www.lenders-financial.com        Lenders Financial Insurance Services, Troy, MI           January, 2013

Mortgage Lenders and Servicers
Taking Note of New Flood Insurance Reform

Flood Insurance reform which had eluded Congress for seven years is now going into effect with the implementation of the Biggert-Waters Flood Insurance Reform Act of 2012. The Act, part of the larger transportation bill H.R. 4348, was signed into law in July 2012.

Biggert-Waters ensures the availability of flood insurance under the National Flood Insurance Program (NFIP) through 2017. This 5-year extension contains significant reform measures deemed necessary for the survival of the NFIP program.

Most of the changes involve core parts of flood insurance: coverage, cost, and property eligibility.  Currently, 5.6 million home and business owners rely on the NFIP program for insurance.

However, Biggert-Waters also contains several critical "regulatory" reforms aimed at mortgage lenders and servicers:


Penalties (for non-compliance with mandatory flood insurance purchase requirements) are increased from $350 to $2000 per violation – with no maximum annual penalty (it was $100,000.)

In direct response to the new law, many financial institutions have conducted internal flood audits to avoid these potentially large financial penalties in future regulatory audits.

Map Changes

The new law establishes an on-going National Flood Mapping Program, and calls for a more aggressive campaign of updating flood maps. Lenders will need to rely on the accuracy of their "Life of Loan" flood zone certifications, as properties will be affected in both zone and rating by new rules established for the NFIP and FEMA

Force Placed Flood Insurance

The new law defines rules for the force placement of flood insurance. Forced placed flood insurance must now be terminated, and the unearned premiums refunded to the mortgagor, within 30 days of receipt of proof of the mortgagor’s updated flood insurance coverage

Standard flood Insurance

The new law allows for private flood insurance to satisfy flood insurance coverage requirements if it meets certain standards. ("Private" does not refer to insurance issued by the many insurance carriers, which issue policies as part of the "Write your Own" partnership with NFIP.)


Amends the Real Estate Settlement Procedures Act (RESPA) to require explanation of the availability of flood insurance under the NFIP or through private insurance for properties both in and out of Standard Flood Hazard Areas (SFHAs)

Highlights of the Biggert-Waters Flood Insurance
Reform Act of 2012 (click here)

   Additional Reading



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Lenders Financial Insurance Services
2838 East Long Lake Rd. Suite 110
Troy, MI  48085
(248) 689-2001