Mortgage Portfolio Protection Program

FEDERAL EMERGENCY MANAGEMENT AGENCY

Mortgage Portfolio Protection Program

AGENCY: Federal Insurance Administration, FEMA.

ACTION: Notice.

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SUMMARY: The Federal Insurance Administration (FIA), the Directorate

within the Federal Emergency Management Agency (FEMA) responsible for

the administration of the National Flood Insurance Program (NFIP), is

announcing changes to the Mortgage Portfolio Protection Program (MPPP)

and its response to comments and suggestions received regarding the

MPPP. Changes have also been made to the MPPP Guidelines (and

Appendices), where applicable, to comply with requirements mandated by

the National Flood Insurance Reform Act of 1994 which was enacted on

September 23, 1994.

EFFECTIVE DATE: October 1, 1994.

FOR FURTHER INFORMATION CONTACT: Tere Martin or Ed Connor, Federal

Emergency Management Agency, Federal Insurance Administration, 500 C

Street, SW., Washington, DC 20472. Mrs. Martin's telephone number is

(202) 646-3430; and Mr. Connor's telephone number is (202) 646-3429.

SUPPLEMENTARY INFORMATION: In 1991, the Federal Insurance

Administration (FIA) developed the Mortgage Portfolio Protection

Program (MPPP) as a mechanism to be used as a last resort and at the

option of a lending institution for securing flood insurance coverage

for properties which are part of the lending institution's mortgage

portfolio. The goals of the MPPP were and are, through the MPPP

notification process, to encourage property owners whose structures are

potentially susceptible to flood damage to purchase a conventional

National Flood Insurance Program (NFIP) flood insurance policy, or,

failing that, have the lending institution obtain an MPPP policy on the

structure.

After two years' experience with the MPPP, on March 24, 1993, the

FIA published a Notice in the Federal Register (58 FR 15874-15875)

requesting public comments on the MPPP as outlined in the Federal

Register of March 1, 1991 (56 FR 8882-8891).

Four questions were included in the 1993 Notice which were to be

the subject of any responses.

A total of eight responses were received: two from different

corporate parts of an insurance company participating in FIA's Write

Your Own (WYO) Program that also participate in the MPPP, two from two

other WYO companies participating in the MPPP, one from a WYO company

not participating in the MPPP, two from vendor companies that service

WYO companies, and one from a local government.

Regarding the questions, comments received, and FIA's response,

they are as follows:

(1) Does the MPPP Work as Designed?

Five responses were received on this question. One WYO company

stated that there was interest in the Program and that it was working

for those lenders that used it but that there will be no serious

participation until the threat of some type of financial penalty

(against lenders that don't comply with the law) becomes reality

through passage of pending legislation. It should be pointed out that

the National Flood Insurance Reform Act of 1994 (the Reform Act)

enacted September 23, 1994, contains provisions requiring increased

compliance with the flood insurance purchase requirement mandated by

the Flood Disaster Protection Act of 1973. The reform legislation

clarifies the flood insurance purchase requirement, gives lenders more

tools to comply, and applies financial penalties for noncompliance.

Another WYO company indicated that it believed that the Program as

designed will not be used a lot in view of the high rates it

contemplates. It believed, however, that the Program helped convince

lenders of the need for compliance, and helped them design a method to

review the portfolios and obtain the information needed to issue

conventionally underwritten flood policies. One WYO company that does

NOT participate in the MPPP stated that the Program apparently is not

working as it was intended because not many policies have been issued

through the Program; that company also commented that there was some

apparent misuse, such as a mortgagee using the Program at loan

origination, and commented that the Program has apparently not improved

compliance with the mandatory purchase provision. A WYO vendor stated

that, when utilized, the MPPP seemed to work well as a compliance tool

at the borrower's level and that the problem lies in persuading the

lending community to utilize the MPPP, the thought being that the cost

and coordination of conducting the portfolio audit and obtaining zone

determination services is a deterrent. The respondent from the local

government stated that such a program is worthwhile and one which would

save much post-purchase agony and confusion resulting from either the

lack of investigation or ignorance of the system. That respondent felt

that a Program like the MPPP would especially help the first time home

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buyers who, in all likelihood, would have no concept of flood insurance

requirements or even its existence.

The FIA believes that the MPPP is working as it was intended. The

MPPP was intended to be a tool to assist lenders who were interested in

bringing their portfolios into compliance with flood insurance

requirements. It was never the intent to have a large number of

policies sold under the MPPP but simply to provide the necessary

administrative vehicle for interested lenders to encourage borrowers to

purchase flood insurance when required and, when there was no positive

response from the borrower, to allow the lender to obtain the required

coverage to either bring its mortgage loan portfolio into compliance

with Federal requirements or to allow it to remain in compliance.

(2) What Improvements Should be Made to the Program?

Five responses were received on this question. One WYO company

suggested that the stated intended use of the MPPP be clarified to

state that it is intended to be used when the lender has reviewed one

or more loans in its portfolio and determined such loan or loans to be

on a building(s) located in a special flood hazard area (SFHA). That

company commented that the existing language appears to state that the

MPPP may only be used in conjunction with a mortgage portfolio review.

The company believes that such a clarification would make the entire

Program much more accessible to the lender. The FIA agrees and such a

change is included in this Notice. Although the existing language was

intended to limit the use of the MPPP to correcting flood insurance

deficiencies of mortgage loan portfolios, it was not intended to limit

such use to flood insurance needs derived from portfolio reviews only.

This same WYO company also suggested that the requirement that WYO

companies using the program maintain copies of the notification letters

required to be sent by the lender to the borrower, when the lender,

instead of the WYO company, actually assumes the responsibility of

notifying the borrower, be changed. It reasoned that such lenders often

will not provide copies of such letters to the WYO company. It

therefore suggested that, under such circumstances, the WYO company,

instead, be required to obtain a letter from an officer of the lending

institution using the MPPP stating that it is complying with the

mandatory letter notification requirements of the MPPP, and also to

obtain samples of the letter notifications such a lender uses in this

regard. The FIA believes that there is sufficient flexibility in the

language contained in the answer to Question #21 of Addendum #4,

National Flood Insurance Program Mortgage Portfolio Protection Program

(MPPP) Questions and Answers, to allow WYO companies to address such

circumstances, particularly because such circumstances were

contemplated and addressed in the answer that appears in the 1991

Notice to Question #20 of Addendum #4. This same WYO company also

suggested that coverage be provided against losses that might occur on

loans during the 45 day letter cycle and to deduct the premium from the

loss payment. Similarly, a WYO vendor suggested that the time frame of

the letter notification cycle correspond to the 30 day protection

period for the mortgagee in the mortgage clause to prevent any lapse of

coverage. This vendor also suggested that the program allow for the

acceleration of the issuance of the MPPP application prior to the end

of the notification cycle so as to avoid any lapse of coverage for the

lender. The FIA does not agree with the first three of these four

suggestions. The FIA believes that the borrower must be given

sufficient time to respond to the lender's notice. Coverage can then

only begin following receipt of premium and after the appropriate

waiting period. The MPPP was designed to be used by a lender when it

discovers that flood insurance is missing from a loan on which it is

required. It was not designed to be used to bring about flood coverage

on a loan which currently has coverage but the lender believes the

borrower may not renew. The existing mortgage clause and renewal

provisions of the NFIP are sufficient to allow a lender that monitors

the renewal of existing policies on loans in its portfolio to renew

that policy on behalf of the mortgagor within a limited period of time

after the policy expires to avoid any lapse of coverage to protect the

interests of the lender. Also, there is no need for an MPPP, nor can it

be used when there is an existing policy and the underwriting

information is therefore available to write (or renew) that policy.

Regarding the last of these suggestions, a WYO company may prepare an

MPPP application in advance of the completion of the notification cycle

so that the coverage is effective upon the completion of the cycle. Of

course the WYO company must receive payment for that coverage far

enough in advance of that date to comply with the waiting period

requirement. Under the NFIP's waiting period rules, the payment must be

received at least 30 days in advance of the completion of the

notification cycle to comply with the new waiting period requirement

established by the Reform Act. However, under the provisions of

paragraph (e)(2) in section 524 of the Reform Act, the borrower should

not be billed in his escrow account or otherwise for the premium until

45 days after receiving notification that flood insurance is required.

This means that, initially, the premium must come from a source other

than the borrower. Another WYO company suggested that FIA obtain the

assistance of the different Federal entities who require this insurance

in performing regular audits on compliance and notifying lenders who

fail to comply of their failure to comply and the requirement of flood

insurance on these properties. A second WYO vendor suggested that

strict enforcement measures should be incorporated into regulations and

a way be provided of verifying that insurance has been placed and

provide stiff penalties if it has not. The FIA works directly with both

the Federal financial institution regulatory and non-regulatory

agencies on an ongoing basis to bring about the compliance intended by

the Flood Disaster Protection Act of 1973. Great progress has been made

in the past several years regarding the increased focus on flood

insurance compliance in compliance reviews by these agencies. The

Reform Act contains provisions to strengthen the mandatory flood

insurance purchase requirements and FIA is now working with the federal

entities for lending regulation in implementing the various mandatory

provisions of the Reform Act. A WYO vendor suggested that if the goal

(of the MPPP) is to sell policies as opposed to forcing the purchase of

Standard Flood Insurance Policies, the MPPP rates are prohibitive, and

should be reduced. As previously stated, the principal goal of the MPPP

is to provide a voluntary, administrative tool to the mortgage lending

and servicing industries that will assist them with their efforts to

comply with mandatory flood insurance requirements. Its use is intended

to allow flood insurance coverage to be obtained on any loan

discovered, following loan origination, to be in need of such coverage

when the borrower, having been notified of the need of and requirement

for such coverage, refuses to obtain the coverage. The sale of

additional policies, either conventionally underwritten or MPPP rated,

although not the primary goal of the MPPP, is a logical secondary goal

that will result from the use of the MPPP by the lending and servicing

industries. The reason the rates are high

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is the lack of underwriting information available on that property due

to the non-responsiveness of the borrower. Without such data the FIA

must assume that the flood risk to which that property is exposed is

high and charge rates that reflect such high risk. A WYO vendor

suggested that WYO companies be given more leeway in customizing the

letter verbiage. The FIA believes that such leeway already exists. The

beginning of the Initial Portfolio Review Letter Notification Process

portion of Addendum #1 of the MPPP Guidelines and Requirements states

that ``The lender/servicer [or their authorized representative] may add

their own messages, make minor editorial modifications to the messages

to conform to the style and practice of the WYO company or lender and

structure the letter to their liking, but they may not alter the

meaning or intent of the messages listed here for any of the letters.''

A WYO vendor suggested that the MPPP policy renewal process be

simplified. It was suggested that the three letter renewal cycle be

replaced with a single letter indicating that coverage can be obtained

at standard rates. The issue of modifying the MPPP renewal process has

also been raised by others outside of this process. The FIA agrees that

some simplification to this process would be in the best interest of

the MPPP without compromising the safeguards designed to protect the

borrower. The FIA believes, however, that such simplification should be

limited to reducing the number of renewal letters required to two

instead of the currently required three or suggested one. This change

is reflected in this Notice. A WYO vendor suggested that lenders be

allowed to sign a generic vendor MPPP cancellation request form instead

of the borrower (insured), since they must sign the application for the

issuance of an MPPP policy. FIA agrees that a change in this

requirement is needed, since it is reasonable to assume that the

borrower will be as unlikely to respond to the lender's request for the

borrower's signature on a cancellation request as the borrower was on

the request to purchase the conventionally underwritten policy. This

change is reflected in this Notice.

(3) Should the MPPP Become a Permanent Part of the National Flood

Insurance Program?

Five comments were received on this question. Two WYO companies,

one WYO vendor, and a local government believed that the MPPP should be

made a permanent part of the NFIP. One WYO company that does not

participate in the MPPP believes that the MPPP should be discontinued

until there is more stringent enforcement of the mandatory purchase

provisions of the NFIP, due to the lack of apparent use of the MPPP.

The FIA believes that there is a continuing need for the MPPP

capability to be available to the mortgage lending and servicing

industries and will therefore make the MPPP available on a permanent

basis as part of the NFIP. There is also little additional cost

incurred in continuing the MPPP since it is already developed.

(4) What Data and Indicators are Available for Determining How Many

Conventionally Underwritten Flood Insurance Policies Have Been Written

as a Result of the MPPP Pilot?

Three comments were received on this question. These comments

indicated that most of the policies written as a result of the use of

the MPPP have been written initially either as a conventionally

underwritten policy or were cancelled and converted to a conventionally

underwritten policy shortly after being written as an MPPP policy. Most

felt that there was no way to measure this, however. One WYO company

vendor indicated that, utilizing property address tracking mechanisms,

a system could be developed to provide such data. The FIA believes that

any benefits that might be realized from undertaking the effort to

explore the feasibility of developing such a capability would not be

worth the time and expense to the NFIP, in light of its limited

resources, and higher priorities for those resources.

WYO companies wishing to participate in the MPPP must sign an

agreement to adhere to the MPPP Guidelines and Requirements for each

new Arrangement year. After we have processed all Arrangements for each

year, we will publish after each October 1, in the Federal Register, an

updated list with the address and name of the contact person for each

WYO company that has signed up for that Arrangement year.

The revised Mortgage Portfolio Protection Program Write Your Own

Company Guidelines and Requirements, as referenced in this document, is

reproduced in its entirety as Appendix A to this notice.

Dated: August 17, 1995.

Elaine A. McReynolds,

Administrator, Federal Insurance Administration.

Appendix A--Federal Emergency Management Agency, Federal Insurance

Administration, National Flood Insurance Program; Mortgage Portfolio

Protection Program, Write Your Own Company Guidelines and Requirements

Background

The Mortgage Portfolio Protection Program (MPPP) was introduced on

January 1, 1991, as an additional tool, provided by the Federal

Insurance Administration (FIA), to assist the mortgage lending and

servicing industries, in response to their requests of the past few

years, in bringing their mortgage portfolios into compliance with the

flood insurance requirements of the Flood Disaster Protection Act of

1973.

The MPPP is not intended to act as a substitute for the need for

mortgagees to review all mortgage loan applications at the time of loan

origination and comply with flood insurance requirements as

appropriate.

It is expected that the proper implementation of the various

requirements of this MPPP will result in mortgagors, following their

notification of the need for flood insurance, to either show evidence

of such a policy, or to contact their local insurance agent or

appropriate Write Your Own (WYO) company to purchase the necessary

coverage. It is also intended that flood insurance policies be written

under the MPPP only as a last resort, and only on mortgages whose

mortgagors have failed to respond to the various notifications required

by this MPPP.

The following represents the criteria and requirements that must be

followed by all parties engaged in the sale of flood insurance under

the National Flood Insurance Program's Mortgage Portfolio Protection

Program:

Requirements for Participating in the MPPP

1. General

a. All mortgagors notified, in conjunction with this Program, of

their need to purchase flood insurance must be encouraged to obtain a

Standard Flood Insurance Policy (SFIP) from their local agent.

b. When a mortgagee or a mortgage servicing company discovers, at

any time following loan origination, that one or more of the loans in

its portfolio is determined to be located in a Special Flood Hazard

Area (SFHA), and that

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there is no evidence of flood insurance on such property (ies), then

the MPPP may be used by such lender/servicer to obtain (force place)

the required flood insurance coverage. The MPPP process can be

accomplished with limited underwriting information and with special

flat flood insurance rates.

c. In the event of a loss, the policy will have to be reformed if

the wrong rate has been applied for the zone in which the property is

located. Also, the amount of coverage may have to be changed if the

building occupancy does not support that amount.

d. It will be the WYO company's responsibility to notify the

mortgagor of all coverage limitations at the inception of coverage and

to impose those limitations that are applicable at the time of loss

adjustment.

2. WYO Arrangement Article III--Fees

With the implementation of the MPPP, there is no change in the

method of WYO company allowance from that which is provided in the

Financial Assistance/Subsidy Arrangement for all flood insurance

written.

3. Use of WYO Company Fees for Lenders/Servicers or Others

a. No portion of the allowance that a WYO company retains under the

WYO Financial Assistance/Subsidy Arrangement for the MPPP may be used

to pay, reimburse or otherwise remunerate a lending institution,

mortgage servicing company, or other similar type of company that the

WYO company may work with to assist in its flood insurance compliance

efforts.

b. The only exception to this is a situation where the lender/

servicer may be actually due a commission on any flood insurance

policies written on any portion of the institution's portfolio because

it was written through a licensed property insurance agent on their

staff or through a licensed insurance agency owned by the institution

or servicing company.

4. Notification

a. WYO Company/Mortgagee--Any WYO company participating in the MPPP

must notify the lender or servicer, for which it is providing the MPPP

capability, of the requirements of the MPPP. The WYO company must

obtain signed evidence from each such lender or servicer indicating

their receipt of this information, and keep a copy in its files. An

example of such evidence of receipt follows as Addendum #5.

b. Mortgagee to Mortgagor--In order to participate in the MPPP, the

lender (or its authorized representative, which will typically be the

WYO company providing the coverage through the MPPP) must notify the

borrower of the following, at a minimum:

(1) The requirements of the Flood Disaster Protection Act of 1973,

(2) The flood zone location of the borrower's property,

(3) The requirement for flood insurance,

(4) The fact that the lender has no evidence of the borrower's

having flood insurance,

(5) The amount of coverage being required and its cost under the

MPPP, and

(6) The options of the borrower for obtaining conventionally

underwritten flood insurance coverage and the potential cost benefits

of doing so.

A more detailed discussion of the notification requirements is made

a part of this program document in both Section 15 and as Addendums 1

and 2.

5. Eligibility

a. Type of Use--The MPPP will be allowed only in conjunction with

mortgage portfolio reviews and the servicing of those portfolios by

lenders and mortgage servicing companies. The MPPP is not allowed to be

used in conjunction with any form of loan origination.

b. Type of Property--The standard NFIP rules apply, and all types

of property eligible for coverage under the NFIP will be eligible for

coverage under the MPPP.

6. Source of Offering

The force placement capability will be offered by the WYO companies

only and not by the NFIP Servicing Agent (National Con-Serv [NCSI]).

7. Dual Interest

The policy will be written covering the interest of both the

mortgagee and the mortgagor. The name of the mortgagor must be included

on the Application Form. It is not, however, necessary to include the

mortgagee as a named insured because the Mortgage Clause (Article 9.P

of the Dwelling Form and Article 8.L of the General Property Form)

affords building coverage to any mortgagee named as mortgagee on the

Flood Insurance Application. If contents coverage for the mortgagee is

desired, the mortgagee should be included as a named insured.

8. Term of Policy

NFIP policies written under the MPPP will be for a term of one year

only (subject to the renewal notification process).

9. Coverage Offered

Both building and contents coverage will be available under the

MPPP. The coverage limits available under the Regular Program will be

$250,000 for building coverage and $100,000 for contents. If the WYO

company wishes to provide higher limits that are available to other

occupancy types such as other residential or non-residential, it may do

so only if it can indicate that occupancy type as appropriate. If the

mortgaged property is in an Emergency Program Community, then the

coverage limits available will be $35,000 for building coverage and

$10,000 for contents. Again, if the higher limits are desired for other

types of property, then the building occupancy type must be provided at

the inception of the policy or when that information may become

available, but it must be prior to any loss.

10. Policy Form

The current SFIP Dwelling Form and General Property Form will be

used, depending upon the type of structure insured. In the absence of

building occupancy information, the Dwelling Form should be used.

11. Waiting Period

The NFIP rules for the waiting period and effective dates apply to

the MPPP.

12. Premium Payment

The current rules applicable to the NFIP will apply. The lender or

servicer (or Payor) has the option to follow its usual business

practices regarding premium payment, so long as the NFIP rules are

followed.

13. Underwriting--Application

a. The MPPP will require less underwriting data than is normally

required under the standard NFIP rules and regulations. The MPPP data

requirements for rating, processing and reporting are, at a minimum:

(1) Name and mailing address of insured (mortgagor--also see Dual

Interest),

(2) Address of insured (mortgaged) property,

(3) Community information (complete NFIP map panel number and date;

program type, Emergency or Regular) countywide maps,

(4) Occupancy type (so statutory coverage limits are not exceeded.

This data may be difficult to obtain. Also see Coverage Offered.),

(5) NFIP flood zone where property is located (lender must

determine, in order to determine if flood insurance requirements are

necessary and to use the MPPP),

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(6) Amount of coverage,

(7) Name and address of mortgagee,

(8) Mortgage loan number,

(9) Policy number.

b. No elevation certificates will be required as there will be no

elevation rating.

c. For more detailed information regarding reporting requirements,

see the WYO Transaction Record Reporting and Processing (TRRP) Plan.

14. Rates (per $100 of insurance)

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Zone Building Contents

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A Zone--All building/occupancy types................ $1.25 $1.25

V Zone--All building/occupancy types................ $3.00 $3.00

A99 Zone--All building/occupancy types.............. .35 .35

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15. Policy Declaration Page Notification Requirements

In addition to the routine information, such as amounts of

coverage, deductibles and premiums, that a WYO company may place on the

Policy declarations page issued to each insured under the NFIP, the

following messages are required:

a. This policy is being provided for you as it is required by

Federal law as has been mentioned in the previous notices sent to you

on this issue. Since your mortgage company has not received proof of

flood insurance coverage on your property in response to those notices,

we provide this policy at their request.

b. The rates charged for this policy may be considerably higher

than those that may be available to you if you contact your local

insurance agent (or the WYO company at ...).

c. The amounts of insurance coverage provided in this policy may

not be sufficient to protect your full equity in the property in the

event of a loss.

d. You may contact your local insurance agent (or WYO company at

...) to replace this policy with a conventionally underwritten Standard

Flood Insurance Policy, at any time, and typically at a significant

savings in premium.

The WYO company may add other messages to the declarations page and

make minor editorial modifications to the language of these messages if

it believes any are necessary to conform to the style or practices of

that WYO company, but any such additional messages or modifications may

not change the meaning or intent of the above messages.

Since the amount of underwriting data obtained at the time of

policy inception will typically be limited, the extent of any coverage

limitations (such as, when replacement coverage is not available or

coverage is limited because the building has a basement or is

considered an elevated building with an enclosure) will be difficult to

determine. It is, therefore, the responsibility of the WYO company to

notify the mortgagor/insured of all coverage limitations at the

inception of coverage and impose any that are applicable at the time of

the loss adjustment.

16. Policy Reformation--Policy Correction

Article 9.F.2. of the Dwelling Policy and Article 8.E.2. of the

General Property Policy will apply as appropriate.

Examples of circumstances under which reformation or correction

might be needed would be:

Policy Reformation--The wrong flat rate was applied for the zone in

which the property was actually located.

Policy Correction--The amount of coverage exceeds the amount

available under the NFIP for the type of building occupancy that

represents the building insured. In such cases, the amount of coverage

would have to be adjusted to the amount available and any appropriate

premium adjustments made.

17. Coverage Basis--Actual Cash Value or Replacement Cost

There are no changes from the standard practices of the NFIP for

these provisions. The coverage basis will depend on the type of

occupancy of the building covered and the amount of coverage carried.

18. Deductible

A $500 Deductible is applicable for policies written under the

MPPP.

19. Expense Constant and Federal Policy Fee

There is no change from the standard practice. The Expense Constant

and Federal Policy Fee in effect at the time the MPPP policy is written

must be used.

20. Renewability

The MPPP policy is a one-year policy. Any renewal of that policy

can occur only following the full notification process spelled out in

addendum #2 that must take place between the lender (or its authorized

representative) and the insured/mortgagor, when the insured/mortgagor

has failed to provide evidence of obtaining a substitute flood

insurance policy.

21. Cancellations

a. Existing Policy--When the mortgagor provides evidence of a flood

insurance policy, from any source, that is currently in effect and has

been in effect prior to the effective date of the MPPP policy, the MPPP

policy may be cancelled flat with a full refund of premium, provided

that the policy in effect is acceptable to the mortgagee. If the

existing policy is an NFIP policy (WYO or direct business), the NFIP

rules require that one of the NFIP policies must be cancelled. The full

premium, including the expense constant and Federal policy fee, will be

returned to the payor. The WYO servicing allowance is not earned by the

WYO company.

b. New Flood Insurance Policy--When the mortgagor/borrower

purchases a flood insurance policy, from any source, following

notification of the need for the policy, the MPPP policy may be

cancelled but on a pro-rata basis. Any premium refund may be calculated

with or without the pro rata share of the expense constant and Federal

policy fee, depending on the company's normal business practice.

c. Other--The NFIP Insurance Manual rules for Cancellation/

Nullification Notices are to be followed, when applicable.

d. Signature Requirement--The signature required on the

Cancellation/Nullification Request Form is that of an authorized

representative of the mortgage lender whose name appears on the NFIP

flood insurance application form that resulted in the MPPP policy being

purchased or the signature of an authorized representative of a

subsequent owner of that loan.

22. Endorsement

An MPPP policy may not be endorsed to convert it directly to a

conventionally underwritten SFIP. Rather, a new policy application,

with a new policy number, must be completed according to the

underwriting requirements of the SFIP, as contained in the NFIP

Insurance Manual. The MPPP policy may be endorsed to assign it under

rules of the NFIP. It may also be endorsed for other reasons such as

increasing coverage.

23. Assignment to a Third Party

Current NFIP rules remain unchanged; therefore, an MPPP policy may

be assigned to another mortgagor or mortgagee. Any such assignment must

be through an endorsement, however.

24. Article XIII--Restrictions Other Flood Insurance

ARTICLE XIII of the Arrangement is also applicable to the MPPP and,

as

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such, does not allow a company to sell other flood insurance that may

be in competition with NFIP coverage. This restriction, however,

applies solely to policies providing flood insurance. It also does not

apply to insurance policies provided by a WYO company in which flood is

only one of several perils provided, or when the flood insurance

coverage amounts are in excess of the statutory limits provided under

the NFIP or when the coverage itself is of such a nature that it is

unavailable under the NFIP, such as blanket portfolio coverage.

Mortgage Portfolio Protection Program (MPPP) Guidelines and

Requirements--Addendum #1

Initial Portfolio Review Letter Notification Process

Once it has been determined by the lender/servicer or its

representative that flood insurance is needed on mortgages in the

lender's portfolio, and there is no evidence of flood insurance, and it

decides to use FIA's MPPP to assist in bringing the lender's portfolio

into compliance with flood insurance, then the following notification

process must be used.

This process will consist of three initial notification letters.

Each letter will contain certain messages, at a minimum, in the body of

the letter. The lender/servicer (or their authorized representative)

may add their own messages, make minor editorial modifications to the

messages to conform to the style and practice of the WYO company or

lender and structure the letter to their liking, but they may not alter

the meaning or intent of the messages listed here for any of the

letters.

Each letter will contain mandatory messages on one or more of the

following items: (1) The requirements of the Flood Disaster Protection

Act of 1973, (2) reminding the insured of the previous letters sent

that resulted in the current flood insurance policy, (3) the high

premiums on the current policy, (4) potentially inadequate coverage

limits, (5) coverage limitations, and (6) the options available to the

insured.

Initial Notification Letter to Mortgagor

The first letter is to be issued after the review of the lender's

portfolio reveals the need for the flood insurance coverage and the

absence of it. This letter must contain, at a minimum, the following

messages:

1. ``The Flood Disaster Protection Act of 1973, a Federal law,

requires that flood insurance be purchased and maintained on mortgage

loans for buildings (and their contents, if appropriate) for the life

of the loan for buildings located in a Special Flood Hazard Area shown

on a map published by FEMA. This applies to such loans from lending

institutions that are under the jurisdiction of a Federal regulatory

agency or instrumentality.''

2. ``We have determined that your property (building), on which we

hold the mortgage loan, is located in a SFHA and, therefore, you are

required by law to have a policy of flood insurance on that property.''

This letter must then include language advising the

mortgagor that in the event they wish to challenge the zone

determination, they should provide written factual evidence supporting

their challenge obtained from a community official, registered

engineer, architect or surveyor, stating the specifics of the location

of the building and the reason for their challenge. The letter must

include reference to the appeal process required in Section 524 of the

National Flood Insurance Reform Act of 1994, after regulations are

promulgated to establish the procedures and process for such review.

FEMA expects to issue the regulations by late October 1995.

The lender/servicer is reminded that since the Act places

the responsibility of determining the flood zone location of each

mortgaged property on the lender/servicer, he cannot discharge that

responsibility by simply obtaining some form of self certification from

the mortgagor. If the lender wishes to change its original

determination on the location of the mortgagor's property based upon

information submitted by the mortgagor, the lender/servicer must

convince itself, after reviewing that submission, that its original

determination was in error and make any such change based on that

review. He should not simply accept unsubstantiated allegations, from

whatever source, as to the building's flood zone location. The ultimate

responsibility for making such determinations under the statute rests

with the mortgagee, not the mortgagor.

3. ``There is no evidence in your mortgage loan file of your having

a flood insurance policy on your property. In case this information is

in error, please contact us at ____________________.''

4. ``If you do not have a flood insurance policy on this property,

you may wish to contact your local insurance agent (or WYO company at

____________________).''

5. ``If you do not respond within 45 days of this letter, either

providing evidence of a flood insurance policy in effect on this

property, or requesting that we provide you with such coverage, the

necessary flood insurance coverage will be provided for you. In that

event, since certain insurance underwriting information about your

property that is necessary to determine the appropriate flood insurance

rate for your policy would not have been obtained, due to your not

responding, the Federal government's Mortgage Portfolio Protection

Program's flood insurance rates will have to be used. These rates may

be considerably higher than those that could be obtained for you if you

respond to this notice.''

This letter, or an attachment, must also include such other

information as: (1) the name of the lender/servicer, (2) the mortgage

loan number, (3) the address of the property in question, (4) the flood

zone in which the property has been determined to be located, (5) the

amount of flood insurance being required, and (6) coverage limitations.

The Second Initial Notification Letter

This letter will be sent 30 days following the first initial

notification letter if no response has been received from the

mortgagor. It will contain, at a minimum, the following messages:

1. ``About a month ago you were notified that Federal law requires

all mortgages, such as yours, on properties determined to be located in

a Special Flood Hazard Area, to be covered by a policy of flood

insurance.''

2. ``That letter mentioned that if you did not respond positively

within 45 days from that letter, it would be necessary to obtain a

policy of flood insurance for you.''

3. ``This is to remind you that since you have not responded to the

earlier notice as yet, and if you do not respond within the next

fifteen days (or the actual expiration date), flood insurance, as

mentioned previously, will be obtained on your property, on your

behalf.''

4. ``In the event that you do not respond and the coverage must be

obtained as mentioned, the cost of that coverage may be significantly

higher than the premium that you could obtain if you were to contact

your local insurance agent (or WYO company at ...).''

Third and Final Initial Notification Letter

This letter must be sent to the mortgagor accompanying the flood

insurance policy declarations page.

This letter must be sent as soon after the end of the 45 day

notification period as possible, if no positive response has been

received to the two previous

[[Page 44887]]

notification letters. It must contain the following messages, at a

minimum:

1. ``This letter is to inform you that a policy of flood insurance

has been obtained on your behalf, to cover the mortgage on your

property, as required by the Flood Disaster Protection Act of 1973.''

2. ``You have been notified on two previous occasions explaining

the circumstances surrounding your need to have flood insurance

coverage and explaining your options, but to date no response has been

received.''

3. ``Attached is the flood insurance policy purchased on your

behalf and its accompanying declarations page that explains: the amount

of coverage purchased on your behalf, its cost, some limitations to

that coverage, and the options you may still wish to exercise to obtain

similar coverage, but typically at a significantly lower cost.''

4. ``If you purchase another flood insurance policy and notify us,

or contact us to request that we purchase a substitute policy under the

NFIP for you, we will cancel this policy and issue you a refund for the

unearned portion of the premium, if we deem that the other policy is

acceptable to satisfy the requirements.''

Mortgage Portfolio Protection Program (MPPP) Guidelines and

Requirements--Addendum #2

MPPP Renewal/Expiration Notification Process

When an MPPP policy has been purchased and the expiration date of

that policy is approaching the end of its one year term, and the

insured has not requested or produced a substitute policy of flood

insurance, the following notification process will be followed.

This process will consist of a total of three (or, at the lender's

option, two) renewal MPPP letters. Each letter will contain certain

required messages within the body of the letter. The lender/servicer

(or their authorized representative) may add their own messages, make

minor editorial modifications to the messages to conform to the style

and practice of the WYO company or lender and structure the letter to

their liking, but they may not alter the meaning or intent of the

messages listed here for any of the letters.

Each letter will contain mandatory messages on one or more of the

following items: (1) reminding the insured of the previous letters sent

that resulted in the current flood insurance policy that is about to

expire; (2) the requirements of the Flood Disaster Protection Act of

1973; (3) the high premiums on the current policy; (4) potentially

inadequate coverage limits; (5) coverage limitations, and (6) the

options available to the insured.

First MPPP Renewal/Expiration Notice (Letter)

The first MPPP renewal letter will be sent to the insured/mortgagor

at least 45 days prior to the renewal/expiration of the MPPP policy. It

will, at a minimum, contain the following messages:

1. ``This letter is to notify you that the flood insurance policy

that was required to be purchased on your property about a year ago is

about to expire.''

2. ``When you were originally notified of the need for this

coverage, it was explained that the Flood Disaster Protection Act of

1973, a Federal law, requires that flood insurance be purchased and

maintained for the life of the loan, on mortgage loans for buildings

(and their contents, if appropriate) located in a Special Flood Hazard

Area shown on a map produced by the Federal Emergency Management

Agency.''

3. ``The premium on the flood insurance policy currently in effect

and written on your behalf, and due to expire, may be considerably

higher than would be the case if you had responded to the suggestions

contained in the previous notices sent you, recommending that you

contact your local insurance agent (or the WYO company) to obtain a

conventionally underwritten Standard Flood Insurance Policy.''

4. ``As has been mentioned in previous notices, you may wish to

replace this policy with a conventionally underwritten Standard Flood

Insurance Policy now, and benefit from rates that potentially are

significantly lower than the rates being used with this policy.''

5. ``Failure to respond to this notice within 45 days (or by

[date]) will result in this policy being renewed, and at rates that are

most likely to be much higher than are otherwise available.''

Second MPPP Renewal/Expiration Notice (Letter)

The requirement for the Second MPPP Renewal/Expiration Notice

(Letter) is optional on the part of the participating WYO company. If

such a company decides not to issue the second of the three notices

(letters), then the Third MPPP Renewal/Expiration Notice (Letter)

required in the March 1, 1991, Federal Register will serve as the

second and final notice required. The language of such a letter may be

modified, if needed, to reflect the fact that only two such letters

were sent.

Third MPPP Renewal/Expiration Notice (Letter)

The third and final notice will be sent out as part of the renewed

MPPP policy. The notice containing the following required messages may

be sent as a cover letter or an attachment to the Policy declarations

page and policy itself, or the required messages may be included on the

declarations page that accompanies the renewal policy. It must contain

the following messages:

1. ``Since you have not responded to our previous notices that your

flood insurance policy, which is required by Federal law, was about to

expire, we have renewed that policy for the next year.''

2. ``As has been previously explained, the Flood Disaster

Protection Act of 1973, a Federal law, requires that flood insurance be

purchased and maintained on mortgage loans for buildings (and their

contents, if appropriate) for the life of the loan, for property

located in a Special Flood Hazard Area shown on a map produced by the

Federal Emergency Management Agency.''

3. ``The premium on this flood insurance policy just renewed may be

considerably higher than would be the case if you had contacted your

local insurance agent (or WYO company at ...), which you may still do,

to obtain a conventionally underwritten Standard Flood Insurance

Policy.''

4. ``If you purchase another flood insurance policy and notify us,

or contact us to request that we purchase a substitute policy under the

NFIP for you, we will cancel this policy and issue you a refund for the

unearned portion of the premium, if we deem that the other policy is

acceptable to satisfy the requirements.''

National Flood Insurance Program Mortgage Portfolio Protection Program

(MPPP)--Addendum #3

Portfolio Review Considerations for Lenders/Servicers Prior to

Participating in the MPPP--Questions and Answers

1. Q. What is the MPPP and who is this Q & A aimed at?

A. The MPPP is a tool for providing flood insurance coverage to

properties which are part of a lending institution's mortgage portfolio

when such properties have been determined to be in a Special Flood

Hazard Area and therefore subject to the flood insurance purchase

requirement mandated by Federal law. The MPPP is aimed at WYO

companies, lenders/servicers participating in the MPPP, Federal

regulatory agencies and other interested parties.

2. Q. What is the first step in using the MPPP?

[[Page 44888]]

A. The MPPP is only intended to be utilized when the lender (or its

representative) has reviewed its portfolio and determined which of the

loans are on buildings located in a Special Flood Hazard Area (SFHA),

and, therefore, in need of flood insurance.

3. Q. What source of information should the MPPP participant, or

their authorized representative, be using in reviewing a loan

portfolio, to determine flood zone location of the properties in

question?

A. The flood insurance maps published by the Federal Emergency

Management Agency (FEMA), augmented by other official documentation

available from local officials or other sources, as may be deemed

necessary.

The Flood Disaster Protection Act of 1973, which imposes the flood

insurance requirement, makes specific reference to ``areas identified

by the Secretary (since changed to Director [of FEMA]) as an area

having special flood hazards''. The National Flood Insurance Act of

1968, as amended, charged FEMA with the responsibility of identifying

areas which have special flood hazards. Therefore, the official source

of information that serves as the basis for identifying such areas is

the maps published by FEMA.

4. Q. What if a source of information other than the FEMA maps is

used as the basis for determining the flood zone location of

properties?

A. The lender may be risking erroneous determinations, thereby

potentially placing the lender in a position of a liability exposure,

bad customer relations and/or problems with its Federal regulatory

agency or worse.

5. Q. Does it mean that if the system used to make these flood zone

determinations is not based on the FEMA maps that it should not be

used?

A. Due to the potential for problems as mentioned above, the lender

must be careful as to the basis behind the system it uses to make these

flood zone determinations. Also, since the lender must keep evidence of

the determination in every mortgage file, if that evidence doesn't

reflect the map panel used to make the determination, the lender may

have difficulty proving to its Federal regulatory agency, or in court

if the need arose, that the lender is complying with the law.

6. Q. What flood zone determination information should the lenders

keep in each mortgagor's file to indicate evidence of compliance?

A. Pursuant to Section 528 of the National Flood Insurance Reform

Act of 1994, FEMA is developing a Standard Flood Hazard Determination

Form (SFHDF) for use by lenders when determining, in the case of a loan

secured by improved real estate or a mobile home, whether the building

or mobile home is located in a special flood hazard area. The SFHDF

contains a section for recording flood zone determination information.

FEMA expects to issue the regulation establishing the SFHDF by late

June 1995. All lenders subject to the Reform Act will have to place a

copy of the SFHDF in each mortgagor's file to indicate evidence of

compliance.

7. Q. What version of the flood map should be used in conjunction

with the MPPP portfolio review?

A. The FEMA map in effect at the time of the portfolio review is

the map that must be used. The provisions of the Flood Disaster

Protection Act of 1973 as amended by the Reform Act (1) require the

lender to notify the borrower that the borrower should obtain flood

insurance, at the borrower's expense, if, at any time during the term

of the loan, the lender determines the improved real estate or mobile

home securing the loan is located in an area identified by FEMA as an

area having special flood hazards and in which flood insurance is

available but the property is not covered by flood insurance; and (2)

require the lender to purchase coverage on behalf of the borrower if

the borrower fails to purchase such flood insurance within 45 days

after notification by the lender.

8. Q. Doesn't the fact that the MPPP was designed to assist

lenders/servicers in bringing their portfolios into compliance with

flood insurance requirements mean that they will be dealing with loans

that can range from being very new to being many years old, and that

the maps that may have been in effect at the time of the loan

origination might not be readily available now?

A. Yes. This does not present a problem since, as mentioned in no.

7 above, compliance with the requirements of the Reform Act requires

use of the map in effect at the time of the review rather than the map

in effect at the time of the loan origination.

9. Q. Once the lender/servicer's portfolio has been reviewed and

determinations have been made as to which properties need flood

insurance, is there anything critical that the lender (or its

representative) should consider before beginning the process of mailing

the initial notices to their mortgagors?

A. Yes, how the mailing will be handled and the results of that

mailing. There is a strong likelihood that, once the mailings begin, a

certain percentage of the mortgagor recipients of those notices will

challenge the notices. Some of those challenges will be directed, in

one way or another, to the lender/servicer, regardless of any

instructions in the notices. The lender should therefore determine at

the outset whether it wants the notices to be sent all at once, or

metered out so many at a time. The larger the volume, the more

consideration to the metering approach that should be given.

Also, the lender needs to consider how it wants the review of its

portfolio carried out. If the results of the review are provided to the

lender all at the same time and the lender decides to send the notices

to the mortgagors so many at a time, it may be exposing itself to

additional liability. This could occur since the lender was aware of

all the mortgages in its portfolio that needed flood insurance, but

acted on only a certain number at a time. The lender, therefore, needs

to consider having the portfolio review carried out in such a fashion

that the results of each portion of that review are made available to

the lender as soon as they are available from the party conducting the

review, and are acted upon as soon as possible thereafter.

National Flood Insurance Program Mortgage Portfolio Protection Program

(MPPP) Questions and Answers--Addendum #4

1. Q. What is the MPPP and what is it designed to do?

A. The MPPP is a tool made available to the lending and mortgage

servicing industries that provides them with the capability to write

flood insurance policies quicker and easier that will assist them with

their efforts to bring their portfolios into compliance with flood

insurance requirements.

2. Q. Is this available to lenders for all their loans?

A. No! It may only be used in conjunction with loan portfolios. It

may not be used as a compliance vehicle for loan originations.

3. Q. Is the MPPP mandatory for lenders/servicers?

A. No! It is voluntary, but lenders/servicers that believe their

loan portfolios may not be in compliance with flood insurance

requirements are strongly encouraged to use it if they believe it could

be helpful.

4. Q. What are the benefits of the MPPP?

A. The specific benefits will vary with the category of participant

as follows:

For lenders/servicers.

Portfolios can be brought into compliance satisfying the

law and regulators.

[[Page 44889]]

Reduce, limit or eliminate certain potential liability.

Protect equity (lender/servicer, borrower).

For WYO companies.

Increased policy sales/fees.

Increased lender/servicer client base.

For insurance agents.

Increased policy sales.

5. Q. Is it possible for WYO companies and insurance agents to

benefit from the MPPP even if they don't directly participate in it?

A. Yes! Property insurance (fire and auto) is already being sold by

insurance agents to many of these same borrowers because lenders

require it in conjunction with home mortgages and auto loans. As a

result, many agents already have established business relationships

with their local lenders. These agents could alert these lenders to the

availability of the MPPP and advise them as to how to proceed even if

the agent was not going to directly participate.

At the same time the agent could offer to assist the lender with

determining the flood zone location of the addresses of all new

mortgage loan applications for that lender and ask, in return, for the

opportunity to write all the flood insurance policies on those

properties that are determined to need it. The notices that will be

sent to the borrowers will generate inquiries and sales.

6. Q. How will flood policies actually be sold under the MPPP?

A. Policies will be written through the insurance companies

participating in FIA's Write Your Own (WYO) Program.

7. Q. Will all the insurance companies participating in the WYO

Program be writing policies under the MPPP?

A. Any WYO company may write policies under the MPPP, but only

those that traditionally have dealt with the lending industry are

expected to participate in this Program. Any such company that does

wish to participate must agree in writing to comply with the

requirements of the MPPP.

8. Q. Will FIA maintain and publish a list of the WYO companies

that participate in the MPPP?

A. Yes! Such a list will be developed and both modified and

republished as needed.

9. Q. What is the first thing a lender/servicer should do if it

wishes to utilize the MPPP?

A. The lender must review its loan portfolio and determine which of

the properties are located in Special Flood Hazard Areas (SFHA).

10. Q. When a lender/servicer decides to utilize the MPPP, must

they use the MPPP to service their portfolio all at the same time?

A. No! Lenders/servicers should carefully analyze the pros and cons

of phasing in their portfolio compliance effort. (See the Q & A that

FIA has developed on ``Portfolio Review Considerations'').

11. Q. Is use of the MPPP limited to only those properties located

in SFHAs?

A. Yes!

12. Q. What will happen if a policy is written through the MPPP,

but the property is not located in an SFHA?

A. If no loss has occurred at the time the situation is discovered

but the mortgagee wants the borrower to have flood insurance even

though the property is not in an SFHA, the situation can be corrected

by cancelling the MPPP policy and rewriting the coverage under a

conventional Standard Flood Insurance Policy (SFIP) with a refund of

any premium overpayment. If such a situation is discovered after a

flood loss has occurred, the claim will be honored. However, the MPPP

policy would have to be cancelled and the coverage rewritten under a

conventional SFIP with a refund of any premium overpayment. The loss

should then be reported under the new policy number. Under both

scenarios, the effective date of the conventional SFIP would be the

same as that of the cancelled MPPP policy.

13. Q. What differences are there between a flood policy sold under

the traditional flood insurance program and one under the MPPP?

A. The actual policy and coverage are the same, but there are

differences primarily in the areas of:

Rates,

A letter notification process to the borrowers,

The underwriting information necessary.

14. Q. What are the rate differences?

A. The rates under the MPPP are, on the average, several times

those used under the traditional flood insurance program.

15. Q. Why are the MPPP rates so high?

A. Due to the fact that the borrower did not respond to the notices

sent, key information necessary to underwrite the risk is not

available. Therefore, it is necessary to assume that those properties

have a very high risk and the rates charged reflect that risk.

16. Q. Does the borrower have any option in avoiding the MPPP

policy with its higher cost?

A. Yes! They can simply contact their local insurance agent, obtain

a conventionally underwritten flood insurance policy and present it to

their lender/servicer.

17. Q. If a borrower pays off the mortgage loan, can the MPPP then

be cancelled?

A. Yes, but any refund due the borrower will be paid on a pro-rata

basis.

18. Q. If the borrower or lender/servicer sells or assigns the

mortgage to another borrower or lender/servicer, can the MPPP policy be

assigned?

A. Yes! The Standard Flood Insurance Policy language allows for the

assignment of all NFIP policies. Any such assignment of an NFIP policy

must be done by way of an endorsement.

19. Q. Must a WYO company participating in the MPPP maintain copies

of all its MPPP documents?

A. The companies are responsible for the data on each Application

Form, in keeping with its normal practices. Although some of the data

beyond that required does not have to be reported, the companies are

still responsible for it. The WYO companies may use their normal

business practices in determining which form they will use to retain

data, forms or other required information.

20. Q. Who initiates the letter notification process required by

the MPPP?

A. The letter notification process is one of the requirements of

the MPPP. The FIA requires any WYO company that wishes to participate

in the MPPP to agree to comply with all those requirements. However,

lenders/servicers differ on how their force placed hazard insurance

notices are sent to their borrowers. Some lenders insist on sending

such notices directly. Others let the insurance company, with whom the

force placed policies are written, send out the notices. Since the MPPP

is a part of the NFIP, then any policies written through the MPPP must

have been written in compliance with all of its requirements,

regardless of the entity that actually sends the notices.

21. Q. Must the lender or WYO company maintain copies of the

notification letters?

A. The WYO company is responsible for assuring that the letters are

sent regardless of whether they or the lender actually sends them. The

WYO company must maintain some form of evidence that the letters are

being sent. It will be the WYO company's decision as to the form the

evidence takes, such as paper copies, micro fiche, computer images or a

record of the mortgagor addresses to whom the letters were sent with an

indication as to the date when those mortgagors were notified.

22. Q. What does a WYO company do if all of the information FIA

requires on

[[Page 44890]]

the declarations (DEC) page won't fit on that page?

A. The company may wish to include some of that information on the

DEC page and some on an ``endorsement.'' In such a case, it should

indicate an endorsement number on the DEC page.

23. Q. Does a policy DEC page have to be issued each time an MPPP

policy is renewed?

A. Yes, and it must accompany the final renewal notification

letter.

24. Q. When an MPPP is renewed, can the same policy number that was

assigned to the original MPPP policy be used?

A. Yes!

25. Q. Will the rating credits that will be available in a

community participating in the Community Rating System (CRS) apply to a

policy written under the MPPP?

A. No!

26. Q. The MPPP requirements call for the full map panel number and

date to be obtained. What does the WYO company do with that information

since the NFIP Application Form in use today doesn't contain enough

space to even capture all this information?

A. The WYO companies have never been required to use NFIP forms in

the WYO program, but have been free to develop their own forms. They

are, however, responsible for all required data, some of which must be

reported and some of which isn't, but must be kept in the company

files. The data requirements for the MPPP follow the same conditions.

The full map panel number for that panel used to determine flood zone

location and rate the policy is the one that must be captured and

maintained. The majority of the maps FIA has published for many years

have the ten digit number, suffix and date for each panel. Some of the

maps still in use have only the six digit community number and date.

The six digit community number cannot be used when the ten digit number

exists.

27. Q. Is contents coverage under the MPPP optional?

A. Yes! The lender must decide whether or not it will require it as

part of the MPPP policy.

28. Q. What is meant by the term ``coverage limitations'' that is

mentioned in the MPPP materials?

A. Primarily Actual Cash Value coverage instead of Replacement Cost

coverage, when appropriate. It could also apply, however, to the

situation where only an amount to cover the loan balance is purchased

which may be insufficient to cover the full insurable value of the

property. The WYO company will have to determine what limitations may

apply depending on the decisions of the lender/servicer as to how it

wants to use the MPPP and the amount of underwriting information

obtained.

29. Q. The notification process contains standards for the letters

being mailed and the MPPP policy being written such as 45, 30, and 15

days. Must these standards be strictly adhered to?

A. There are a number of standards similar to this in the NFIP and

some limited flexibility has been built into the actual implementation

process through the underwriting review process that FIA uses with the

companies. FIA is preparing modifications of that review process to

incorporate the MPPP criteria and will attempt to incorporate such

flexibility into these changes.

30. Q. May WYO companies, under the requirements of the MPPP, use

any portion of the MPPP fee they retain, for any purpose other than as

a commission to an insurance agent or agency for their writing the

policy, such as for flood zone determinations or the tracking of loans?

A. No!

The National Flood Insurance Program's Mortgage Portfolio Protection

Program Implementation Package; Addendum #5

Receipt for Materials and Agreement to Adhere to Criteria and

Requirements

The Federal Insurance Administration (FIA) has published a package

of materials for implementing their Mortgage Portfolio Protection

Program (MPPP). This package contains the Criteria and Requirements

that the insurance companies participating in FIA's MPPP through FIA's

Write Your Own (WYO) program and any lending institutions and/or

mortgage servicing or similar companies must adhere to when

participating in the MPPP.

The Implementation Package contains the following:

A cover letter from the FIA Administrator to the WYO

companies and other users of the MPPP.

A Guide for WYO Companies, Lending Institutions, Mortgage

Servicers and Other Potential Users

Addendum #1--Initial Portfolio Review Letter Notification

Process

Addendum #2--Portfolio Review Renewal Letter Notification

Process

Addendum #3--Portfolio Considerations Q & A

Addendum #4--MPPP Q & A

Addendum #5--Receipt for Materials and Agreement to Adhere to

Criteria and Requirements (this document)

This ``Receipt and Agreement,'' together with the Package

referenced above, must be presented by any WYO company that offers the

MPPP to a lender/servicer; and the lender/servicer that agrees to

participate in the MPPP to assist in bringing its portfolio into

compliance with flood insurance requirements must sign this ``Receipt

and Agreement'' as evidence of having actually received the Package and

agreeing to comply with the criteria and requirements contained

therein.

This acknowledges that the package of implementation materials for

the Federal Insurance Administration's (FIA) Mortgage Portfolio

Protection Program (MPPP) has been received.

----------------------------------------------------------------------

(Name of WYO company representative providing the Package)

----------------------------------------------------------------------

(Name of the WYO company being represented)

----------------------------------------------------------------------

(Date of receipt)

----------------------------------------------------------------------

(Name of lender/mortgage representative receiving the Package)

----------------------------------------------------------------------

(Name of lender/mortgage servicer being represented)

----------------------------------------------------------------------

(Date of receipt)

Note: WYO companies are required to keep a copy of this Receipt

in their files for each lender/mortgage servicer to which they

provide services under the MPPP. Lenders/mortgage servicers may wish

to do the same.

[FR Doc. 95-21400 Filed 8-28-95; 8:45 am]

BILLING CODE 6718-03-P