CHICAGO - To implement the National Flood Insurance Act of 1994, six regulatory agencies will unveil proposed rules for comment next week.
The proposal contains new escrow requirements for flood insurance premiums, requires banks to force-place flood insurance if the borrower lacks sufficient coverage, and allows lenders to charge fees for determining if a property is located in a flood hazard area.
The five agencies that regulate depository institutions - the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, and the National Credit Union Administration - are jointly proposing amendments to their current flood insurance rules.
Meanwhile, as part of the interagency effort, the Farm Credit Administration is issuing flood insurance rules for the first time.
The proposal is expected to be published in the Federal Register next week and be out for public comment for 60 days. The rule will likely be adopted in January, and take effect in April.
James K. Baebel, a senior review examiner with the FDIC, said the final rules would probably mirror the proposal.
"The final outcome will likely be fine-tuned from this proposal, but we're looking for comment on what changes may be necessary," Mr. Baebel said at the National Compliance Conference here of America's Community Bankers.
Samuel E. Pincich, a flood insurance specialist with America's Community Bankers, said the trade association expects the final rules won't vary much different from the coming proposal.
"They've been working on it for a year," Mr. Pincich said. "We've talked to them several times, as has everyone else with an interest in this. We submit that this is fair and friendly rulemaking and encourage them to adopt a final rule that looks like this."
The rules, in keeping with the flood insurance act, instruct banks that require the escrow of loan charges to require the escrow of flood insurance premiums and fees as well.
The proposal also states that if at any time during the life of a loan a lender determines that the borrower's coverage is insufficient, the lender must notify the borrower - if the borrower fails to buy more insurance within 45 days, the lender has to buy the extra insurance on the owner's behalf.
The new rules would bar banks from lending on property in a flood area unless the borrower has sufficient coverage. Lenders may charge the borrower a fee for determining whether the land is in a flood area.
Getting the word out about flood insurance has been a government priority.
The Federal Emergency Management Agency has been sponsoring one-day seminars throughout the nation since the law was enacted last year.
After attending one of agency's seminars, Carol Fogle, compliance officer at Carroll County Bank and Trust, is organizing a similar seminar for bankers in Maryland in early November.
Joseph Taborek, president of Credit Insurance Markets Inc. in University Park, Fla., said he believes most bankers are aware of the need to pay attention to flood insurance requirements.
"Most people know that the rules are coming and have started to prepare for it," Mr. Taborek said at the ACB conference.
The regulators at the conference said the agencies will be going to lengths to help banks comply.
New mapping software is being developed to identify flood areas, and toll-free numbers and hot lines will be available for banks with questions about whether maps are current. The Federal Emergency Management Agency also has developed publications to help banks understand their responsibilities.
