2007 Revision of Mandatory Purchase Guidelines Published

The Mandatory Purchase of Flood Insurance Guidelines booklet provides guidance to the federally regulated lending industry for implementing the mandatory purchase provisions of the National Flood Insurance Reform Act of 1994 and other key legislation that governs the NFIP.

The revised 2007 edition of the Guidelines clarifies some of the complex issues that have emerged since the 1999 edition, and incorporates industry best practices and lessons learned for implementing statutory requirements.

A Tour of Revisions to the Text

Section A of the Guidelines introduces the NFIP and discusses its legislative history. This section also describes the federally regulated lending agencies and the types of lending institutions they each supervise. A flowchart illustrating the mandatory purchase process at loan origination has been moved to this section.

Information in Section B focuses on coverage availability and includes a website address for information on the NFIP and levees. Information that clarifies processing procedures for Letters of Map Change has also been added to this section.

Section C provides details about the general mandatory purchase provisions established by the Flood Disaster Protection Act of 1973 and strengthened by the National Flood Insurance Reform Act of 1994. Information has been added to this section to explain the options available for purchasing coverage for buildings in the course of construction and specify that there is no 30-day waiting period for this coverage.

Section D addresses condominiums, cooperatives, and timeshares. Information has been added to this section to reflect a recent Program change which states effective October 1, 2007, the Declarations Page of each Residential Condominium Building Association Policy (RCBAP) issued or renewed must show the building Replacement Cost Value (RCV) and the number of units within that building. A recommendation for lenders to require 100-percent RCV for RCBAP coverage has been added to this section. The application of coinsurance penalties and loss assessments is clarified in Section D and deductible information for Government-Sponsored Enterprises has been updated.

Section E, the final section of the Guidelines, addresses the tripwires that alert lenders and servicers to a change in circumstances that could require flood coverage on a property. A flowchart describing tripwires during the life of loan has been moved to this section. Additional information is now included in the Section E discussion of regulatory penalties.


Highlights of Other Changes

Appendix 1 has been updated to include text referencing the NFIP history and legal citations.

Appendix 2 has been revised to include the newest version of the Federal Deposit Insurance Corporation regulations for the banks it oversees.

Appendix 3 now includes the updated version of the Standard Flood Hazard Determination Form.

Appendix 4 provides two examples of Notices of Special Flood Hazard and Availability of Federal Disaster Relief Assistance. One notice is for NFIP participating communities and one is for non-participating communities.

Appendix 5 provides contact information for federally regulated lending agencies, Government-Sponsored Enterprises, and flood-related resources.

Appendix 6 expands the waiting period discussion to correspond with the NFIP Flood Insurance Manual.

Appendix 7 updates the Mortgage Portfolio Protection Program information.

The Glossary has been updated to be consistent with the Flood Insurance Manual, and the Index in the back of the Guidelines has been expanded to include information added to the booklet.

To Get Your Copy

The 2007 edition of the Mandatory Purchase of Flood Insurance Guidelines is now available on the FEMA website. A printed copy is available at no cost from the FEMA Distribution Center (1-800-480-2520).