OCC Renews Flood-Zone Loan Paperwork for Banks and Borrowers
Published Date: 5/22/2025
Notice
Summary
The Office of the Comptroller of the Currency (OCC) is renewing its paperwork rules for loans in flood-prone areas and wants your feedback by July 21, 2025. This affects banks and borrowers in special flood hazard zones, aiming to keep paperwork clear and manageable without adding extra costs. Your comments help shape how these rules stay fair and easy to follow!
Analyzed Economic Effects
7 provisions identified: 2 benefits, 3 costs, 2 mixed.
Paperwork burden on banks and servicers
The OCC is renewing its information collection for loans in Special Flood Hazard Areas and estimates 978 respondents with a total annual burden of 141,239 hours. Comments on the renewal are due by July 21, 2025.
Mandatory escrow for flood insurance premiums
For loans secured by property in a Special Flood Hazard Area made, increased, extended, or renewed on or after January 1, 2016, national banks and Federal savings associations (and their servicers) must escrow flood insurance premiums and fees, subject to certain exceptions by loan type and institution size. When escrow is required, the lender must mail or deliver a written notice informing the borrower that escrow is required.
Forced-placement insurance and borrower charges
If a lender or servicer finds that the property securing a loan lacks adequate flood insurance, the lender must notify the borrower to obtain coverage and, if the borrower does not buy it, the lender or servicer must purchase insurance on the borrower's behalf and may charge the borrower for premiums and fees. Insurance purchased by the institution must be terminated within 30 days after the lender receives confirmation of the borrower's existing coverage.
Required use and retention of FEMA form
National banks and Federal savings associations must use the FEMA Standard Flood Hazard Determination Form for required determinations and must retain a copy of the completed form for the period the bank or savings association owns the loan.
Required borrower notices and record retention
When making, increasing, extending, or renewing a loan on property in a Special Flood Hazard Area, lenders must provide a written borrower notice that includes specific statements (e.g., that the property is in a special flood hazard area, NFIP availability, private insurance availability, encouragement to compare policies, and whether federal disaster relief may be available). Lenders must keep a record of receipt for the period they own the loan and may accept a seller's written assurance in lieu of providing the notice.
Banks may accept private flood insurance
Under 12 CFR 22.3, national banks and Federal savings associations may accept a private flood insurance policy that is not under the National Flood Insurance Program if the policy provides sufficient protection of the designated loan and the institution documents its conclusion that protection is sufficient in writing.
Requirement to notify FEMA of servicer identity changes
Lenders making, increasing, extending, renewing, selling, or transferring a loan secured by property in a Special Flood Hazard Area must notify FEMA (or its designee) of the loan servicer's identity and must notify FEMA of any change in servicer within 60 days after the effective date of the change.
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