Earlier this year, the “Moving Ahead for Progress in the 21st Century Act” (“MAP-21”; Pub. L. 112-141; 126 Stat. 205 [H.R. 4348 2012]) became law. Section 100239(a)(6) of MAP-21 amends 42 USCA §4012a(6), so that it will require the following:
(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).”
This notice is only required if it is determined that the property is located in a flood zone. In addition, §100239(b) of MAP-21 makes a technical, albeit similar, amendment to 42 USCA §4104a(a)(3)(C), so that it will be as follows:
“Written notification required under this subsection shall include-
(C) a statement that flood insurance coverage may be purchased under the national flood insurance program and is also available from private insurers as required under Section 102(b)(6) of the Flood Disaster Protection Act of 1973 (42 USC 4012A(b)(6))”
Cx11 is required pursuant under this 42 USCA §4104a. It is also required under various Federal regulations (12 CFR §§22.9, 208.25, 339.9, 572.9, 614.4955, & 760.9), the appendices to which set forth a model form that may be used for these disclosure requirements (use of this model form is optional). Cx11 is based on this model form.
The model form does not currently provide for this new notice requirement. While it is anticipated that the form will be updated in the future to accommodate this new notice, DocuTech will, in the interim, include its own version of this notice in Cx11. The notice will appear in the first and second bulletins in paragraph five.
It is unclear from MAP-21 as to when it will effectively change the statutes requiring Cx11. Taking a conservative approach, DocuTech will be making its changes now, the effective date for which is December 1, 2012. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
November 23, 2012