Jim Gilpin
By Jim Gilpin on February 23, 2022

Federal Flood Insurance Regulations: Joint Agencies' Rulemaking History

Starting in '73, here's an overview of the joint agencies' rulemaking regarding federal flood insurance regulations

Introduction‌ ‌

Many‌ ‌loan‌ ‌servicers‌ ‌have‌ ‌spent‌ ‌their‌ ‌careers‌ ‌observing‌ ‌the‌ ‌ever-changing‌ ‌federal‌ ‌flood‌ ‌insurance‌ ‌regulations. ‌This‌ ‌article‌ ‌will‌ ‌provide‌ ‌a‌ ‌primer‌ ‌on‌ ‌the‌ ‌history‌ ‌of‌ ‌NFIP‌ ‌flood‌ ‌insurance‌ ‌
regulation‌s ‌and‌ ‌provide‌ ‌links‌ ‌to‌ ‌the‌ ‌actual‌ ‌language‌ ‌as‌ ‌published‌ ‌in‌ ‌the‌ ‌Federal‌ ‌Register.‌ ‌In‌ ‌addition,‌ ‌this‌ ‌article‌ ‌provides‌ ‌a‌ ‌chronological‌ ‌DIY‌ ‌reference‌ ‌to‌ ‌the‌ ‌Joint‌ ‌Agencies'‌ rulemaking‌ ‌for lenders since‌ ‌their‌ ‌inception‌ ‌in‌ ‌1994.‌ ‌

‌Acts‌ ‌vs.‌ ‌Regulation‌ ‌

The 1973‌ ‌Flood‌ ‌Disaster‌ ‌Protection‌ ‌Act‌ ‌(FDPA)‌ ‌brought‌ ‌Congress‌ ‌and‌ ‌the‌ ‌lending‌ ‌industry‌ ‌together‌ ‌to‌ ‌increase‌ ‌flood‌ ‌insurance‌ ‌usage‌ ‌in‌ ‌flood-prone‌ ‌areas.‌ ‌The‌ ‌NFIP‌ ‌needed‌ ‌to‌ ‌increase‌ ‌flood‌ ‌
insurance‌ ‌premiums‌ ‌by‌ ‌mandating‌ ‌flood‌ ‌insurance‌ ‌purchases‌ ‌for‌ ‌properties‌ ‌in‌ ‌flood‌ ‌zones.‌ ‌

Lenders‌ ‌providing‌ ‌mortgages‌ ‌to‌ ‌these‌ ‌property‌ ‌owners‌ could be used as gatekeepers. ‌The‌ ‌FDPA‌ ‌required‌ ‌mandatory‌ ‌flood‌ ‌insurance‌ ‌purchase‌ ‌for‌ ‌loans‌ ‌made‌ ‌by‌ ‌Federally‌ ‌Regulated‌ ‌
Lenders‌ ‌in‌ ‌flood-prone‌ ‌areas.‌ ‌The‌ ‌FDPA‌ ‌started‌ ‌the‌ ‌rocky‌ relationship‌ ‌between‌ ‌

  • Congress,‌ ‌
  • lenders,‌ ‌
  • and‌ ‌regulators.‌‌

Congress‌ ‌would‌ ‌formalize‌ ‌its‌ ‌relationship‌ ‌with‌ ‌the‌ ‌regulators‌ ‌with‌ ‌the‌ ‌1994‌ ‌National‌ ‌Flood‌ ‌Insurance‌ ‌Reform‌ ‌Act‌ ‌(The‌ ‌Reform‌ ‌Act).‌ ‌The‌ ‌Reform‌ ‌Act‌ ‌created‌ ‌the‌ ‌Joint‌ ‌Agencies,‌ ‌now‌ ‌
called‌ ‌"Agencies,"‌ ‌which‌ ‌included‌ ‌the‌ ‌

  • OCC,‌ ‌
  • Federal‌ ‌Reserve‌ ‌Board,‌ ‌
  • FDIC,‌ ‌
  • OTS,‌ ‌
  • NCUA,‌ ‌
  • and FCA‌ ‌banking‌ ‌regulators.‌

The‌ ‌Agencies‌ ‌were‌ ‌now‌ ‌the‌ ‌police‌ ‌department‌ ‌for‌ ‌the‌ ‌NFIP.‌ ‌

the tracking win that loan servicing needs
Congress‌ ‌has‌ ‌created‌ ‌two‌ ‌additional‌ ‌flood‌ ‌insurance‌ ‌Acts‌ ‌since‌ ‌1994.‌ ‌These‌ ‌Acts‌ ‌resulted‌ ‌in‌ ‌eight‌ ‌different‌ ‌Q&As‌ ‌to‌ ‌be‌ ‌released‌ ‌by‌ ‌the‌ ‌Agencies.‌ ‌Each‌ ‌subsequent‌ ‌Q&A‌ ‌attempted‌ ‌to‌ ‌
clarify‌ ‌their‌ ‌regulation.‌ ‌Unfortunately,‌ ‌there‌ ‌have‌ ‌been‌ ‌more‌ ‌questions‌ ‌than‌ ‌answers‌ ‌for‌ ‌most‌ ‌of‌ ‌the‌ ‌last‌ ‌18‌ ‌years.‌ ‌

2022‌ ‌may‌ ‌be‌ ‌the‌ ‌year‌ ‌that‌ ‌the‌ ‌Agencies‌ ‌finally‌ ‌catch‌ ‌up with Congress.‌ ‌‌

History‌ ‌of‌ ‌the‌ ‌Agency's‌ ‌Q&As‌ ‌

After‌ ‌being‌ ‌created‌ ‌in‌ ‌1994,‌ ‌the‌ ‌Agencies‌ ‌published‌ ‌their‌ ‌first‌ ‌final‌ ‌rule‌ ‌in‌ ‌1996‌ ‌to‌ ‌implement‌ ‌the‌ ‌National‌ ‌Flood‌ ‌Insurance‌ ‌Reform‌ ‌Act‌ ‌of‌ ‌1994.‌ ‌This‌ ‌final‌ ‌rule‌ ‌generated‌ ‌many‌ ‌questions‌ ‌from‌ servicers.‌ ‌Accordingly,‌ ‌in‌ ‌1997,‌ ‌the‌ ‌Agencies‌ ‌created‌ ‌49‌ ‌Q&As‌ ‌to‌ ‌address‌ ‌the‌ ‌servicers'‌ ‌concerns.‌ ‌

In‌ ‌2009,‌ ‌after‌ ‌12‌ ‌years,‌ ‌the‌ ‌Agencies‌ ‌published‌ ‌additional‌ ‌Q&As.‌ ‌The‌ ‌Q&As‌ ‌now‌ ‌totaled‌ ‌77‌ ‌questions,‌ ‌including‌ ‌five‌ ‌new‌ questions‌ ‌relating‌ ‌to‌ ‌force-placed‌ ‌insurance.‌ ‌The‌ ‌industry‌ ‌
comment‌ ‌period‌ ‌for‌ ‌these‌ ‌questions‌ ‌ended‌ ‌in‌ ‌October‌ ‌of‌ ‌2011.‌ ‌

The‌ ‌Agencies‌ ‌did‌ ‌not‌ ‌publish‌ ‌the‌ ‌final‌ ‌rule‌ ‌before‌ ‌Congress‌ ‌passed‌ ‌the‌ ‌2012‌ ‌Biggert‌ ‌Waters‌ ‌Flood‌ ‌Insurance‌ ‌Reform‌ ‌Act‌ ‌
(BW-12).‌ ‌Therefore,‌ ‌the‌ ‌2011‌ ‌final‌ ‌rule‌ ‌was‌ ‌never‌ ‌published.‌

BW-12‌ ‌was‌ ‌an‌ ‌attempt‌ ‌by‌ ‌Congress‌ ‌to‌ ‌shore‌ ‌up‌ ‌the‌ ‌NFIP‌ ‌financing‌ ‌after‌ ‌the‌ ‌devastating‌ ‌hurricane‌ ‌losses‌ ‌during‌ ‌the‌ ‌first‌ ‌decade‌ ‌of‌ ‌the‌ ‌21st‌ ‌century.‌ ‌Unfortunately,‌ ‌BW-12‌ ‌significantly‌ ‌
increased‌ ‌flood‌ ‌insurance‌ ‌premiums‌ ‌for‌ ‌homeowners.‌ ‌Dramatically‌ ‌higher‌ ‌premiums‌ ‌created‌ ‌a‌ ‌voter‌ ‌uprising‌ ‌in‌ ‌New‌ ‌York‌ ‌and‌ ‌New‌ ‌Jersey‌ ‌as‌ ‌many‌ ‌voters‌ ‌who‌ ‌owned‌ ‌oceanfront‌ ‌vacation‌ ‌homes‌ ‌on‌ ‌the‌ ‌Jersey‌ ‌Shore‌ ‌were‌ ‌adversely‌ ‌affected‌ ‌by‌ ‌BW-12.‌ ‌ ‌

Biggert-Waters‌ ‌introduced‌ ‌significant‌ ‌changes‌ ‌to‌ ‌flood‌ ‌regulation.‌ ‌Once‌ ‌signed‌ ‌into‌ ‌law,‌ ‌the‌ ‌agencies‌ ‌went‌ ‌to‌ ‌work‌ ‌and‌ ‌quickly‌ ‌introduced‌ ‌additional‌ ‌Q&A‌ ‌in‌ ‌October‌ ‌2013.‌ ‌But,‌ ‌once‌ ‌again,‌ ‌the‌ ‌Agency's‌ ‌work‌ ‌was‌ ‌interrupted‌ ‌by‌ ‌Congress's‌ ‌response‌ ‌to‌ ‌appease‌ ‌voters.‌ ‌

As‌ ‌a‌ ‌result‌ ‌of‌ ‌this‌ ‌voter‌ ‌revolt,‌ ‌Congress‌ ‌passed‌ ‌the‌ ‌2014‌ ‌Homeowner‌ ‌Flood‌ ‌Insurance‌ ‌Affordability‌ ‌Act‌ ‌(HFIAA).‌ ‌HFIAA‌ ‌immediately‌ ‌retracted‌ ‌the‌ ‌punitive‌ ‌premium‌ ‌rate‌ ‌increases‌ ‌and‌ ‌replaced‌ ‌them‌ ‌with‌ ‌gradual‌ ‌increases‌ ‌over‌ ‌time.‌ ‌In‌ ‌addition,‌ ‌both‌ ‌BW-12‌ ‌and‌ ‌HFIAA‌ ‌made‌ ‌significant‌ ‌changes‌ ‌regarding‌ ‌

  • escrow‌ ‌of‌ ‌premium,‌ ‌
  • force-placed‌ ‌insurance,‌ ‌
  • and‌ private‌ ‌flood‌ ‌insurance.‌ ‌

As‌ ‌a‌ ‌result,‌ ‌many‌ ‌new‌ ‌regulations‌ ‌would‌ ‌need‌ ‌to‌ ‌be‌ ‌created‌ ‌by‌ ‌the‌ ‌Agencies.‌

the tracking win that loan servicing needsAfter‌ ‌BW-12‌ ‌passed‌ ‌in‌ ‌2012,‌ ‌loan‌ ‌servicers‌ ‌struggled‌ ‌with‌ ‌their‌ ‌regulators‌ ‌regarding‌ ‌NFIP‌ ‌compliance‌ ‌until‌ ‌the‌ ‌Agency‌ ‌published‌ ‌its ‌Q&A‌ ‌in‌ ‌2015.‌ ‌From‌ ‌2012‌ ‌to‌ ‌2015,‌ ‌we‌ ‌at‌ ‌Miniter‌ ‌
Group‌ ‌turned‌ ‌to‌ ‌the‌ ‌NFIP's‌ ‌MPPP‌ ‌guidance,‌ ‌the‌ ‌2007‌ ‌Final‌ ‌Rule,‌ and‌ ‌the‌ ‌2011‌ ‌Q&As‌ ‌to‌ ‌help‌ ‌our‌ ‌lenders‌ ‌stay‌ ‌compliant.‌ ‌

In‌ ‌October‌ ‌2014,‌ ‌the‌ ‌Agencies‌ ‌released‌ ‌for‌ ‌comment‌ ‌a‌ ‌Final‌ ‌Rule‌ ‌which‌ ‌was‌ ‌combined‌ ‌with‌ ‌the‌ ‌2013‌ ‌rule‌ ‌and‌ ‌made‌ ‌significant‌ ‌headway‌ ‌in‌ ‌defining‌ ‌NFIP‌ ‌regulation‌ ‌to‌ ‌lenders.‌ ‌

  • Escrow,‌ ‌
  • force-placed‌ ‌insurance,‌
  • and‌ ‌detached‌ ‌structures‌ ‌
    were‌ ‌mainstream‌ ‌changes‌ ‌with‌ ‌dozens‌ ‌of‌ ‌small‌ ‌regulatory‌ ‌changes.‌ ‌

The‌ ‌Agencies‌ ‌left‌ ‌private‌ ‌flood‌ ‌insurance‌ ‌for‌ ‌future‌ ‌work.‌ ‌This‌ ‌
rulemaking‌ ‌became‌ ‌the‌ ‌Agencies‌ ‌2015‌ ‌Final‌ ‌Rule.‌ ‌

In‌ ‌November‌ ‌2016,‌ ‌the‌ ‌Agencies‌ ‌introduced‌ ‌a‌ ‌Notice‌ ‌of‌ ‌Rulemaking‌ ‌for‌ ‌Private‌ ‌Flood‌ ‌Insurance‌ ‌to‌ ‌complete‌ ‌regulations‌ ‌for‌ ‌BW-12‌ ‌and‌ ‌HFIAA.‌ ‌This‌ ‌effort‌ ‌led‌ ‌to‌ ‌the‌ ‌completion‌ ‌of‌ ‌the‌ ‌Private‌ ‌Flood‌ ‌Insurance‌ ‌Final Rule‌ ‌in‌ ‌February ‌2019.‌ ‌However,‌ after ‌releasing‌ ‌this‌ ‌final‌ ‌rule,‌ ‌the‌ ‌Agencies‌ ‌held‌ ‌a‌ ‌Private‌ ‌Flood‌ Insurance‌ ‌Webinar‌ ‌in‌ ‌June‌ ‌of‌ ‌that‌ ‌year.‌ ‌ ‌

The‌ ‌Agencies‌ ‌are‌ ‌currently‌ ‌working‌ ‌on‌ ‌a‌ ‌proposed‌ ‌rule‌ ‌to‌ ‌reorganize‌ ‌the‌ ‌2007‌ ‌&‌ ‌2011‌ ‌Q&As,‌ ‌including‌ ‌additional‌ ‌questions‌ ‌relating‌ ‌to‌ ‌BW-12‌ ‌and‌ ‌HFIAA.‌ ‌The‌ ‌reorganized‌ ‌Q&As‌ ‌include‌ ‌17‌ ‌
comprehensive‌ ‌sections‌ ‌replacing‌ ‌the‌ ‌sequentially‌ ‌numbered‌ ‌questions.‌ ‌This‌ ‌proposed‌ ‌rule‌ ‌comment‌ ‌period‌ ‌ended‌ ‌in‌ ‌November‌ ‌of‌ ‌2020.‌ ‌

In‌ ‌addition,‌ ‌a‌ ‌second‌ ‌rule‌ ‌for‌ ‌the‌ ‌Private‌ Flood‌ ‌Insurance‌ ‌Q&As‌ ‌comment‌ ‌period‌ ‌ended‌ ‌March‌ ‌of‌ ‌2021.‌ The‌ ‌combined‌ ‌Q&As‌ ‌will‌ ‌become‌ ‌the‌ ‌Agencies‌' ‌2022‌ ‌final‌ ‌rule,‌ ‌hopefully‌ ‌ending‌ ‌the‌ ‌18-year‌ ‌confusion‌ ‌around‌ ‌NFIP‌ ‌flood‌ ‌regulation.‌ ‌

Conclusion‌ ‌

As‌ ‌the‌ ‌Agencies‌ ‌finalize‌ ‌and‌ ‌reorganize‌ ‌flood‌ ‌regulation‌ ‌for‌ ‌lenders‌ ‌in‌ ‌2021‌ ‌and‌ ‌2022,‌ ‌FEMA‌ ‌has‌ ‌introduced‌ ‌Risk‌ ‌Rating‌ ‌2.0,‌ ‌which‌ ‌goes‌ ‌into‌ ‌effect‌ ‌later‌ ‌in‌ ‌2022.‌ ‌

At‌ ‌Miniter‌ ‌Group,‌ ‌we‌ ‌will‌ ‌continue‌ ‌to‌ ‌stay‌ ‌abreast‌ ‌of‌ ‌flood‌ ‌insurance‌ ‌regulations‌ ‌for‌ ‌our‌ ‌lenders.‌ ‌Since‌ ‌this‌ ‌article‌ ‌is‌ ‌for‌ loan‌ ‌servicers'‌ ‌reference,‌ ‌please‌ ‌use‌ ‌the‌ ‌chronological‌ reference‌ ‌section‌ ‌below‌ for pdf documents ‌of‌ ‌all‌ ‌rules‌ published‌ ‌by‌ ‌the‌ ‌Agencies.‌ ‌

the tracking win that loan servicing needs


These links download a .pdf document directly to your device

August 1996

1996 Agency Final Rule

July 1997

First Agencies Q&A

October 2011

2011 Agencies Q&A - Request for Comment

October 2013

2013 Agencies -Proposed Rule

July 2015

2015 Final Rule

November 2016

Private Flood Insurance – Proposed Rule

February 2019

Private Flood Insurance – Final Rule

June 2019

Webinar: Private Flood Insurance

July 2020

Revised Q&A – Request for Comments

March 2021

Private Flood Insurance Q&A – Request for Comment

Published by Jim Gilpin February 23, 2022
Jim Gilpin