Attention lenders! Two recent civil money penalties assessed against banks for flood insurance program violations should get your attention. First, the OCC announced a nearly $18 million civil money penalty against Citibank, N.A., Sioux Falls, South Dakota, for violations of the Flood Disaster Protection Act of 1973 and the OCC’s implementing regulations.
The OCC found the bank engaged in a pattern or practice of violating 42 U.S.C. § 4012a(e) and 12 C.F.R. § 22.7(a). Specifically, the bank failed to purchase regulatory required flood insurance on behalf of borrowers with loans secured by buildings and mobile homes located in special flood hazard areas where flood insurance is available in a timely manner. The failure to purchase the required flood insurance in a timely manner resulted from Citibank’s deficient FDPA policies and procedures, which allowed the bank’s third-party service provider to extend the 45-day notification period after the initial borrower notification.
We also learned that the Federal Reserve Board recently assessed a $36,500 civil money penalty against Alden State Bank, but the violations were unspecified in the enforcement action.
This is a good time to review your loan policies and actual practice to ensure you are in compliance with NCUA’s flood insurance requirements at Part 760. There is great verbiage in CU PolicyPro policy #7330 if you need a place to start.