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Federal Register / Vol. 86, No. 51 / Thursday, March 18, 2021 / Proposed Rules
Private Flood Compliance 4. If the policy is not available prior to closing, what can the lender rely on to make sure the policy meets the requirements of the Regulation?
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. Lenders should determine whether they have sufficient evidence to show the policy meets the requirements under the Regulation.
Lenders can take steps to help mitigate against closing delays such as designating employees responsible for reviewing flood policies, training employees, and requesting additional information from insurers early in the process. If the lender does not have enough information to determine if the policy meets the private flood insurance requirements under the Regulation, then the lender should timely request additional information as necessary to complete its review.
Private Flood Compliance 5. Under existing force placement requirements, a declarations page is sufficient to evidence a borrowers purchase of a flood insurance policy. Does the declarations page have sufficient information for a lender to determine whether the policy complies with the Regulation?

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It depends. If the declarations page provides enough information for the lender to determine whether the policy meets the mandatory acceptance provision or discretionary acceptance provision of the Regulation or if the declarations pages contains the compliance aid assurance clause, then the lender may rely on the declarations pages. However, if the declarations page does not provide enough information for the lender to determine whether the policy satisfies the mandatory acceptance provision or discretionary acceptance provision of the Regulation, the lender should request additional information about the policy to aid in making its determination.
Private Flood Compliance 6. May a lender accept a multiple-peril policy issued by a private insurer to satisfy the mandatory purchase of flood insurance requirement?
Yes. A lender can accept a multipleperil policy that covers the hazard of flood under the private flood insurance provisions of the Regulation, provided the policy meets the requirements under the Regulation.

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Private Flood Compliance 7. How do the private flood insurance requirements of the Regulation, especially the compliance aid assurance clause, work in conjunction with the requirements from secondary market investors for example, the Federal National Mortgage Association Fannie Mae or the Federal Home Loan Mortgage Corporation Freddie Mac?
Lenders must comply with Federal flood insurance requirements. The requirements for the secondary market are separate from the Regulation. A
lender should carefully review these separate requirements for secondary market investors regarding acceptable private flood insurance if the lender plans to sell loans to such investors and should direct questions regarding these requirements to the appropriate entities.
Private Flood Compliance 8. When servicing a loan covered by flood insurance pursuant to the Act and the Regulation, which requirements must a servicer follow in evaluating the acceptance of a flood insurance policy issued by a private insurer?
For loans serviced on behalf of lenders supervised by the Agencies, the servicer must comply with the Regulation in determining whether a flood insurance policy issued by a private insurer must be accepted under the mandatory acceptance provision or may be accepted under the discretionary acceptance provision or mutual aid provision. For loans serviced on behalf of other entities not supervised by the Agencies, the servicer should comply with the terms of its contract with that entity. For example, when servicing loans on behalf of Fannie Mae or Freddie Mac, where there are insurer rating requirements specified within those entities servicing guidance or other relevant authorities that are not required in the Regulation, the servicer should adhere to those servicing requirements.
Private Flood Compliance 9. How can a lender determine: i Whether an insurer is licensed or admitted in a particular State, ii or whether a surplus lines or nonadmitted alien insurer is permitted to issue an insurance policy in a particular State?
A lender may refer to the website of the State insurance regulator where the collateral property is located to determine whether a particular insurer is licensed, admitted, or otherwise permitted to issue an insurance policy in a particular State. If the lender cannot determine this information from the website, the lender could contact the
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State insurance regulator directly.
Further, information with respect to surplus lines insurer eligibility also may be available in the Consumer Insurance Search CIS tool available on the National Association of Insurance Commissioners NAIC website. Lenders may consult commercial service providers regarding the eligibility of surplus lines insurers in particular States provided the lenders have a reasonable basis to believe that these service providers have reliable information.
With regard to nonadmitted alien insurers in particular, lenders could review the NAICs Quarterly Listing of Alien Insurers.46
Private Flood Compliance 10. May lenders accept policies issued by private insurers that are surplus lines insurers for noncommercial residential properties?
Yes, if the surplus lines insurer is eligible or not disapproved to place insurance in the State or jurisdiction in which the property to be insured is located, lenders may accept policies issued by surplus lines insurers as coverage for noncommercial i.e., residential properties.
Consistent with the Act and the Regulation, the Agencies confirm that policies issued by surplus lines insurers for noncommercial properties are covered in the definition of private flood insurance and in the discretionary acceptance provision. In the definition of private flood insurance, surplus lines policies for noncommercial properties are covered as policies that are issued by insurance companies that are 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. 47 Similarly, within the discretionary acceptance provision, noncommercial residential policies issued by surplus lines carriers are covered as policies that are issued by private insurance companies that are 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. 48
For purposes of the Regulation, the meaning of otherwise approved is 46 See
15 U.S.C. 8204.
84 FR 49554956 Feb.20, 2019. See also 12 CFR 22.2k1i OCC; 12 CFR
208.25b9iA Board; 12 CFR 339.2 FDIC; 12
CFR 614.4925 FCA; and 12 CFR 760.2 NCUA.
48 See 84 FR 4962 Feb. 20, 2019. See also 12
CFR 22.3c3ii OCC; 12 CFR 208.25c3iiiB
Board; 12 CFR 339.3c3ii FDIC; 12 CFR
614.4930c3ii FCA; and 12 CFR 760.3c3ii NCUA.
47 See
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