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The letter answered the question of whether a bank, that works with its borrowers by extending maturities/payments or balloon payments due to the pandemic, is required to make a new flood zone determination and provide new notices of special flood hazards for the extended loan. The Fed stated flood insurance requirements are generally triggered upon the making, increasing, renewing or extending of any designated loan. If a lender modifies a loan by extending the loan term, then this change is a triggering event and flood-related requirements kick in. There is no waiver of flood requirements in emergency situations. However, the Fed indicated they will consider the unique circumstances impacting borrowers and institutions resulting from the pandemic. They do not expect to issue an enforcement action against an institution, provided the circumstances were related to the pandemic and the institution made good faith efforts to support borrowers while complying with the flood insurance requirements, as well as responding to any needed corrective action.
Additionally, the letter focused on a previous announcement (FEMA Bulletin W-20002) related to the grace period to renew National Flood Insurance Program (NFIP) policies that expire between Feb. 13, 2020 and June 15, 2020 (FEMA emergency period), which has been extended from 30 days to 120 days due to the pandemic. A borrower will be covered by the NFIP policy if the flood insurance premium is paid before the 120-day grace period expires. Regarding policies that expire during the FEMA emergency period, FEMA provided the following information:
If you have questions about how these flood insurance regulations might impact your financial institution, contact Doeren Mayhew’s compliance specialists.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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