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6500 - Consumer Protection
{{8-31-00 p.7497}}
FLOOD DISASTER PROTECTION ACT OF 1973
AN ACT
To expand the national flood insurance program by
substantially increasing limits of coverage and total amount of
insurance authorized to be outstanding and by requiring known
flood-prone communities to participate in the program, and for other
purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That this Act
may be cited as the "Flood Disaster Protection Act of 1973".
[Codified to 42 U.S.C. 4002 note]
[Source: Section 1 of the Act of December 31, 1973 (Pub. L. No.
93--234; 87 Stat. 975), effective December 31, 1973]
FINDINGS AND DECLARATION OF PURPOSE
SEC. 2. (a) The Congress finds that--
(1) annual losses throughout the Nation from floods and mudslides
are increasing at an alarming rate, largely as a result of the
accelerating development of, and concentration of population in, areas
of flood and mudslide hazards;
(2) the availability of Federal loans, grants, guaranties,
insurance, and other forms of financial assistance are often
determining factors in the utilization of land and the location and
construction of public and of private industrial, commercial, and
residential facilities;
(3) property acquired or constructed with grants or other Federal
assistance may be exposed to risk of loss through floods, thus
frustrating the purpose for which such assistance was extended;
(4) Federal instrumentalities insure or otherwise provide
financial protection to banking and credit institutions whose assets
include a substantial number of mortgage loans and other indebtedness
secured by property exposed to loss and damage from floods and
mudslides;
(5) the Nation cannot afford the tragic losses of life caused
annually by flood occurrences, nor the increasing losses of property
suffered by flood victims, most of whom are still inadequately
compensated despite the provision of costly disaster relief benefits;
and
(6) it is in the public interest for persons already living in
flood-prone areas to have both an opportunity to purchase flood
insurance and access to more adequate limits of coverage, so that they
will be indemnified for their losses in the event of future flood
disasters.
(b) The purpose of this Act, therefore, is to--
(1) substantially increase the limits of coverage authorized
under the national flood insurance program;
(2) provide for the expeditious identification of, and the
dissemination of information concerning, flood-prone areas;
(3) require State or local communities, as a condition of future
Federal financial assistance, to participate in the flood insurance
program and to adopt adequate flood plan ordinances with effective
enforcement provisions consistent with Federal standards to reduce or
avoid future flood losses; and
(4) require the purchase of flood insurance by property owners
who are being assisted by Federal programs or by federally supervised,
regulated, or insured agencies or institutions in the acquisition or
improvement of land or facilities located or to be located in
identified areas having special flood hazards.
[Codified to 42 U.S.C. 4002]
[Source: Section 2 of the Act of December 31, 1973 (Pub.
L. No. 93--234; 87 Stat. 975), effective December 31, 1973]
{{8-31-00 p.7498}}
DEFINITIONS
SEC. 3. (a) As used in this Act, unless the context otherwise
requires, the term--
(1) "community" means a State or a political subdivision
thereof which has zoning and building code jurisdiction over a
particular area having special flood hazards;
(2) "Federal agency" means any department, agency,
corporation, or other entity instrumentality of the executive branch of
the Federal Government, and includes the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation;
(3) "financial assistance" means any form of loan, grant,
guaranty, insurance, payment, rebate, subsidy, disaster assistance loan
or grant, or any other form of direct or indirect Federal assistance,
other than general or special revenue sharing or formula grants made to
States;
(4) "financial assistance for acquisition or construction
purposes" means any form of financial assistance which is intended
in whole or in part for the acquisition, construction, reconstruction,
repair, or improvement of any publicly or privately owned building or
mobile home, and for any machinery, equipment, fixtures, and
furnishings contained or to be contained therein, and shall include the
purchase or subsidization of mortgages or mortgage loans but shall
exclude assistance pursuant to the Disaster Relief Act of 1974 (other
than assistance under such Act in connection with a flood);
(5) "Federal entity for lending regulation" means the Board
of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Comptroller of the Currency, the Office of
Thrift Supervision, the National Credit Union Administration, and the
Farm Credit Administration, and with respect to a particular regulated
lending institution means the entity primarily responsible for the
supervision of the institution:
(6) "Director" means the Director of the Federal Emergency
Management Agency; and
(7) "Federal agency lender" means a Federal agency that
makes direct loans secured by improved real estate or a mobile home, to
the extent such agency acts in such capacity;
(8) the term "improved real estate" means real estate upon
which a building is located;
(9) "lender" means a regulated lending institution or
Federal agency lender;
(10) "regulated lending institution" means any bank,
savings and loan association, credit union, farm credit bank, Federal
land bank association, production credit association, or similar
institution subject to the supervision of a Federal entity for lending
regulation; and
(11) "servicer" means the person responsible for receiving
any scheduled periodic payments from a borrower pursuant to the terms
of a loan, including amounts for taxes, insurance premiums, and other
charges with respect to the property securing the loan, and making the
payments of principal and interest and such other payments with respect
to the amounts received from the borrower as may be required pursuant
to the terms of the loan.
(b) The Director is authorized to define or redefine, by rules and
regulations, any scientific or technical term used in this Act, insofar
as such definition is not inconsistent with the purposes of this Act.
[Codified to 42 U.S.C. 4003]
[Source: Section 3 of the Act of December 31, 1973 (Pub.
L. No. 93--234; 87 Stat. 976), effective December 31, 1973, as amended
by section 703(b) of title VII of the Act of October 12, 1977 (Pub. L.
No. 95--128; 91 Stat. 1145), effective October 12, 1977; section 451(e)
of title IV of the Act of November 30, 1983 (Pub. L. No. 98--181; 97
Stat. 1229), effective November 30, 1983; section 511(a) of title V of
the Act of September 23, 1994 (Pub. L. No. 103--325; 108 Stat. 2255),
effective September 23, 1994]
* * * * *
{{8-31-00 p.7498.01}}
REQUIREMENT TO PURCHASE FLOOD
INSURANCE
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 Director
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.
(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 Director 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.
(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 Director 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). 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).
(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 Director 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).
(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,
{{8-31-00 p.7498.02}}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.
(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 Director. The Director 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.
(d) ESCROW OF FLOOD INSURANCE PAYMENTS.--
(1) REGULATED LENDING INSTITUTIONS.--Each Federal entity
for lending regulation (after consultation and coordination with the
Financial Institutions Examination Council) shall by regulation require
that, if a regulated lending institution requires the escrowing of
taxes, insurance premiums, fees, or any other charges for a loan
secured by residential improved real estate or a mobile home, then all
premiums and fees for flood insurance under the National Flood
Insurance Act of 1968 for the real estate or mobile home shall be paid
to the regulated lending institution or other servicer for the loan in
a manner sufficient to make payments as due for the duration of the
loan. Upon receipt of the premiums, the regulated lending institution
or servicer of the loan shall deposit the premiums in an escrow account
on behalf of the borrower. Upon receipt of a notice from the Director
or the provider of the insurance that insurance premiums are due, the
regulated lending institution or servicer shall pay from the escrow
account to the provider of the insurance the amount of insurance
premiums owed.
(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 Director
(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
{{10-31-08 p.7498.03}}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.
(3) 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 Director 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
Director receives the request, the Director 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 Director shall be
final.
(B) EFFECT OF DETERMINATION.--Any person to whom a
borrower provides a letter issued by the Director 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 Director, which 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 Director 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.
(4) 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.
{{10-31-08 p.7498.04}}
(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 $350 for each violation under paragraph (2)
or paragraph (3). The total amount of penalties assessed under this
subsection against any single regulated lending institution or
enterprise during any calendar year may not exceed $100,000.
(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
{{10-31-08 p.7498.05}}or mobile
home securing the loan is located or that, in the determination of the
Director, 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.
[Codified to 42 U.S.C. 4012a]
[Source: Section 102 of title I of the Act of December 31, 1973
(Pub. L. No. 93--234; 87 Stat. 978), effective December 31, 1973, as
amended by section 451(e)(1) of title IV of the Act of November 30,
1983 (Pub. L. No. 98--181; 97 Stat. 1229), effective November 30, 1983;
sections 522, 523, 524, 525, 526(b), and 582(c) of title V of the Act
of September 23, 1994 (Pub. L. No. 103--325; 108 Stat. 2257, 2258,
2259, 2260, 2262, and 2287, respectively), effective September 23,
1994; section 1161(e) of title I of the Act of July 30, 2008 (Pub. L.
No. 110--289; 122 Stat. 2780), effective July 30, 2008]
* * * * *
EFFECT OF NONPARTICIPATION IN FLOOD INSURANCE
PROGRAM
SEC. 202. (a) No Federal officer or agency shall approve any
financial assistance for acquisition or construction purposes on and
after July 1, 1975, for use in any area that has been identified by the
Director as an area having special flood hazards unless the community
in which such area is situated is then participating in the national
flood insurance program.
(b) In addition to the requirements of
section 1364 of the National
Flood Insurance Act of 1968, each Federal entity for lending regulation
shall by regulation require the regulated lending institutions
described in such section, and each Federal agency lender shall issue
regulations requiring the Federal agency lender, described in such
section to notify (as a condition of making, increasing, extending, or
renewing any loan secured by property described in such section) the
purchaser or lessee of such property of whether, in the event of a
disaster caused by flood to such property, Federal disaster relief
assistance will be available to such property.
[Codified to 42 U.S.C. 4106]
[Source: Section 202 of title II of the Act of December 31, 1973
(Pub. L. No. 93--234; 87 Stat. 982), effective December 31, 1973, as
amended by section 303 of title III of the Act of July 2, 1975 (Pub. L.
No. 94--50; 89 Stat. 256), effective July 2, 1975; the Act of December
31, 1975 (Pub. L. No. 94--198; 89 Stat. 1116), effective December 31,
1975; section 14(a) of the Act of August 3, 1976 (Pub. L. No. 94--375;
90 Stat. 1075), effective August 3, 1976; section 703(a) of title VII
of the Act of October 12, 1977 (Pub. L. No. 95--128; 91 Stat. 1144),
effective October 12, 1977; section 451(e)(1) of title IV of the Act of
November 30, 1983 (Pub. L. No. 98--181; 97 Stat. 1229), effective
November 30, 1983; sections 411(a) and 413(a)(2) of title IV of the Act
of September 23, 1994 (Pub. L. No. 103--325; 108 Stat. 2253 and 2254),
effective September 23, 1994]
* * * * *
AUTHORITY TO ISSUE REGULATIONS
SEC. 205. (a) The Director is authorized to issue such regulations
as may be necessary to carry out the purpose of this Act.
(b) The head of each Federal agency that administers a program of
financial assistance relating to the acquisition, construction,
reconstruction, repair, or improvement of publicly or privately owned
land or facilities, and each Federal instrumentality responsible for
the supervision, approval, regulation, or insuring of banks, savings
and loan associations, or similar institutions, shall, in cooperation
with the Director, issue appropriate rules and regulations to govern
the carrying out of the agency's responsibilities under this Act.
[Codified to 42 U.S.C. 4128]
{{10-31-08 p.7498.06}}
[Source: Section 205 of title II of the Act of December 31, 1973
(Pub. L. No. 93--234; 87 Stat. 983), effective December 31, 1973, as
amended by section 451(e)(1) of title IV of the Act of November 30,
1983 (Pub. L. No. 98--181; 97 Stat. 1229), effective November 30,
1983]
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