Flood Insurance: Revised Interagency Questions and Answers

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 22

[Docket IDs OCC-2020-0033, OCC-2020-0008]

FEDERAL RESERVE SYSTEM

12 CFR Part 208

[Docket No. R-1742, OP-1720]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 339

RIN 3064-ZA16

FARM CREDIT ADMINISTRATION

12 CFR Part 614

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 760

RIN 3133-AF31, RIN 3133-AF14

Loans in Areas Having Special Flood Hazards; Interagency Questions and Answers

Regarding Flood Insurance

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AGENCY: Office of the Comptroller of the Currency (OCC); Board of Governors of the Federal

Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); Farm Credit

Administration (FCA); and National Credit Union Administration (NCUA).

ACTION: Guidance.

SUMMARY: The OCC, Board, FDIC, FCA, and NCUA (collectively, the Agencies) are

reorganizing, revising, and expanding the Interagency Questions and Answers Regarding Flood

Insurance. This revised guidance will assist lenders in meeting their responsibilities under

Federal flood insurance law and increase public understanding of the Agencies’ respective flood

insurance regulations. Significant topics addressed by the revisions include guidance related to

major amendments to the flood insurance laws with regard to the escrow of flood insurance

premiums, the detached structure exemption, force placement procedures, and the acceptance of

flood insurance policies issued by private insurers. With this issuance, the Agencies are

consolidating the Questions and Answers proposed by the Agencies in July 2020 and the

Questions and Answers proposed by the Agencies in March 2021 into one set of Interagency

Questions and Answers Regarding Flood Insurance.

DATES: The issuance date of this guidance is May 11, 2022.

FOR FURTHER INFORMATION CONTACT:

OCC: Rhonda L

ued by private insurers. With this issuance, the Agencies are

consolidating the Questions and Answers proposed by the Agencies in July 2020 and the

Questions and Answers proposed by the Agencies in March 2021 into one set of Interagency

Questions and Answers Regarding Flood Insurance.

DATES: The issuance date of this guidance is May 11, 2022.

FOR FURTHER INFORMATION CONTACT:

OCC: Rhonda L. Daniels, Compliance Specialist, Compliance Risk Policy Division, (202) 649-

5405; Amber Dapshi, Compliance Specialist, Compliance Risk Policy Division, (240) 646-4348;

Heidi M. Thomas, Special Counsel, Sadia Chaudhary, Counsel, Rima Kundnani, Counsel, or

Cyndy MacMahon, Attorney, Chief Counsel’s Office, (202) 649-5490.

Board: Vivian W. Wong, Senior Counsel, (202) 452-3667, Matthew Dukes, Counsel, (202) 973-

5096, or Keshia King, Lead Supervisory Policy Analyst, (202) 452-2496, Division of Consumer

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and Community Affairs; or Daniel Ericson, Senior Counsel, (202) 452-3359, Legal Division; for

users of Telecommunications Relay Service (TRS),Telecommunications Device for the Deaf

(TDD) only, contact 711 or (202) 263-4869.

FDIC: Navid Choudhury, Counsel, Policy Unit, Legal Division, (202) 898-6526; or Simin Ho,

Senior Policy Analyst, Division of Depositor and Consumer Protection, (202) 898-6907.

FCA: Ira D. Marshall, Senior Policy Analyst, Office of Regulatory Policy, (703) 883-4379, TTY

(703) 883-4056 or Jennifer Cohn, Assistant General Counsel, Office of General Counsel, (720)

213-0440.

NCUA: Thomas Zells, Senior Staff Attorney, Office of General Counsel, (703) 518-6540, or

Simon Hermann, Senior Credit Specialist, Office of Examination and Insurance, (703) 518-6360

(202) 898-6907.

FCA: Ira D. Marshall, Senior Policy Analyst, Office of Regulatory Policy, (703) 883-4379, TTY

(703) 883-4056 or Jennifer Cohn, Assistant General Counsel, Office of General Counsel, (720)

213-0440.

NCUA: Thomas Zells, Senior Staff Attorney, Office of General Counsel, (703) 518-6540, or

Simon Hermann, Senior Credit Specialist, Office of Examination and Insurance, (703) 518-6360.

SUPPLEMENTARY INFORMATION:

Background

The National Flood Insurance Act of 1968 created the National Flood Insurance Program

(NFIP), which is administered by the Federal Emergency Management Agency (FEMA).1 The

NFIP enables property owners in participating communities to purchase flood insurance if the

community has adopted floodplain management ordinances and minimum standards for new and

substantially damaged or improved construction. Thus, in participating communities, Federally-

backed flood insurance is available for property owners in flood risk areas.

Congress expanded the NFIP by enacting the Flood Disaster Protection Act of 1973

(FDPA).2 The FDPA made the purchase of flood insurance mandatory in connection with loans

made by Federally-regulated lending institutions when the loans are secured by improved real

estate or mobile homes located in a special flood hazard area (SFHA). The National Flood

1 Pub. L. 90–448, 82 Stat. 572 (1968).

2 Pub. L. 93–234, 87 Stat. 975 (1973).

DPA made the purchase of flood insurance mandatory in connection with loans

made by Federally-regulated lending institutions when the loans are secured by improved real

estate or mobile homes located in a special flood hazard area (SFHA). The National Flood

1 Pub. L. 90–448, 82 Stat. 572 (1968).

2 Pub. L. 93–234, 87 Stat. 975 (1973).

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Insurance Reform Act of 1994 (the Reform Act) (Title V of the Riegle Community Development

and Regulatory Improvement Act of 1994) comprehensively revised the Federal flood insurance

statutes.3 The Reform Act required the OCC, Board, FDIC, Office of Thrift Supervision (OTS),

and NCUA to revise their flood insurance regulations, and required the FCA to promulgate a

flood insurance regulation for the first time. The OCC, Board, FDIC, OTS, FCA, and NCUA4

fulfilled these requirements by issuing a joint final rule in the summer of 1996.5

In October 2013, the Agencies jointly issued proposed rules6 to implement the escrow,

force placement, and private flood insurance provisions of the Biggert-Waters Flood Insurance

Reform Act of 2012 (the Biggert-Waters Act).7 In March 2014, Congress enacted the

Homeowner Flood Insurance Affordability Act (HFIAA), which, among other things, amended

the Biggert-Waters Act’s requirements regarding the escrow of flood insurance premiums and

fees and created a new exemption from the mandatory flood insurance purchase requirement for

certain detached structures.8 The Agencies finalized the regulations to implement provisions in

the Biggert-Waters Act and HFIAA under the Agencies’ jurisdiction, except for the provisions in

the Biggert-Waters Act related to private flood insurance, with a final rule issued in July 2015

(2015 Final Rule).9 In February 2019, the Agencies finalized regulations to implement the

private flood insurance related provisions of the Biggert-Waters Act (2019 Final Rule).10

3 Pub. L

cies’ jurisdiction, except for the provisions in

the Biggert-Waters Act related to private flood insurance, with a final rule issued in July 2015

(2015 Final Rule).9 In February 2019, the Agencies finalized regulations to implement the

private flood insurance related provisions of the Biggert-Waters Act (2019 Final Rule).10

3 Pub. L. 103-325, 108 Stat. 2255 (1994).

4 Throughout this document “the Agencies” includes the OTS with respect to events that occurred prior to July 21,

2011, but does not include OTS with respect to events thereafter. Sections 311 and 312 of the Dodd-Frank Wall

Street Reform and Consumer Protection Act transferred OTS’s functions to other agencies on July 21, 2011. The

OTS’s supervisory functions relating to Federal savings associations were transferred to the OCC, while those

relating to State savings associations were transferred to the FDIC. See also 76 FR 39246 (July 6, 2011).

5 61 FR 45684 (Aug. 29, 1996).

6 78 FR 65107 (Oct. 30, 2013).

7 Pub. L. 112-141, 126 Stat. 916 (2012).

8 Pub. L. 113–89, 128 Stat. 1020 (2014).

9 80 FR 43215 (July 21, 2015). Subsequently, on November 7, 2016, the Agencies re-proposed the private flood

insurance provisions through a joint notice of proposed rulemaking (81 FR 78063).

10 84 FR 4953 (Feb. 20, 2019).

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Interagency Questions and Answers Regarding Flood Insurance

Since 1997, the Interagency Questions and Answers11 have provided the lending industry

and other interested parties with guidance addressing a wide spectrum of technical flood

insurance-related compliance issues. In 2009, the Agencies comprehensively revised and

reorganized the initial 1997 Interagency Questions and Answers (2009 Interagency Questions

and Answers)

s Regarding Flood Insurance

Since 1997, the Interagency Questions and Answers11 have provided the lending industry

and other interested parties with guidance addressing a wide spectrum of technical flood

insurance-related compliance issues. In 2009, the Agencies comprehensively revised and

reorganized the initial 1997 Interagency Questions and Answers (2009 Interagency Questions

and Answers). In 2011, the Agencies further finalized two additional Q&As that were proposed

in 2009, and re-proposed three Q&As that were never finalized.12

In light of the significant changes to flood insurance requirements pursuant to the

Biggert-Waters Act and HFIAA, as well as the Agencies’ regulations issued to implement these

laws, the Agencies proposed new and revised Interagency Questions and Answers in July 2020

(July 2020 Proposed Questions and Answers) that covered a broad range of topics related to

technical flood insurance-related issues, including the escrow of flood insurance premiums, the

detached structure exemption to the mandatory purchase of flood insurance requirement, and

force placement procedures.13 This proposal also reorganized the Interagency Questions and

Answers to provide a more logical flow of questions through the flood insurance process. The

Agencies also committed in the July 2020 Proposed Questions and Answers to separately issuing

for notice and comment additional proposed questions and answers relating to the 2019 Final

Rule implementing the private flood insurance provisions of the Biggert-Waters Act. The

11 Throughout this document, “Interagency Questions and Answers” refers to the Interagency Questions and

Answers Regarding Flood Insurance in its entirety; “Q&A” refers to an individual question and answer within the

Questions and Answers

019 Final

Rule implementing the private flood insurance provisions of the Biggert-Waters Act. The

11 Throughout this document, “Interagency Questions and Answers” refers to the Interagency Questions and

Answers Regarding Flood Insurance in its entirety; “Q&A” refers to an individual question and answer within the

Questions and Answers.

12 For additional information on the history of the Interagency Questions and Answers, please see the preamble to

the July 2020 Proposed Interagency Questions and Answers at 85 FR 40442 (July 6, 2020).

13 See 85 FR 40442 (July 6, 2020). The comment period for the July 2020 Proposed Questions and Answers was

extended from Sept. 4, 2020 to Nov. 3, 2020. See 85 FR 54946 (Sept. 3, 2020).

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Agencies published these proposed questions and answers in March 2021 (March 2021 Proposed

Questions and Answers).14

With this Federal Register notice, the Agencies are consolidating the July 2020 Proposed

Questions and Answers and the March 2021 Proposed Questions and Answers into one set of

Interagency Questions and Answers Regarding Flood Insurance (2022 Interagency Questions

and Answers), consisting of 144 Questions and Answers (including 24 private flood insurance

questions and answers), revised as appropriate based on comments received. Specifically, the

Q&As in the March 2021 Proposed Questions and Answers are now set forth as sections III, IV,

and V in the 2020 Interagency Questions and Answers, and the remaining sections, with the

exception of proposed Section III discussed below, are renumbered accordingly. The Agencies

also are making non-substantive revisions to certain questions and answers to more directly

respond to the question asked, provide additional clarity, or make technical corrections

w set forth as sections III, IV,

and V in the 2020 Interagency Questions and Answers, and the remaining sections, with the

exception of proposed Section III discussed below, are renumbered accordingly. The Agencies

also are making non-substantive revisions to certain questions and answers to more directly

respond to the question asked, provide additional clarity, or make technical corrections.

These 2022 Interagency Questions and Answers supersede the 2009 Interagency

Questions and Answers (and the 2011 amendments to the 2009 Interagency Questions and

Answers) and supplement other guidance or interpretations issued by the Agencies related to

loans in areas having special flood hazards. In addition to guidance and interpretations issued by

the Agencies, lenders should be aware of information related to the NFIP provided by FEMA

that may address questions pertaining to NFIP requirements.

The issuance of these 2022 Interagency Questions and Answers responds to requests over

the years from the lending industry, including at conferences and through interagency webinars,

to provide additional guidance on flood insurance compliance issues. In addition, the 2022

Interagency Questions and Answers are responsive to requests made pursuant to the most recent

14 See 86 FR 14696 (Mar. 18, 2021).

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review under the Economic Growth and Regulatory Paperwork Reduction Act of 1996

(EGRPRA), which directs some of the Agencies to conduct a joint review of their regulations

every 10 years and consider whether any of those regulations are outdated, unnecessary, or

unduly burdensome.15 As part of the most recent joint review, the Board, FDIC, OCC, and

NCUA received comments on the Agencies’ flood insurance rules

Economic Growth and Regulatory Paperwork Reduction Act of 1996

(EGRPRA), which directs some of the Agencies to conduct a joint review of their regulations

every 10 years and consider whether any of those regulations are outdated, unnecessary, or

unduly burdensome.15 As part of the most recent joint review, the Board, FDIC, OCC, and

NCUA received comments on the Agencies’ flood insurance rules. Several commenters asked

for more guidance to the industry on flood insurance requirements, particularly with respect to

renewal notices for force-placed insurance policies, the required amount of flood insurance, and

flood insurance requirements for tenant-owned buildings and detached structures. One

commenter specifically requested that the Agencies update the Interagency Questions and

Answers. In the 2017 EGRPRA Joint Report to Congress issued by the Federal Financial

Institutions Examination Council (FFIEC), the Board, FDIC, and OCC indicated that they agreed

with commenters that the Interagency Questions and Answers should be updated and planned to

address many of the flood insurance issues raised by EGRPRA commenters.16 Accordingly, in

issuing these 2022 Interagency Questions and Answers, the Agencies are addressing the

commitment made in the 2017 EGRPRA Joint Report to Congress.

15 Pub. L. 104-208, 110 Stat. 3001 (1996) (codified at 12 U.S.C. 3311). The most recent report to Congress required

by EGRPRA was published by the Board, FDIC, OCC, and NCUA under the FFIEC in March 2017 and is available

at https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf. The NCUA, although an

FFIEC member, is not a “Federal banking agency” within the meaning of EGRPRA and so is not required to

participate in the review process. Nevertheless, the NCUA elected to participate in the EGRPRA review and

conducted its own parallel review of its regulations

EC in March 2017 and is available

at https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf. The NCUA, although an

FFIEC member, is not a “Federal banking agency” within the meaning of EGRPRA and so is not required to

participate in the review process. Nevertheless, the NCUA elected to participate in the EGRPRA review and

conducted its own parallel review of its regulations. The FCA is not subject to EGRPRA; however, as required by

the Farm Credit System Reform Act of 1996 (see 12 U.S.C. 2252 note), FCA engages in periodic regulatory review.

The Consumer Financial Protection Bureau (CFPB), although an FFIEC member, is not a “Federal banking agency”

within the meaning of EGRPRA and so is not required to participate in the review process.

16 Specifically, the OCC, Board, and FDIC stated in the EGRPRA report that they “agree with these EGRPRA

commenters that additional agency guidance on flood insurance requirements would be helpful to the banking

industry and that the Interagency Flood Q&As should be updated to address recent amendments to the flood

insurance statutes. In fact, the agencies have begun work on revising the Interagency Flood Q&As to reflect the

agencies’ recently issued final rules implementing the Biggert-Waters Act and HFIAA requirements and to address

other issues that have arisen since the last update in 2011. As part of this revision, the agencies also plan to address

many of the flood insurance issues raised by EGRPRA commenters.” FFIEC Joint EGRPRA Report to Congress,

March 2017 at 56; available at https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.

ing the Biggert-Waters Act and HFIAA requirements and to address

other issues that have arisen since the last update in 2011. As part of this revision, the agencies also plan to address

many of the flood insurance issues raised by EGRPRA commenters.” FFIEC Joint EGRPRA Report to Congress,

March 2017 at 56; available at https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.

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Reorganization of Interagency Questions and Answers

For ease of reference and in light of the increased number of subjects covered that

address complex issues, the Agencies proposed to reorganize the Interagency Questions and

Answers to provide a more logical flow of questions through the flood insurance process for

lenders, servicers, regulators, and policyholders. Moreover, the Agencies also proposed a new

system of designation for the Q&As. Rather than numbering the Q&As successively through all

the categories, each Q&A would be designated by the category to which it belongs and then

designated in numerical order for that particular category. This numbering system enables the

Agencies to add or delete Q&As in the future without needing to significantly renumber or

reorganize all of the Q&As. Furthermore, the Agencies have added three new Q&As

(Applicability 13, Amount 10, and Condo and Co-op 9) to better address commenters’ questions

and for organizational purposes, rather than adding information into existing Q&As.

As discussed below, commenters supported the proposed reorganization. Therefore, the

Agencies are adopting this reorganization with the inclusion of three new categories related to

the private flood insurance requirements, proposed in the March 2021 Proposed Questions and

Answers. The table below sets forth the current categories and the corresponding new,

reorganized categories for purposes of comparison:

Table of Contents

Category from

2009 Interagency Questions and Answers

Reorganized Category in 2022

Interagency Questions and

Answers

w categories related to

the private flood insurance requirements, proposed in the March 2021 Proposed Questions and

Answers. The table below sets forth the current categories and the corresponding new,

reorganized categories for purposes of comparison:

Table of Contents

Category from

2009 Interagency Questions and Answers

Reorganized Category in 2022

Interagency Questions and

Answers

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I.

Determining When Certain Loans Are

Designated Loans for Which Flood Insurance Is

Required Under the Act and Regulation

Determining the Applicability of

Flood Insurance Requirements for

Certain Loans [Applicability]

II.

Determining the Appropriate Amount of Flood

Insurance Required Under the Act and

Regulation

Exemptions From the Mandatory

Flood Insurance Purchase

Requirements [Exemptions]

III.

Exemptions From the Mandatory Flood

Insurance Requirements

Private Flood Insurance –

Mandatory Acceptance

[Mandatory]

IV.

Flood Insurance Requirements for Construction

Loans

Private Flood Insurance –

Discretionary Acceptance

[Discretionary]

V.

Flood Insurance Requirements for Non-

residential Buildings

Private Flood Insurance – General

Compliance [Private Flood

Compliance]

VI.

Flood Insurance Requirements for Residential

Condominiums

Required Use of Standard Flood

Hazard Determination Form

[SFHDF]

VII.

Flood Insurance Requirements for Home Equity

Loans, Lines of Credit, Subordinate Liens, and

Other Security Interests in Collateral Located in

an SHFA

Flood Insurance Determination

Fees [Fees]

od Insurance – General

Compliance [Private Flood

Compliance]

VI.

Flood Insurance Requirements for Residential

Condominiums

Required Use of Standard Flood

Hazard Determination Form

[SFHDF]

VII.

Flood Insurance Requirements for Home Equity

Loans, Lines of Credit, Subordinate Liens, and

Other Security Interests in Collateral Located in

an SHFA

Flood Insurance Determination

Fees [Fees]

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VIII.

Flood Insurance Requirements in the Event of

the Sale or Transfer of a Designated Loan

and/or Its Servicing Rights

Flood Zone Discrepancies [Zone]

IX.

Escrow Requirements

Notice of Special Flood Hazards

and Availability of Federal

Disaster Relief [Notice]

X.

Force Placement

Determining the Appropriate

Amount of Flood Insurance

Required [Amount]

XI.

Private Flood Insurance

Flood Insurance Requirements for

Construction Loans

[Construction]

XII.

Required Use of Standard Flood Hazard

Determination Form (SFHDF)

Flood Insurance Requirements for

Residential Condominiums and

Co-Ops [Condo and Co-Op ]

XIII.

Flood Determination Fees

Flood Insurance Requirements for

Home Equity Loans, Lines of

Credit, Subordinate Liens, and

Other Security Interests in

Collateral Located in an SFHA

[Other Security Interests]

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XIV.

Flood Zone Discrepancies

Requirement to Escrow Flood

Insurance Premiums and Fees –

General [Escrow]

XV.

Notice of Special Flood Hazards and

Availability of Federal Disaster Relief

Requirement to Escrow Flood

Insurance Premiums and Fees –

Small Lender Exception [Escrow

Small Lender Exception]

XVI.

Mandatory Civil Money Penalties

Requirement to Escrow Flood

Insurance Premiums and Fees –

Loan Exceptions [Escrow Loan

Exceptions]

XVII.

Force Placement of Flood

Insurance [Force Placement]

XVIII.

Flood Insurance Requirements in

the Event of the Sale or Transfer

of a Designated Loan and/or Its

Servicing Rights [Servicing]

XIX

ender Exception [Escrow

Small Lender Exception]

XVI.

Mandatory Civil Money Penalties

Requirement to Escrow Flood

Insurance Premiums and Fees –

Loan Exceptions [Escrow Loan

Exceptions]

XVII.

Force Placement of Flood

Insurance [Force Placement]

XVIII.

Flood Insurance Requirements in

the Event of the Sale or Transfer

of a Designated Loan and/or Its

Servicing Rights [Servicing]

XIX.

Mandatory Civil Money Penalties

[Penalty]

For ease of reference, the following terms are used throughout this document: “Act” refers to the

National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as revised

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by the National Flood Insurance Reform Act of 1994, Biggert-Waters Flood Insurance Reform

Act of 2012, and Homeowner Flood Insurance Affordability Act of 2014 (codified at 42 U.S.C.

4001 et seq). “Regulation” refers to each Agency’s current final rule.17 References to the NFIP

Flood Insurance Manual refer to the version published in April 2021.

Public Comments

The Agencies solicited comment on all aspects of the proposed Q&As and received a

total of 22 substantive comment letters on the July 2020 Proposed Questions and Answers and

11 substantive comment letters on the March 2021 Proposed Questions and Answers. Many of

the commenters supported the proposed organizational changes to the Interagency Questions and

Answers and believed the new organization provided clarity, increased understanding, and was

user-friendly. In addition, some commenters specifically found the grouping by topic to be very

useful, noting this would improve accessibility and allow the Agencies to easily revise the

Interagency Questions and Answers in the future. One commenter found the addition of

references to the Regulation to be beneficial. Another commenter requested that the Agencies

combine both sets of questions and answers into one set of final questions and answers

ound the grouping by topic to be very

useful, noting this would improve accessibility and allow the Agencies to easily revise the

Interagency Questions and Answers in the future. One commenter found the addition of

references to the Regulation to be beneficial. Another commenter requested that the Agencies

combine both sets of questions and answers into one set of final questions and answers. As

indicated above, the Agencies are adopting the proposed reorganization of the Interagency

Questions and Answers and combining both the July 2020 Proposed Questions and Answers and

the March 2021 Proposed Questions and Answers into one document.

One commenter requested that these Interagency Questions and Answers be made

available to insurance agents, which would be helpful for lenders and make the process easier for

borrowers. A few commenters also suggested that the NCUA add the finalized Interagency

Questions and Answers to the Regulation as an Appendix. The commenters felt that this would

17 12 CFR part 22 (OCC); 12 CFR 208.25 (Board); 12 CFR part 339 (FDIC); 12 CFR part 614, subpart S (FCA);

and 12 CFR part 760 (NCUA).

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ensure the Interagency Questions and Answers are easily located and used by credit union staff

in years to come.

The Agencies note that the Interagency Questions and Answers are already publicly

available, including to insurance agents, as the Interagency Questions and Answers are published

in the Federal Register and readily accessible on the Agencies’ websites. At this time, the

Agencies decline to add the Interagency Questions and Answers to the Regulation as an

Appendix. Furthermore, the NCUA is committed to assisting credit unions comply with the

flood insurance requirements

y

available, including to insurance agents, as the Interagency Questions and Answers are published

in the Federal Register and readily accessible on the Agencies’ websites. At this time, the

Agencies decline to add the Interagency Questions and Answers to the Regulation as an

Appendix. Furthermore, the NCUA is committed to assisting credit unions comply with the

flood insurance requirements.

In addition, the Agencies received several comments that urged the Agencies to provide

periodic updates and review the Interagency Questions and Answers on a regular basis, as well

as to allow the industry an adequate notice and comment period. Commenters stated that this

would provide industry and other stakeholders predictable opportunities to provide feedback on

compliance issues and questions as they arise. Commenters also felt this type of review would

maintain the Interagency Questions and Answers in a more organized manner and would ensure

the guidance keeps pace with the marketplace and the issues that arise with respect to

compliance. One commenter emphasized that this review should take place more frequently than

the 10-year EGRPRA cycle and recommended a formal review of the Interagency Questions and

Answers every three to five years. Other commenters stated that additional issues may arise for

credit unions, who planned to share these issues with the NCUA, and asked that the Interagency

Questions and Answers be updated in the future to provide additional clarity.

The Agencies understand the value of the Interagency Questions and Answers to the

industry and other stakeholders and will continue to review the Interagency Questions and

Answers and update the guidance as necessary. The Agencies agree that the reorganization of

sues with the NCUA, and asked that the Interagency

Questions and Answers be updated in the future to provide additional clarity.

The Agencies understand the value of the Interagency Questions and Answers to the

industry and other stakeholders and will continue to review the Interagency Questions and

Answers and update the guidance as necessary. The Agencies agree that the reorganization of

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the Interagency Questions and Answers will facilitate future updates. The Agencies expect to

update the Interagency Questions and Answers as needed and will provide interested parties a

sufficient notice and comment period.

Other commenters encouraged the Agencies to include in the final version of the

Interagency Questions and Answers an explicit statement referencing the Interagency Statement

Clarifying the Role of Supervisory Guidance (Interagency Statement).18 The commenters stated

the Agencies should confirm that the Interagency Questions and Answers are guidance and

failure to comply with the Interagency Questions and Answers are not grounds for matters

requiring attention (MRAs), matters requiring immediate attention (MRIA), or any other adverse

supervisory action. The Agencies confirm that the Agencies are providing the Interagency

Questions and Answers as guidance only. The Agencies are not adding a reference to the

Interagency Statement in the Interagency Questions and Answers because doing so is

unnecessary.

One commenter asked the Agencies to specifically reference which Q&As apply only to

an NFIP policy and which Q&As apply to a flood insurance policy issued by a private insurance

company or both. In response to this comment, the Agencies note that all the Q&As apply to all

policies, whether NFIP or a flood insurance policy issued by a private insurance company, unless

otherwise noted in the Q&A.

The Agencies also received a general comment regarding climate change. The

commenter noted that the Interagency Questions and Answers failed to discuss climate change

risks

pany or both. In response to this comment, the Agencies note that all the Q&As apply to all

policies, whether NFIP or a flood insurance policy issued by a private insurance company, unless

otherwise noted in the Q&A.

The Agencies also received a general comment regarding climate change. The

commenter noted that the Interagency Questions and Answers failed to discuss climate change

risks. According to the commenter, climate change risks should serve as a “safe-harbor” for

18 The OCC, Board, FDIC, and NCUA subsequently codified this statement. See 12 CFR part 4, Appendix A to

subpart F (OCC); 12 CFR part 262, Appendix A (Board); 12 CFR part 302, Appendix A (FDIC); and 12 CFR part

791, Appendix A to subpart D (NCUA).

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insurers to deny flood coverage. Further, the commenter suggested that the Agencies should

explicitly require the insurers to consider climate risks and that flood insurance should be

mandatory in high risk zones as a result of climate change. Climate change risk is outside the

scope of the Agencies’ Interagency Questions and Answers. The Agencies note that they are

working individually and on an interagency basis to address financial risks associated with

climate change consistent with the Agencies’ regulatory and supervisory authorities. Therefore,

the Agencies decline to make changes to any of the Q&As in response to this comment.

Comments on specific Q&As are discussed below in the Section-by-Section Analysis.

Section-by-Section Analysis

Section I. Determining the Applicability of Flood Insurance Requirements for Certain Loans

(Applicability)

Section I includes questions and answers related to the applicability of the Regulation’s

flood insurance requirements to certain loans

the Q&As in response to this comment.

Comments on specific Q&As are discussed below in the Section-by-Section Analysis.

Section-by-Section Analysis

Section I. Determining the Applicability of Flood Insurance Requirements for Certain Loans

(Applicability)

Section I includes questions and answers related to the applicability of the Regulation’s

flood insurance requirements to certain loans. This proposed general applicability section

included existing Q&As 1 through 7 relating to residential buildings and, for organizational

purposes, incorporated existing section V’s Q&As 24 and 25, which address flood insurance

requirements for non-residential buildings. The Agencies also proposed a streamlined heading

for this section to provide greater clarity with no intended change in substance or meaning. The

Agencies proposed changes to the Q&As in this section in the July 2020 Proposed Questions and

Answers.

Applicability 1. The Agencies proposed to redesignate existing Q&A 1 as Q&A

Applicability 1 with only minor language modifications, and no intended change in substance or

meaning. This Q&A discusses whether the Regulation applies to a loan where the building or

mobile home securing the loan is located in a community that does not participate in the NFIP.

16

The Agencies received no specific comments on this Q&A and are adopting Q&A Applicability

1 as proposed with minor non-substantive edits.

Applicability 2. The Agencies proposed to redesignate existing Q&A 24 as Q&A

Applicability 2. This Q&A discusses whether a lender is required to mandate flood insurance for

buildings with limited utility or value. The Agencies proposed to update this Q&A to indicate

that the answer depends on whether buildings with limited utility meet the detached structure

exemption, which provides an exemption from the mandatory purchase requirements for certain

detached structures. This exemption was added by HFIAA

whether a lender is required to mandate flood insurance for

buildings with limited utility or value. The Agencies proposed to update this Q&A to indicate

that the answer depends on whether buildings with limited utility meet the detached structure

exemption, which provides an exemption from the mandatory purchase requirements for certain

detached structures. This exemption was added by HFIAA. The proposal also removed the

existing language indicating that the lender should consider any local zoning issues or other

issues that would affect its collateral. In addition, the Agencies made minor wording changes.

The Agencies received one comment on this Q&A. The commenter suggested an

alternative “carve-out” approach that would permit a lender to include all buildings in the

security instrument as a matter of convenience in closing the loan and in marketing the parcel of

land if necessary, even if a structure could have been “carved out” as not necessary for collateral.

The commenter suggested that buildings that are included as security for a loan as a matter of

convenience, and not to protect the lender by providing material credit support for the loan,

would not be considered to be buildings “securing the loan” that need to be covered by flood

insurance. However, the approach suggested by this commenter is not legally possible because

the Act19 requires flood insurance on all improved property that secures a designated loan. The

Agencies therefore are adopting Q&A Applicability 2 as proposed with an added cross-reference

to Q&A Exemptions 1, which discusses the exemptions from the mandatory purchase

requirement, for reader reference.

19 Pub. L. 93–234, 87 Stat. 975 (1973), codified at 42 U.S.C. 4012a.

ll improved property that secures a designated loan. The

Agencies therefore are adopting Q&A Applicability 2 as proposed with an added cross-reference

to Q&A Exemptions 1, which discusses the exemptions from the mandatory purchase

requirement, for reader reference.

19 Pub. L. 93–234, 87 Stat. 975 (1973), codified at 42 U.S.C. 4012a.

17

Applicability 3. The Agencies proposed to redesignate existing Q&A 25 as proposed

Q&A Applicability 3. This Q&A discusses a lender’s requirements under the Regulation for a

loan secured by multiple buildings if only some of the buildings are located in an SFHA, or if

some of the buildings are located in different communities and only some of the communities

participate in the NFIP. The Agencies proposed to change the answer to emphasize when flood

insurance is required as opposed to when it is not required as in the existing Q&A. Further, the

Agencies proposed to include an example in the answer. The Agencies proposed these changes

to provide greater clarity and to improve readability and did not intend any change in substance

or meaning.

The Agencies received two comments on this proposed Q&A. One commenter requested

that the Agencies add a statement that the mandatory purchase requirement is only applicable to

buildings with a physical footprint at least partially within the boundaries of an SFHA. This

commenter stated that the extension of a plat or lot into the SFHA does not automatically trigger

the mandatory purchase of flood insurance for buildings located on that plat or lot. The other

commenter requested that the Agencies address situations when a portion of a property securing

a loan is located in an SFHA but the improvements located on that same property are not located

in the SFHA. The commenter recommends that if the structure is not located within an SFHA,

then insurance should not be required

se of flood insurance for buildings located on that plat or lot. The other

commenter requested that the Agencies address situations when a portion of a property securing

a loan is located in an SFHA but the improvements located on that same property are not located

in the SFHA. The commenter recommends that if the structure is not located within an SFHA,

then insurance should not be required.

The Agencies confirm that land itself is not subject to the mandatory flood insurance

purchase requirement. To address these comments, the Agencies are clarifying in the final

answer to this Q&A that if any portion of a building is located in an SFHA in which flood

insurance is available under the Act, the flood insurance requirement applies even if the entire

structure is not located in the SFHA. Further, the Agencies are revising the final answer to state

18

that a building located on a portion of a plat or lot that is not in an SFHA is not subject to the

mandatory flood insurance purchase requirement even if a portion of the plat or lot not

containing a building extends into an SFHA. With these amendments and some minor non-

substantive edits, the Agencies are adopting Q&A Applicability 3.

Applicability 4. The Agencies proposed to redesignate existing Q&A 2 as Q&A

Applicability 4. This Q&A discusses a lender’s responsibility if a particular building or mobile

home that secures a loan is no longer located within an SFHA due to a map change. The

Agencies proposed to broaden this Q&A to also address a lender’s responsibility if a building or

mobile home that secures a loan is not located within an SFHA, even if not due to a map change.

In addition, the Agencies proposed to reword for clarity the sentence in the answer indicating

that a lender, by contract, may still require flood insurance on such buildings or mobile homes

for safety and soundness purposes

roaden this Q&A to also address a lender’s responsibility if a building or

mobile home that secures a loan is not located within an SFHA, even if not due to a map change.

In addition, the Agencies proposed to reword for clarity the sentence in the answer indicating

that a lender, by contract, may still require flood insurance on such buildings or mobile homes

for safety and soundness purposes. The proposed sentence states that a lender may, at its

discretion and taking into consideration appropriate State law, require flood insurance for

property outside of SFHAs for safety and soundness purposes as a condition of a loan being

made. Further, the Agencies proposed to add language to the answer to specifically note that

each lender should tailor its own flood insurance policies and procedures to suit its business

needs and protect its ongoing interest in the collateral. The Agencies intended no substantive

changes with these revisions. The Agencies received no specific comment on this proposed

Q&A and are adopting it as proposed with one technical change. The Agencies are removing the

discussion of the NFIP Preferred Risk Policy because of changes made by FEMA in Risk Rating

2.0 - Equity in Action (Risk Rating 2.0).20

20 See https://www.fema.gov/flood-insurance/risk-rating.

19

Applicability 5. The Agencies proposed to redesignate existing Q&A 3 as Q&A

Applicability 5 and to revise it by making minor language modifications for greater clarity, with

no intended change in substance or meaning. This Q&A discusses whether a lender’s purchase

of a designated loan triggers any requirements under the Regulation. The Agencies received

positive comment on this Q&A and are adopting it as proposed.

Applicability 6. The Agencies proposed to redesignate existing Q&A 5, which addresses

whether the Regulation applies to loans that are being restructured or modified, as proposed

Q&A Applicability 6 with no changes

ether a lender’s purchase

of a designated loan triggers any requirements under the Regulation. The Agencies received

positive comment on this Q&A and are adopting it as proposed.

Applicability 6. The Agencies proposed to redesignate existing Q&A 5, which addresses

whether the Regulation applies to loans that are being restructured or modified, as proposed

Q&A Applicability 6 with no changes. One commenter specifically stated that the clarification

provided by Q&A Applicability 6 may be very helpful in light of the COVID-19 pandemic as

more consumers may need to modify their mortgages. A few commenters requested that Q&A

Applicability 6 include additional examples to clarify when flood compliance requirements are

triggered in loan restructurings and modifications, and they provided specific language. As in

the existing Q&A, proposed Q&A Applicability 6 states that if the loan otherwise meets the

definition of a designated loan and if the lender increases the amount of the loan, or extends or

renews the terms of the original loan, then the Regulation applies. However, the Agencies agree

that additional clarification on when loan restructurings and modifications trigger the

Regulation’s requirements would be helpful. Furthermore, the Agencies believe that rewording

the question also would provide additional clarity. Therefore, the Agencies are revising the

question in the final Q&A to ask whether a loan that is being restructured or modified constitutes

a triggering event (making, increasing, renewing, or extending a loan) under the Regulation. In

addition, the Agencies are revising the answer in the final Q&A to provide that if a loan

modification or restructuring involves recapitalizing delinquent payments and other amounts due

under the loan, or amounts that were otherwise originally contemplated to be part of the loan

dified constitutes

a triggering event (making, increasing, renewing, or extending a loan) under the Regulation. In

addition, the Agencies are revising the answer in the final Q&A to provide that if a loan

modification or restructuring involves recapitalizing delinquent payments and other amounts due

under the loan, or amounts that were otherwise originally contemplated to be part of the loan

20

pursuant to the contract with the borrower, into the loan’s outstanding principal balance and the

maturity date of the loan otherwise stays the same, the Regulation would not apply because the

modification or restructuring would not increase, extend, or renew the terms of the loan. The

revisions to the final answer also provide that, conversely, if the loan modification or

restructuring changes terms of the loan such as by increasing the outstanding principal balance

beyond what was contemplated as part of the loan under the contract with the borrower, or by

extending the maturity date of the loan, the Regulation would apply because the lender increased

or extended the terms of the loan beyond what was originally contemplated to be part of the loan.

With these amendments, the Agencies are adopting Q&A Applicability 6.

Applicability 7. The Agencies proposed to redesignate existing Q&A 6, which addresses

whether table funded loans are treated as new loan originations, as Q&A Applicability 7. The

Agencies proposed to update the answer to refer to the definition of “table funding” in the

Regulation instead of to the obsolete definition of this term in the Department of Housing and

Urban Development’s (HUD) former Real Estate Settlement Procedures Act (RESPA) rule. The

Agencies received no specific comment on this Q&A and are adopting it as proposed.

Applicability 8. The Agencies proposed to redesignate existing Q&A 7 as Q&A

Applicability 8 and proposed only one minor wording change, with no intended change in

substance or meaning

erm in the Department of Housing and

Urban Development’s (HUD) former Real Estate Settlement Procedures Act (RESPA) rule. The

Agencies received no specific comment on this Q&A and are adopting it as proposed.

Applicability 8. The Agencies proposed to redesignate existing Q&A 7 as Q&A

Applicability 8 and proposed only one minor wording change, with no intended change in

substance or meaning. This Q&A addresses whether a lender is required to perform a review of

its, or of its servicers’, existing loan portfolio for compliance with the flood insurance

requirements under the Act and Regulation. The Agencies received positive comment on this

Q&A and are adopting it as proposed.

Applicability 9. The Agencies proposed to redesignate existing Q&A 4 as Q&A

Applicability 9 and to make only minor language modifications for greater clarity, with no

21

intended change in substance or meaning. This proposed Q&A addressed whether the

mandatory purchase requirements apply to loan syndications or participations. The proposed

answer provided that the acquisition by a lender of an interest in a loan either by participation or

syndication after that loan has been made does not trigger the requirements of the Act or the

Regulation but that, as with purchased loans, depending upon the circumstances, the lender may

undertake due diligence for safety and soundness purposes to protect itself against the risk of

flood or other types of loss. The proposed answer also stated that lenders who pool or contribute

funds that will be simultaneously advanced to a borrower or borrowers as a loan secured by

improved real estate would be making a loan that triggers the requirements of the Act and

Regulation, and that Federal flood insurance requirements also would apply when a group of

lenders refinances, extends, renews or increases a loan

The proposed answer also stated that lenders who pool or contribute

funds that will be simultaneously advanced to a borrower or borrowers as a loan secured by

improved real estate would be making a loan that triggers the requirements of the Act and

Regulation, and that Federal flood insurance requirements also would apply when a group of

lenders refinances, extends, renews or increases a loan. Further, the proposed answer provided

that although the agreement among the lenders may assign compliance duties to a lead lender or

agent, and may include clauses in which the lead lender or agent indemnifies participating

lenders against flood losses, each participating lender remains individually responsible for

compliance with the Act and Regulation. Therefore, under the proposed answer, the Agencies

would examine whether the regulated institution/participating lender has performed upfront due

diligence to determine whether the lead lender or agent has undertaken the necessary activities to

ensure that the borrower obtains appropriate flood insurance and that the lead lender or agent has

adequate controls to monitor the loan(s) on an ongoing basis for compliance with the flood

insurance requirements. Lastly, the proposed answer stated that the Agencies expect the

participating lender to have adequate controls to monitor the activities of the lead lender or agent

for compliance with flood insurance requirements over the term of the loan.

and that the lead lender or agent has

adequate controls to monitor the loan(s) on an ongoing basis for compliance with the flood

insurance requirements. Lastly, the proposed answer stated that the Agencies expect the

participating lender to have adequate controls to monitor the activities of the lead lender or agent

for compliance with flood insurance requirements over the term of the loan.

22

The Agencies received a number of comments on this Q&A. Some commenters

requested that the Agencies offer further clarity on what constitutes sufficient “upfront due

diligence” and “adequate controls to monitor the activities of the lead lender or agent for

compliance with flood insurance requirements over the term of the loan.” These commenters

also stated that problems arise when lead lenders have different regulators employing different

approaches for upfront due diligence as well as monitoring for flood compliance. One

commenter recommended the inclusion of an explicit statement in the Q&A that if a lead lender

on a facility is not Federally regulated, and thus not subject to flood compliance requirements,

any participating lenders on that facility also do not have flood compliance obligations with

respect to that facility. Another commenter requested that the Agencies indicate in the Q&A that

as long as a participating non-lead lender has adopted written policies, procedures, and processes

for managing the risks of flood compliance that are reasonably within that participating lender’s

control, that lender generally would be viewed as having satisfied its flood compliance

obligations. A third commenter stated that the answer was confusing since it appears to state that

flood compliance requirements can be assigned to the lead lender but subsequently states that

each individual lender remains responsible for compliance

e that are reasonably within that participating lender’s

control, that lender generally would be viewed as having satisfied its flood compliance

obligations. A third commenter stated that the answer was confusing since it appears to state that

flood compliance requirements can be assigned to the lead lender but subsequently states that

each individual lender remains responsible for compliance. The commenter suggested that, in

instances where a lead lender is in charge of ensuring flood insurance requirements are met,

participating lenders be allowed to rely on, as a safe harbor, documentation from the lead lender

to limit their individual exposure.

The Agencies understand the compliance complications that may arise with loan

syndications and participations. However, the requirements under the Act and the Regulation

apply to each lender individually, even if they are part of a loan syndication or participation. The

Agencies may not remove these requirements as suggested if the lead lender is not Federally-

23

regulated nor create a safe harbor that allows a lender to rely on the lead lender’s policies or

procedures or on others’ policies and procedures for compliance. Further, the Agencies believe

it is more appropriate for lenders to determine specific due diligence procedures and controls to

ensure compliance with the Act and Regulation based on the particular facts of each transaction.

Therefore, the Agencies decline to include examples of such procedures and controls in the

Q&A. However, to emphasize the particular concerns that may arise with lead lenders who are

not Federally-regulated, the Agencies are adding a statement in the final answer indicating that a

non-lead lender’s due diligence and monitoring of the lead lender is especially important when

the lead lender itself is not subject to Federal flood insurance requirements. With this

amendment, the Agencies are adopting Q&A Applicability 9.

Applicability 10

may arise with lead lenders who are

not Federally-regulated, the Agencies are adding a statement in the final answer indicating that a

non-lead lender’s due diligence and monitoring of the lead lender is especially important when

the lead lender itself is not subject to Federal flood insurance requirements. With this

amendment, the Agencies are adopting Q&A Applicability 9.

Applicability 10. The Agencies proposed new Q&A Applicability 10 to address a

lender’s obligations when participating in a multi-tranche credit facility, specifically whether a

lender is expected to consider any triggering event and any cashless roll of which it becomes

aware in any tranche. The proposed answer provided that a multi-tranche credit facility is

analogous to a loan syndication or participation and that the Agencies do not expect a lender

participating in one tranche in a multi-tranche credit facility to be responsible for taking action to

comply with flood insurance requirements in connection with a triggering event or cashless roll

that occurs in a tranche in which the lender does not participate. Furthermore, the proposed

answer clarified that the Agencies expect a lender participating in a multi-tranche credit facility

to perform upfront due diligence to determine whether the lead lender has adequate controls to

monitor the loan on an ongoing basis for compliance with flood insurance requirements. One

commenter requested the same changes it suggested for proposed Q&A Applicability 9 regarding

further clarification on what constitutes sufficient upfront due diligence and adequate controls

he credit facility

to perform upfront due diligence to determine whether the lead lender has adequate controls to

monitor the loan on an ongoing basis for compliance with flood insurance requirements. One

commenter requested the same changes it suggested for proposed Q&A Applicability 9 regarding

further clarification on what constitutes sufficient upfront due diligence and adequate controls

24

and removal of flood compliance requirements if the lead lender is not Federally-regulated. For

the reasons stated in the discussion of Q&A Applicability 9, the Agencies decline to accept these

changes and are adopting Q&A Applicability 10 as proposed with the addition of a similar

statement added to Q&A Applicability 9 regarding due diligence and non-Federal lead lenders.

Applicability 11. The Agencies proposed new Q&A Applicability 11 to clarify that an

automatic extension of a credit facility agreed upon by the borrower and lender in the original

loan agreement would not constitute a triggering event for purposes of the Federal flood

insurance requirements. The Agencies received no specific comment on this Q&A and are

adopting it as proposed.

Applicability 12. The Agencies proposed new Q&A Applicability 12, based on guidance

previously issued by the Agencies,21 to address the applicability of the mandatory purchase

requirement during a period of time when coverage under the NFIP is unavailable, such as due to

a lapse in authorization or in appropriations. The proposed answer clarified that during a period

when NFIP coverage is not available, lenders may continue to make loans subject to the

Regulation without flood insurance coverage but must continue to make flood determinations,

provide timely, complete and accurate notices to borrowers, and comply with other aspects of the

Regulation. The proposed answer also indicated that lenders should evaluate the safety and

soundness and legal risks, and prudently manage those risks, during such periods when the NFIP

is unavailable

the

Regulation without flood insurance coverage but must continue to make flood determinations,

provide timely, complete and accurate notices to borrowers, and comply with other aspects of the

Regulation. The proposed answer also indicated that lenders should evaluate the safety and

soundness and legal risks, and prudently manage those risks, during such periods when the NFIP

is unavailable. One commenter specifically commented on this proposed Q&A, stating that it

21 See Guidance Regarding Lapse and Extension of FEMA’s Authority to Issue Flood Insurance Contracts, OCC

Bulletin 2010-20 (OCC); Informal Guidance on the Lapse of FEMA’s Authority to Issue Flood Insurance Contracts,

CA Letter 10-3 (Board); Lapse of FEMA Authority to Issue Flood Insurance Policies, FIL-23-2010 (FDIC); Lapse

and Extension of FEMA’s Authority to Issue Flood Insurance Contracts, Informational Memorandum June 3, 2010

(FCA), and Guidance on the Lapse of FEMA’s Authority to Issue Flood Insurance Contracts, Letter No. 10-CU-08

(NCUA).

25

provides helpful and appreciated clarity on how credit unions should proceed in the event of a

lapse in authorization or appropriations. The Agencies are adopting this Q&A as proposed.

New Q&A Applicability 13. To address a number of comments regarding what is and is

not a triggering event under the Regulation, and to further clarify the Interagency Questions and

Answers Regarding Flood Insurance, the Agencies are adding a new Q&A Applicability 13 to

the 2022 Interagency Questions and Answers to specifically address triggering events. This new

Q&A provides lenders with a quick reference of what constitutes a triggering event under the

Regulation.

Specifically, Q&A Applicability 13 states that under the Regulation, a triggering event

occurs when a designated loan is made, increased, extended, or renewed

dding a new Q&A Applicability 13 to

the 2022 Interagency Questions and Answers to specifically address triggering events. This new

Q&A provides lenders with a quick reference of what constitutes a triggering event under the

Regulation.

Specifically, Q&A Applicability 13 states that under the Regulation, a triggering event

occurs when a designated loan is made, increased, extended, or renewed. If a triggering event

occurs with respect to a designated loan, the lender is required to comply with certain

requirements of the Regulation, including the mandatory flood insurance purchase requirement,

the requirement to provide the Notice of Special Flood Hazards to the borrower, the requirement

to notify the Administrator of FEMA or the Administrator’s designee (the insurance provider) in

writing of the identity of the servicer of the loan, and the requirement to escrow for a loan

secured by residential property, unless either the lender or the loan qualifies for an exception.

This Q&A also includes examples of events that are not considered triggering events for

purposes of the Regulation, including the purchase of a loan from another lender (see Q&A

Applicability 5); a loan modification that does not increase the amount of the loan nor extend or

renew the terms of the loan (see Q&A Applicability 6); the assumption of the loan by another

borrower; the remapping of a building securing the loan into an SFHA; the acquisition by a

lender of an interest in a loan either by participation or syndication (see Q&A Applicability 9); a

cashless roll (see Q&A Applicability 10); certain automatic extensions of credit (see Q&A

he loan nor extend or

renew the terms of the loan (see Q&A Applicability 6); the assumption of the loan by another

borrower; the remapping of a building securing the loan into an SFHA; the acquisition by a

lender of an interest in a loan either by participation or syndication (see Q&A Applicability 9); a

cashless roll (see Q&A Applicability 10); certain automatic extensions of credit (see Q&A

26

Applicability 11); and certain treatments of force placement premiums and fees (see Q&A Force

Placement 10).

Applicability 14 (Proposed as Q&A Coverage 2). The Agencies proposed to redesignate

existing Q&A 64 as Q&A Coverage 2. As noted below, the Agencies are renumbering this Q&A

as Q&A Applicability 14. This Q&A addresses when a lender may rely on an insurance policy

providing portfolio-wide coverage, removes the reference to criteria set forth by FEMA, and

includes language addressing a lender’s reliance on a policy that provides portfolio-wide

coverage.

Several commenters suggested that the Agencies clarify the term “portfolio-wide”

coverage to explain that the typical “master policy” that lenders obtain and use to force place

flood insurance on individual loans is different than portfolio-wide coverage. The Agencies

agree with the commenters and are clarifying that a lender may not rely on an insurance policy

providing portfolio-wide coverage to meet the flood insurance purchase or force placement

requirements if the policy only provides coverage to the lender (“single interest”). As stated in

the Regulation, flood insurance coverage under the discretionary acceptance provision must

cover both the mortgagor and mortgagee (i.e. lender and the borrower) as loss payees, except in

the case of a policy that is provided by a condominium association, cooperative, homeowners

association, or other applicable group and for which the premium is paid by the respective

organization

As stated in

the Regulation, flood insurance coverage under the discretionary acceptance provision must

cover both the mortgagor and mortgagee (i.e. lender and the borrower) as loss payees, except in

the case of a policy that is provided by a condominium association, cooperative, homeowners

association, or other applicable group and for which the premium is paid by the respective

organization. However, the Agencies are adding language to the answer indicating that lenders

may purchase a master flood insurance policy that provides coverage for its entire portfolio and

covers both the lender and the borrower (“dual interest”) because these policies provide coverage

for the entire portfolio as well as individual coverage, and include the issuance of an individual

policy or certificate.

27

A few commenters suggested that the answer be clarified to state that a portfolio-wide

gap policy may be useful in some circumstances, such as when a property is newly mapped into

an SFHA. Additionally, a few commenters suggested that lenders be allowed to rely on master

policies for compliance purposes. The Agencies decline to make these revisions. As noted in

the existing and proposed Q&A, master policies providing portfolio-wide coverage may be

useful protection for the lender for a gap in coverage in the period of time before a force-placed

policy takes effect; however, such policies do not provide coverage for the borrower and cannot

be used to satisfy the force placement requirement.

One commenter stated that using the term “private insurance policy” may be confused

with a borrower-procured flood insurance policy issued by a private insurer. The Agencies agree

and are making technical changes to remove the term “private” when referring to lender procured

flood insurance policies in the Q&A.

The Agencies are adopting this Q&A as proposed with the amendments discussed above

and an additional minor non-substantive change.

Applicability 15 (Proposed as Q&A Coverage 3)

ower-procured flood insurance policy issued by a private insurer. The Agencies agree

and are making technical changes to remove the term “private” when referring to lender procured

flood insurance policies in the Q&A.

The Agencies are adopting this Q&A as proposed with the amendments discussed above

and an additional minor non-substantive change.

Applicability 15 (Proposed as Q&A Coverage 3). The Agencies proposed new Q&A

Coverage 3 to address when mandatory flood insurance on a designated loan is required to be in

place during the closing process. As noted below, the Agencies are renumbering this Q&A as

Q&A Applicability 15. This proposed Q&A clarified that a lender should use the loan “closing

date” to determine the date by which flood insurance should be in place for a designated loan,

and that FEMA deems the “closing date” as the date the ownership of the property transfers to

the new owner based on State law. The proposed answer further explained the difference

between “wet funding” and “dry funding” States and how it impacts the “closing date” for

purposes of flood insurance.

28

A few commenters suggested expanding the Q&A to clarify the “closing date” for

refinances subject to rescission. One lender suggested that it would be helpful to add examples

to illustrate when mandatory flood insurance needs to be in place on a designated loan. The

Agencies agree and are expanding the answer to address transactions where there is no transfer

of property ownership, such as a refinance, and the borrower is purchasing a new flood insurance

policy or is required to increase flood insurance coverage. In these cases, the lender should use

the loan’s consummation date, which is the date the borrower becomes contractually obligated

on the loan, as the effective date for the flood insurance policy. As a result of this clarification,

the Agencies do not believe adding examples is necessary. The Agencies are adopting this Q&A

with the changes discussed above.

Section II

insurance coverage. In these cases, the lender should use

the loan’s consummation date, which is the date the borrower becomes contractually obligated

on the loan, as the effective date for the flood insurance policy. As a result of this clarification,

the Agencies do not believe adding examples is necessary. The Agencies are adopting this Q&A

with the changes discussed above.

Section II. Exemptions from the Mandatory Flood Insurance Purchase Requirements

(Exemptions)

Existing section III includes one Q&A related to the exemptions from the mandatory

flood insurance purchase requirements. The Agencies proposed to redesignate existing section

III as section II and proposed a streamlined heading for this section to provide greater clarity

with no intended change in substance or meaning. As proposed, section II includes existing

Q&A 18 and six new Q&As, Exemptions 2 through 7, pertaining to the exemption from the

mandatory flood insurance purchase requirements for certain detached structures created by

HFIAA. The Agencies proposed changes to the Q&As in this section in the July 2020 Proposed

Questions and Answers. As noted in the proposal, this set of Q&As on the detached structure

exemption responds to a request for more guidance related to this exemption, as documented in

the EGRPRA report.22

22 https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.

the Q&As in this section in the July 2020 Proposed

Questions and Answers. As noted in the proposal, this set of Q&As on the detached structure

exemption responds to a request for more guidance related to this exemption, as documented in

the EGRPRA report.22

22 https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.

29

Exemptions 1. The Agencies proposed to redesignate existing Q&A 18 as Q&A

Exemptions 1. This Q&A discusses the exemptions from the mandatory flood insurance

purchase requirement. The Agencies proposed to revise the Q&A to include the detached

structure exemption in addition to the existing exemptions for State-owned property and loans

with an original principal balance of $5,000 or less and an original repayment term of one year or

less. The proposed Q&A also noted that although an exemption may apply, a borrower may still

elect to purchase flood insurance or a lender may still require flood insurance as a condition of

making the loan for purposes of safety and soundness, depending on its risk analysis. One

commenter requested further clarity and examples on what constitutes a detached structure.

Another commenter requested clarification on “mixed use” property where detached buildings

that may have been used for commercial purposes but no longer have a commercial use could

fall under the residential exemption if the residence is using the structure for storage. The

Agencies note that what constitutes a detached structure is a fact-based determination and that

the lender, who is in the best position to consider all the facts and circumstances and with input

from the borrower, has the responsibility to determine what constitutes a detached structure and

its purpose or the primary use of a mixed use structure. The Agencies are not in a position to

provide examples for all possible scenarios

a detached structure is a fact-based determination and that

the lender, who is in the best position to consider all the facts and circumstances and with input

from the borrower, has the responsibility to determine what constitutes a detached structure and

its purpose or the primary use of a mixed use structure. The Agencies are not in a position to

provide examples for all possible scenarios. The Agencies also are including a cross reference to

Q&A Exemptions 2 to provide further guidance and therefore are adopting the Q&A with this

addition.

Exemptions 2. The Agencies proposed new Q&A Exemptions 2 to address whether a

lender must take a security interest in the primary residential structure for a detached structure to

be eligible for the detached structure exemption. The proposed answer provided that although a

lender does not have to take a security interest in the primary residential structure, it would need

30

to evaluate the uses of the detached structures to confirm each is eligible for the exemption. One

commenter suggested that the Agencies provide more examples of a primary residential

structure. The Agencies decline to provide examples as the Agencies have indicated in the

preamble to the 2015 Final Rule that whether a structure is defined as a primary

residential structure is fact specific and that lenders would need to conduct good faith due

diligence to make this determination. Another commenter suggested the Agencies separate this

Q&A into two discrete questions to highlight different aspects of the answer. The Agencies

decline to adopt this suggestion because the example is intertwined with the principles being

discussed in the answer. Accordingly, the Agencies are adopting the Q&A as proposed.

Exemptions 3

t good faith due

diligence to make this determination. Another commenter suggested the Agencies separate this

Q&A into two discrete questions to highlight different aspects of the answer. The Agencies

decline to adopt this suggestion because the example is intertwined with the principles being

discussed in the answer. Accordingly, the Agencies are adopting the Q&A as proposed.

Exemptions 3. The Agencies proposed new Q&A Exemptions 3 to clarify that a flood

hazard determination is required for a detached structure even though flood insurance coverage

is not required on such a structure because the determination is used to identify the number and

type of structures present on the property. One commenter noted that in practice, lenders first

obtain a flood hazard determination as to the entire parcel of property to determine if any

structures are located in an SFHA and then determine whether any detached structures on the

property may be exempt under the Regulation, and therefore the proposed Q&A may imply that

the presence or absence of exempt structures may affect whether a flood hazard determination is

required. The Agencies agree that this Q&A may be confusing as proposed. As a result, the

Agencies are revising the Q&A to clarify that a flood hazard determination is required even

where detached structures are present. The revised answer provides that a flood hazard

determination is needed to determine whether a building or mobile home securing a loan is or

will be located in an SFHA where flood insurance is available under the Act. The answer further

provides that in order to determine whether the exemption for non-residential detached structures

on is required even

where detached structures are present. The revised answer provides that a flood hazard

determination is needed to determine whether a building or mobile home securing a loan is or

will be located in an SFHA where flood insurance is available under the Act. The answer further

provides that in order to determine whether the exemption for non-residential detached structures

31

on residential property may apply, a flood hazard determination must be conducted first, without

regard to whether there may be any detached structures that could be exempt. With these

amendments, the Agencies are adopting Q&A Exemptions 3.

Exemptions 4. The Agencies proposed new Q&A Exemptions 4 to provide that a lender

or its servicer may cancel its flood insurance requirement on an eligible detached structure that is

currently insured, but that a lender alternatively may want to continue to require flood insurance

coverage for detached structures of relatively high value if such coverage would be beneficial to

the borrower and the lender. The Agencies received no specific comments on this Q&A and are

adopting the Q&A as proposed.

Exemptions 5. The Agencies proposed new Q&A Exemptions 5 to address whether a

property being remapped into an SFHA triggers a review of the intended use of each detached

structure. Specifically, the proposed answer stated that a lender must examine the status of a

detached structure upon a qualifying triggering event and that a remapping is not a triggering

event. The proposed answer also stated that although there is no duty to monitor the status of a

detached structure following the lender’s initial determination, sound risk management practices

may lead a lender to conduct scheduled periodic reviews that track the need for flood insurance

on properties securing loans in its portfolio

g triggering event and that a remapping is not a triggering

event. The proposed answer also stated that although there is no duty to monitor the status of a

detached structure following the lender’s initial determination, sound risk management practices

may lead a lender to conduct scheduled periodic reviews that track the need for flood insurance

on properties securing loans in its portfolio. Further, the proposed answer notes that, consistent

with existing obligations under the Regulation, if a lender determines at any time that a property,

including a detached structure, has become subject to the mandatory flood insurance purchase

requirement and, as a result, the collateral is uninsured or underinsured, the lender has a duty to

inform the borrower of the obligation to obtain or increase insurance coverage and to purchase

flood insurance on the borrower’s behalf, as necessary.

32

One commenter asked whether notification of a map change constitutes notice that the

property may be subject to the mandatory flood insurance purchase requirement. Another

commenter inquired whether this Q&A allows a lender to rely on the initial appraisal as to what

the detached structure is being used for or whether the lender is responsible for determining the

current use. One commenter noted that the answer reiterates the requirements for force

placement which do not seem relevant to the answer. Based on the comments received, the

Agencies are revising the question to focus instead on whether a triggering event requires a

lender to review the intended use of the detached structure. The answer remains unchanged,

except for removing the language regarding remapping and force placement and non-substantive

wording changes for clarification. In addition, the Agencies are including a reference to new

Q&A Applicability 13, which explains what constitutes a triggering event. With these changes,

the Agencies are adopting Q&A Exemptions 5.

Exemptions 6

the detached structure. The answer remains unchanged,

except for removing the language regarding remapping and force placement and non-substantive

wording changes for clarification. In addition, the Agencies are including a reference to new

Q&A Applicability 13, which explains what constitutes a triggering event. With these changes,

the Agencies are adopting Q&A Exemptions 5.

Exemptions 6. The Agencies proposed new Q&A Exemptions 6 to discuss whether a

lender, following a review of its loan portfolio, may determine to no longer require flood

insurance on a detached structure in an SFHA if the structure does not provide contributory

value. The Agencies proposed to clarify that, while a lender or servicer could initiate such a

review, the Regulation does not permit the exemption of structures from the mandatory flood

insurance purchase requirement based solely on their contributory value. Instead, a specific

exemption must apply. The Agencies received no specific comments on this Q&A and are

adopting the Q&A as proposed.

Exemptions 7. The Agencies proposed new Q&A Exemptions 7 to address whether a

building would qualify as a detached structure if it is joined to another building by a stairway or

covered walkway. The proposed answer provided that for purposes of the detached structure

33

exemption, a structure is “detached” from the primary residential structure if it is not joined by

any structural connection to that structure, and “stands alone.” One commenter suggested that

the Agencies allow lenders to defer to an insurer’s definition for a structural connection as this

term is not defined in the Regulation or statute, or that the Agencies define this term. As

indicated in the proposed Q&A, the Agencies have interpreted this term to mean a structure is

“detached” if it stands alone and that this interpretation is consistent with the coverage provision

of the NFIP’s Standard Flood Insurance Policy (SFIP) for additions and extensions to a dwelling

unit

s this

term is not defined in the Regulation or statute, or that the Agencies define this term. As

indicated in the proposed Q&A, the Agencies have interpreted this term to mean a structure is

“detached” if it stands alone and that this interpretation is consistent with the coverage provision

of the NFIP’s Standard Flood Insurance Policy (SFIP) for additions and extensions to a dwelling

unit. The proposed answer also included a reference to the NFIP Flood Insurance Manual for

additional information. However, the Agencies are amending the Q&A to track the language of

the Regulation and are removing the FEMA example as it is unnecessary. Therefore, the

Agencies are adopting the Q&A with these changes.

Proposed Section III. Coverage (NFIP/Private Flood Insurance)

The Agencies proposed in the July 2020 Questions and Answers to move existing section

XI to section III. This section included two new Q&As (Coverage 1 and 3), and existing Q&A

64 redesignated as Coverage 2. Because the Agencies are consolidating the July 2020 Proposed

Questions and Answers and the March 2021 Proposed Questions and Answers, for

organizational purposes, in the 2022 Interagency Questions and Answers the Agencies are

moving the three Q&As under Section III Coverage to other sections as noted below and

reassigning section III.

The Agencies proposed new Q&A Coverage 1 in the July 2020 Proposed Questions and

Answers to assist lenders in complying with the discretionary acceptance provision and mutual

aid societies provision in the Agencies’ 2019 Final Rule. The Agencies are redesignating this

Agencies are

moving the three Q&As under Section III Coverage to other sections as noted below and

reassigning section III.

The Agencies proposed new Q&A Coverage 1 in the July 2020 Proposed Questions and

Answers to assist lenders in complying with the discretionary acceptance provision and mutual

aid societies provision in the Agencies’ 2019 Final Rule. The Agencies are redesignating this

34

Q&A as Q&A Discretionary 4. Please refer to Section IV, Q&A Discretionary 4 for the

Agencies response to comments.

The Agencies proposed to redesignate existing Q&A 64 as Coverage 2. This Q&A

addresses when a lender may rely on an insurance policy providing portfolio-wide coverage,

removes the reference to criteria set forth by FEMA, and includes language addressing a lender’s

reliance on a policy that provides portfolio-wide coverage. The Agencies are re-designating this

Q&A as Q&A Applicability 14. Please refer to Section I, Q&A Applicability 14 for the

Agencies response to comments.

The Agencies proposed new Q&A Coverage 3 in the July 2020 Proposed Questions and

Answers to address when mandatory flood insurance on a designated loan is required to be in

place during the closing process. The Agencies redesignated Q&A Coverage 3 as Q&A

Applicability 15. Please refer to Section I, Q&A Applicability 15 for the Agencies response to

comments.

Additionally, the Agencies proposed in the July 2020 Proposed Questions and Answers

to delete existing Q&A 63 because it was inconsistent with the Agencies’ final rule

implementing the private flood insurance provision of the Biggert-Waters Act.23 The Agencies

received no specific comment on this proposed change and are deleting this Q&A as proposed.

Section III. Private Flood Insurance – Mandatory Acceptance (Mandatory)

The 2019 Final Rule requires lenders to accept “private flood insurance,” as defined in

the Biggert-Waters Act (mandatory acceptance)

implementing the private flood insurance provision of the Biggert-Waters Act.23 The Agencies

received no specific comment on this proposed change and are deleting this Q&A as proposed.

Section III. Private Flood Insurance – Mandatory Acceptance (Mandatory)

The 2019 Final Rule requires lenders to accept “private flood insurance,” as defined in

the Biggert-Waters Act (mandatory acceptance). In order to assist lenders in evaluating whether

a flood insurance policy meets the definition of “private flood insurance,” the 2019 Final Rule

also includes a compliance aid provision. Under the compliance aid provision, a lender may

23 84 FR 4953 (Feb. 20, 2019).

35

conclude that a policy meets the definition of “private flood insurance” without further review if

the policy, or an endorsement to the policy, contains the compliance aid statement set forth in the

rule.

The Agencies proposed a number of Q&As regarding mandatory acceptance and the

compliance aid provision in the March 2021 Proposed Questions and Answers. As discussed in

further detail below, the Agencies are combining proposed Q&A Mandatory 2 with proposed

Q&A Discretionary 4 and renumbering the Q&A as Q&A Private Flood Compliance 11. The

Agencies also are renumbering the other Q&As in this section accordingly.

General Comments. The Agencies received some general comments regarding the Q&As

related to the mandatory acceptance of private flood insurance policies. One commenter was

supportive of the proposed Q&As, stating that the Agencies’ implementation of the mandatory

acceptance provisions and widespread use of a compliance aid assurance clause have allowed the

private flood insurance market to thrive. This commenter believed the mandatory acceptance

provisions facilitate private policy placements, ensure that consumers have access to affordable

flood coverage, and provide security to lenders seeking to fulfill their compliance obligation

of the mandatory

acceptance provisions and widespread use of a compliance aid assurance clause have allowed the

private flood insurance market to thrive. This commenter believed the mandatory acceptance

provisions facilitate private policy placements, ensure that consumers have access to affordable

flood coverage, and provide security to lenders seeking to fulfill their compliance obligation.

Another commenter suggested the Q&As could incorporate language that clarifies digital

transmission of relevant flood coverage documents, as well as physical transmission or use of

paper documents, is permissible. As explained under Q&A Discretionary 2, the Regulation does

not address the acceptability of electronic records, but lenders may accept electronic and digital

records for recordkeeping purposes.

One commenter noted that a number of the mandatory acceptance Q&As refer to

“reviews” of private flood insurance policies. This commenter stated that it would be helpful to

clarify that a flood insurance policy issued by a private insurer is subject to two different

36

reviews. According to the commenter, as with any flood insurance policy, including NFIP

policies, the lender or servicer must conduct the mandatory purchase requirement review in

connection with a triggering event. The commenter stated that this review would include, among

other things, determining whether the policy contains the appropriate coverage limits, deductible,

term of coverage, and mortgagee clause. In addition, the commenter stated that, the lender or

servicer must determine whether a private flood insurance policy satisfies the definition of

“private flood insurance” or could otherwise be accepted by a lender under the discretionary

acceptance criteria. The commenter requested this clarification throughout the Interagency

Questions and Answers.

The Agencies understand the commenter’s confusion regarding the term “review” as used

in some of the Q&As in the mandatory acceptance section

insurance policy satisfies the definition of

“private flood insurance” or could otherwise be accepted by a lender under the discretionary

acceptance criteria. The commenter requested this clarification throughout the Interagency

Questions and Answers.

The Agencies understand the commenter’s confusion regarding the term “review” as used

in some of the Q&As in the mandatory acceptance section. The Agencies have generally

clarified the type of review involved for relevant mandatory acceptance Q&As, either in the text

of the Q&A or the preamble.

Mandatory 1. Proposed new Q&A Mandatory 1 addressed whether a lender may decide

to only accept private flood insurance policies under the mandatory acceptance provision of the

Regulation. The proposed answer confirmed that a lender may decide to only accept private

flood insurance policies that the lender is required to accept under the mandatory acceptance

provision because the policies meet the definition of “private flood insurance” under the

Regulation. The proposed answer also clarified that a lender is not required to accept flood

insurance policies that only meet the criteria set forth in the discretionary acceptance or mutual

aid provision in the Regulation. The Agencies received no specific comments on this Q&A and

are adopting it as proposed with minor non-substantive edits.

37

Mandatory 2 (Proposed as Q&A Mandatory 3). Proposed new Q&A Mandatory 3

addressed whether the private flood insurance requirements under the Regulation require a lender

to change its policy of not originating a mortgage in non-participating communities or coastal

barrier regions where the NFIP is not available. The proposed answer explained that the

Regulation does not require a lender to originate a loan that does not meet the lender’s

underwriting criteria

y 3

addressed whether the private flood insurance requirements under the Regulation require a lender

to change its policy of not originating a mortgage in non-participating communities or coastal

barrier regions where the NFIP is not available. The proposed answer explained that the

Regulation does not require a lender to originate a loan that does not meet the lender’s

underwriting criteria. Further, the proposed answer noted that the flood insurance purchase

requirement only applies to loans secured by structures located or to be located in an SFHA in

which flood insurance is available under the Act. As stated in Q&A Applicability 1, as proposed

and as adopted by the Agencies, the mandatory flood insurance purchase requirement does not

apply within non-participating communities where NFIP insurance is not available under the

Act. Therefore, the proposed answer states that the lender does not need to change its policy of

not originating mortgages in areas where NFIP insurance is unavailable solely because of the

private flood insurance requirements under the Regulation. The Agencies received no specific

comments on this Q&A and are adopting it as proposed, with minor changes for clarity, and

renumbered as Q&A Mandatory 2.

Mandatory 3 (Proposed as Q&A Mandatory 4). Proposed new Q&A Mandatory 4

addressed whether the compliance aid assurance clause could act as a conformity clause that

would make a flood insurance policy issued by a private insurer conform to the definition of

“private flood insurance” under the Regulation. The proposed answer clarified that the

compliance aid assurance clause is not intended to act as a conformity clause but rather to

facilitate the ability of lenders and borrowers to recognize policies that meet the definition of

“private flood insurance” and promote the consistent acceptance of policies that meet this

definition.

finition of

“private flood insurance” under the Regulation. The proposed answer clarified that the

compliance aid assurance clause is not intended to act as a conformity clause but rather to

facilitate the ability of lenders and borrowers to recognize policies that meet the definition of

“private flood insurance” and promote the consistent acceptance of policies that meet this

definition.

38

The Agencies received a few comments on this proposed Q&A. One commenter agreed

in principle that the compliance aid language should not, and cannot, act as a conformity clause,

due mainly to the unique legal status that the term “conformity clause” has in State insurance

regulation and contract law. Another commenter noted that whether the compliance aid

assurance clause acts as a conformity clause is best interpreted by State insurance regulation and

contract law. The third commenter explained that interpretation of insurance contracts, including

whether the compliance aid assurance clause acts as a conformity clause, should be a matter of

State law. This commenter further stated that this Q&A is outside the scope of the Federal flood

insurance statutes and regulations, and is outside the Agencies’ authority to interpret and apply

those Federal statutes and regulations. The commenter recommended instead that the Agencies

address this question by providing guidance that this is a matter of State insurance contract law.

The Agencies disagree with this commenter’s statement regarding the scope of the Act and

Regulation and the Agencies’ authority to interpret or apply the Act and Regulation. The

Agencies adopted the compliance aid provision in the Regulation pursuant to the authority

granted to the Agencies in the Act to issue the Regulation.24 Therefore, the Agencies have the

authority to interpret this provision in a Q&A

sagree with this commenter’s statement regarding the scope of the Act and

Regulation and the Agencies’ authority to interpret or apply the Act and Regulation. The

Agencies adopted the compliance aid provision in the Regulation pursuant to the authority

granted to the Agencies in the Act to issue the Regulation.24 Therefore, the Agencies have the

authority to interpret this provision in a Q&A.

Additionally, a few of the commenters recommended that the Agencies delete references

to “assurance clause” in this Q&A and revert to prior language that simply refers to this clause as

the compliance aid language or statement. The commenters noted that the addition of “assurance

clause” in the current Q&A could infer a meaning beyond that intended by the Agencies because

the term “assurance clause” has broad meaning under State insurance regulations and insurance

laws. The Agencies agree with these comments. The Agencies are removing references to

24 42 U.S.C. 4012a(b)(1).

39

“assurance clause” in the final Q&A, as well as in the other Q&As, and will refer to this as the

“compliance aid statement” per the Regulation. With this change, and a minor change for

clarity, the Agencies are adopting this Q&A as proposed and renumbered as Q&A Mandatory 3.

Mandatory 4 (Proposed as Q&A Mandatory 5). Proposed new Q&A Mandatory 5 stated

that a lender is not required to accept a flood insurance policy issued by a private insurer solely

because the policy contains the compliance aid assurance clause if the lender chooses to conduct

its own review and determines the flood insurance policy actually does not meet the mandatory

acceptance requirements

Mandatory 4 (Proposed as Q&A Mandatory 5). Proposed new Q&A Mandatory 5 stated

that a lender is not required to accept a flood insurance policy issued by a private insurer solely

because the policy contains the compliance aid assurance clause if the lender chooses to conduct

its own review and determines the flood insurance policy actually does not meet the mandatory

acceptance requirements. The proposed answer noted that if a flood insurance policy issued by a

private insurer does not include the compliance aid assurance clause, the lender must still review

the policy to determine if it meets the requirements for private flood insurance as set forth in the

Regulation before the lender may choose to reject the policy.

One commenter believed that a flood insurance policy issued by a private insurer that

includes the compliance aid statement must be accepted and did not support Q&A Mandatory 5.

The Agencies have been clear that a lender is not required to accept a flood insurance policy

issued by a private insurer solely because it contains the compliance aid statement. Lenders may

still, at their discretion, review a flood insurance policy issued by a private insurer that contains

the compliance aid statement and reject the policy if they do not believe it meets the definition of

“private flood insurance” or if it does not meet other requirements of the Regulation, such as

providing the required amount of insurance.

Other commenters emphasized that Q&A Mandatory 5 is confusing and unclear. For

example, commenters pointed out that a lender does not have to accept a flood insurance policy

issued by a private insurer that does not meet the coverage requirements and a review is not

required if a policy does not meet the coverage requirements. Commenters were unsure if the

the required amount of insurance.

Other commenters emphasized that Q&A Mandatory 5 is confusing and unclear. For

example, commenters pointed out that a lender does not have to accept a flood insurance policy

issued by a private insurer that does not meet the coverage requirements and a review is not

required if a policy does not meet the coverage requirements. Commenters were unsure if the

40

“required to accept” phrase in the question applies only to an assessment of whether the policy

meets the definition of “private flood insurance” or if a lender could be required to accept the

policy even if the policy is otherwise insufficient (such as the required dollar amount of

coverage).

Some commenters believed the Agencies make an assumption about a given lender’s

processes by concluding that the lender would review a policy under mandatory acceptance

criteria before the lender would review under discretionary acceptance criteria even though the

Agencies make clear under proposed Q&A Mandatory 8 that a lender “may first review the

policy to determine whether it meets the criteria under the discretionary acceptance provision.”

One commenter emphasized that the Agencies go further than necessary in the proposed

response and seem to dictate certain processes for the lender.

In addition, commenters suggested the Agencies consider alternative language for Q&A

Mandatory 5. One commenter was confused by the Agencies’ choice of language that did not

align with the Regulation or the preamble discussion on the proposed Q&A. One commenter

recommended the Agencies modify the answer to use plain language from the 2019 Final Rule

and use consistent language to avoid confusion regarding key compliance concepts

Agencies consider alternative language for Q&A

Mandatory 5. One commenter was confused by the Agencies’ choice of language that did not

align with the Regulation or the preamble discussion on the proposed Q&A. One commenter

recommended the Agencies modify the answer to use plain language from the 2019 Final Rule

and use consistent language to avoid confusion regarding key compliance concepts.

As explained in the preamble to the 2019 Final Rule, the Regulation does not permit

lenders to reject a flood insurance policy issued by a private insurer solely because the policy is

not accompanied by the compliance aid statement.25 The Agencies stress that the compliance aid

statement is meant to be an aid for lenders and it is not required for lenders to accept a flood

insurance policy issued by a private insurer. In addition, lenders should remember that other

25 84 FR 4953, 4959 (Feb. 20, 2019).

41

aspects of the Regulation must be met for a lender to accept a flood insurance policy issued by a

private insurer, even if the policy meets the definition of “private flood insurance.”

However, the Agencies understand the commenters’ concerns about Q&A Mandatory 5

as proposed and are incorporating suggested changes to address these issues. The final answer

provides that if a flood insurance policy issued by a private insurer includes the compliance aid

statement, the lender may choose to rely upon the statement and would not need to review the

policy further to determine if the policy meets the definition of “private flood insurance.” The

final answer also makes clear, however, that the lender is not required to accept this policy based

upon inclusion of the compliance aid statement alone and may choose to make its own

determination about whether the policy meets the definition of “private flood insurance” or

whether the policy is acceptable under the discretionary acceptance or mutual aid criteria

rivate flood insurance.” The

final answer also makes clear, however, that the lender is not required to accept this policy based

upon inclusion of the compliance aid statement alone and may choose to make its own

determination about whether the policy meets the definition of “private flood insurance” or

whether the policy is acceptable under the discretionary acceptance or mutual aid criteria. In

addition, if a flood insurance policy issued by a private insurer does not include the compliance

aid statement, the final answer provides that the lender may not reject the policy solely because it

does not include this statement. The final answer also states that a lender is not relieved from the

requirement to accept a policy that meets the definition of “private flood insurance” and provides

the required amount of insurance under the Regulation. The final answer also provides that the

lender may determine the policy is acceptable under the discretionary acceptance or mutual aid

criteria.

Lastly, as mentioned in Q&A Mandatory 3 in this section, the Agencies are changing the

term “compliance aid assurance clause” throughout this Q&A to “compliance aid statement” to

be consistent with the Regulation.

With these changes, the Agencies are adopting proposed Q&A Mandatory 5 and

renumbering it as Q&A Mandatory 4.

42

Mandatory 5 (Proposed as Q&A Mandatory 6). Proposed new Q&A Mandatory 6

discussed whether a lender is required to conduct an additional review of a flood insurance

policy issued by a private insurer under the mandatory acceptance provision if the policy

includes the compliance aid assurance clause

gencies are adopting proposed Q&A Mandatory 5 and

renumbering it as Q&A Mandatory 4.

42

Mandatory 5 (Proposed as Q&A Mandatory 6). Proposed new Q&A Mandatory 6

discussed whether a lender is required to conduct an additional review of a flood insurance

policy issued by a private insurer under the mandatory acceptance provision if the policy

includes the compliance aid assurance clause. The proposed answer stated that under the

mandatory acceptance provision of the Regulation, if a policy or an endorsement to the policy

contains the compliance aid assurance clause, a lender is not required to conduct any further

review of the policy in order to determine that the policy meets the definition of “private flood

insurance.” The proposed answer also clarified that the language of the compliance aid

assurance clause must be stated as set forth in the Regulation in order for the lender to rely on the

protections of the compliance aid assurance clause. However, a lender need not reject a policy

containing the compliance aid assurance clause if the formatting, font, punctuation, and similar

stylistic effects that do not change the substantive meaning of the clause are different from the

compliance aid assurance clause set forth in the Regulation. The proposed answer included a

cross-reference to proposed new Q&A Mandatory 7.

The Agencies received a specific comment on Q&A Mandatory 6 that was supportive.

The commenter agreed that if a policy or an endorsement to the policy contains the compliance

aid statement, further review is not necessary in order for the lender to determine that a policy

meets the definition of “private flood insurance.” Therefore, the Agencies are adopting this

Q&A as proposed, other than amending the term “compliance aid assurance clause” throughout

the Q&A to “compliance aid statement” to be consistent with the Regulation. The Agencies are

also renumbering Q&A Mandatory 6 as proposed to Q&A Mandatory 5 and updating the

included cross-reference.

policy

meets the definition of “private flood insurance.” Therefore, the Agencies are adopting this

Q&A as proposed, other than amending the term “compliance aid assurance clause” throughout

the Q&A to “compliance aid statement” to be consistent with the Regulation. The Agencies are

also renumbering Q&A Mandatory 6 as proposed to Q&A Mandatory 5 and updating the

included cross-reference.

43

Mandatory 6 (Proposed as Q&A Mandatory 7). Proposed new Q&A Mandatory 7

described additional reviews a lender must conduct when a flood insurance policy issued by a

private insurer includes the compliance aid assurance clause, as the clause only assists a lender in

making the determination that a flood insurance policy meets the definition of “private flood

insurance” in the Regulation, and not other requirements specified in the Regulation.

Specifically, under the proposed answer, the lender also must ensure that the amount of

insurance is at least equal to the lesser of the outstanding principal balance of the designated loan

or the maximum limit of coverage available for the particular type of property under the Act.

The answer also included a cross-reference to proposed new Q&A Mandatory 6.

One commenter recommended that the Agencies revise Q&A Mandatory 7 and include a

new Q&A under the Private Flood Compliance section. This commenter understood that the

Agencies are attempting to reassure lenders who may be reluctant to accept a flood insurance

policy issued by a private insurer merely because the policy includes the compliance aid

statement. At the same time, the commenter believed that the Agencies do not want lenders to

overlook the fundamental “requirements for coverage” review. Thus, the commenter suggested

the Agencies simplify Q&A Mandatory 7 and move the language regarding coverage and other

applicable requirements to a new Q&A under the Private Flood Compliance section

se the policy includes the compliance aid

statement. At the same time, the commenter believed that the Agencies do not want lenders to

overlook the fundamental “requirements for coverage” review. Thus, the commenter suggested

the Agencies simplify Q&A Mandatory 7 and move the language regarding coverage and other

applicable requirements to a new Q&A under the Private Flood Compliance section. In addition,

this commenter further recommended the Agencies include appropriate cross-references between

Q&A Mandatory 7 and their suggested new Q&A, as well as to applicable questions under other

sections. The Agencies disagree with this comment. Under the Regulation, lenders must

determine whether a policy issued by a private flood insurance company meets both the

definition of “private flood insurance” and the required amount of insurance under the

Regulation. The intent of proposed Q&A Mandatory 7 is to remind lenders that they must

44

review the policy to ensure that it meets the amount of insurance required under the Regulation

even if the policy includes the compliance aid statement.

Many commenters had concerns with the sentence in the answer recommending that

lenders ensure the accuracy of other key aspects of the policy, such as the borrower’s name and

address. These commenters specifically found the phrase “key aspects of the policy” to be

ambiguous, open-ended, extraneous, and potentially problematic and recommended either its

deletion or amendment. Specifically, one commenter noted that because there are no statutory or

regulatory requirements or references regarding this phrase or the included examples, this

sentence could confuse lenders. Another commenter stated that the Agencies should clearly

define the exact elements that lenders must review beyond the compliance aid statement. One

commenter suggested that the Agencies instead instruct lenders to review the policy as they

would review other insurance policies for safety and soundness

nces regarding this phrase or the included examples, this

sentence could confuse lenders. Another commenter stated that the Agencies should clearly

define the exact elements that lenders must review beyond the compliance aid statement. One

commenter suggested that the Agencies instead instruct lenders to review the policy as they

would review other insurance policies for safety and soundness. Further, one commenter

explained that there are many valid reasons for differences between the named parties on a

mortgage and a property insurance policy as well as for differences in the physical address of the

property, especially if the mortgage system reflects the legal description for the property as

opposed to a mailing address.

The Agencies agree with the commenters that the phrase “other key aspects of the policy”

is unclear. Because this sentence is not necessary to answer the question, the Agencies are

deleting it in the final answer. Using alternative language regarding safety and soundness, as

suggested by one commenter, would not eliminate ambiguity. However, the Agencies note that

this deletion does not eliminate the need for lenders to conduct other reviews of a policy pursuant

to their internal processes.

45

One commenter requested that the Agencies use the term “limit” instead of the term

“coverage” the first time it appears in the answer. The Agencies have considered this request

and are changing this use of “coverage” to “amount of insurance,” which is the phrase used in

the Regulation.

Additionally, the Agencies are adding a reference to the Regulation in the question in this

Q&A to avoid further confusion. The Agencies also are amending the term “compliance aid

assurance clause” throughout the Q&A to “compliance aid statement” to be consistent with the

Regulation.

With these changes, the Agencies are adopting this Q&A, renumbering it as Q&A

Mandatory 6, and making a corresponding update to the included cross-reference

to the Regulation in the question in this

Q&A to avoid further confusion. The Agencies also are amending the term “compliance aid

assurance clause” throughout the Q&A to “compliance aid statement” to be consistent with the

Regulation.

With these changes, the Agencies are adopting this Q&A, renumbering it as Q&A

Mandatory 6, and making a corresponding update to the included cross-reference.

Mandatory 7 (Proposed as Q&A Mandatory 8). Proposed new Q&A Mandatory 8

addressed whether a lender may use the criteria under the discretionary acceptance provision to

decide whether to accept a policy that does not contain the compliance aid assurance clause

without first reviewing the policy to determine if it meets the mandatory acceptance provision.

The proposed answer clarified that a lender may first review the policy to determine whether it

meets the criteria under the discretionary acceptance provision. However, if the policy is not

accepted under the discretionary acceptance provision, the lender still needs to determine

whether it must accept the policy under the mandatory acceptance criteria. The proposed answer

also reminded lenders to document that a policy provides sufficient protection of the loan if the

lender accepts the policy under the discretionary acceptance provision of the Regulation.

The Agencies did not receive any specific comment on Q&A Mandatory 8. However, the

Agencies are adding a cross reference to Q&A Discretionary 2 regarding the documentation of

the sufficient protection of the loan, which provides that the lender may document this

sufficient protection of the loan if the

lender accepts the policy under the discretionary acceptance provision of the Regulation.

The Agencies did not receive any specific comment on Q&A Mandatory 8. However, the

Agencies are adding a cross reference to Q&A Discretionary 2 regarding the documentation of

the sufficient protection of the loan, which provides that the lender may document this

46

information electronically. The Agencies also are amending the term “compliance aid assurance

clause” in the question to “compliance aid statement” to be consistent with the Regulation. The

Agencies are adopting Q&A Mandatory 8 with minor clarifying edits and renumbering as Q&A

Mandatory 7.

Mandatory 8 (Proposed as Q&A Mandatory 9). Proposed new Q&A Mandatory 9 noted

that if the compliance aid assurance clause is included on the declarations page, a lender may

accept the policy without further review to determine whether the policy meets the definition of

“private flood insurance.” However, a lender also must ensure that the policy provides the

amount of insurance as required under the Regulation. One commenter pointed out that many

private flood insurance policies do not include this representation on the declarations page, but

they do include it in the policy, and requested that the Agencies edit this Q&A to reflect this fact.

The Agencies note that the Regulation provides that a lender may accept a flood insurance policy

issued by a private insurer if the compliance aid statement is in the policy. The purpose of the

proposed Q&A was to provide guidance when a lender receives only the declarations page and

not the policy. Therefore, to clarify this Q&A, the Agencies are changing the question to refer to

the lender only receiving a declarations page without receiving a copy of the policy.

Another commenter asked the Agencies to amend the response to make it clear that the

lender may determine that the policy meets the definition of “private flood insurance” without

further review

tions page and

not the policy. Therefore, to clarify this Q&A, the Agencies are changing the question to refer to

the lender only receiving a declarations page without receiving a copy of the policy.

Another commenter asked the Agencies to amend the response to make it clear that the

lender may determine that the policy meets the definition of “private flood insurance” without

further review. The Agencies agree and have revised the answer as suggested by this

commenter, which better reflects the language in the Regulation.

One commenter stated that it would be helpful for the Agencies to identify in the answer

the specific items that a lender must review to ensure compliance with the mandatory purchase

requirement when the compliance aid assurance clause is included. The Agencies have

47

addressed this issue in Q&A Mandatory 6 and included a cross-reference to Q&A Mandatory 6

in Q&A Mandatory 9. Therefore, the Agencies do not believe it is necessary to amend Q&A

Mandatory 9 to include this information.

Lastly, the Agencies are amending the term “compliance aid assurance clause”

throughout the Q&A to “compliance aid statement” to be consistent with the Regulation.

With the changes described above, the Agencies are adopting this Q&A, renumbering it

as Q&A Mandatory 8, and making a corresponding update to the included cross-reference.

Mandatory 9 (Proposed as Private Flood Compliance 11). The Agencies are

renumbering proposed Q&A Private Flood Compliance 11 as Q&A Mandatory 9 in the 2022

Interagency Questions and Answers because it more appropriately fits within the Mandatory

Acceptance Q&A section

are adopting this Q&A, renumbering it

as Q&A Mandatory 8, and making a corresponding update to the included cross-reference.

Mandatory 9 (Proposed as Private Flood Compliance 11). The Agencies are

renumbering proposed Q&A Private Flood Compliance 11 as Q&A Mandatory 9 in the 2022

Interagency Questions and Answers because it more appropriately fits within the Mandatory

Acceptance Q&A section. As proposed, this Q&A addressed whether a lender may accept a

private flood insurance policy that includes a compliance aid assurance clause, but that also

includes a disclaimer that the “insurer is not licensed in the State or jurisdiction in which the

property is located.” The proposed answer explained circumstances under which lenders may

accept a policy issued by an insurer that is not licensed in the State or jurisdiction in which the

property is located. The proposed answer also included a cross-reference to proposed Q&A

Private Flood Compliance 10, which addressed whether lenders may accept policies issued by

private insurers that are surplus lines insurers26 for noncommercial residential properties.

Some commenters suggested revising the answer to be more direct and to remove

language that is addressed in Q&A Private Flood Compliance 10. The Agencies agree with the

26 The National Association of Insurance Commissioners (NAIC) notes, “[t]he surplus lines market (inclusive of

U.S. and non-U.S. domiciled insurers) is a distinct segment of the industry consisting of non-admitted specialized

insurers covering risks not available within the admitted market…Surplus lines insurers are subject to regulatory

requirements and are overseen for solvency by their domiciliary [S]tate or country.”

https://content.naic.org/cipr_topics/topic_surplus_lines.htm. For specific definitions related to surplus lines

insurers, lenders should review the State law in which the property is located.

zed

insurers covering risks not available within the admitted market…Surplus lines insurers are subject to regulatory

requirements and are overseen for solvency by their domiciliary [S]tate or country.”

https://content.naic.org/cipr_topics/topic_surplus_lines.htm. For specific definitions related to surplus lines

insurers, lenders should review the State law in which the property is located.

48

commenters that the answer can be worded more effectively and are adopting language similar to

that recommended by one of the commenters. As revised, the answer provides that if the policy

includes a statement indicating that the insurer is not licensed in the State or jurisdiction in which

the property is located, suggesting that the policy is issued by a surplus lines insurer, but contains

a compliance aid statement, lenders may accept the policy as long as the policy complies with

the Regulation and applicable State laws. However, the Agencies note that the language

removed from the proposed answer that provided specific circumstances under which lenders

may accept a policy issued by a surplus lines insurer is still relevant. Specifically, a lender may

accept a policy issued by a surplus lines insurer recognized or not disapproved by the relevant

State insurance regulator as protection for loan collateral that is a commercial property. Also, a

lender may accept a policy issued by a surplus lines insurer as protection for loan collateral that

is a noncommercial property as a policy issued by an insurance company that is “otherwise

approved to engage in the business of insurance by the insurance regulator of the State or

jurisdiction in which the property to be insured is located.”

The Agencies also are making one technical change to this question, amending the term

“compliance aid assurance clause” to “compliance aid statement” to be consistent with the

Regulation.

With the changes described above, the Agencies are adopting Q&A Mandatory 9.

Section IV

insurance by the insurance regulator of the State or

jurisdiction in which the property to be insured is located.”

The Agencies also are making one technical change to this question, amending the term

“compliance aid assurance clause” to “compliance aid statement” to be consistent with the

Regulation.

With the changes described above, the Agencies are adopting Q&A Mandatory 9.

Section IV. Private Flood Insurance – Discretionary Acceptance (Discretionary)

The 2019 Final Rule permits a lender, at its discretion, to accept a flood insurance policy

issued by a private insurer even if the policy does not meet the statutory and regulatory definition

of “private flood insurance,” provided the policy meets certain requirements in the rule

49

(discretionary acceptance). The 2019 Final Rule also permits a lender, at its discretion, to accept

certain mutual aid plans that meet the conditions stated in the rule.

The Agencies proposed the Q&As in this section, except for Q&A Discretionary 4, in the

March 2021 Proposed Questions and Answers. The Agencies originally proposed Q&A

Discretionary 4, as adopted in these 2022 Interagency Questions and Answers, as Q&A

Coverage 1 in the July 2020 Proposed Questions and Answers. The Agencies are combining

proposed Q&A Discretionary 4 with proposed Q&A Mandatory 2 and renumbering this Q&A as

Q&A Private Flood Compliance 11, as discussed in more detail below.

Discretionary 1. Proposed Q&A Discretionary 1 addressed whether lenders are required

to accept flood insurance policies that meet the discretionary acceptance criteria. The proposed

answer notes that the discretionary acceptance criteria in the Regulation set forth the minimum

acceptable criteria that a flood insurance policy must have for the lender to accept the policy

under the discretionary acceptance provision

ed Q&A Discretionary 1 addressed whether lenders are required

to accept flood insurance policies that meet the discretionary acceptance criteria. The proposed

answer notes that the discretionary acceptance criteria in the Regulation set forth the minimum

acceptable criteria that a flood insurance policy must have for the lender to accept the policy

under the discretionary acceptance provision. The proposed answer clarified that it is at the

lender’s discretion to accept a policy that meets the discretionary acceptance criteria so long as

the policy does not meet the mandatory acceptance criteria. The Agencies received no specific

comments on this Q&A and are adopting Q&A Discretionary 1 as proposed.

Discretionary 2. Proposed Q&A Discretionary 2 addressed the requirements for

documentation to demonstrate that a policy provides sufficient protection of a loan when a lender

accepts that policy under the discretionary acceptance criteria. The proposed answer explained

that the Regulation requires the lender to document its conclusion in writing that the policy

provides sufficient protection of the loan, consistent with safety and soundness principles. In

addition, the proposed answer included a cross-reference to Q&A Discretionary 4 which

discusses some factors to consider when determining whether a flood insurance policy issued by

50

a private insurer provides sufficient protection of the loan, consistent with safety and soundness

principles.27 Furthermore, the proposed answer noted that while the Regulation does not require

any specific documentation to demonstrate that the policy provides sufficient protection of the

loan, lenders may include any information that reasonably supports the lender’s conclusion

following review of the policy.

One commenter on this Q&A suggested that the Agencies clarify that a lender’s

electronic records may serve as documentation that demonstrates that a policy provides sufficient

protection of the loan

on to demonstrate that the policy provides sufficient protection of the

loan, lenders may include any information that reasonably supports the lender’s conclusion

following review of the policy.

One commenter on this Q&A suggested that the Agencies clarify that a lender’s

electronic records may serve as documentation that demonstrates that a policy provides sufficient

protection of the loan. The Agencies note that specific provisions in the Regulation allow for the

use of electronic records. For example, the Regulation allows for the use of the Standard Flood

Hazard Determination Form in an electronic format. Although there are no general provisions in

the Regulation regarding the acceptability of electronic records, the Agencies agree that

electronic and digital records are acceptable for a lender’s recordkeeping purposes. In

consideration of this comment, the Agencies are amending the Q&A by adding that a lender’s

review of a policy under the discretionary acceptance provision may be performed and recorded

electronically.

The second commenter asked the Agencies to clarify whether in situations where a loan

is secured by a building and land, and the value of the land securing a loan is greater than the

loan amount, the lender could determine that flood insurance is not required or that the

deductible may be higher than what the mandatory purchase criteria allows. The Agencies note

that the Regulation requires that flood insurance be at least equal to the lesser of the outstanding

27 These factors include whether: (1) a policy’s deductibles are reasonable based on a borrower’s financial condition;

ot required or that the

deductible may be higher than what the mandatory purchase criteria allows. The Agencies note

that the Regulation requires that flood insurance be at least equal to the lesser of the outstanding

27 These factors include whether: (1) a policy’s deductibles are reasonable based on a borrower’s financial condition;

(2) the insurer provides adequate notice of cancellation to the mortgagor and the mortgagee; (3) the terms and

conditions of the policy with respect to payment per occurrence or per loss and aggregate limits are adequate to

protect the lending institution’s interest in the collateral; (4) the flood insurance policy complies with applicable

State insurance laws; and (5) the private insurance company has the financial strength, solvency and ability to satisfy

claims. See 85 FR 40442, 40458 (July 6, 2020).

51

principal balance of the designated loan or the maximum limit of coverage available for the

particular type of property, and that land is excluded from this analysis. Therefore, the lender

cannot waive the flood insurance requirement based on the value of the land. Additionally, a

flood insurance policy issued by a private insurer must provide sufficient protection of the

designated loan, consistent with general safety and soundness principles. When evaluating

higher deductibles, lenders should ensure the deductible is reasonable considering the borrower’s

financial condition. The Agencies believe that no change is needed in the Q&A to address this

comment and that readers should refer to Q&A Private Flood Compliance 1.

With the amendment described above, the Agencies are adopting Q&A Discretionary 2.

Discretionary 3

principles. When evaluating

higher deductibles, lenders should ensure the deductible is reasonable considering the borrower’s

financial condition. The Agencies believe that no change is needed in the Q&A to address this

comment and that readers should refer to Q&A Private Flood Compliance 1.

With the amendment described above, the Agencies are adopting Q&A Discretionary 2.

Discretionary 3. Proposed Q&A Discretionary 3 addressed how a lender could evaluate

concerns related to an insurer’s solvency, strength, and ability to pay claims in order to

determine whether an insurance policy provides sufficient protection of a loan, consistent with

general safety and soundness principles. The proposed answer provided that a lender may

evaluate an insurer’s solvency, strength, and ability to satisfy claims by obtaining information

from the State insurance regulator’s office of the State in which the property securing the loan is

located, among other options. The proposed answer further indicated that a lender could rely on

the licensing or other processes used by the State insurance regulator for such an evaluation.

A number of commenters suggested that the Agencies provide additional examples for

evaluating an insurer’s solvency, including the use of third-party sources of information such as

credit rating agencies. Although lenders could consider many sources of information to evaluate

an insurer, the Agencies decline to provide examples other than those included in the proposed

Q&A. Further, including credit rating agencies as an example would be inconsistent with the

principle in Section 939A of the Dodd-Frank Act, which required the Agencies to remove

of information such as

credit rating agencies. Although lenders could consider many sources of information to evaluate

an insurer, the Agencies decline to provide examples other than those included in the proposed

Q&A. Further, including credit rating agencies as an example would be inconsistent with the

principle in Section 939A of the Dodd-Frank Act, which required the Agencies to remove

52

references to, or requirements of reliance on, credit ratings in their regulations with regard to

assessment of the creditworthiness of a security or money market instrument using credit rating

agencies. Although this provision concerns regulations, and not guidance, and is focused on the

creditworthiness of a security or money market instrument, and not the solvency of an insurer,

the Agencies believe it would be inappropriate to endorse or reference the use of credit rating

agencies in the Interagency Questions and Answers in light of Section 939A of the Dodd-Frank

Act.

One commenter suggested that the Agencies remove the requirement for financial

institutions to evaluate the solvency and strength of private flood insurers. The Agencies note

that the Regulation does not require lenders to evaluate the solvency and strength of private flood

insurers. Rather, it requires lenders to determine that the policy provides sufficient protection of

the designated loan, consistent with general safety and soundness principles. Evaluating the

solvency and strength of private flood insurers is one factor, among others, that lenders could

consider in making this determination, as detailed in Q&A Discretionary 4 as adopted, discussed

below. For these reasons, the Agencies are adopting the Q&A as proposed, with an update to the

included cross-reference to reflect Q&A renumbering.

Discretionary 4 (Proposed as Q&A Coverage 1)

ating the

solvency and strength of private flood insurers is one factor, among others, that lenders could

consider in making this determination, as detailed in Q&A Discretionary 4 as adopted, discussed

below. For these reasons, the Agencies are adopting the Q&A as proposed, with an update to the

included cross-reference to reflect Q&A renumbering.

Discretionary 4 (Proposed as Q&A Coverage 1). The Agencies proposed new Q&A

Coverage 1 in the July 2020 Proposed Questions and Answers to assist lenders in complying

with the discretionary acceptance provision and mutual aid societies provision in the Agencies’

final rule implementing the private flood insurance provision of the Biggert-Waters Act. As

noted above, the Agencies are renumbering this Q&A as Discretionary 4. The Q&A provides

additional information on some factors to consider when determining whether a flood insurance

policy issued by a private insurer provides sufficient protection of a loan.

53

The Agencies received several comments on this Q&A. One commenter supported the

Q&A because it is not overly prescriptive and will likely enhance the development of the private

flood insurance market. A few commenters recommended that the Agencies clarify that the

sufficient protection of a loan requirement only applies to the discretionary acceptance provision.

The Agencies agree and are clarifying the question so that it specifically references the

discretionary acceptance and mutual aid acceptance provisions.

One commenter recommended that the Agencies expand the answer to explain that if a

flood insurance policy issued by a private insurer or flood endorsement to an insurance policy

issued by a private insurer states that the policy meets the definition of private flood insurance

under 42 U.S.C. 4012a, or includes similar alternative language, such as that the coverage is at

least as broad as the NFIP, the policy is explicitly acceptable

es expand the answer to explain that if a

flood insurance policy issued by a private insurer or flood endorsement to an insurance policy

issued by a private insurer states that the policy meets the definition of private flood insurance

under 42 U.S.C. 4012a, or includes similar alternative language, such as that the coverage is at

least as broad as the NFIP, the policy is explicitly acceptable. Additionally, the commenter

suggested that if the flood insurance policy issued by a private issuer is determined to be less

than the coverage provided under an NFIP policy, and the policy states that coverage is amended

to match the terms of an NFIP policy, that the policy is explicitly acceptable. The Regulation

provides a specific compliance aid provision to assist lenders in determining if a policy meets the

definition of private flood insurance. While lenders may consider the alternative language noted

above when reviewing flood insurance policies issued by private insurers, making a policy

acceptable based on such statements would not be consistent with the Regulation. Therefore, the

Agencies are adopting proposed Q&A Coverage 1, renumbered as Discretionary 4, with the

amendments discussed above.

Section V. Private Flood Insurance – General Compliance (Private Flood Compliance)

The Agencies proposed eleven new Q&As in this section in the March 2021 Proposed

Questions and Answers. As discussed in more detail above, the Agencies are renumbering

gulation. Therefore, the

Agencies are adopting proposed Q&A Coverage 1, renumbered as Discretionary 4, with the

amendments discussed above.

Section V. Private Flood Insurance – General Compliance (Private Flood Compliance)

The Agencies proposed eleven new Q&As in this section in the March 2021 Proposed

Questions and Answers. As discussed in more detail above, the Agencies are renumbering

54

proposed Q&A Private Flood Compliance 11 from the March 2021 Proposed Questions and

Answers as Q&A Mandatory 9. Q&A Private Flood Compliance 11, as adopted in these 2022

Interagency Questions and Answers, is a combination of proposed Q&A Mandatory 2 and

proposed Q&A Discretionary 4 from the March 2021 Proposed Questions and Answers.

Private Flood Compliance 1. Proposed new Q&A Private Flood Compliance 1 addressed

the maximum deductible permissible for a flood insurance policy issued by a private insurer on

properties located in an SFHA. The proposed answer clarified that the analysis depends on

whether the lender is accepting the flood insurance policy under the mandatory acceptance

provision or the discretionary acceptance provision.

For a private flood insurance policy that the lender is accepting under the mandatory

acceptance provision, the proposed answer stated that the Regulation provides that the policy

must contain a deductible that is “at least as broad as” the maximum deductible in the SFIP

under the NFIP, which means that the deductible is no higher than the specified maximum under

an SFIP for any total coverage amount up to the maximum available under the NFIP at the time

the policy is provided to the lender. Further, the proposed answer provided that a policy with a

coverage amount exceeding that available under the NFIP may have a deductible exceeding the

specific maximum deductible under an SFIP

means that the deductible is no higher than the specified maximum under

an SFIP for any total coverage amount up to the maximum available under the NFIP at the time

the policy is provided to the lender. Further, the proposed answer provided that a policy with a

coverage amount exceeding that available under the NFIP may have a deductible exceeding the

specific maximum deductible under an SFIP. However, the proposed answer also advised that

for safety and soundness purposes, the lender should consider whether the deductible is

reasonable based on the borrower’s financial condition, consistent with guidance the Agencies

proposed in Q&A Amount 928 and with how deductibles may be evaluated under the

discretionary acceptance provision. The proposed answer also set forth examples to aid in

compliance.

28 Proposed Q&A Amount 9 provided that a lender should determine the reasonableness of the deductible on a case-

by-case basis, taking into account the risk that such a deductible would pose to the borrower and the lender.

55

Further, the proposed answer provided that for purposes of compliance with the

discretionary acceptance provision, the Regulation requires that the policy provide sufficient

protection of the loan, consistent with general safety and soundness principles. The proposed

answer stated that among other factors a lender could consider in determining whether the policy

provides sufficient protection of the loan is whether the deductible is reasonable based on the

borrower’s financial condition

eptance provision, the Regulation requires that the policy provide sufficient

protection of the loan, consistent with general safety and soundness principles. The proposed

answer stated that among other factors a lender could consider in determining whether the policy

provides sufficient protection of the loan is whether the deductible is reasonable based on the

borrower’s financial condition. The proposed answer further provided that unlike the limitation

on deductibles for policies accepted under the mandatory acceptance provision for any total

coverage amount up to the maximum available under the NFIP, a lender can accept a flood

insurance policy issued by a private insurer under the discretionary acceptance provision with a

deductible higher than that for an SFIP for a similar type of property, provided the lender has

determined the policy provides sufficient protection of the loan, consistent with general safety

and soundness provisions. Finally, the proposed answer provided that whether a lender is

evaluating the policy under the mandatory acceptance provision or the discretionary acceptance

provision, a lender may not allow the borrower to use a deductible amount equal to the insurable

value of the property to avoid the mandatory purchase requirement.

The Agencies received several comments on this Q&A. One commenter asked for

clarification of the flood insurance requirements for non-residential detached structures that are

part of a commercial property and requested that the Agencies not limit the applicability of the

detached structure exemption only to residential properties. The Agencies note that Congress

established the detached structure exemption in HFIAA. This exemption provides that any

structure that is part of a residential property but detached from the primary residential structure

and does not serve as a residence is not required to be covered by flood insurance

imit the applicability of the

detached structure exemption only to residential properties. The Agencies note that Congress

established the detached structure exemption in HFIAA. This exemption provides that any

structure that is part of a residential property but detached from the primary residential structure

and does not serve as a residence is not required to be covered by flood insurance. As this

statutory exemption only applies to a detached structure that is part of a residential property, the

56

Agencies cannot create an exemption for detached structures that are part of a commercial

property. Therefore, the Agencies do not have authority to revise the answer as requested.

One commenter requested clarification regarding the deductible when multiple buildings

are insured on a single insurance policy. Some other commenters requested clarification on how

the statement in Q&A Amount 9 referenced in the final paragraph of the proposed Q&A applies

differently to a flood insurance policy issued by a private insurer covering multiple individual

buildings versus an NFIP policy, which is limited to covering a single building. In response to

these comments, the Agencies are amending the answer to add language that provides that a

lender may accept a private flood insurance policy covering multiple buildings regardless of

whether any single building covered by the policy has an insurable value lower than the amount

of the per occurrence deductible. The Agencies also are adding cross-references to new Q&A

Amount 10 and Q&A Private Flood Compliance 2, which address related deductible issues, to

assist the reader.

One commenter indicated that the Q&A should include guidance that directs private

insurers to consider climate change risk when setting flood insurance deductibles. As discussed

above, climate change risk is outside the scope of the Agencies’ Interagency Questions and

Answers

Q&A

Amount 10 and Q&A Private Flood Compliance 2, which address related deductible issues, to

assist the reader.

One commenter indicated that the Q&A should include guidance that directs private

insurers to consider climate change risk when setting flood insurance deductibles. As discussed

above, climate change risk is outside the scope of the Agencies’ Interagency Questions and

Answers. As indicated previously, the Agencies are working individually and on an interagency

basis to address financial risks associated with climate change consistent with the Agencies’

regulatory and supervisory authorities. Therefore, the Agencies decline to make any change to

the Q&A in response to this comment. For clarity, the Agencies are rewording the reference to

the deductible requirement in the Regulation. With this clarifying edit and the amendment as

noted, the Agencies are adopting Q&A Private Flood Compliance 1.

57

Private Flood Compliance 2. Proposed new Q&A Private Flood Compliance 2 clarified

that a lender may require that the deductible of any flood insurance policy issued by a private

insurer be lower than the maximum deductible for an NFIP policy, under both the mandatory

acceptance provision and the discretionary acceptance provision. The proposed answer further

stated that for the mandatory acceptance provision, the Regulation requires that the private flood

insurance policy be at least as broad as an NFIP policy, which includes a requirement that the

private flood insurance policy contain a deductible no higher than the specified maximum

deductible for an SFIP. Therefore, the proposed answer clarified that a lender may require a

borrower’s private flood insurance policy deductible to be lower than the maximum deductible

for an NFIP policy in connection with a policy that the lender accepts under the mandatory

acceptance provision consistent with general safety and soundness principles and based on a

borrower’s financial condition, among other factors

Therefore, the proposed answer clarified that a lender may require a

borrower’s private flood insurance policy deductible to be lower than the maximum deductible

for an NFIP policy in connection with a policy that the lender accepts under the mandatory

acceptance provision consistent with general safety and soundness principles and based on a

borrower’s financial condition, among other factors. With respect to the discretionary

acceptance provision, the proposed answer noted that the lender need only consider whether the

policy, including the stated deductible, provides sufficient protection of the loan, consistent with

general safety and soundness principles. The proposed answer also included a reference to

proposed Q&A Private Flood Compliance 1, which also addresses deductibles.

A commenter requested that the Agencies include in the answer an example of when a

lender is not required to accept a policy for safety and soundness reasons related to the

deductible, such as when a deductible is too high based on the borrower’s financial condition.

The Agencies decline to include an example in the answer because the answer already makes

clear that a lender can require, as a condition of accepting the policy, a lower deductible for

safety and soundness reasons. The Agencies note that the issues of deductibles as they relate to

flood insurance policies issued by private insurers are already discussed in Q&A Private Flood

cial condition.

The Agencies decline to include an example in the answer because the answer already makes

clear that a lender can require, as a condition of accepting the policy, a lower deductible for

safety and soundness reasons. The Agencies note that the issues of deductibles as they relate to

flood insurance policies issued by private insurers are already discussed in Q&A Private Flood

58

Compliance 1. Therefore, the Agencies are adopting this Q&A as proposed with some minor

non-substantive edits.

Private Flood Compliance 3. Proposed Q&A Private Flood Compliance 3 provided

guidance regarding whether a lender may charge fees to the borrower for the lender’s use of a

third party to review flood insurance policies. The proposed answer provided that the Act and

the Regulation do not prohibit lenders from charging fees to borrowers for contracting with a

third party to review flood insurance policies, including a policy issued by a private insurer, and,

as provided in Q&A Fees 1 and Q&A Fees 2, lenders may charge limited, reasonable fees for

flood determinations and life-of-loan monitoring.29 The proposed answer reminded lenders that

they should be aware of any other applicable requirements regarding fees and disclosures of fees.

A commenter suggested that the Q&A should be expanded to specifically speak to the

lender’s ability to condition its acceptance of a flood insurance policy issued by a private insurer

on payment of a fee. The Agencies disagree. As provided in the Act and the Regulation, a

lender is required to accept a flood insurance policy issued by a private insurer that meets the

definition of “private flood insurance,” as long as the policy meets the amount of insurance

required under the Regulation. Therefore, a lender cannot condition the acceptance of such a

policy on the payment of a fee by the borrower. Further, as stated above lenders should be aware

of any other applicable requirements regarding fees and disclosures of fees

by a private insurer that meets the

definition of “private flood insurance,” as long as the policy meets the amount of insurance

required under the Regulation. Therefore, a lender cannot condition the acceptance of such a

policy on the payment of a fee by the borrower. Further, as stated above lenders should be aware

of any other applicable requirements regarding fees and disclosures of fees. Therefore, the

Agencies are adopting this Q&A as proposed with minor non-substantive edits.

Private Flood Compliance 4. Proposed new Q&A Private Flood Compliance 4 addressed

the lender’s responsibility to ensure a policy issued by a private insurer meets the private flood

29 New Q&A Fees 1, which is adapted from current Q&A 69, lists the four instances in the Act and Regulation when

a lender or servicer can charge the borrower a fee for making a flood determination. New Q&A Fees 2, adapted

from current Q&A 70, provides that charges made for life-of-loan reviews by determination firms may be passed to

the borrower under certain conditions.

59

insurance requirements of the Regulation if the policy is not available prior to loan closing. The

proposed answer stated that the Act and Regulation do not specify the acceptable types of

documentation for a lender to rely on when reviewing a flood insurance policy issued by a

private insurer. The proposed answer also advised lenders to determine whether they have

sufficient evidence to show the policy meets requirements under the Regulation and that if the

lender does not have enough information to make this determination, then the lender should

timely request additional information as necessary to complete its review. The proposed answer

also suggested some optional steps that a lender could take to mitigate against closing delays.

The Agencies received a number of comments on this Q&A

meets requirements under the Regulation and that if the

lender does not have enough information to make this determination, then the lender should

timely request additional information as necessary to complete its review. The proposed answer

also suggested some optional steps that a lender could take to mitigate against closing delays.

The Agencies received a number of comments on this Q&A. Commenters asserted that

lenders may not be able to obtain, before closing, a full policy or other information sufficient to

determine whether a policy complies with the private flood insurance requirements of the

Regulation. The commenters suggested revising the answer to provide that a lender may close a

loan without determining whether the policy satisfies these requirements and, if the lender later

determines that the policy does not satisfy these requirements, the lender would then comply

with the Act’s force-placed insurance requirements. The commenters also noted that with NFIP

policies, lenders often rely on paid applications as evidence of coverage and receive a

declarations page only after loan closing.

The Agencies decline to make the changes the commenters request. If a borrower is

obtaining a flood insurance policy issued by a private insurer, the lender must determine whether

the policy meets the requirements under the Regulation. If the lender cannot make this

determination before closing on the loan, it may need to delay the closing. As discussed in Q&A

Private Flood Compliance 5, the declarations page, if available to the lender before closing, may

provide enough information for the lender to determine whether the policy meets the mandatory

determine whether

the policy meets the requirements under the Regulation. If the lender cannot make this

determination before closing on the loan, it may need to delay the closing. As discussed in Q&A

Private Flood Compliance 5, the declarations page, if available to the lender before closing, may

provide enough information for the lender to determine whether the policy meets the mandatory

60

acceptance provision or discretionary acceptance provision of the Regulation or may contain the

compliance aid statement, in which case the lender may rely solely on the declarations page.

Otherwise, the lender may choose to ask the borrower to obtain the necessary information from

the private insurer to provide to the lender.

Further, with respect to the commenter’s statement that with NFIP policies, lenders often

rely before closing on paid applications for coverage and do not receive a declarations page until

after closing, the Agencies note that an NFIP policy does not need to be evaluated to determine if

it complies with the private flood insurance requirements of the Regulation. In contrast, flood

insurance policies issued by private insurers may not necessarily satisfy the private flood

insurance requirements of the Regulation. As indicated above, a lender must review such a

policy to determine if it satisfies these requirements.

Finally, commenters also requested that the answer distinguish its applicability to the two

forms of review: the review of sufficiency for compliance with the mandatory purchase

requirement and the review of acceptability under the private flood insurance requirements of the

Regulation. The intent of this Q&A is to remind lenders of their responsibility to ensure that a

policy meets the private flood insurance requirements of the Regulation if the policy is not

available prior to loan closing. It is not to address any of the other requirements in the

Regulation

ase

requirement and the review of acceptability under the private flood insurance requirements of the

Regulation. The intent of this Q&A is to remind lenders of their responsibility to ensure that a

policy meets the private flood insurance requirements of the Regulation if the policy is not

available prior to loan closing. It is not to address any of the other requirements in the

Regulation. To clarify this, the Agencies are amending the Q&A so that it addresses only the

private flood insurance requirements under the Regulation and does not address any other flood

requirements that the Regulation imposes. The Agencies also are adding in this Q&A a

reference to Q&A Private Flood Compliance 5, to direct readers to guidance on whether a

declarations page provides sufficient information for a lender to determine whether the policy

complies with the private flood insurance requirements of the Regulation.

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With the exception of the changes discussed above, the Agencies are adopting this Q&A

as proposed.

Private Flood Compliance 5. Proposed new Q&A Private Flood Compliance 5 addressed

whether a declarations page provides sufficient information for a lender to determine whether a

policy complies with the private flood insurance requirements of the Regulation. Under the

proposed answer, the lender may rely on the declarations page if it provides sufficient

information for the lender to determine whether the policy meets the mandatory acceptance

provision or the discretionary acceptance provision of the Regulation or if the declarations page

contains the compliance aid assurance clause. However, if the declarations page does not

provide sufficient information, the proposed answer suggested that the lender should request

additional information about the policy to aid its determination.

The Agencies received a number of comments on this Q&A

sion or the discretionary acceptance provision of the Regulation or if the declarations page

contains the compliance aid assurance clause. However, if the declarations page does not

provide sufficient information, the proposed answer suggested that the lender should request

additional information about the policy to aid its determination.

The Agencies received a number of comments on this Q&A. Similar to Q&A Private

Flood Compliance 4, the commenters asserted that the information lenders receive before closing

may not be sufficient to determine whether the policy complies with the private flood insurance

requirements of the Regulation, even though it is sufficient to determine that the policy satisfies

the mandatory purchase requirement, and they suggested revising the answer to provide that a

lender may close a loan without determining whether the policy satisfies the private flood

insurance requirements. If the lender later determined that the policy does not satisfy these

requirements, the lender would then comply with the Act’s force-placed insurance requirements.

For the reasons discussed in Private Flood Compliance 4, the Agencies decline to make the

requested changes.

Commenters further requested that the answer distinguish its applicability to the two

forms of review: the review of sufficiency for compliance with the mandatory purchase

62

requirement and the review of acceptability under the private flood insurance requirements of the

Regulation. The Agencies note that the focus of this Q&A is on the private flood insurance

requirements of the Regulation and not any other flood requirements imposed by the Regulation.

To clarify this, the Agencies are revising the question to specifically refer only to the private

flood insurance requirements under the Regulation.

Several of the commenters requested guidance about a lender’s authority to request

necessary information from the borrower or insurer

lood insurance

requirements of the Regulation and not any other flood requirements imposed by the Regulation.

To clarify this, the Agencies are revising the question to specifically refer only to the private

flood insurance requirements under the Regulation.

Several of the commenters requested guidance about a lender’s authority to request

necessary information from the borrower or insurer. The Agencies affirm that lenders may seek

necessary information from borrowers and insurers. As discussed above, if a lender is unable to

obtain the necessary information about a policy issued by a private insurer before closing, it may

need to delay the closing. Another commenter suggested that the Q&A is unnecessarily limited

by references to the declarations page and that that the Agencies should revise the Q&A to focus

on the various forms of, and purposes for examining, evidence of coverage rather than

emphasizing the declarations page. The Agencies note that this Q&A focuses on the declarations

page because, prior to proposing this Q&A, the Agencies had received many questions

requesting guidance on whether a declarations page provides sufficient information for a lender

to determine whether a policy complies with the private flood insurance requirements of the

Regulation. Q&A Private Flood Compliance 4 makes clear that the Act and Regulation do not

specify the acceptable types of documentation on which a lender must rely when reviewing a

flood insurance policy issued by a private insurer. If the necessary information is contained in

other appropriate documentation, the lender need not rely on the declarations page.

The Agencies are adopting this Q&A as proposed, with the change to the question

discussed above, and with one technical change to the answer that amends the term “compliance

aid assurance clause” to “compliance aid statement” to be consistent with the Regulation.

If the necessary information is contained in

other appropriate documentation, the lender need not rely on the declarations page.

The Agencies are adopting this Q&A as proposed, with the change to the question

discussed above, and with one technical change to the answer that amends the term “compliance

aid assurance clause” to “compliance aid statement” to be consistent with the Regulation.

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Private Flood Compliance 6. The Agencies proposed new Q&A Private Flood

Compliance 6 to provide guidance on a lender’s ability to accept multiple-peril policies.

Specifically, the proposed answer clarified that a lender may accept multiple-peril policies that

cover the hazard of flood under the private flood insurance provisions of the Regulation,

provided they meet the requirements of the Regulation.

A commenter requested that the Q&A clarify that lenders are permitted to accept both

standalone multiple-peril policies that address flood risks and policies that insure against other

risks and that have a flood-related endorsement, as long as the mandatory or discretionary

provisions of the Regulation are otherwise satisfied. The Agencies agree that lenders may accept

multiple-peril policies that either address flood risks in the policy itself or address flood risks as

an endorsement to the policy, and have amended to answer to clarify this.

The Agencies are also making a technical correction to this Q&A by removing the phrase

“provided the policy meets the requirements under the Regulation.” This phrase is redundant

because the private flood insurance provisions of the Regulation already require the policy to

meet the Regulation’s requirements.

The Agencies are adopting this Q&A with this amendment.

Private Flood Compliance 7

The Agencies are also making a technical correction to this Q&A by removing the phrase

“provided the policy meets the requirements under the Regulation.” This phrase is redundant

because the private flood insurance provisions

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