flood insurance - ttsmedia.ttstrain.comttsmedia.ttstrain.com/cufloodslides092815.pdf · flood...
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1
ANNE LOLLEY
andTotal Training Solutions
FLOOD INSURANCESPECIAL CREDIT UNION EDITION
CALL ME!
QUESTIONS?CALL OR E‐MAIL ANNE
877‐778‐5192 x4
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THE NEW STUFF
Detached structure exemption . . .
A structure is exempt if:
Part of a residential property
Detached from primary residence
Does not serve as a residence
page 3page 3
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Detached structures – effective date . . .
Regulation effective October 1, 2015
Part of Homeowner Flood Insurance Affordability Act of 2014
Effective on March 21, 2014
Detached structures – more . . .
Only exempt if used primarily for: Personal
Family
Household
Detached if no structural connection
Lender determines whether used as residence
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Detached structures – more . . .
Lender may require insurance
No duty to monitor
Re‐examine when triggering event: Increase
Renew
Extend
New escrow rules . . .
Escrow required if loan is:
Made, increased, extended or renewed on or after January 1, 2016
Secured by residential real estate or mobile home
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New escrow rules – exempt loans . . .
Exempt loans: Business, commercial, agricultural
Subordinate lien – insurance already in place
Insurance already provided by condo, cooperative
HELOC
Non‐performing loan
12 months or less
New escrow rules – exempt lenders . . .
Small lenders are exempt if:
Assets under $1 billion
Prior to July 6, 2012:No law required escrow for entire term; and
No policy requiring escrow
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New escrow rules - option . . .Must offer option to escrow if loan: Outstanding on January 1, 2016
Secured by residential real estate or mobile home
Must offer by June 30, 2016
New Appendix B – model option form
Requirement does not apply if: Loan or lender is exempt from escrow requirements
Lender is already escrowing
Enhanced force-placement procedures . . .
No notice until lapse (expiration date)
Earlier notices may be sent as a courtesy
Lender can force‐place when coverage lapses
If overlapping coverage, within 30 days: Notify insurance company
Refund premiums for overlap period
Accept declarations page as confirmation of insurance
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Revised Special Flood Hazard Notice . . .
New regulation revises Notice to include:
Private insurance availability
Same coverage
Encouragement to compare
Effective January 1, 2016
New model notice (Appendix A)
page 6page 6
FLOOD!
THE NCUA REGULATIONS
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YOUR ESSENTIAL REFERENCE TOOL
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ApplicabilityMAKE
INCREASE
EXTEND
RENEW
LOAN SECURED BY
BUILDING/MANUFACTURED HOME
page 17page 17
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Definitions page 17page 17
Building
WALLED‐AND‐ROOFED STRUCTURE
Above ground
Includes buildings under construction
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Manufactured home
ONLY IF PERMANENT FOUNDATION
If it can’t be hauled away to avoid flood waters . . . assume it’s subject to flood insurance rules.
Special Flood Hazard Area
SFHA
1% flood chance in any given year(26% for 30‐year loan)
_________________
Zones A and V
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Participating Community
Contracts with FEMA
reduce flood damage
restrict development in SFHA________
NFIP FLOOD INSURANCE IS AVAILABLE
NATIONAL FLOOD INSURANCE PROGRAM
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Designated Loan
1. Secured by building/manufactured home
2. Located in SFHA
3. Participating community_______
FLOOD INSURANCE IS REQUIRED AND AVAILABLE
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National Flood Insurance Program (NFIP)
Congress first authorized in 1968
Funded by government, offset by premiums
First voluntary, but mandated in 1973
Now required for loans: Secured by building/manufactured home
SFHA + participating community
Originally only purchased through federal government
In 1983 partnered with private insurance carriers
page 17page 17
Credit Union Responsibilities
page 18page 18
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MAPS ON-LINE SERVICE
The Determination
MAKE/INCREASE/EXTEND/RENEW
LOAN SECURED BY BUILDING/MANUFACTURED HOME
Must determine if building is in SFHA
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The Determination
Whether building is in SFHA
Whether community participates
FOR THE CREDIT UNION, NOT THE BORROWER
STANDARD FLOOD HAZARD DETERMINATION FORM
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The Notice
IF BUILDING IS IN SFHA
PROVIDE NOTICE
Building is in SFHA
Whether flood insurance is available
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The Notice
Reasonable time before closing – 10 days
Must be signed or acknowledged
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The Insurance
CANNOT
MAKE/INCREASE/EXTEND/RENEW
WITHOUT FLOOD INSURANCE
Secured by building/manufactured home
SFHA
Participating community
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The Insurance
Insurance must be in place
before the loan is made/increased/extended/renewed!
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Note: Non‐Participating Community
SFHACOMMUNITY DOES NOT PARTICIPATE
Flood insurance not required
Can make conventional loan without flood insurance
Government‐guaranteed loans not permitted
Required Amount of Insurance
LESSEROF
OUTSTANDING PRINCIPAL BALANCE
OF THE LOAN
“INSURABLE VALUE”OF THE STRUCTURE
“INSURABLE VALUE”
OVERALL VALUE OF PROPERTY LESS: VALUE OF LAND
Includes repair or replacement cost of foundation and supporting structures
CAPS ON “INSURABLE VALUE”
RESIDENTIAL $250,000NON-RESIDENTIAL $500,000
OR
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Required Amount of Insurance
LESSEROF $300,000 HOME LOAN $320,000 INSURABLE VALUEOR
Exemptions
Loans of $5,000 or less with term of
one year or less
Detached structures on residential property
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Disputes page 19page 19
1. Determination Disputed
Letter of Determination Review (LODR)
CREDIT UNION/BORROWER JOINTLY SUBMIT REQUEST
WITHIN 45 DAYS
FEE INVOLVED
BOUND BY DETERMINATION
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2. Above‐Base Flood Elevation
Letter of Map Amendment(LOMA)
NATURAL ISLAND – INADVERTENTLY INCLUDED IN SFHA
PROPERTY OWNER MAKES REQUEST
BOUND BY DETERMINATION
3. Site Graded and Filled
Letter of Map Revision Based on Fill(LOMR‐F)
(ARTIFICIAL IMPROVEMENT—NOT NATURAL ISLAND)
BOUND BY DETERMINATION
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More Dispute Situations
FOR MORE
DISPUTE INFORMATION
FEMA’S Flood Insurance Guidelines(Pages 14 – 18)
Previous Determinationspage 20page 20
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Previous Determinations
Okay to use if: Not more than 7 years old
Nomap changes
Increasing/extending/renewing
Consider recertification
Cannot use if: New loan
Refinancing
Fees page 20page 20
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Fees
Determination only ‐ Not included in finance charge
Life‐of‐Loan Monitoring ‐ Include in finance charge
Force‐Placement page 20page 20
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Force Placement
TRIGGER
Credit union discovers—anytime during life of loan: Insurance is not in place
Less than required amount
Monitoring is not required – but be prudent
Force Placement
INSURANCE LAPSES / INSUFFICIENT AMOUNT
NOTIFY BORROWER
IF NO INSURANCE IN 45 DAYS, CREDIT UNION MUST PURCHASE INSURANCE (AND MAY CHARGE BORROWER).
NEW RULE
CREDIT UNION IS PERMITTED TO OBTAIN INSURANCE AT LAPSE, AND MAY IMMEDIATELY CHARGE BORROWER.
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Escrowing page 20page 20
Escrowing
Currently . . . must escrow flood insurance premium if:
Residential real estate loan and
Credit union requires escrow of other taxes and insurance
page 20page 20
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Escrowing
If made, increased, extended or renewed on or after January 1, 2016, lender must escrow
If outstanding on January 1, 2016, lender must offer option to escrow
Neither required if exempt loan or lender
page 20page 20
INTERAGENCY QUESTIONS AND ANSWERS
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I. DESIGNATED LOANS
Non‐participating communitiesInsurance not required Conventional loan okay No SBA/VA/FHA Consider risk
Purchase of loanNot a trigger Due diligence required
ParticipationEach lender responsible Compliance duties may be assigned to one lender
Restructure/modificationQuestion is whether loan is increased, extended or renewed
Performing reviewsNot specifically required But sound risk management may require scheduled periodic reviews
page 21page 21
II. APPROPRIATE AMOUNT
Required coverageRequired insurance amount Caps Insurable value Examples
Residential/Nonresidential buildingsDistinction essential for escrow rules
Multiple buildingsDetermining amount of insurance Allocating insurance Examples
Additional flood insurancePermitted Not required
Maximum DeductablePermissible
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III. EXEMPTIONS
$5,000 or less / 1 year or less
Does not yet discuss detached structures
page 25page 25
IV. CONSTRUCTION LOANS
Property to be developedInsurance not required if loan is only secured by land
Building in course of constructionFlood insurance is applicable Gives specific detail
page 26page 26
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V. NON‐RESIDENTIAL BUILDINGS
Structures with limited valueInsurance required Can “carve out” . . . but may not be able to market if foreclosed
Multiple buildingsConsider each building
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VI. CONDOMINIUMS
Not reprinted in booklet
Available upon request
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VII. HOME EQUITY LOANS / LINES OF CREDIT /
SECOND MORTGAGES / OTHER LIENS
Home equity loansUsual rule Lien priority irrelevant
Lines of creditRequirements not triggered by a draw
Second mortgagesSpecial rules for determining amount of insurance Examples
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VII. OTHER LIENS
Inventory stored in unsecured buildingFlood insurance not required
Building and contents both securedFlood insurance required for building and contents Example
Abundance of cautionReason irrelevant Insurance required
Personal guaranteesIf secured by structure, flood insurance may apply
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VIII. SALE / TRANSFER OF LOAN
Notify FEMAFEMA designated insurance company to receive notice
Mergers and acquisitions
page 30page 30
IX. ESCROW REQUIREMENTS
Defining “residential real estate”Multi‐family buildings Mixed‐use properties
Voluntary escrow accountsEscrow of flood insurance not triggered
Premiums for credit life, disability insuranceEscrow of flood insurance not triggered
Does not yet discuss new rules
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X. FORCE PLACEMENT
Explanation of requirement
Does not yet discuss new rule
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XI. PRIVATE INSURANCE POLICIES
Relying on private insurance policy
Policy not meeting FEMA criteria
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XII. DETERMINATION FORM
Whether to provideNot required to provide May give, but does not replace notification
Electronic formatPermitted
Previous determinationRules for using Can never use when making a new loan Refi by new lender is new loan
page 34page 34
XIII. FEES
Determination feesFour instances when fees are permitted
Life‐of‐loan reviewGenerally permitted If RESPA loan, can only charge if loan closes (otherwise would be unearned fee)
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XIV. FLOOD ZONE DISCREPANCIES
Discrepancy in insurance policy / determination
Compare documents Resolve discrepancies
page 36page 36
XV. NOTICE OF FLOOD HAZARD
Multiple borrowersOnly need to give to one borrower
Mobile homesIf not certain of final location, give at earliest possible time
Previous noticeIrrelevant . . . give new notice
Sample form (in FEMA Guidelines)Not mandatory May personalize, change format, add information
Does not yet discuss new form
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XVI. MANDATORY PENALTIES
Penalties Mandatory penalty if pattern or practice of violations
Does not yet discuss new penalties [now $2,000 / no limit]
Pattern or practiceRepeated Intentional Regular Usual Deliberate List of considerations
page 38page 38
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2015 CUWebinarsOctober 1st - Best-Ever Compliance
Checklists for ConsumerLoans
October 5th - Stress Testing 101
October 8th - Optimizing Your Loan Review Process
October 14th - 10 Lessons Learned When Your Member Dies
October 21st - Understanding the Residential Mortgage Application
Thanks for participating!
TTS800‐831‐[email protected]
Anne Lolley877‐778‐5192 [email protected]