[House Report 114-524]
[From the U.S. Government Publishing Office]


114th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      114-524

======================================================================



 
          FLOOD INSURANCE MARKET PARITY AND MODERNIZATION ACT

                                _______
                                

 April 26, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2901]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2901) to amend the Flood Disaster Protection Act 
of 1973 to require that certain buildings and personal property 
be covered by flood insurance, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Flood Insurance Market Parity and 
Modernization Act''.

SEC. 2. PRIVATE FLOOD INSURANCE.

  (a) Mandatory Purchase Requirement.--
          (1) Amount and term of coverage.--Section 102 of the Flood 
        Disaster Protection Act of 1973 (42 U.S.C. 4012a) is amended by 
        striking ``Sec. 102. (a)'' and all that follows through the end 
        of subsection (a) and inserting the following:
  ``Sec. 102. (a) Amount and Term of Coverage.--After the expiration of 
sixty days following the date of enactment of this Act, no Federal 
officer or agency shall approve any financial assistance for 
acquisition or construction purposes for use in any area that has been 
identified by the Administrator as an area having special flood hazards 
and in which the sale of flood insurance has been made available under 
the National Flood Insurance Act of 1968, unless the building or mobile 
home and any personal property to which such financial assistance 
relates is covered by flood insurance: Provided, That the amount of 
flood insurance (1) in the case of Federal flood insurance, is at least 
equal to the development or project cost of the building, mobile home, 
or personal property (less estimated land cost), the outstanding 
principal balance of the loan, or the maximum limit of Federal flood 
insurance coverage made available with respect to the particular type 
of property, whichever is less; or (2) in the case of private flood 
insurance, is at least equal to the development or project cost of the 
building, mobile home, or personal property (less estimated land cost), 
the outstanding principal balance of the loan, or the maximum limit of 
Federal flood insurance coverage made available with respect to the 
particular type of property, whichever is less: Provided further, That 
if the financial assistance provided is in the form of a loan or an 
insurance or guaranty of a loan, the amount of flood insurance required 
need not exceed the outstanding principal balance of the loan and need 
not be required beyond the term of the loan. The requirement of 
maintaining flood insurance shall apply during the life of the 
property, regardless of transfer of ownership of such property.''.
          (2) Requirement for mortgage loans.--Subsection (b) of 
        section 102 of the Flood Disaster Protection Act of 1973 (42 
        U.S.C. 4012a(b)) is amended--
                  (A) by striking the subsection designation and all 
                that follows through the end of paragraph (5) and 
                inserting the following:
  ``(b) Requirement for Mortgage Loans.--
          ``(1) Regulated lending institutions.--Each Federal entity 
        for lending regulation (after consultation and coordination 
        with the Financial Institutions Examination Council established 
        under the Federal Financial Institutions Examination Council 
        Act of 1974) shall by regulation direct regulated lending 
        institutions not to make, increase, extend, or renew any loan 
        secured by improved real estate or a mobile home located or to 
        be located in an area that has been identified by the 
        Administrator as an area having special flood hazards and in 
        which flood insurance has been made available under the 
        National Flood Insurance Act of 1968, unless the building or 
        mobile home and any personal property securing such loan is 
        covered for the term of the loan by flood insurance: Provided, 
        That the amount of flood insurance (A) in the case of Federal 
        flood insurance, is at least equal to the outstanding principal 
        balance of the loan or the maximum limit of Federal flood 
        insurance coverage made available with respect to the 
        particular type of property, whichever is less; or (B) in the 
        case of private flood insurance, is at least equal to the 
        outstanding principal balance of the loan or the maximum limit 
        of Federal flood insurance coverage made available with respect 
        to the particular type of property, whichever is less.
          ``(2) Federal agency lenders.--
                  ``(A) In general.--A Federal agency lender may not 
                make, increase, extend, or renew any loan secured by 
                improved real estate or a mobile home located or to be 
                located in an area that has been identified by the 
                Administrator as an area having special flood hazards 
                and in which flood insurance has been made available 
                under the National Flood Insurance Act of 1968, unless 
                the building or mobile home and any personal property 
                securing such loan is covered for the term of the loan 
                by flood insurance in accordance with paragraph (1). 
                Each Federal agency lender may issue any regulations 
                necessary to carry out this paragraph. Such regulations 
                shall be consistent with and substantially identical to 
                the regulations issued under paragraph (1).
                  ``(B) Requirement to accept flood insurance.--Each 
                Federal agency lender shall accept flood insurance as 
                satisfaction of the flood insurance coverage 
                requirement under subparagraph (A) if the flood 
                insurance coverage meets the requirements for coverage 
                under that subparagraph.
          ``(3) Government-sponsored enterprises for housing.--The 
        Federal National Mortgage Association and the Federal Home Loan 
        Mortgage Corporation shall implement procedures reasonably 
        designed to ensure that, for any loan that is--
                  ``(A) secured by improved real estate or a mobile 
                home located in an area that has been identified, at 
                the time of the origination of the loan or at any time 
                during the term of the loan, by the Administrator as an 
                area having special flood hazards and in which flood 
                insurance is available under the National Flood 
                Insurance Act of 1968, and
                  ``(B) purchased or guaranteed by such entity,
        the building or mobile home and any personal property securing 
        the loan is covered for the term of the loan by flood insurance 
        in the amount provided in paragraph (1). The Federal National 
        Mortgage Association and the Federal Home Loan Mortgage 
        Corporation shall accept flood insurance as satisfaction of the 
        flood insurance coverage requirement under paragraph (1) if the 
        flood insurance coverage provided meets the requirements for 
        coverage under that paragraph and any requirements established 
        by the Federal National Mortgage Association or the Federal 
        Home Loan Corporation, respectively, relating to the financial 
        strength of private insurance companies from which the Federal 
        National Mortgage Association or the Federal Home Loan Mortgage 
        Corporation will accept private flood insurance, provided that 
        such requirements shall not affect or conflict with any State 
        law, regulation, or procedure concerning the regulation of the 
        business of insurance.
          ``(4) Applicability.--
                  ``(A) Existing coverage.--Except as provided in 
                subparagraph (B), paragraph (1) shall apply on the date 
                of enactment of the Riegle Community Development and 
                Regulatory Improvement Act of 1994.
                  ``(B) New coverage.--Paragraphs (2) and (3) shall 
                apply only with respect to any loan made, increased, 
                extended, or renewed after the expiration of the 1-year 
                period beginning on the date of enactment of the Riegle 
                Community Development and Regulatory Improvement Act of 
                1994. Paragraph (1) shall apply with respect to any 
                loan made, increased, extended, or renewed by any 
                lender supervised by the Farm Credit Administration 
                only after the expiration of the period under this 
                subparagraph.
                  ``(C) Continued effect of regulations.--
                Notwithstanding any other provision of this subsection, 
                the regulations to carry out paragraph (1), as in 
                effect immediately before the date of enactment of the 
                Riegle Community Development and Regulatory Improvement 
                Act of 1994, shall continue to apply until the 
                regulations issued to carry out paragraph (1) as 
                amended by section 522(a) of such Act take effect.
          ``(5) Rule of construction.--Except as otherwise specified, 
        any reference to flood insurance in this section shall be 
        considered to include Federal flood insurance and private flood 
        insurance. Nothing in this subsection shall be construed to 
        supersede or limit the authority of a Federal entity for 
        lending regulation, the Federal Housing Finance Agency, a 
        Federal agency lender, the Federal National Mortgage 
        Association, or the Federal Home Loan Mortgage Corporation to 
        establish requirements relating to the financial strength of 
        private insurance companies from which the entity or agency 
        will accept private flood insurance, provided that such 
        requirements shall not affect or conflict with any State law, 
        regulation, or procedure concerning the regulation of the 
        business of insurance.''; and
                  (B) by striking paragraph (7) and inserting the 
                following new paragraph:
          ``(7) Definitions.--In this section:
                  ``(A) Flood insurance.--The term `flood insurance' 
                means--
                          ``(i) Federal flood insurance; and
                          ``(ii) private flood insurance.
                  ``(B) Federal flood insurance.--the term `Federal 
                flood insurance' means an insurance policy made 
                available under the National Flood Insurance Act of 
                1968 (42 U.S.C. 4001 et seq.).
                  ``(C) Private flood insurance.--The term `private 
                flood insurance' means an insurance policy that--
                          ``(i) is issued by an insurance company that 
                        is--
                                  ``(I) licensed, admitted, or 
                                otherwise approved to engage in the 
                                business of insurance in the State in 
                                which the insured building is located, 
                                by the insurance regulator of that 
                                State; or
                                  ``(II) eligible as a nonadmitted 
                                insurer to provide insurance in the 
                                home State of the insured, in 
                                accordance with sections 521 through 
                                527 of the Dodd-Frank Wall Street 
                                Reform and Consumer Protection Act (15 
                                U.S.C. 8201 through 8206);
                          ``(ii) is issued by an insurance company that 
                        is not otherwise disapproved as a surplus lines 
                        insurer by the insurance regulator of the State 
                        in which the property to be insured is located; 
                        and
                          ``(iii) provides flood insurance coverage 
                        that complies with the laws and regulations of 
                        that State.
                  ``(D) State.--The term `State' means any State of the 
                United States, the District of Columbia, the 
                Commonwealth of Puerto Rico, Guam, the Northern Mariana 
                Islands, the Virgin Islands, and American Samoa.''.
  (b) Effect of Private Flood Insurance Coverage on Continuous Coverage 
Requirements.--Section 1308 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4015) is amended by adding at the end the following:
  ``(n) Effect of Private Flood Insurance Coverage on Continuous 
Coverage Requirements.--For purposes of applying any statutory, 
regulatory, or administrative continuous coverage requirement, 
including under section 1307(g)(1), the Administrator shall consider 
any period during which a property was continuously covered by private 
flood insurance (as defined in section 102(b)(7) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(b)(7))) to be a period of 
continuous coverage.''.

                          Purpose and Summary

    Introduced by Representative Ross on June 25, 2015, the 
``Flood Insurance Market Parity and Modernization Act'' amends 
the Flood Disaster Protection Act to clarify that flood 
insurance offered by a private carrier outside of the National 
Flood Insurance Program (NFIP) can satisfy the Act's mandatory 
purchase requirement. H.R. 2901 defines acceptable private 
flood insurance as a policy providing flood insurance coverage 
that is issued by an insurance company that is licensed, 
admitted, or otherwise approved to engage in the business of 
insurance in the state or jurisdiction in which the insured 
property is located. Under H.R. 2901, an acceptable private 
flood insurance policy may also be issued by an insurance 
company that is eligible as a non-admitted insurer to provide 
insurance in the state or jurisdiction where the property to be 
insured is located.

                  Background and Need for Legislation

    In 1968, Congress created the NFIP, which is administered 
by the Federal Emergency Management Agency (FEMA) and provides 
flood insurance to policyholders across the country. Residents 
and business owners in participating communities across the 
United States and its territories may buy flood insurance 
through insurance agents and companies that participate as 
third-party administrators in the NFIP's Write Your Own (WYO) 
Program.
    Property owners can purchase flood insurance through the 
NFIP only if their communities participate in the NFIP. To 
participate in the NFIP, communities must agree to abide by 
provisions intended to mitigate flood risks. For example, 
participating communities must adopt building codes that 
require new structures built in floodplains (which are high-
risk areas) to be protected against flooding or to be elevated 
above the 100-year floodplain. FEMA calculates flood insurance 
premiums according to the average expected annual losses 
resulting from a natural disaster event that has a probability 
of occurring once every 100 years.
    In 1973, Congress passed the Flood Disaster Protection Act, 
under which federally regulated or insured lenders must require 
the purchase of flood insurance on properties in high-risk 
flooding areas if the U.S. government backs the mortgage 
thereon. While the Act does not require that coverage be 
provided under the NFIP, its effect, over time, has been to 
discourage private sector participation in the flood insurance 
market and funnel virtually all flood risk through the NFIP.
    Currently, the NFIP has approximately 5.3 million policies 
providing over $1.3 trillion in coverage in almost 22,000 
communities in 56 jurisdictions that participate in the 
program. As of January 31, 2016, the NFIP had an outstanding 
debt of $23 billion borrowed from the U.S. Treasury, with 
$7.425 billion remaining of its total temporary $30.425 billion 
Treasury borrowing authority.
    Currently, federal restrictions and confusing bureaucratic 
regulatory barriers have prevented the private flood insurance 
market from developing and, as a result, consumers have only 
one option for flood insurance: the NFIP. H.R. 2901 encourages 
the development of a robust private market by allowing insurers 
to work directly with their state commissioners to write 
policies that work for their customers' pricing and coverage 
needs. Choice and competition will lead to better products, 
pricing, and innovation and will give consumers another place 
to turn to besides the Federal government for this important 
safeguard.

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Housing and Insurance held a hearing examining matters relating 
to H.R. 2901 on January 13, 2016.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
March 2, 2016, and ordered H.R. 2901 to be reported favorably 
to the House as amended by a recorded vote of 53 yeas to 0 nays 
(recorded vote no. FC-95), a quorum being present. Before the 
motion to report was offered, the Committee adopted an 
amendment in the nature of a substitute offered by Mr. Ross by 
voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House as amended. The motion 
was agreed to by a recorded vote of 53 yeas 0 nays (Record vote 
no. FC-95), a quorum being present.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 2901 
will promote a robust private flood insurance market by 
clarifying that insurance offered by a private carrier can 
satisfy the Flood Disaster Protection Act's mandatory insurance 
purchase requirement.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 11, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2901, the Flood 
Insurance Market Parity and Modernization Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Aurora 
Swanson.
            Sincerely,
                                                Keith Hall.
    Enclosure.

H.R. 2901--Flood Insurance Market Parity and Modernization Act

    H.R. 2901 would clarify that flood insurance provided by 
private firms satisfies the requirement that homeowners 
maintain flood coverage on mortgaged properties that are backed 
by a federal guarantee and located in a flood zone. The bill 
also would direct the Federal Emergency Management Agency 
(FEMA) to consider policy holders who drop a National Flood 
Insurance Program (NFIP) policy and then later return to NFIP 
as having continuous coverage if they can demonstrate that a 
flood insurance policy from a private firm was maintained 
throughout the interim period. Enacting the bill would affect 
direct spending; therefore, pay-as-you-go procedures apply. 
However, CBO estimates those effects would be insignificant. 
Enacting the legislation would not affect revenues.
    Currently, private flood insurance options are not widely 
available. Based on information from FEMA and participants in 
private flood insurance markets, CBO expects that enacting the 
bill would have a very small effect on the decisions that 
consumers make regarding whether to carry a NFIP policy or to 
pursue private flood insurance. In addition, offsetting 
receipts from NFIP premiums would be available to be spent for 
flood claims, thus CBO estimates that any change in those 
collections would be offset by a similar change in direct 
spending.
    CBO estimates that enacting the bill would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    H.R. 2901 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Aurora Swanson. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2901 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 2901 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 2901 contains at least one 
directed rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This Section cites H.R. 2901 as the ``Flood Insurance 
Market Parity and Modernization Act''.

Section 2. Private flood insurance

    Section 2 updates current law to reinforce and strengthen 
requirements that flood insurance provided by private sector 
insurance carriers shall be accepted and considered similar to 
those polices offered by the National Flood Insurance Program 
(NFIP), provided certain conditions are met. Section 2 strikes 
and restates, in part, the current statute with updated 
language to reflect the recognition of flood policies offered 
by the NFIP and the private flood insurance market. Identical 
to current law, Section 2 restates the mandatory insurance 
requirement that any building, mobile home or personal property 
that would be financed by a federally-backed mortgage must have 
flood insurance if the property is located in an area 
designated as a special flood hazard.
    This section clarifies that the coverage amount of flood 
insurance provided under either a Federal or private policy 
must be at least equal to the lesser of: the development or 
project cost of the building, mobile home, or personal property 
(less estimated land cost); the outstanding principal balance 
of the federally insured loan secured by the property; or the 
maximum limit of Federal flood insurance coverage made 
available with respect to the particular type of property. If 
the financial assistance provided is in the form of a loan or 
an insurance or guaranty of a loan, the amount of required 
flood insurance need not exceed the outstanding principal 
balance of the loan and need not be required beyond the term of 
the loan.
    Consistent with current law, Federal banking regulators are 
required to instruct, by regulation, that regulated 
institutions not make loans secured by real property located in 
flood zones unless the property is covered by ``flood 
insurance'' (Federal or private). Moreover, H.R. 2901 clarifies 
that each Federal banking regulator must require regulated 
financial institutions to accept Federal (National Flood 
Insurance Program) and private flood insurance as satisfaction 
of the flood insurance coverage requirement.
    H.R. 2901 updates current law to require the Government 
Sponsored Enterprises (GSEs), known as the Federal National 
Mortgage Association and the Federal Home Loan Mortgage 
Corporation, to require flood insurance for any real estate or 
mobile home located in a special flood hazard area and 
purchased or guaranteed by such entity. This section would also 
add a new requirement that these GSEs accept Federal (National 
Flood Insurance Program) and private flood insurance as 
satisfaction of the mandatory flood insurance coverage 
requirement, provided that the flood insurance coverage meets 
the requirements under H.R. 2901 and any requirements 
established by the Federal National Mortgage Association or the 
Federal Home Loan Corporation relating to the financial 
strength of such private insurance companies. Such requirements 
developed by the GSEs shall not affect or conflict with any 
state law, regulation, or procedure concerning the regulation 
of the business of insurance.
    H.R. 2901 defines flood insurance as either ``Federal flood 
insurance'' or ``private flood insurance.'' ``Federal flood 
insurance'' is defined as a policy available through the NFIP. 
``Private flood insurance'' is defined as a flood insurance 
policy that is issued by a state-licensed insurer, or a non-
admitted insurer that is not disapproved by the state as a 
surplus lines insurer, and that complies with the laws and 
regulations of the state in which the insured property is 
located. The term ``State'' means any State of the United 
States, the District of Columbia, the Commonwealth of Puerto 
Rico, Guam, the Northern Mariana Islands, the Virgin Islands, 
and American Samoa.
    Finally, Section 2 clarifies that the Administrator of the 
Federal Emergency Management Agency shall consider any period 
during which a property was continuously covered by private 
flood insurance to be a period of continuous coverage.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                 FLOOD DISASTER PROTECTION ACT OF 1973




           *       *       *       *       *       *       *
TITLE I--EXPANSION OF NATIONAL FLOOD INSURANCE PROGRAM

           *       *       *       *       *       *       *



    flood insurance purchase and compliance requirements and escrow 
                                accounts

  Sec. 102. [(a) After the expiration of sixty days following 
the date of enactment of this Act, no Federal officer or agency 
shall approve any financial assistance for acquisition or 
construction purposes for use in any area that has been 
identified by the Administrator as an area having special flood 
hazards and in which the sale of flood insurance has been made 
available under the National Flood Insurance Act of 1968, 
unless the building or mobile home and any personal property to 
which such financial assistance relates is covered by flood 
insurance in an amount at least equal to its development or 
project cost (less estimated land cost) or to the maximum limit 
of coverage made available with respect to the particular type 
of property under the National Flood Insurance Act of 1968, 
whichever is less: Provided, That if the financial assistance 
provided is in the form of a loan or an insurance or guaranty 
of a loan, the amount of flood insurance required need not 
exceed the outstanding principal balance of the loan and need 
not be required beyond the term of the loan. The requirement of 
maintaining flood insurance shall apply during the life of the 
property, regardless of transfer of ownership of such 
property.] (a) Amount and Term of Coverage._After the 
expiration of sixty days following the date of enactment of 
this Act, no Federal officer or agency shall approve any 
financial assistance for acquisition or construction purposes 
for use in any area that has been identified by the 
Administrator as an area having special flood hazards and in 
which the sale of flood insurance has been made available under 
the National Flood Insurance Act of 1968, unless the building 
or mobile home and any personal property to which such 
financial assistance relates is covered by flood insurance: 
Provided, That the amount of flood insurance (1) in the case of 
Federal flood insurance, is at least equal to the development 
or project cost of the building, mobile home, or personal 
property (less estimated land cost), the outstanding principal 
balance of the loan, or the maximum limit of Federal flood 
insurance coverage made available with respect to the 
particular type of property, whichever is less; or (2) in the 
case of private flood insurance, is at least equal to the 
development or project cost of the building, mobile home, or 
personal property (less estimated land cost), the outstanding 
principal balance of the loan, or the maximum limit of Federal 
flood insurance coverage made available with respect to the 
particular type of property, whichever is less: Provided 
further, That if the financial assistance provided is in the 
form of a loan or an insurance or guaranty of a loan, the 
amount of flood insurance required need not exceed the 
outstanding principal balance of the loan and need not be 
required beyond the term of the loan. The requirement of 
maintaining flood insurance shall apply during the life of the 
property, regardless of transfer of ownership of such property.
  [(b) Requirement for Mortgage Loans.--
          [(1) Regulated lending institutions.--Each Federal 
        entity for lending regulation (after consultation and 
        coordination with the Financial Institutions 
        Examination Council established under the Federal 
        Financial Institutions Examination Council Act of 1974) 
        shall by regulation direct regulated lending 
        institutions--
                  [(A) not to make, increase, extend, or renew 
                any loan secured by improved real estate or a 
                mobile home located or to be located in an area 
                that has been identified by the Administrator 
                as an area having special flood hazards and in 
                which flood insurance has been made available 
                under the National Flood Insurance Act of 1968, 
                unless the building or mobile home and any 
                personal property securing such loan is covered 
                for the term of the loan by flood insurance in 
                an amount at least equal to the outstanding 
                principal balance of the loan or the maximum 
                limit of coverage made available under the Act 
                with respect to the particular type of 
                property, whichever is less; and
                  [(B) to accept private flood insurance as 
                satisfaction of the flood insurance coverage 
                requirement under subparagraph (A) if the 
                coverage provided by such private flood 
                insurance meets the requirements for coverage 
                under such subparagraph.
          [(2) Federal agency lenders.--A Federal agency lender 
        may not make, increase, extend, or renew any loan 
        secured by improved real estate or a mobile home 
        located or to be located in an area that has been 
        identified by the Administrator as an area having 
        special flood hazards and in which flood insurance has 
        been made available under the National Flood Insurance 
        Act of 1968, unless the building or mobile home and any 
        personal property securing such loan is covered for the 
        term of the loan by flood insurance in the amount 
        provided in paragraph (1)(A). Each Federal agency 
        lender shall accept private flood insurance as 
        satisfaction of the flood insurance coverage 
        requirement under the preceding sentence if the flood 
        insurance coverage provided by such private flood 
        insurance meets the requirements for coverage under 
        such sentence. Each Federal agency lender shall issue 
        any regulations necessary to carry out this paragraph. 
        Such regulations shall be consistent with and 
        substantially identical to the regulations issued under 
        paragraph (1)(A).
          [(3) Government-sponsored enterprises for housing.--
        The Federal National Mortgage Association and the 
        Federal Home Loan Mortgage Corporation shall implement 
        procedures reasonably designed to ensure that, for any 
        loan that is--
                  [(A) secured by improved real estate or a 
                mobile home located in an area that has been 
                identified, at the time of the origination of 
                the loan or at any time during the term of the 
                loan, by the Administrator as an area having 
                special flood hazards and in which flood 
                insurance is available under the National Flood 
                Insurance Act of 1968, and
                  [(B) purchased by such entity,
        the building or mobile home and any personal property 
        securing the loan is covered for the term of the loan 
        by flood insurance in the amount provided in paragraph 
        (1)(A). The Federal National Mortgage Association and 
        the Federal Home Loan Mortgage Corporation shall accept 
        private flood insurance as satisfaction of the flood 
        insurance coverage requirement under paragraph (1)(A) 
        if the flood insurance coverage provided by such 
        private flood insurance meets the requirements for 
        coverage under such paragraph and any requirements 
        established by the Federal National Mortgage 
        Association or the Federal Home Loan Mortgage 
        Corporation, respectively, relating to the financial 
        solvency, strength, or claims-paying ability of private 
        insurance companies from which the Federal National 
        Mortgage Association or the Federal Home Loan Mortgage 
        Corporation will accept private flood insurance.
          [(4) Applicability.--
                  [(A) Existing coverage.--Except as provided 
                in subparagraph (B), paragraph (1) shall apply 
                on the date of enactment of the Riegle 
                Community Development and Regulatory 
                Improvement Act of 1994.
                  [(B) New coverage.--Paragraphs (2) and (3) 
                shall apply only with respect to any loan made, 
                increased, extended, or renewed after the 
                expiration of the 1-year period beginning on 
                the date of enactment of the Riegle Community 
                Development and Regulatory Improvement Act of 
                1994. Paragraph (1) shall apply with respect to 
                any loan made, increased, extended, or renewed 
                by any lender supervised by the Farm Credit 
                Administration only after the expiration of the 
                period under this subparagraph.
                  [(C) Continued effect of regulations.--
                Notwithstanding any other provision of this 
                subsection, the regulations to carry out 
                paragraph (1), as in effect immediately before 
                the date of enactment of the Riegle Community 
                Development and Regulatory Improvement Act of 
                1994, shall continue to apply until the 
                regulations issued to carry out paragraph (1) 
                as amended by section 522(a) of such Act take 
                effect.
          [(5) Rule of construction.--Nothing in this 
        subsection shall be construed to supersede or limit the 
        authority of a Federal entity for lending regulation, 
        the Federal Housing Finance Agency, a Federal agency 
        lender, the Federal National Mortgage Association, or 
        the Federal Home Loan Mortgage Corporation to establish 
        requirements relating to the financial solvency, 
        strength, or claims-paying ability of private insurance 
        companies from which the entity or agency will accept 
        private flood insurance.]
  (b) Requirement for Mortgage Loans.--
          (1) Regulated lending institutions.--Each Federal 
        entity for lending regulation (after consultation and 
        coordination with the Financial Institutions 
        Examination Council established under the Federal 
        Financial Institutions Examination Council Act of 1974) 
        shall by regulation direct regulated lending 
        institutions not to make, increase, extend, or renew 
        any loan secured by improved real estate or a mobile 
        home located or to be located in an area that has been 
        identified by the Administrator as an area having 
        special flood hazards and in which flood insurance has 
        been made available under the National Flood Insurance 
        Act of 1968, unless the building or mobile home and any 
        personal property securing such loan is covered for the 
        term of the loan by flood insurance: Provided, That the 
        amount of flood insurance (A) in the case of Federal 
        flood insurance, is at least equal to the outstanding 
        principal balance of the loan or the maximum limit of 
        Federal flood insurance coverage made available with 
        respect to the particular type of property, whichever 
        is less; or (B) in the case of private flood insurance, 
        is at least equal to the outstanding principal balance 
        of the loan or the maximum limit of Federal flood 
        insurance coverage made available with respect to the 
        particular type of property, whichever is less.
          (2) Federal agency lenders.--
                  (A) In general.--A Federal agency lender may 
                not make, increase, extend, or renew any loan 
                secured by improved real estate or a mobile 
                home located or to be located in an area that 
                has been identified by the Administrator as an 
                area having special flood hazards and in which 
                flood insurance has been made available under 
                the National Flood Insurance Act of 1968, 
                unless the building or mobile home and any 
                personal property securing such loan is covered 
                for the term of the loan by flood insurance in 
                accordance with paragraph (1). Each Federal 
                agency lender may issue any regulations 
                necessary to carry out this paragraph. Such 
                regulations shall be consistent with and 
                substantially identical to the regulations 
                issued under paragraph (1).
                  (B) Requirement to accept flood insurance.--
                Each Federal agency lender shall accept flood 
                insurance as satisfaction of the flood 
                insurance coverage requirement under 
                subparagraph (A) if the flood insurance 
                coverage meets the requirements for coverage 
                under that subparagraph.
          (3) Government-sponsored enterprises for housing.--
        The Federal National Mortgage Association and the 
        Federal Home Loan Mortgage Corporation shall implement 
        procedures reasonably designed to ensure that, for any 
        loan that is--
                  (A) secured by improved real estate or a 
                mobile home located in an area that has been 
                identified, at the time of the origination of 
                the loan or at any time during the term of the 
                loan, by the Administrator as an area having 
                special flood hazards and in which flood 
                insurance is available under the National Flood 
                Insurance Act of 1968, and
                  (B) purchased or guaranteed by such entity,
        the building or mobile home and any personal property 
        securing the loan is covered for the term of the loan 
        by flood insurance in the amount provided in paragraph 
        (1). The Federal National Mortgage Association and the 
        Federal Home Loan Mortgage Corporation shall accept 
        flood insurance as satisfaction of the flood insurance 
        coverage requirement under paragraph (1) if the flood 
        insurance coverage provided meets the requirements for 
        coverage under that paragraph and any requirements 
        established by the Federal National Mortgage 
        Association or the Federal Home Loan Corporation, 
        respectively, relating to the financial strength of 
        private insurance companies from which the Federal 
        National Mortgage Association or the Federal Home Loan 
        Mortgage Corporation will accept private flood 
        insurance, provided that such requirements shall not 
        affect or conflict with any State law, regulation, or 
        procedure concerning the regulation of the business of 
        insurance.
          (4) Applicability.--
                  (A) Existing coverage.--Except as provided in 
                subparagraph (B), paragraph (1) shall apply on 
                the date of enactment of the Riegle Community 
                Development and Regulatory Improvement Act of 
                1994.
                  (B) New coverage.--Paragraphs (2) and (3) 
                shall apply only with respect to any loan made, 
                increased, extended, or renewed after the 
                expiration of the 1-year period beginning on 
                the date of enactment of the Riegle Community 
                Development and Regulatory Improvement Act of 
                1994. Paragraph (1) shall apply with respect to 
                any loan made, increased, extended, or renewed 
                by any lender supervised by the Farm Credit 
                Administration only after the expiration of the 
                period under this subparagraph.
                  (C) Continued effect of regulations.--
                Notwithstanding any other provision of this 
                subsection, the regulations to carry out 
                paragraph (1), as in effect immediately before 
                the date of enactment of the Riegle Community 
                Development and Regulatory Improvement Act of 
                1994, shall continue to apply until the 
                regulations issued to carry out paragraph (1) 
                as amended by section 522(a) of such Act take 
                effect.
          (5) Rule of construction.--Except as otherwise 
        specified, any reference to flood insurance in this 
        section shall be considered to include Federal flood 
        insurance and private flood insurance. Nothing in this 
        subsection shall be construed to supersede or limit the 
        authority of a Federal entity for lending regulation, 
        the Federal Housing Finance Agency, a Federal agency 
        lender, the Federal National Mortgage Association, or 
        the Federal Home Loan Mortgage Corporation to establish 
        requirements relating to the financial strength of 
        private insurance companies from which the entity or 
        agency will accept private flood insurance, provided 
        that such requirements shall not affect or conflict 
        with any State law, regulation, or procedure concerning 
        the regulation of the business of insurance.
          (6) Notice.--
                  (A) In general.--Each lender shall disclose 
                to a borrower that is subject to this 
                subsection that--
                          (i) flood insurance is available from 
                        private insurance companies that issue 
                        standard flood insurance policies on 
                        behalf of the national flood insurance 
                        program or directly from the national 
                        flood insurance program;
                          (ii) flood insurance that provides 
                        the same level of coverage as a 
                        standard flood insurance policy under 
                        the national flood insurance program 
                        may be available from a private 
                        insurance company that issues policies 
                        on behalf of the company; and
                          (iii) the borrower is encouraged to 
                        compare the flood insurance coverage, 
                        deductibles, exclusions, conditions and 
                        premiums associated with flood 
                        insurance policies issued on behalf of 
                        the national flood insurance program 
                        and policies issued on behalf of 
                        private insurance companies and to 
                        direct inquiries regarding the 
                        availability, cost, and comparisons of 
                        flood insurance coverage to an 
                        insurance agent.
                  (B) Rule of construction.--Nothing in this 
                paragraph shall be construed as affecting or 
                otherwise limiting the authority of a Federal 
                entity for lending regulation to approve any 
                disclosure made by a regulated lending 
                institution for purposes of complying with 
                subparagraph (A).
          [(7) Private flood insurance defined.--In this 
        subsection, the term ``private flood insurance'' means 
        an insurance policy that--
                  [(A) is issued by an insurance company that 
                is--
                          [(i) licensed, admitted, or otherwise 
                        approved to engage in the business of 
                        insurance in the State or jurisdiction 
                        in which the insured building is 
                        located, by the insurance regulator of 
                        that State or jurisdiction; or
                          [(ii) in the case of a policy of 
                        difference in conditions, multiple 
                        peril, all risk, or other blanket 
                        coverage insuring nonresidential 
                        commercial property, is recognized, or 
                        not disapproved, as a surplus lines 
                        insurer by the insurance regulator of 
                        the State or jurisdiction where the 
                        property to be insured is located;
                  [(B) provides flood insurance coverage which 
                is at least as broad as the coverage provided 
                under a standard flood insurance policy under 
                the national flood insurance program, including 
                when considering deductibles, exclusions, and 
                conditions offered by the insurer;
                  [(C) includes--
                          [(i) a requirement for the insurer to 
                        give 45 days' written notice of 
                        cancellation or non-renewal of flood 
                        insurance coverage to--
                                  [(I) the insured; and
                                  [(II) the regulated lending 
                                institution or Federal agency 
                                lender;
                          [(ii) information about the 
                        availability of flood insurance 
                        coverage under the national flood 
                        insurance program;
                          [(iii) a mortgage interest clause 
                        similar to the clause contained in a 
                        standard flood insurance policy under 
                        the national flood insurance program; 
                        and
                          [(iv) a provision requiring an 
                        insured to file suit not later than 1 
                        year after date of a written denial of 
                        all or part of a claim under the 
                        policy; and
                  [(D) contains cancellation provisions that 
                are as restrictive as the provisions contained 
                in a standard flood insurance policy under the 
                national flood insurance program.]
          (7) Definitions.--In this section:
                  (A) Flood insurance.--The term ``flood 
                insurance'' means--
                          (i) Federal flood insurance; and
                          (ii) private flood insurance.
                  (B) Federal flood insurance.--the term 
                ``Federal flood insurance'' means an insurance 
                policy made available under the National Flood 
                Insurance Act of 1968 (42 U.S.C. 4001 et seq.).
                  (C) Private flood insurance.--The term 
                ``private flood insurance'' means an insurance 
                policy that--
                          (i) is issued by an insurance company 
                        that is--
                                  (I) licensed, admitted, or 
                                otherwise approved to engage in 
                                the business of insurance in 
                                the State in which the insured 
                                building is located, by the 
                                insurance regulator of that 
                                State; or
                                  (II) eligible as a 
                                nonadmitted insurer to provide 
                                insurance in the home State of 
                                the insured, in accordance with 
                                sections 521 through 527 of the 
                                Dodd-Frank Wall Street Reform 
                                and Consumer Protection Act (15 
                                U.S.C. 8201 through 8206);
                          (ii) is issued by an insurance 
                        company that is not otherwise 
                        disapproved as a surplus lines insurer 
                        by the insurance regulator of the State 
                        in which the property to be insured is 
                        located; and
                          (iii) provides flood insurance 
                        coverage that complies with the laws 
                        and regulations of that State.
                  (D) State.--The term ``State'' means any 
                State of the United States, the District of 
                Columbia, the Commonwealth of Puerto Rico, 
                Guam, the Northern Mariana Islands, the Virgin 
                Islands, and American Samoa.
  (c) Exceptions to Purchase Requirements.--
          (1) State-owned property.--Notwithstanding the other 
        provisions of this section, flood insurance shall not 
        be required on any State-owned property that is covered 
        under an adequate State policy of self-insurance 
        satisfactory to the Administrator. The Administrator 
        shall publish and periodically revise the list of 
        States to which this subsection applies.
          (2) Small loans.--Notwithstanding any other provision 
        of this section, subsections (a) and (b) shall not 
        apply to any loan having--
                  (A) an original outstanding principal balance 
                of $5,000 or less; and
                  (B) a repayment term of 1 year or less.
          (3) Detached structures.--Notwithstanding any other 
        provision of this section, flood insurance shall not be 
        required, in the case of any residential property, for 
        any structure that is a part of such property but is 
        detached from the primary residential structure of such 
        property and does not serve as a residence.
  (d) Escrow of Flood Insurance Payments.--
          (1) Regulated lending institutions.--
                  (A) Federal entities responsible for lending 
                regulations.--Each Federal entity for lending 
                regulation (after consultation and coordination 
                with the Federal Financial Institutions 
                Examination Council) shall, by regulation, 
                direct that all premiums and fees for flood 
                insurance under the National Flood Insurance 
                Act of 1968, for residential improved real 
                estate or a mobile home, shall be paid to the 
                regulated lending institution or servicer for 
                any loan secured by the residential improved 
                real estate or mobile home, with the same 
                frequency as payments on the loan are made, for 
                the duration of the loan. Except as provided in 
                subparagraph (B), upon receipt of any premiums 
                or fees, the regulated lending institution or 
                servicer shall deposit such premiums and fees 
                in an escrow account on behalf of the borrower. 
                Upon receipt of a notice from the Administrator 
                or the provider of the flood insurance that 
                insurance premiums are due, the premiums 
                deposited in the escrow account shall be paid 
                to the provider of the flood insurance.
                  (B) Limitation.--Except as may be required 
                under applicable State law, a Federal entity 
                for lending regulation may not direct or 
                require a regulated lending institution to 
                deposit premiums or fees for flood insurance 
                under the National Flood Insurance Act of 1968 
                in an escrow account on behalf of a borrower 
                under subparagraph (A)--
                          (i) if--
                                  (I) the regulated lending 
                                institution has total assets of 
                                less than $1,000,000,000; and
                                  (II) on or before the date of 
                                enactment of the Biggert-Waters 
                                Flood Insurance Reform Act of 
                                2012, the regulated lending 
                                institution--
                                          (aa) in the case of a 
                                        loan secured by 
                                        residential improved 
                                        real estate or a mobile 
                                        home, was not required 
                                        under Federal or State 
                                        law to deposit taxes, 
                                        insurance premiums, 
                                        fees, or any other 
                                        charges in an escrow 
                                        account for the entire 
                                        term of the loan; and
                                          (bb) did not have a 
                                        policy of consistently 
                                        and uniformly requiring 
                                        the deposit of taxes, 
                                        insurance premiums, 
                                        fees, or any other 
                                        charges in an escrow 
                                        account for loans 
                                        secured by residential 
                                        improved real estate or 
                                        a mobile home; or
                          (ii) in the case of a loan that--
                                  (I) is in a junior or 
                                subordinate position to a 
                                senior lien secured by the same 
                                residential improved real 
                                estate or mobile home for which 
                                flood insurance is being 
                                provided at the time of the 
                                origination of the loan;
                                  (II) is secured by 
                                residential improved real 
                                estate or a mobile home that is 
                                part of a condominium, 
                                cooperative, or other project 
                                development, if the residential 
                                improved real estate or mobile 
                                home is covered by a flood 
                                insurance policy that--
                                          (aa) meets the 
                                        requirements that the 
                                        regulated lending 
                                        institution is required 
                                        to enforce under 
                                        subsection (b)(1);
                                          (bb) is provided by 
                                        the condominium 
                                        association, 
                                        cooperative, homeowners 
                                        association, or other 
                                        applicable group; and
                                          (cc) the premium for 
                                        which is paid by the 
                                        condominium 
                                        association, 
                                        cooperative, homeowners 
                                        association, or other 
                                        applicable group as a 
                                        common expense;
                                  (III) is secured by 
                                residential improved real 
                                estate or a mobile home that is 
                                used as collateral for a 
                                business purpose;
                                  (IV) is a home equity line of 
                                credit;
                                  (V) is a nonperforming loan; 
                                or
                                  (VI) has a term of not longer 
                                than 12 months.
          (2) Federal agency lenders.--Each Federal agency 
        lender shall by regulation require and provide for 
        escrow and payment of any flood insurance premiums and 
        fees relating to residential improved real estate and 
        mobile homes securing loans made by the Federal agency 
        lender under the circumstances and in the manner 
        provided under paragraph (1). Any regulations issued 
        under this paragraph shall be consistent with and 
        substantially identical to the regulations issued under 
        paragraph (1).
          (3) Applicability of respa.--Escrow accounts 
        established pursuant to this subsection shall be 
        subject to the provisions of section 10 of the Real 
        Estate Settlement Procedures Act of 1974.
          (4) Definition.--For purposes of this subsection, the 
        term ``residential improved real estate'' means 
        improved real estate for which the improvement is a 
        residential building.
          (5) Applicability.--This subsection shall apply only 
        with respect to any loan made, increased, extended, or 
        renewed after the expiration of the 1-year period 
        beginning on the date of enactment of the Riegle 
        Community Development and Regulatory Improvement Act of 
        1994.
  (e) Placement of Flood Insurance by Lender.--
          (1) Notification to borrower of lack of coverage.--
        If, at the time of origination or at any time during 
        the term of a loan secured by improved real estate or 
        by a mobile home located in an area that has been 
        identified by the Administrator (at the time of the 
        origination of the loan or at any time during the term 
        of the loan) as an area having special flood hazards 
        and in which flood insurance is available under the 
        National Flood Insurance Act of 1968, the lender or 
        servicer for the loan determines that the building or 
        mobile home and any personal property securing the loan 
        is not covered by flood insurance or is covered by such 
        insurance in an amount less than the amount required 
        for the property pursuant to paragraph (1), (2), or (3) 
        of subsection (b), the lender or servicer shall notify 
        the borrower under the loan that the borrower should 
        obtain, at the borrower's expense, an amount of flood 
        insurance for the building or mobile home and such 
        personal property that is not less than the amount 
        under subsection (b)(1), for the term of the loan.
          (2) Purchase of coverage on behalf of borrower.--If 
        the borrower fails to purchase such flood insurance 
        within 45 days after notification under paragraph (1), 
        the lender or servicer for the loan shall purchase the 
        insurance on behalf of the borrower and may charge the 
        borrower for the cost of premiums and fees incurred by 
        the lender or servicer for the loan in purchasing the 
        insurance, including premiums or fees incurred for 
        coverage beginning on the date on which flood insurance 
        coverage lapsed or did not provide a sufficient 
        coverage amount.
          (3) Termination of force-placed insurance.--Within 30 
        days of receipt by the lender or servicer of a 
        confirmation of a borrower's existing flood insurance 
        coverage, the lender or servicer shall--
                  (A) terminate any insurance purchased by the 
                lender or servicer under paragraph (2); and
                  (B) refund to the borrower all premiums paid 
                by the borrower for any insurance purchased by 
                the lender or servicer under paragraph (2) 
                during any period during which the borrower's 
                flood insurance coverage and the insurance 
                coverage purchased by the lender or servicer 
                were each in effect, and any related fees 
                charged to the borrower with respect to the 
                insurance purchased by the lender or servicer 
                during such period.
          (4) Sufficiency of demonstration.--For purposes of 
        confirming a borrower's existing flood insurance 
        coverage, a lender or servicer for a loan shall accept 
        from the borrower an insurance policy declarations page 
        that includes the existing flood insurance policy 
        number and the identity of, and contact information 
        for, the insurance company or agent.
          (5) Review of determination regarding required 
        purchase.--
                  (A) In general.--The borrower and lender for 
                a loan secured by improved real estate or a 
                mobile home may jointly request the 
                Administrator to review a determination of 
                whether the building or mobile home is located 
                in an area having special flood hazards. Such 
                request shall be supported by technical 
                information relating to the improved real 
                estate or mobile home. Not later than 45 days 
                after the Administrator receives the request, 
                the Administrator shall review the 
                determination and provide to the borrower and 
                the lender with a letter stating whether or not 
                the building or mobile home is in an area 
                having special flood hazards. The determination 
                of the Administrator shall be final.
                  (B) Effect of determination.--Any person to 
                whom a borrower provides a letter issued by the 
                Administrator pursuant to subparagraph (A), 
                stating that the building or mobile home 
                securing the loan of the borrower is not in an 
                area having special flood hazards, shall have 
                no obligation under this title to require the 
                purchase of flood insurance for such building 
                or mobile home during the period determined by 
                the Administratorwhich shall be specified in 
                the letter and shall begin on the date on which 
                such letter is provided.
                  (C) Effect of failure to respond.--If a 
                request under subparagraph (A) is made in 
                connection with the origination of a loan and 
                the Administrator fails to provide a letter 
                under subparagraph (A) before the later of (i) 
                the expiration of the 45-day period under such 
                subparagraph, or (ii) the closing of the loan, 
                no person shall have an obligation under this 
                title to require the purchase of flood 
                insurance for the building or mobile home 
                securing the loan until such letter is 
                provided.
          (6) Applicability.--This subsection shall apply to 
        all loans outstanding on or after the date of enactment 
        of the Riegle Community Development and Regulatory 
        Improvement Act of 1994.
  (f) Civil Monetary Penalties for Failure To Require Flood 
Insurance or Notify.--
          (1) Civil monetary penalties against regulated 
        lenders.--Any regulated lending institution that is 
        found to have a pattern or practice of committing 
        violations under paragraph (2) shall be assessed a 
        civil penalty by the appropriate Federal entity for 
        lending regulation in the amount provided under 
        paragraph (5).
          (2) Lender violations.--The violations referred to in 
        paragraph (1) shall include--
                  (A) making, increasing, extending, or 
                renewing loans in violation of--
                          (i) the regulations issued pursuant 
                        to subsection (b) of this section;
                          (ii) the escrow requirements under 
                        subsection (d) of this section; or
                          (iii) the notice requirements under 
                        section 1364 of the National Flood 
                        Insurance Act of 1968; or
                  (B) failure to provide notice or purchase 
                flood insurance coverage in violation of 
                subsection (e) of this section.
          (3) Civil monetary penalties against gse's.--
                  (A) In general.--If the Federal National 
                Mortgage Association or the Federal Home Loan 
                Mortgage Corporation is found by the Director 
                of the Federal Housing Finance Agency to have a 
                pattern or practice of purchasing loans in 
                violation of the procedures established 
                pursuant to subsection (b)(3), the Director of 
                such Office shall assess a civil penalty 
                against such enterprise in the amount provided 
                under paragraph (5) of this subsection.
                  (B) Definition.--For purposes of this 
                subsection, the term ``enterprise'' means the 
                Federal National Mortgage Association or the 
                Federal Home Loan Mortgage Corporation.
          (4) Notice and hearing.--A penalty under this 
        subsection may be issued only after notice and an 
        opportunity for a hearing on the record.
          (5) Amount.--A civil monetary penalty under this 
        subsection may not exceed $2,000 for each violation 
        under paragraph (2) or paragraph (3).
          (6) Lender compliance.--Notwithstanding any State or 
        local law, for purposes of this subsection, any 
        regulated lending institution that purchases flood 
        insurance or renews a contract for flood insurance on 
        behalf of or as an agent of a borrower of a loan for 
        which flood insurance is required shall be considered 
        to have complied with the regulations issued under 
        subsection (b).
          (7) Effect of transfer on liability.--Any sale or 
        other transfer of a loan by a regulated lending 
        institution that has committed a violation under 
        paragraph (1), that occurs subsequent to the violation, 
        shall not affect the liability of the transferring 
        lender with respect to any penalty under this 
        subsection. A lender shall not be liable for any 
        violations relating to a loan committed by another 
        regulated lending institution that previously held the 
        loan.
          (8) Deposit of penalties.--Any penalties collected 
        under this subsection shall be paid into the National 
        Flood Mitigation Fund under section 1367 of the 
        National Flood Insurance Act of 1968.
          (9) Additional penalties.--Any penalty under this 
        subsection shall be in addition to any civil remedy or 
        criminal penalty otherwise available.
          (10) Statute of limitations.--No penalty may be 
        imposed under this subsection after the expiration of 
        the 4-year period beginning on the date of the 
        occurrence of the violation for which the penalty is 
        authorized under this subsection.
  (g) Other Actions To Remedy Pattern of Noncompliance.--
          (1) Authority of federal entities for lending 
        regulation.--A Federal entity for lending regulation 
        may require a regulated lending institution to take 
        such remedial actions as are necessary to ensure that 
        the regulated lending institution complies with the 
        requirements of the national flood insurance program if 
        the Federal agency for lending regulation makes a 
        determination under paragraph (2) regarding the 
        regulated lending institution.
          (2) Determination of violations.--A determination 
        under this paragraph shall be a finding that--
                  (A) the regulated lending institution has 
                engaged in a pattern and practice of 
                noncompliance in violation of the regulations 
                issued pursuant to subsection (b), (d), or (e) 
                or the notice requirements under section 1364 
                of the National Flood Insurance Act of 1968; 
                and
                  (B) the regulated lending institution has not 
                demonstrated measurable improvement in 
                compliance despite the assessment of civil 
                monetary penalties under subsection (f).
  (h) Fee for Determining Location.--Notwithstanding any other 
Federal or State law, any person who makes a loan secured by 
improved real estate or a mobile home or any servicer for such 
a loan may charge a reasonable fee for the costs of determining 
whether the building or mobile home securing the loan is 
located in an area having special flood hazards, but only in 
accordance with the following requirements:
          (1) Borrower fee.--The borrower under such a loan may 
        be charged the fee, but only if the determination--
                  (A) is made pursuant to the making, 
                increasing, extending, or renewing of the loan 
                that is initiated by the borrower;
                  (B) is made pursuant to a revision or 
                updating under section 1360(f) of the 
                floodplain areas and flood-risk zones or 
                publication of a notice or compendia under 
                subsection (h) or (i) of section 1360 that 
                affects the area in which the improved real 
                estate or mobile home securing the loan is 
                located or that, in the determination of the 
                Administrator, may reasonably be considered to 
                require a determination under this subsection; 
                or
                  (C) results in the purchase of flood 
                insurance coverage pursuant to the requirement 
                under subsection (e)(2).
          (2) Purchaser or transferee fee.--The purchaser or 
        transferee of such a loan may be charged the fee in the 
        case of sale or transfer of the loan.

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                              ----------                              


                  NATIONAL FLOOD INSURANCE ACT OF 1968



           *       *       *       *       *       *       *
TITLE XIII--NATIONAL FLOOD INSURANCE

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CHAPTER I--THE NATIONAL FLOOD INSURANCE PROGRAM

           *       *       *       *       *       *       *


               establishment of chargeable premium rates

  Sec. 1308. (a) On the basis of estimates made under section 
1307 and such other information as may be necessary, the 
Administrator shall from time to time prescribe, after 
providing notice--
          (1) chargeable premium rates for any types and 
        classes of properties for which insurance coverage 
        shall be available under section 1305 (at less than the 
        estimated risk premium rates under section 1307(a)(1), 
        where necessary), and
          (2) the terms and conditions under which, and the 
        areas (including subdivisions thereof) within which 
        such rates shall apply.
  (b) Such rates shall, insofar as practicable, be--
          (1) based on a consideration of the respective risks 
        involved, including differences in risks due to land 
        use measures, flood-proofing, flood forecasting, and 
        similar measures;
          (2) adequate, on the basis of accepted actuarial 
        principles, to provide reserves for anticipated losses, 
        or if less than such amount consistent with the 
        objective of making flood insurance available where 
        necessary at reasonable rates so as to encourage 
        prospective insureds to purchase such insurance and 
        with the purposes of this title;
          (3) adequate, together with the fee under paragraph 
        (1)(B)(iii) or (2) of section 1307(a), to provide for 
        any administrative expenses of the flood insurance and 
        floodplain management programs (including the costs of 
        mapping activities under section 1360);
          (4) stated so as to reflect the basis for such rates, 
        including the differences (if any) between the 
        estimated risk premium rates under section 1307(a)(1) 
        and the estimated rates under section 1307(a)(2); and
          (5) adequate, on the basis of accepted actuarial 
        principles, to cover the average historical loss year 
        obligations incurred by the National Flood Insurance 
        Fund.
  (c) Actuarial Rate Properties.--Subject only to the 
limitations provided under paragraphs (1) and (2), the 
chargeable rate shall not be less than the applicable estimated 
risk premium rate for such area (or subdivision thereof) under 
section 1307(a)(1) with respect to the following properties:
          (1) Post-firm properties.--Any property the 
        construction or substantial improvement of which the 
        Administrator determines has been started after 
        December 31, 1974, or started after the effective date 
        of the initial rate map published by the Administrator 
        under paragraph (2) of section 1360 for the area in 
        which such property is located, whichever is later, 
        except that the chargeable rate for properties under 
        this paragraph shall be subject to the limitation under 
        subsection (e).
          (2) Certain leased coastal and river properties.--Any 
        property leased from the Federal Government (including 
        residential and nonresidential properties) that the 
        Administrator determines is located on the river-facing 
        side of any dike, levee, or other riverine flood 
        control structure, or seaward of any seawall or other 
        coastal flood control structure.
  (d) With respect to any chargeable premium rate prescribed 
under this section, a sum equal to the portion of the rate that 
covers any administrative expenses of carrying out the flood 
insurance and floodplain management programs which have been 
estimated under paragraphs (1)(B)(ii) and (1)(B)(iii) of 
section 1307(a) or paragraph (2) of such section (including the 
fees under such paragraphs), shall be paid to the 
Administrator. The Administrator shall deposit the sum in the 
National Flood Insurance Fund established under section 1310.
  (e) Annual Limitation on Premium Increases.--Except with 
respect to properties described under paragraph (2) of 
subsection (c), and notwithstanding any other provision of this 
title--
          (1) the chargeable risk premium rate for flood 
        insurance under this title for any property may not be 
        increased by more than 18 percent each year, except--
                  (A) as provided in paragraph (4);
                  (B) in the case of property identified under 
                section 1307(g); or
                  (C) in the case of a property that--
                          (i) is located in a community that 
                        has experienced a rating downgrade 
                        under the community rating system 
                        program carried out under section 
                        1315(b);
                          (ii) is covered by a policy with 
                        respect to which the policyholder has--
                                  (I) decreased the amount of 
                                the deductible; or
                                  (II) increased the amount of 
                                coverage; or
                          (iii) was misrated;
          (2) the chargeable risk premium rates for flood 
        insurance under this title for any properties initially 
        rated under section 1307(a)(2) within any single risk 
        classification, excluding properties for which the 
        chargeable risk premium rate is not less than the 
        applicable estimated risk premium rate under section 
        1307(a)(1), shall be increased by an amount that 
        results in an average of such rate increases for 
        properties within the risk classification during any 
        12-month period of not less than 5 percent of the 
        average of the risk premium rates for such properties 
        within the risk classification upon the commencement of 
        such 12-month period;
          (3) the chargeable risk premium rates for flood 
        insurance under this title for any properties within 
        any single risk classification may not be increased by 
        an amount that would result in the average of such rate 
        increases for properties within the risk classification 
        during any 12-month period exceeding 15 percent of the 
        average of the risk premium rates for properties within 
        the risk classification upon the commencement of such 
        12-month period; and
          (4) the chargeable risk premium rates for flood 
        insurance under this title for any properties described 
        in subparagraphs (A) through (E) of section 1307(a)(2) 
        shall be increased by 25 percent each year, until the 
        average risk premium rate for such properties is equal 
        to the average of the risk premium rates for properties 
        described under paragraph (3).
  (f) Adjustment of Premium.--Notwithstanding any other 
provision of law, if the Administrator determines that the 
holder of a flood insurance policy issued under this Act is 
paying a lower premium than is required under this section due 
to an error in the flood plain determination, the Administrator 
may only prospectively charge the higher premium rate.
  (g) Frequency of Premium Collection.--With respect to any 
chargeable premium rate prescribed under this section, the 
Administrator shall provide policyholders that are not required 
to escrow their premiums and fees for flood insurance as set 
forth under section 102 of the Flood Disaster Protection Act of 
1973 (42 U.S.C. 4012a) with the option of paying their premiums 
annually or monthly.
  (h) Rule of Construction.--For purposes of this section, the 
calculation of an ``average historical loss year''--
          (1) includes catastrophic loss years; and
          (2) shall be computed in accordance with generally 
        accepted actuarial principles.
  (i) Rates for Properties Newly Mapped into Areas with Special 
Flood Hazards.--Notwithstanding subsection (f), the premium 
rate for flood insurance under this title that is purchased on 
or after the date of the enactment of this subsection--
          (1) on a property located in an area not previously 
        designated as having special flood hazards and that, 
        pursuant to any issuance, revision, updating, or other 
        change in a flood insurance map, becomes designated as 
        such an area; and
          (2) where such flood insurance premium rate is 
        calculated under subsection (a)(1) of section 1307 (42 
        U.S.C. 4014(a)(1)),
shall for the first policy year be the preferred risk premium 
for the property and upon renewal shall be calculated in 
accordance with subsection (e) of this section until the rate 
reaches the rate calculated under subsection (a)(1) of section 
1307.
  (j) Premiums and Reports.--In setting premium risk rates, in 
addition to striving to achieve the objectives of this title 
the Administrator shall also strive to minimize the number of 
policies with annual premiums that exceed one percent of the 
total coverage provided by the policy. For any policies 
premiums that exceed this one percent threshold, the 
Administrator shall report such exceptions to the Committee on 
Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate.
  (k) Consideration of Mitigation Methods.--In calculating the 
risk premium rate charged for flood insurance for a property 
under this section, the Administrator shall take into account 
the implementation of any mitigation method identified by the 
Administrator in the guidance issued under section 1361(d) (42 
U.S.C. 4102(d)).
  (l) Clear Communications.--The Administrator shall clearly 
communicate full flood risk determinations to individual 
property owners regardless of whether their premium rates are 
full actuarial rates.
  (m) Protection of Small Businesses, Non-Profits, Houses of 
Worship, and Residences.--
          (1) Report.--Not later than 18 months after the date 
        of the enactment of this section and semiannually 
        thereafter, the Administrator shall monitor and report 
        to Committee on Financial Services of the House 
        Representatives and the Committee on Banking, Housing, 
        and Urban Affairs of the Senate, the Administrator's 
        assessment of the impact, if any, of the rate increases 
        required under subparagraphs (A) and (D) of section 
        1307(a)(2) and the surcharges required under section 
        1308A on the affordability of flood insurance for--
                  (A) small businesses with less than 100 
                employees;
                  (B) non-profit entities;
                  (C) houses of worship; and
                  (D) residences with a value equal to or less 
                than 25 percent of the median home value of 
                properties in the State in which the property 
                is located.
          (2) Recommendations.--If the Administrator determines 
        that the rate increases or surcharges described in 
        paragraph (1) are having a detrimental effect on 
        affordability, including resulting in lapsed policies, 
        late payments, or other criteria related to 
        affordability as identified by the Administrator, for 
        any of the properties identified in subparagraphs (A) 
        through (D) of such paragraph, the Administrator shall, 
        not later than 3 months after making such a 
        determination, make such recommendations as the 
        Administrator considers appropriate to improve 
        affordability to the Committee on Financial Services of 
        the House of Representatives and the Committee on 
        Banking, Housing, and Urban Affairs of the Senate.
  (n) Effect of Private Flood Insurance Coverage on Continuous 
Coverage Requirements.--For purposes of applying any statutory, 
regulatory, or administrative continuous coverage requirement, 
including under section 1307(g)(1), the Administrator shall 
consider any period during which a property was continuously 
covered by private flood insurance (as defined in section 
102(b)(7) of the Flood Disaster Protection Act of 1973 (42 
U.S.C. 4012a(b)(7))) to be a period of continuous coverage.

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