Under Section 100204 of the Biggert-Waters Flood Insurance Reform Act of 2012, the maximum limit of building coverage available for non-condominium residential buildings designed for use for five or more families, classified as “Other Residential Buildings” by the National Flood Insurance Program (NFIP,) has been increased from $250,000 per building to $500,000. The new coverage limits are available for new policies, policy renewals, or existing policies with change endorsements effective on or after June 1, 2014.
Below is the FDIC Financial Institution Letter released May 30, 2014, with the Interagency Statement on Increased Maximum Flood Insurance Coverage for “Other Residential Buildings.” While the statement does not demand that lenders perform an immediate full file search of its loan portfolio, they do state that for safety and soundness purposes a lender may want to review its loan portfolio to determine whether additional flood insurance coverage is required for certain properties in light of the availability of increased flood insurance coverage for Other Residential Buildings. If, as a result of the increase in the maximum limit of building coverage, the lender makes a determination on or after June 1, 2014, that the building securing the designated loan is now covered by flood insurance in an amount less than required, it should take steps to ensure that the borrower obtains sufficient coverage. If an affected borrower has not provided evidence of the increased flood insurance, the lender must notify the borrower that they should obtain additional flood insurance for the remaining term of the loan. If the borrower fails to obtain the sufficient coverage within 45 days from notification, the lender must force place for the insufficient amount.
Your current Flood master policy already provides $500,000 maximum coverage for Other Residential Buildings. Please review your collateral codes and descriptions to be sure that HUB/RIS can identify collateral that falls into this category, and let us know if you determine that certain buildings now require additional coverage. If you are reporting insurable value on your data file, please remember that any changes to that amount need to be reported manually to HUB/RIS even if you make the change on your system.