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Compliance Know your flood insurance duties
WASHINGTON (7/30/08)—Farmers, business owners and homeowners in many areas of the country are struggling to recover from massive flooding this year. 2008 has witnessed recent floods in New Mexico and Texas caused by the torrential rains attached to Dolly; floods in Iowa, Indiana, Wisconsin; floods wrecking havoc throughout the Midwest and more. Aptly, the Credit Union National Association’s (CUNA’s) Compliance Challenge this month quizzes credit unions with a question on federal flood insurance requirements. The Challenge reminds credit unions that federal regulators may impose civil money penalties for noncompliance with mandatory flood insurance purchase requirements. Federal law requires such penalties when a lender has exhibited a “pattern or practice” of failing at such things as:
* Requiring the purchase of flood insurance for loans secured by improved real estate located in a special flood hazard area (SFHA); * Placing flood insurance premiums, on applicable loans, in escrow if the credit union requires the escrow of taxes, insurance premiums, fees, or other charges; * Providing the proper notices pertaining to covered loans (e.g., flood hazard determination notice, notification of change in loan servicer); and * Purchasing insurance on the borrower’s behalf when the borrower fails to maintain adequate flood insurance coverage. That practice, known as “force placing” insurance, should occur after notifying a borrower of the deficiency, and giving him or her 45 days to purchase the appropriate coverage.
Credit unions should note, advises the Challenge, that the per-violation and aggregate amounts of civil penalties are adjusted for inflation on a periodic basis. Now, what about civil liability? Use the resource link below to read about that issue, and many more compliance gems, by linking to CUNA’s compliance web page.
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