[Federal Register Volume 62, Number 25 (Thursday, February 6, 1997)]
[Rules and Regulations]
[Pages 5530-5534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2902]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 36
RIN 2900-AH63
Loan Guaranty: Flood Insurance Requirements
AGENCY: Veterans Benefits Administration, Department of Veterans
Affairs.
ACTION: Final rule.
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SUMMARY: The Department of Veterans Affairs (VA) is amending its loan
guaranty regulations regarding loans in areas having special flood
hazards. This action is required by statute to implement the provisions
of the National Flood Insurance Reform Act of 1994, Title V of Public
Law 103-325. VA is amending its regulations to strengthen requirements
for procuring and maintaining flood insurance on properties in areas
having special flood hazards which secure loans guaranteed by VA, and
to include new requirements for VA as a ``Federal agency lender.'' The
new requirements include escrow requirements for flood insurance
premiums, the requirement to ``force place'' flood insurance under
certain circumstances, enhanced flood hazard notice requirements, new
authority for VA to charge fees for determining whether a property is
located in a special flood hazard area, and various other provisions
necessary to implement the National Flood Insurance Reform Act of 1994.
EFFECTIVE DATE: This final rule is effective February 6, 1997.
FOR FURTHER INFORMATION CONTACT: Ms. Judith Caden, Assistant Director
for Loan Policy (264), Loan Guaranty Service, Veterans Benefits
Administration, Department of Veterans Affairs, Washington, DC 20420,
(202) 273-7368.
SUPPLEMENTARY INFORMATION: Title V of the Riegle Community Development
and Regulatory Improvement Act of 1994, which is called the National
Flood Insurance Reform Act of 1994 (Reform Act), comprehensively
revised existing Federal flood insurance statutes. The Reform Act was
intended to increase compliance with flood insurance requirements and
participation in the National Flood Insurance Program in order to
provide additional income to the National Flood Insurance Fund and to
decrease the financial burden of flooding on the Federal government,
taxpayers, and flood victims. The Reform Act requires the Federal
entities for lending regulation to issue regulations fulfilling its
statutory requirements, and Federal agency lenders to issue regulations
consistent with and substantially identical to the regulations issued
by the Federal entities for lending regulation. The Federal entities
for lending regulation published a joint final rule on August 29, 1996.
VA is amending its regulations in order to set forth the
requirement of flood insurance coverage on properties located in
special flood hazard areas which secure loans made or guaranteed by VA,
and to fulfill the statutory requirement that VA issue regulations
consistent with and substantially identical to the regulations issued
by the Federal entities for lending regulation.
Existing VA regulations regarding flood insurance requirements are
based on several provisions of Title 42 U.S.C., Chapter 50, which were
in place prior to the enactment of the Reform Act. 42 U.S.C. 4106(a)
provides that no Federal agency shall approve any financial assistance
(guarantee or make a loan) for acquisition or construction purposes on
and after July 1, 1975, for use in any area that has been identified by
the Director of the Federal Emergency Management Agency (FEMA) as an
area having special flood hazards unless the community in which such
area is situated is then participating in the National Flood Insurance
Program. 42 U.S.C. 4012a(a) provides that no Federal agency shall
approve any financial assistance for acquisition or construction
purposes for use in any area that has been identified by the Director
of FEMA as having special flood hazards and in which the sale of flood
insurance is available under the National Flood Insurance Act of 1968
unless the building or manufactured home and any personal property to
which such financial assistance relates is covered by flood insurance.
The Reform Act added 42 U.S.C. 4012a(b) which provides that
regulated lending institutions and Federal agency lenders cannot make,
increase, extend, or renew any loan secured by improved real estate or
a manufactured home located or to be located in an area that has been
identified by the Director of FEMA as an area having special flood
hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968, unless the building or
manufactured home and any personal property securing such loan is
covered by flood insurance. Further, lenders selling loans to the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation must ensure that any loan secured by improved real estate
or a manufactured home identified as being in a special flood hazard
area at the time of origination or any time during the term of the loan
is covered by flood insurance.
One significant impact of the new provisions on VA is a greater
emphasis on ensuring flood insurance coverage during the entire term of
loans guaranteed or made by VA which require such insurance, taking
into account any remapping of special flood hazard areas by FEMA. VA is
amending 38 CFR 36.4222 regarding hazard insurance coverage for
manufactured home loans guaranteed by VA, 38 CFR 36.4326 regarding
hazard insurance coverage for other loans guaranteed by VA, and 38 CFR
36.4600(c)(3) regarding hazard insurance coverage for loans sold by VA
subject to guaranty, by adding language to emphasize that the flood
insurance requirement applies any time during the term of the loan that
the security is located in a special flood hazard area, not just when
the loan is made. VA is adding language to 38 CFR 36.4512(b) which
provides that it cannot make, increase, extend, or renew any loan
secured by improved real estate or a manufactured home located or to be
located in a special flood hazard area unless the security is covered
by flood insurance for the term of the loan.
Under 42 U.S.C. 4106(a), Federal agencies are prohibited from
providing financial assistance for acquisition or construction purposes
for use in any area that has been identified by FEMA as an area having
special flood hazards unless the community in which such area is
situated is then participating in the National Flood Insurance Program.
Although this is not a new provision of the law, VA is using this
opportunity to ensure program participants are aware of the
prohibition. VA is incorporating the prohibition into 38 CFR 36.4222,
36.4326, 36.4402 and 36.4512.
In 38 CFR 36.4326 and 36.4402(a)(6), the reference to the Secretary
of Housing and Urban Development is replaced by a reference to the
FEMA.
38 CFR 36.4500(b) is amended to make the provisions of 38 CFR
36.4512 applicable to Native American veteran direct loans. Editorial
changes are also made to 38 CFR 36.4512.
The Reform Act requires that VA issue regulations consistent with
and substantially identical to those issued
[[Page 5531]]
by the Federal entities for lending regulation. The regulations issued
by the Federal entities for lending regulation restate the requirements
of the law as applied to regulated lending institutions. VA is adding
this language, as applied to its role as a Federal agency lender, to
its regulations as sections 38 CFR 36.4700 through 36.4709. These
regulations apply whenever VA makes, increases, extends or renews, and,
in some cases, sells a loan secured by improved real estate or a
manufactured home located in an area identified by FEMA as having
special flood hazards. The regulations include the following
requirements: VA will maintain the required amount of flood insurance
for the term of the loan; VA will escrow for flood insurance premiums
if it requires the escrow of taxes, insurance, or other charges; VA
will use the standard flood hazard determination form prescribed by
FEMA, retain a copy of each completed form, and may charge a fee for
flood determinations under certain circumstances; VA will force
placement of flood insurance under certain circumstances; VA will
provide notice of special flood hazards and availability of Federal
disaster relief assistance, in a specific written format, to the
borrower and servicer of the loan, and retain a record of receipt of
the notices by these parties; and VA will notify the Director of FEMA,
or the Director's designee, of the identity of the servicer of the loan
and of any change in the servicer. VA is omitting the references to
table funding contained in the regulations issued by the Federal
entities for lending regulation from its amendments because they are
not applicable to its role as a Federal agency lender.
The Secretary hereby certifies that this final rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612. The final rule essentially restates statutory provisions and
reflects statutory requirements. Therefore, pursuant to 5 U.S.C.
605(b), this final rule is exempt from the initial and final regulatory
flexibility analysis requirements of sections 603 and 604.
The Catalog of Federal Domestic Assistance Program numbers are
64.106, 64.114, 64.118, 64.119 and 64.126.
List of Subjects in 38 CFR Part 36
Condominiums, Handicapped, Housing Loan programs--housing and
community development, Manufactured homes, Veterans.
Approved: January 24, 1997.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set out in the preamble, 38 CFR part 36 is amended
as set forth below.
PART 36--LOAN GUARANTY
1. An authority citation for part 36 is added to read as follows:
Authority: 38 U.S.C. 501, 3701-3704, 3707, 3710-3714, 3719,
3720, 3729, 3762, unless otherwise noted.
2. In Sec. 36.4222, paragraph (a)(1) is revised to read as follows:
Sec. 36.4222 Hazard insurance.
(a) * * *
(1) Flood insurance will be required on any manufactured home,
building or personal property securing a loan at any time during the
term of the loan that such security is located in an area identified by
the Federal Emergency Management Agency as having special flood hazards
and in which flood insurance has been made available under the National
Flood Insurance Act, as amended. The amount of flood insurance must be
at least equal to the lesser of the outstanding principal balance of
the loan or the maximum limit of coverage available for the particular
type of property under the National Flood Insurance Act, as amended.
The Secretary cannot guarantee a loan for the acquisition or
construction of property located in an area identified by the Federal
Emergency Management Agency as having special flood hazards unless the
community in which such area is situated is then participating in the
National Flood Insurance Program.
(Authority: 42 U.S.C. 4012a, 4106(a))
* * * * *
3. Section 36.4326 is revised to read as follows:
Sec. 36.4326 Hazard insurance.
The holder shall require insurance policies to be procured and
maintained in an amount sufficient to protect the security against the
risks or hazards to which it may be subjected to the extent customary
in the locality. All moneys received under such policies covering
payment of insured losses shall be applied to restoration of the
security or to the loan balance. Flood insurance will be required on
any building or personal property securing a loan at any time during
the term of the loan that such security is located in an area
identified by the Federal Emergency Management Agency as having special
flood hazards and in which flood insurance has been made available
under the National Flood Insurance Act, as amended. The amount of flood
insurance must be at least equal to the lesser of the outstanding
principal balance of the loan or the maximum limit of coverage
available for the particular type of property under the National Flood
Insurance Act, as amended. The Secretary cannot guarantee a loan for
the acquisition or construction of property located in an area
identified by the Federal Emergency Management Agency as having special
flood hazards unless the community in which such area is situated is
then participating in the National Flood Insurance Program.
(Authority: 42 U.S.C. 4012a, 4106(a))
4. In Sec. 36.4402, paragraph (a)(6) is revised to read as follows:
Sec. 36.4402 Eligibility.
(a) * * *
(6) The housing unit, if it is located or becomes located in an
area identified by the Federal Emergency Management Agency as having
special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act, as amended, is or
will be covered by flood insurance. The amount of flood insurance must
be at least equal to the lesser of the full insurable value of the
property or the maximum limit of coverage available for the particular
type of property under the National Flood Insurance Act, as amended.
The Secretary cannot approve any financial assistance for the
acquisition or construction of property located in an area identified
by the Federal Emergency Management Agency as having special flood
hazards unless the community in which such area is situated is then
participating in the National Flood Insurance Program.
(Authority: 42 U.S.C. 4012a, 4106(a))
* * * * *
5. In Sec. 36.4500, paragraph (b) is revised to read as follows:
Sec. 36.4500 Applicability.
* * * * *
(b) Sections 36.4501, 36.4512, and 36.4527, which concern direct
loans to Native American veterans shall be applicable to loans made by
the Secretary pursuant to 38 U.S.C. 3761 through 3764.
(Authority: 42 U.S.C. 4012a)
* * * * *
6. Section 36.4512 is revised to read as follows:
Sec. 36.4512 Taxes and insurance.
(a) In addition to the monthly installment payments of principal
and
[[Page 5532]]
interest payable under the terms of the loan agreement, the borrower
will be required to make payments monthly to the Secretary in such
amounts as may be determined by the Secretary from time to time to be
necessary for the purpose of accumulating funds sufficient for the
payment of taxes and assessments, ground rents, insurance premiums, and
similar levies or charges on the security property. The borrower at
loan closing shall pay in cash to the Secretary such sum as it
estimates may be necessary as the initial deposit to the borrower's tax
and insurance reserve account.
(Authority: 38 U.S.C. 3720)
(b) The borrower shall procure and maintain insurance of a type or
types and in such amounts as may be required by the Secretary to
protect the security against fire and other hazards. The Secretary
cannot make a loan for the acquisition or construction of property
located in an area identified by the Federal Emergency Management
Agency as having special flood hazards unless the community in which
such area is situated is then participating in the National Flood
Insurance Program. The Secretary shall not make, increase, extend, or
renew a loan secured by a building or manufactured home that is located
or to be located in an area identified by the Federal Emergency
Management Agency as having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance
Act, as amended, unless the building or manufactured home and any
personal property securing the loan is covered by flood insurance for
the term of the loan. The amount of flood insurance must be at least
equal to the lesser of the outstanding principal balance of the loan or
the maximum limit of coverage available for the particular type of
property under the National Flood Insurance Act, as amended. The
requirements of 38 CFR 36.4700 through 36.4709 shall apply to direct
loans made pursuant to 38 U.S.C. 3711 and 3761 through 3764. All hazard
and flood insurance shall be carried with a company or companies
satisfactory to the Secretary and the policies and renewals thereof
shall be held in the possession of the Secretary and contain a
mortgagee loss payable clause in favor of and in a form satisfactory to
the Secretary.
(Authority: 42 U.S.C. 4012a, 4106(a))
7. In Sec. 36.4600, paragraph (c)(3) is revised to read as follows:
Sec. 36.4600 Sale of loans, guarantee of payment.
* * * * *
(c) * * *
(3) To maintain insurance in an amount sufficient to protect the
security against risks or hazards to which it may be subjected to the
extent customary in the locality, and to apply the proceeds of loss
payments to the loan balance or the restoration of the security, as the
holder may in the holder's discretion deem proper. Flood insurance will
be required on any building or personal property securing a loan at any
time during the term of the loan that such security is located in an
area identified by the Federal Emergency Management Agency as having
special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act, as amended. The
amount of flood insurance must be at least equal to the lesser of the
outstanding principal balance of the loan or the maximum limit of
coverage available for the particular type of property under the
National Flood Insurance Act, as amended. The notice requirements of 38
CFR 36.4709 shall apply to loans sold pursuant to this section.
(Authority: 42 U.S.C. 4012a, 4104a)
* * * * *
8. Sections 36.4700 through 36.4709 are added to read as follows:
Sec. 36.4700 Authority, purpose, and scope.
(a) Authority. Sections 36.4700 through 36.4709 of this part are
issued pursuant to 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
(b) Purpose. The purpose of sections 36.4700 through 36.4709 of
this part is to implement the requirements of the National Flood
Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as
amended (42 U.S.C. 4001-4129).
(c) Scope. Sections 36.4700 through 36.4709 of this part, except
for Secs. 36.4705 and 36.4707, apply to loans secured by buildings or
mobile homes located or to be located in areas determined by the
Director of the Federal Emergency Management Agency to have special
flood hazards. Sections 36.4705 and 36.4707 apply to loans secured by
buildings or mobile homes, regardless of location.
(Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128)
Sec. 36.4701 Definitions.
(a) Act means the National Flood Insurance Act of 1968, as amended
(42 U.S.C. 4001-4129).
(b) Secretary means the Secretary of Veterans Affairs.
(c) Building means a walled and roofed structure, other than a gas
or liquid storage tank, that is principally above ground and affixed to
a permanent site, and a walled and roofed structure while in the course
of construction, alteration, or repair.
(d) Community means a State or a political subdivision of a State
that has zoning and building code jurisdiction over a particular area
having special flood hazards.
(e) Designated loan means a loan secured by a building or mobile
home that is located or to be located in a special flood hazard area in
which flood insurance is available under the Act.
(f) Director of FEMA means the Director of the Federal Emergency
Management Agency.
(g) Mobile home means a structure, transportable in one or more
sections, that is built on a permanent chassis and designed for use
with or without a permanent foundation when attached to the required
utilities. The term mobile home does not include a recreational
vehicle. For purposes of this part, the term mobile home means a mobile
home on a permanent foundation. The term mobile home includes a
manufactured home as that term is used in the NFIP.
(h) NFIP means the National Flood Insurance Program authorized
under the Act.
(i) Residential improved real estate means real estate upon which a
home or other residential building is located or to be located.
(j) Servicer means the person responsible for:
(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.
(k) Special flood hazard area means the land in the flood plain
within a community having at least a one percent chance of flooding in
any given year, as designated by the Director of FEMA.
(Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106 and 4128)
Sec. 36.4702 Requirement to purchase flood insurance where available.
In general. The Secretary shall not make, increase, extend, or
renew any designated loan unless the building or mobile home and any
personal property securing the loan is covered by flood insurance for
the term of the loan. The amount of insurance must be at least
[[Page 5533]]
equal to the lesser of the outstanding principal balance of the
designated loan or the maximum limit of coverage available for the
particular type of property under the Act. Flood insurance coverage
under the Act is limited to the overall value of the property securing
the designated loan minus the value of the land on which the property
is located.
(Authority: 42 U.S.C. 4012a)
Sec. 36.4703 Exemptions.
The flood insurance requirement prescribed by 38 CFR 36.4702 does
not apply with respect to:
(a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of States falling within this exemption;
or
(b) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
(Authority: 42 U.S.C. 4012a(c))
Sec. 36.4704 Escrow requirement.
If the Secretary requires the escrow of taxes, insurance premiums,
fees, or any other charges for a loan secured by residential improved
real estate or a mobile home that is made, increased, extended, or
renewed on or after October 1, 1996, the Secretary shall also require
the escrow of all premiums and fees for any flood insurance required
under 38 CFR 36.4702. The Secretary, or a servicer acting on behalf of
the Secretary, shall deposit the flood insurance premiums on behalf of
the borrower in an escrow account. This escrow account will be subject
to escrow requirements adopted pursuant to section 10 of the Real
Estate Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA),
which generally limits the amount that may be maintained in escrow
accounts for certain types of loans and requires escrow account
statements for those accounts, only if the loan is otherwise subject to
RESPA. Following receipt of a notice from the Director of FEMA or other
provider of flood insurance that premiums are due, the Secretary, or a
servicer acting on behalf of the Secretary, shall pay the amount owed
to the insurance provider from the escrow account by the date when such
premiums are due.
(Authority: 42 U.S.C. 4012a(d))
Sec. 36.4705 Required use of standard flood hazard determination form.
(a) Use of form. The Secretary shall use the standard flood hazard
determination form developed by the Director of FEMA (as set forth in
appendix A of 44 CFR part 65) when determining whether the building or
mobile home offered as collateral security for a loan is or will be
located in a special flood hazard area in which flood insurance is
available under the Act. The standard flood hazard determination form
may be used in a printed, computerized, or electronic manner.
(b) Retention of form. The Secretary shall retain a copy of the
completed standard flood hazard determination form, in either hard copy
or electronic form, for the period of time the Secretary owns the loan.
(Authority: 42 U.S.C. 4104b)
Sec. 36.4706 Forced placement of flood insurance.
If the Secretary, or a servicer acting on behalf of the Secretary,
determines at any time during the term of a designated loan that the
building or mobile home and any personal property securing the
designated loan is not covered by flood insurance or is covered by
flood insurance in an amount less than the amount required under 38 CFR
36.4702, then the Secretary or a servicer acting on behalf of the
Secretary, shall notify the borrower that the borrower should obtain
flood insurance, at the borrower's expense, in an amount at least equal
to the amount required under 38 CFR 36.4702, for the remaining term of
the loan. If the borrower fails to obtain flood insurance within 45
days after notification, then the Secretary or a servicer acting on
behalf of the Secretary, shall purchase insurance on the borrower's
behalf. The Secretary or a servicer acting on behalf of the Secretary,
may charge the borrower for the cost of premiums and fees incurred in
purchasing the insurance.
(Authority: 42 U.S.C. 4012a(e))
Sec. 36.4707 Determination fees.
(a) General. Notwithstanding any Federal or State law other than
the Flood Disaster Protection Act of 1973 as amended (42 U.S.C. 4001-
4129), the Secretary, or a servicer acting on behalf of the Secretary,
may charge a reasonable fee for determining whether the building or
mobile home securing the loan is located or will be located in a
special flood hazard area. A determination fee may also include, but is
not limited to, a fee for life-of-loan monitoring.
(b) Borrower fee. The determination fee authorized by paragraph (a)
of this section may be charged to the borrower if the determination:
(1) Is made in connection with a making, increasing, extending, or
renewing of the loan that is initiated by the borrower;
(2) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(3) Reflects the Director 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 Director 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
Secretary or a servicer acting on behalf of the Secretary, on behalf of
the borrower under 38 CFR 36.4706.
(c) Purchaser or transferee fee. The determination fee authorized
by paragraph (a) of this section may be charged to the purchaser or
transferee of a loan in the case of the sale or transfer of the loan.
(Authority: 42 U.S.C. 4012a(h))
Sec. 36.4708 Notice of special flood hazards and availability of
Federal disaster relief assistance.
(a) Notice requirement. When the Secretary makes, increases,
extends, or renews a loan secured by a building or a mobile home
located or to be located in a special flood hazard area, the Secretary
shall mail or deliver a written notice to the borrower and to the
servicer in all cases whether or not flood insurance is available under
the Act for the collateral securing the loan.
(b) Contents of notice. The written notice must include the
following information:
(1) A warning, in a form approved by the Director 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 under the NFIP and may also be available from private
insurers; and
(4) 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. The Secretary shall provide the notice
required by paragraph (a) of this section to the
[[Page 5534]]
borrower within a reasonable time before the completion of the
transaction, and to the servicer as promptly as practicable after the
Secretary provides notice to the borrower and in any event no later
than the time the Secretary provides other similar notices to the
servicer concerning hazard insurance and taxes. Notice to the servicer
may be made electronically or may take the form of a copy of the notice
to the borrower.
(d) Record of receipt. The Secretary shall retain a record of the
receipt of the notices by the borrower and the servicer for the period
of time the Secretary owns the loan.
(e) Alternate method of notice. Instead of providing the notice to
the borrower required by paragraph (a) of this section, the Secretary
may obtain satisfactory written assurance from a seller or lessor that,
within a reasonable time before the completion of the sale or lease
transaction, the seller or lessor has provided such notice to the
purchaser or lessee. The Secretary shall retain a record of the written
assurance from the seller or lessor for the period of time the
Secretary owns the loan.
(f) Use of prescribed form of notice. The Secretary will be
considered to be in compliance with the requirement for notice to the
borrower of this section by providing written notice to the borrower
containing the language presented in appendix A to this part within a
reasonable time before the completion of the transaction. The notice
presented in appendix A to this part satisfies the borrower notice
requirements of the Act.
(Authority: 42 U.S.C. 4104a)
Sec. 36.4709 Notice of servicer's identity.
(a) Notice requirement. When the Secretary makes, increases,
extends, renews, sells, or transfers a loan secured by a building or
mobile home located or to be located in a special flood hazard area,
the Secretary shall notify the Director of FEMA (or the Director's
designee) in writing of the identity of the servicer of the loan. The
Director of FEMA has designated the insurance provider to receive the
Secretary's notice of the servicer's identity. This notice may be
provided electronically if electronic transmission is satisfactory to
the Director of FEMA's designee.
(b) Transfer of servicing rights. The Secretary shall notify the
Director of FEMA (or the Director's designee) of any change in the
servicer of a loan described in paragraph (a) of this section within 60
days after the effective date of the change. This notice may be
provided electronically if electronic transmission is satisfactory to
the Director of FEMA's designee. Upon any change in the servicing of a
loan described in paragraph (a) of this section, the duty to provide
notice under this paragraph (b) shall transfer to the transferee
servicer.
(Authority: 42 U.S.C. 4104a)
9. Appendix A to part 36 is added to read as follows:
Appendix A to Part 36--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 Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area
using FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary
Map for the following community: ________. This area has at least a
one percent (1%) chance of a flood equal to or exceeding the base
flood elevation (a 100-year flood) in any given year. During the
life of a 30-year mortgage loan, the risk of a 100-year flood in a
special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director 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.
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 also may be available
from private insurers that do not participate in the NFIP.
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
overall value of the property securing the loan minus the value of
the land on which the property is located.
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.
____ 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.
(Authority: 42 U.S.C. 4104a)
[FR Doc. 97-2902 Filed 2-5-97; 8:45 am]
BILLING CODE 8320-01-P