Question:
Hi Heather,
Our NCUA examiner asked us how we report loans with flood insurance to the FEMA administrator. I wasn’t aware of this requirement, and I couldn’t find any information on FEMA’s website about how to exactly do this. Can you help?
Answer:
I can help! Let’s start with the requirement from NCUA flood insurance regulation:
(a) Notice requirement. When a credit union 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 credit union shall notify the Administrator of FEMA (or the Administrator of FEMA’s designee) in writing of the identity of the servicer of the loan. The Administrator of FEMA has designated the insurance provider to receive the credit union’s notice of the servicer’s identity. This notice may be provided electronically if electronic transmission is satisfactory to the Administrator of FEMA’s designee.
Notice this sentence, “The Administrator of FEMA has designated the insurance provider to receive the credit union’s notice of the servicer’s identity.”
It kind of sounds like you only need to report the loan servicer’s identity to the flood insurance provider. But it’s unclear if you need to ensure the insurance company reports to FEMA. Fortunately, the Interagency Questions and Answers Regarding Flood Insurance, published by the NCUA and other federal regulators, provides clarification:
SERVICING 2. When a lender makes a designated loan and will be servicing that loan, what are the requirements for notifying the Administrator of FEMA or the Administrator’s designee, i.e. the insurance provider?
Under the Regulation, the Administrator’s designee is the insurance company issuing the flood insurance policy. The borrower’s purchase of an NFIP policy (or the lender’s force placement of an NFIP policy) will constitute notice to the Administrator of FEMA when the lender is servicing that loan.
