PART 760—LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS Authority: 12 U.S.C. 1757, 1784(e), 1789; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128. Source: 80 FR 43259, July 21, 2015, unless otherwise noted. § 760.1 Authority, purpose, and scope. (a) Authority. (b) Purpose. (c) Scope. § 760.2 Definitions. As used in this part: Act Administrator of FEMA Building Community Credit union Designated loan Mobile home mobile home mobile home mobile home Mutual aid society (1) Whose members share a common religious, charitable, educational, or fraternal bond; (2) That covers losses caused by damage to members' property pursuant to an agreement, including damage caused by flooding, in accordance with this common bond; and (3) That has a demonstrated history of fulfilling the terms of agreements to cover losses to members' property caused by flooding. NFIP Private flood insurance (1) Is issued by an insurance company that is: (i) Licensed, admitted, or 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; or (ii) Recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the State or jurisdiction in which the property to be insured is located in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property; (2) Provides flood insurance coverage that is at least as broad as the coverage provided under an SFIP for the same type of property, including when considering deductibles, exclusions, and conditions offered by the insurer. To be at least as broad as the coverage provided under an SFIP, the policy must, at a minimum: (i) Define the term “flood” to include the events defined as a “flood” in an SFIP; (ii) Contain the coverage specified in an SFIP, including that relating to building property coverage; personal property coverage, if purchased by the insured mortgagor(s); other coverages; and increased cost of compliance coverage; (iii) Contain deductibles no higher than the specified maximum, and include similar non-applicability provisions, as under an SFIP, for any total policy coverage amount up to the maximum available under the NFIP at the time the policy is provided to the lender; (iv) Provide coverage for direct physical loss caused by a flood and may only exclude other causes of loss that are excluded in an SFIP. Any exclusions other than those in an SFIP may pertain only to coverage that is in addition to the amount and type of coverage that could be provided by an SFIP or have the effect of providing broader coverage to the policyholder; and (v) Not contain conditions that narrow the coverage provided in an SFIP; (3) Includes all of the following: (i) A requirement for the insurer to give written notice 45 days before cancellation or non-renewal of flood insurance coverage to: (A) The insured; and (B) The credit union that made the designated loan secured by the property covered by the flood insurance, or the servicer acting on its behalf; (ii) Information about the availability of flood insurance coverage under the NFIP; (iii) A mortgage interest clause similar to the clause contained in an SFIP; and (iv) A provision requiring an insured to file suit not later than one year after the date of a written denial of all or part of a claim under the policy; and (4) Contains cancellation provisions that are as restrictive as the provisions contained in an SFIP. Residential improved real estate Servicer (1) Receiving any scheduled, periodic payments from a borrower under the terms of a loan, including amounts for taxes, insurance premiums, and other charges with respect to the property securing the loan; and (2) Making payments of principal and interest and any other payments from the amounts received from the borrower as may be required under the terms of the loan. SFIP Special flood hazard area Table funding [80 FR 43259, July 21, 2015, as amended at 84 FR 4974, Feb. 20, 2019] § 760.3 Requirement to purchase flood insurance where available. (a) In general. (b) Table funded loan. (c) Private flood insurance Mandatory acceptance. (2) Compliance aid for mandatory acceptance. (3) Discretionary acceptance. (i) Provides coverage in the amount required by paragraph (a) of this section; (ii) Is issued by an insurer that is licensed, admitted, or 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; or in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property, is issued by a surplus lines insurer recognized, or not disapproved, by the insurance regulator of the State or jurisdiction where the property to be insured is located; (iii) Covers both the mortgagor(s) and the mortgagee(s) as loss payees, except in the case of a policy that is provided by a condominium association, cooperative, homeowners association, or other applicable group and for which the premium is paid by the condominium association, cooperative, homeowners association, or other applicable group as a common expense; and (iv) Provides sufficient protection of the designated loan, consistent with general safety and soundness principles, and the credit union documents its conclusion regarding sufficiency of the protection of the loan in writing. (4) Mutual aid societies. (i) The NCUA has determined that such plans qualify as flood insurance for purposes of the Act; (ii) The plan provides coverage in the amount required by paragraph (a) of this section; (iii) The plan covers both the mortgagor(s) and the mortgagee(s) as loss payees; and (iv) The plan provides sufficient protection of the designated loan, consistent with general safety and soundness principles, and the credit union documents its conclusion regarding sufficiency of the protection of the loan in writing. [80 FR 43259, July 21, 2015, as amended at 84 FR 4974, Feb. 20, 2019] § 760.4 Exemptions. The flood insurance requirement prescribed by § 760.3 does not apply with respect to: (a) Any State-owned property covered under a policy of self-insurance satisfactory to the Administrator of FEMA, who publishes and periodically revises the list of States falling within this exemption; (b) Property securing any loan with an original principal balance of $5,000 or less and a repayment term of one year or less; or (c) Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence. For purposes of this paragraph (c): (1) “A structure that is a part of a residential property” is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes; (2) A structure is “detached” from the primary residential structure if it is not joined by any structural connection to that structure; and (3) “Serve as a residence” shall be based upon the good faith determination of the credit union that the structure is intended for use or actually used as a residence, which generally includes sleeping, bathroom, or kitchen facilities. § 760.5 Escrow requirement. (a) In general Applicability. (2) Exceptions. (i) The loan is an extension of credit primarily for business, commercial, or agricultural purposes; (ii) The loan is in a subordinate position to a senior lien secured by the same residential improved real estate or mobile home for which the borrower has obtained flood insurance coverage that meets the requirements of § 760.3(a); (iii) Flood insurance coverage for the residential improved real estate or mobile home is provided by a policy that: (A) Meets the requirements of § 760.3(a); (B) Is provided by a condominium association, cooperative, homeowners association, or other applicable group; and (C) The premium for which is paid by the condominium association, cooperative, homeowners association, or other applicable group as a common expense; (iv) The loan is a home equity line of credit; (v) The loan is a nonperforming loan, which is a loan that is 90 or more days past due and remains nonperforming until it is permanently modified or until the entire amount past due, including principal, accrued interest, and penalty interest incurred as the result of past due status, is collected or otherwise discharged in full; or (vi) The loan has a term of not longer than 12 months. (3) Duration of exception. (4) Escrow account. (b) Notice. (c) Small lender exception Qualification. (i) That has total assets of less than $1 billion as of December 31 of either of the two prior calendar years; and (ii) On or before July 6, 2012: (A) Was not required under Federal or State law to deposit taxes, insurance premiums, fees, or any other charges in an escrow account for the entire term of any loan secured by residential improved real estate or a mobile home; and (B) Did not have a policy of consistently and uniformly requiring the deposit of taxes, insurance premiums, fees, or any other charges in an escrow account for any loans secured by residential improved real estate or a mobile home. (2) Change in status. (d) Option to escrow In general. (i) The credit union or the loan qualifies for an exception from the escrow requirement under paragraphs (a)(2) or (c) of this section, respectively; (ii) The borrower is already escrowing all premiums and fees for flood insurance for the loan; or (iii) The credit union is required to escrow flood insurance premiums and fees pursuant to paragraph (a) of this section. (2) Notice. (3) Timing. [80 FR 43261, July 21, 2015] § 760.6 Required use of standard flood hazard determination form. (a) Use of form. www.fema.gov. (b) Retention of form. § 760.7 Force placement of flood insurance. (a) Notice and purchase of coverage. (b) Termination of force-placed insurance Termination and refund. (i) Notify the insurance provider to terminate any insurance purchased by the credit union or its servicer under paragraph (a) of this section; and (ii) Refund to the borrower all premiums paid by the borrower for any insurance purchased by the credit union or its servicer under paragraph (a) of this section during any period during which the borrower's flood insurance coverage and the insurance coverage purchased by the credit union or its servicer were each in effect, and any related fees charged to the borrower with respect to the insurance purchased by the credit union or its servicer during such period. (2) Sufficiency of demonstration. § 760.8 Determination fees. (a) General. (b) Borrower fee. (1) Is made in connection with a making, increasing, extending, or renewing of the loan that is initiated by the borrower; (2) Reflects the Administrator of FEMA's revision or updating of floodplain areas or flood-risk zones; (3) Reflects the Administrator of FEMA's publication of a notice or compendium that: (i) Affects the area in which the building or mobile home securing the loan is located; or (ii) By determination of the Administrator of FEMA, may reasonably require a determination whether the building or mobile home securing the loan is located in a special flood hazard area; or (4) Results in the purchase of flood insurance coverage by the credit union or its servicer on behalf of the borrower under § 760.7. (c) Purchaser or transferee fee. § 760.9 Notice of special flood hazards and availability of Federal disaster relief assistance. (a) Notice requirement. (b) Contents of notice. (1) A warning, in a form approved by the Administrator of FEMA, that the building or the mobile home is or will be located in a special flood hazard area; (2) A description of the flood insurance purchase requirements set forth in section 102(b) of the Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4012a(b)); (3) A statement, where applicable, that flood insurance coverage is available from private insurance companies that issue standard flood insurance policies on behalf of the NFIP or directly from the NFIP; (4) A statement that flood insurance that provides the same level of coverage as a standard flood insurance policy under the NFIP may also be available from a private insurance company that issues policies on behalf of the company; (5) A statement that the borrower is encouraged to compare the flood insurance coverage, deductibles, exclusions, conditions, and premiums associated with flood insurance policies issued on behalf of the NFIP and policies issued on behalf of private insurance companies and that the borrower should direct inquiries regarding the availability, cost, and comparisons of flood insurance coverage to an insurance agent; and (6) A statement whether Federal disaster relief assistance may be available in the event of damage to the building or mobile home caused by flooding in a Federally declared disaster. (c) Timing of notice. (d) Record of receipt. (e) Alternate method of notice. (f) Use of sample form of notice. [80 FR 43259, July 21, 2015, as amended at 80 FR 43262, July 21, 2015] § 760.10 Notice of servicer's identity. (a) Notice requirement. (b) Transfer of servicing rights. Appendix A to Part 760—Sample Form of Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance We are giving you this notice to inform you that: The building or mobile home securing the loan for which you have applied is or will be located in an area with special flood hazards. The area has been identified by the Administrator of the Federal Emergency Management Agency (FEMA) as a special flood hazard area using FEMA's Flood Insurance Rate Map Flood Hazard Boundary Map Federal law allows a lender and borrower jointly to request the Administrator of FEMA to review the determination of whether the property securing the loan is located in a special flood hazard area. If you would like to make such a request, please contact us for further information. ____The community in which the property securing the loan is located participates in the National Flood Insurance Program (NFIP). Federal law will not allow us to make you the loan that you have applied for if you do not purchase flood insurance. The flood insurance must be maintained for the life of the loan. If you fail to purchase or renew flood insurance on the property, Federal law authorizes and requires us to purchase the flood insurance for you at your expense. • At a minimum, flood insurance purchased must cover the lesser of: (1) The outstanding principal balance of the loan; or (2) the maximum amount of coverage allowed for the type of property under the NFIP. Flood insurance coverage under the NFIP is limited to the building or mobile home and any personal property that secures your loan and not the land itself. • Federal disaster relief assistance (usually in the form of a low-interest loan) may be available for damages incurred in excess of your flood insurance if your community's participation in the NFIP is in accordance with NFIP requirements. • Although you may not be required to maintain flood insurance on all structures, you may still wish to do so, and your mortgage lender may still require you to do so to protect the collateral securing the mortgage. If you choose not to maintain flood insurance on a structure and it floods, you are responsible for all flood losses relating to that structure. Availability of Private Flood Insurance Coverage Flood insurance coverage under the NFIP may be purchased through an insurance agent who will obtain the policy either directly through the NFIP or through an insurance company that participates in the NFIP. Flood insurance that provides the same level of coverage as a standard flood insurance policy under the NFIP may be available from private insurers that do not participate in the NFIP. You should compare the flood insurance coverage, deductibles, exclusions, conditions, and premiums associated with flood insurance policies issued on behalf of the NFIP and policies issued on behalf of private insurance companies and contact an insurance agent as to the availability, cost, and comparisons of flood insurance coverage. [Escrow Requirement for Residential Loans Federal law may require a lender or its servicer to escrow all premiums and fees for flood insurance that covers any residential building or mobile home securing a loan that is located in an area with special flood hazards. If your lender notifies you that an escrow account is required for your loan, then you must pay your flood insurance premiums and fees to the lender or its servicer with the same frequency as you make loan payments for the duration of your loan. These premiums and fees will be deposited in the escrow account, which will be used to pay the flood insurance provider.] ____Flood insurance coverage under the NFIP is not available for the property securing the loan because the community in which the property is located does not participate in the NFIP. In addition, if the non-participating community has been identified for at least one year as containing a special flood hazard area, properties located in the community will not be eligible for Federal disaster relief assistance in the event of a Federally declared flood disaster. [80 FR 43262, July 21, 2015] Appendix B to Part 760—Sample Clause for Option to Escrow for Outstanding Loans Escrow Option Clause You have the option to escrow all premiums and fees for the payment on your flood insurance policy that covers any residential building or mobile home that is located in an area with special flood hazards and that secures your loan. If you choose this option: • Your payments will be deposited in an escrow account to be paid to the flood insurance provider. • The escrow amount for flood insurance will be added to the regular mortgage payment that you make to your lender or its servicer. • The payments you make into the escrow account will accumulate over time and the funds will be used to pay your flood insurance policy when your lender or servicer receives a notice from your flood insurance provider that the flood insurance premium is due. To choose this option, follow the instructions below. If you have any questions about the option, contact [Insert Name of Lender or Servicer] at [Insert Contact Information]. [Insert Instructions for Selecting to Escrow] [80 FR 43263, July 21, 2015]