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<br />SECTION 206.1 OF THE COMPTROLLER'S HANDBOOK FOR CONSUMER EXAMINATIONS, <br />COMPTROLLER OF THE CURRENCY <br /> <br />Flood Disaster Protection Act <br />Introduction <br /> <br />Section 206.1 <br /> <br />held liable in a negligence su~, Recent court decisions <br />have stated that the FDPA does not grant a borrower a <br />federal cause of action against a lender who violates the <br />provisions of the FDPA or regulatiOns issued by the reg. <br />ulatory agencies implementing the FOPA, HoM\<er. these <br />court decisiOns have not con1)letely foreclOsecl borrow- <br />ers from suing depository institutiOns on the basis 01 state <br />statutes or common law, <br /> <br />Banks that rely on outside sources. such as appraisers. <br />to determine whether the property 10 secure the IoIln is <br />Of is not lOcated in e special flood hazard aree. are <br />llttimately responsible for the ICcuracy 01 that determi- <br />nation, <br /> <br />SpecIal Provisions <br /> <br />The pamphlet titled "QuestiOns and Ans_s on the Na- <br />tional Flood Insurance Program." made _ilable to all <br />banks through the issuance 01 Banking Bulletin 88-3 and <br />again referred to in OCC Advisory. AL-88-4 dated Sap. <br />!ember 16. 1988. provides useful informatiOn to lenders, <br /> <br />Naw Insurance Policies-On December 27. 1989. FEMA <br />announced that two new flood insurance policies are <br />available (see BB-89-22), One policy provides for a <br />greater amount of coverage for condominium owners: ~ <br />allows flood insurance coverage up to the actual cash <br />value of the building or to the number of units times the <br />maximum lim~s lor single family residential buildings, The <br />other provides lor lOwer premiums to cover property in <br />minimal and moderate flood hazard ereas, Although <br />flood insurance is not required on properties outside the <br />designated special flood hazard areas. rt has been noted <br /> <br />~'.HIniInNIoIfDr~f.r"""" <br />-.- <br /> <br />by FEMA thaf for the past _al years an _age of 33 <br />percent 01 flOod damage occurs in those secondary <br />zones, With reduced premiums rt:M available. national <br />banks may wish to review their mortgage lending require- <br />ments for mortgage ioens in flood hazard zones to deter- <br />mine the banks' IeIIeI 01 risk, If a significant portion of the <br />bank's real estate portfolio is lOcated in the secondary <br />flood risk zones, prudent banking practiCes may warrant <br />flood insurance coverage. <br /> <br />AIlvised FEMA Flood Insurance Guidelines-On .1J1y 13. <br />1989. FEMA issued "MandlllOly Purchase 01 Flood In- <br />surance; Guidelines" 10 replace guidelines in~ially pub- <br />tillhed .klly 17, 1974, These guidelines will be issued in <br />88-89-2710 all national banks, <br /> <br />Other Real Estate Owned-National banks w~h signil~ <br />cant OREO in flood hazard arees should. as a prudent <br />banking practiCe. purchase flood insurance poliCies on <br />!heir OREO property, <br /> <br />Contract Language-The bank may wish to add suffi- <br />cienllanguage to ~s mortgage contracts to provide au- <br />thority to obtain flood insurance and charge ~ 10 the <br />consumer when at any time during the term 01 the mort. <br />gage. <br /> <br />. The property is determined to be lOcated in a special <br />tlOOd hazard area, (In~ial determination was wrong <br />or !he aree has been deSignated as a special flood <br />hazard aree after the ioen was closed, <br /> <br />. The borrower failed to renew the flood insurance pol. <br />iCy. <br /> <br />5 <br /> <br />.7, <br />