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NCUA guides CUs through NFIP lapse
WASHINGTON (6/24/10)—The National Credit Union Administration (NCUA) on Wednesday said that while the National Flood Insurance Plan (NFIP) remains inactive due to the lack of a congressional response, credit unions may continue to make loans without flood insurance. Making these loans are not considered violations of the NCUA’s Part 760: Loans in Area Having Special Flood Hazards, but the NCUA in its guidance stressed that credit unions should “continue to make flood determinations, provide timely, complete, and accurate notices to borrowers, and comply with other parts of the flood insurance regulations.” Credit unions must also “evaluate safety and soundness and legal risks and prudently manage those risks” while the NFIP continues its inactive period. “Lenders need to have a system in place so that policies are obtained as soon as available following reauthorization for properties subject to mandatory flood insurance coverage,” the NCUA guidance added. The NFIP is vital to many credit unions, as the mortgages they write for properties in a floodplain are required to have flood insurance. Since flood insurance is unavailable in many parts of the country, the NFIP is an important resource to credit unions and other lenders. The NFIP and certain other government programs lapsed on June 1, when Congress again failed for the third time this year to extend the authority of the NFIP. However, legislation that would extend the authorizations for the NFIP and certain other programs is pending in Congress. For the full NCUA release, use the resource link.
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