determination under para-
graph (3) regarding the other lending institution.
‘‘(3) DETERMINATION OF VIOLATIONS.—A de-
termination under this paragraph shall be a finding
that—
‘‘(A) the regulated lending institution or
other lending institution, as the case may be,
has engaged in a pattern and practice of non-
compliance in violation of the regulations issued
pursuant to subsection (b), (d), or (e) of this
section or the notice requirements under section
1364 of the National Flood Insurance Act of
1968; and
‘‘(B) the regulated lending institution or
other lending institution, as the case may be,
has not demonstrated measurable improvement
in compliance despite the assessment of civil
monetary penalties under subsection (f).’’.
(b) DEPOSIT OF PENALTIES.—Section 1310(b) of the
National Flood Insurance Act of 1968 is amended—
(1) in paragraph (5), by striking ‘‘and’’ at the
end;
(2) by redesignating paragraph (6) as para-
graph (9); and
(3) by inserting after paragraph (5) the follow-
ing new paragraph:
‘‘(6) any penalties collected under section
102(f) of the Flood Disaster Protection Act of
1973;’’.
SEC. 106. ONGOING COMPLIANCE WITH FLOOD INSURANCE
PURCHASE REQUIREMENTS.
Section 102 of the Flood Disaster Protection Act of
1973 (42 U.S.C. 4012a), as amended by the preceding
provisions of this Act, is further amended by adding at
the end the following new subsection:
‘‘(h) NOTIFICATION OF FLOOD HAZARDS TO LOAN
TRANSFEREE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graphs (2) through (5), before the sale or transfer
of any loan secured by improved real estate or a mo-
bile home, the seller or transferor of the loan shall
determine whether the property is in an area that
has been designated by the Director as an area hav-
ing special flood hazards. The seller or transferor
shall, before sale or transfer, notify the purchaser or
transferee and any servicer of the loan in writing re-
garding the results of the determination. A deter-
mination under this paragraph shall be evidenced
using the standard hazard determination form under
section 1365 of the National Flood Insurance Act of
1968.
‘‘(2) EXCEPTIONS.—For any loan secured by
improved real estate or a mobile home, a determina-
tion and notice under paragraph (1) shall not be re-