Joint Comments to the Agencies on Private Flood Q&As

Office of the Comptroller of the Currency
Chief Counsel’s Office
Attn: Comments Processing
400 7th Street SW, Suite 3E-218
Washington, DC 20219
Docket ID OCC-2020-0033

Kevin J. Kramp, Director
Office of Regulatory Policy
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090

Ann E. Misback, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW,
Washington, DC 20551
Docket No. R–1742

Melane Conyers-Ausbrooks, Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
NCUA RIN 3133–AF31

James P. Sheesley
Assistant Executive Secretary
Attention: Comments-RIN 3064–ZA16/Legal ESS
Federal Deposit Insurance Corporation
550 17th St NW
Washington, DC 20429

Dear Ladies and Gentlemen:

The undersigned organizations respectfully submit these comments on the interagency questions and answers regarding private flood insurance (Q&A) proposed by the Office of Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), the Farm Credit Administration, and the National Credit Union Administration (NCUA) (Agencies). We appreciate the Agencies’ efforts to clarify the application of private flood insurance acceptance rules.

We recognize the Agencies’ long-standing practice of addressing the practical and operational challenges of applying flood insurance rules by developing and disseminating detailed Q&As, through a process that gathers and considers input from a broad range of stakeholders. The Agencies’ private flood insurance acceptance regulations (the “Regulations”) apply across a complex commercial, residential, and multifamily financial system, and the Q&As can help provide clarity on discrepancies between regulatory intent and policy implementation. Often, rules that seem straightforward can become complicated when applied in the operational context of real estate finance. Rules designed for one situation can have an unintended consequence on another. For example, rules that work in single-family residential lending situations are often less clear in the world of multi-family or commercial transactions.

Consequently, we believe it is important for the Agencies to note on the face of the finalized Q&As that they are guidance only and should not serve as the basis for supervisory action. As recently noted in the final rule regarding the Role of Supervisory Guidance, the Agencies recognize a difference between supervisory guidance and formal regulations, and how agencies expect institutions and their management to react to supervisory guidance. As a result, lenders/servicers should not be cited for failures to adhere to the Q&As themselves. A clear statement noting this important distinction would assist regulated institutions in understanding supervisory expectations with regards to the final Interagency Q&As.

We have developed our comments and responses to the proposed Q&As, gathering the collective input of a broad range of industry participants, including servicers, lenders, service providers, and insurance providers. Based on that input, we highlight areas of possible confusion and opportunities for clarity, as well as providing feedback as to the factual and operational scenarios our members experience. We hope that sharing practical operational perspectives will improve the functionality of the Q&As and make them more effective as tools for guidance.

Consistent with the Agencies’ organization of the Q&As, our specific comments in many cases include the full text of the Q&As3 and generally address the Q&As in the format set forth by the Agencies as follows:

• Mandatory Acceptance
• Discretionary Acceptance
• General Compliance

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