
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC4012a]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                  CHAPTER 50--NATIONAL FLOOD INSURANCE
 
           SUBCHAPTER I--THE NATIONAL FLOOD INSURANCE PROGRAM
 
Sec. 4012a. Flood insurance purchase and compliance requirements 
        and escrow accounts
        

(a) Amount and term of coverage

    After the expiration of sixty days following December 31, 1973, 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 [42 U.S.C. 4001 et seq.], 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 [12 U.S.C. 3301 et seq.]) 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 [42 U.S.C. 4001 et seq.], 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 September 23, 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 September 23, 1994. Paragraph 
        (1) shall apply with respect to any loan made, 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 September 23, 1994, shall continue to apply until the 
        regulations issued to carry out paragraph (1) as amended by 
        section 522(a) of Public Law 103-325 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) of this section 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 
    [42 U.S.C. 4001 et seq.] 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 [12 U.S.C. 2609].

          (4) ``Residential improved real estate'' defined

        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 September 23, 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 [42 U.S.C. 4001 et seq.], 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 paragraph (1), (2), or (3) of 
    subsection (b) of this section, 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) of this section, 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 \1\ 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.
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    \1\ See References in Text note below.
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        (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 \1\ 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 
    September 23, 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 [42 U.S.C. 4104a]; 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 
        Office of Federal Housing Enterprise Oversight of the Department 
        of Housing and Urban Development to have a pattern or practice 
        of purchasing loans in violation of the procedures established 
        pursuant to subsection (b)(3) of this section, the Director of 
        such Office shall assess a civil penalty against such enterprise 
        in the amount provided under paragraph (5) of this subsection.

        (B) ``Enterprise'' defined

            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) of this section.

                 (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 [42 U.S.C. 4104d].

                      (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) of 
        this section or the notice requirements under section 1364 of 
        the National Flood Insurance Act of 1968 [42 U.S.C. 4104a]; and
            (B) the regulated lending institution has not demonstrated 
        measurable improvement in compliance despite the assessment of 
        civil monetary penalties under subsection (f) of this section.

(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) \2\ [42 U.S.C. 4101(f)] of the floodplain areas and 
        flood-risk zones or publication of a notice or compendia under 
        subsection (h) or (i) of section 1360 \2\ [42 U.S.C. 4101(h), 
        (i)] that affects the area in which the improved real estate 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
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    \2\ So in original. Probably should be followed by ``of the National 
Flood Insurance Act of 1968''.
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            (C) results in the purchase of flood insurance coverage 
        pursuant to the requirement under subsection (e)(2) of this 
        section.

                   (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.

(Pub. L. 93-234, title I, Sec. 102, Dec. 31, 1973, 87 Stat. 978; Pub. L. 
98-181, title IV, Sec. 451(e)(1), Nov. 30, 1983, 97 Stat. 1229; Pub. L. 
103-325, title V, Secs. 522-526, 531, 582(c), Sept. 23, 1994, 108 Stat. 
2257-2262, 2267, 2287.)

                       References in Text

    The National Flood Insurance Act of 1968, referred to in subsecs. 
(a), (b), (d)(1), and (e)(1), and the Act, referred to in subsec. (b), 
is title XIII of Pub. L. 90-448, Aug. 1, 1968, 82 Stat. 572, as amended, 
which is classified principally to this chapter (Sec. 4001 et seq.). For 
complete classification of this Act to the Code, see Short Title note 
set out under section 4001 of this title and Tables.
    The Federal Financial Institutions Examination Council Act of 1974, 
referred to in subsec. (b)(1), probably means the Federal Financial 
Institutions Examination Council Act of 1978, Pub. L. 95-630, title X, 
Nov. 10, 1978, 92 Stat. 3694, as amended, which is classified 
principally to chapter 34 (Sec. 3301 et seq.) of Title 12, Banks and 
Banking. For complete classification of this Act to the Code, see Short 
Title note set out under section 3301 of Title 12 and Tables.
    Section 522(a) of Public Law 103-325, referred to in subsec. 
(b)(4)(C), was in original ``section 522(a) of such Act'', which 
generally amended subsec. (b) of this section.
    This title, referred to in subsec. (e)(3)(B), (C), means title I of 
Pub. L. 93-234, Dec. 31, 1973, 87 Stat. 977, which enacted this section 
and section 4104 of this title and amended sections 4001, 4013 to 4016, 
4026, 4054, 4056, and 4121 of this title.

                          Codification

    Section was enacted as part of Flood Disaster Protection Act of 
1973, and not as part of National Flood Insurance Act of 1968 which 
comprises this chapter.


                               Amendments

    1994--Pub. L. 103-325, Sec. 531, substituted section catchline for 
former section catchline.
    Subsec. (a). Pub. L. 103-325, Sec. 582(c), struck out ``, during the 
anticipated economic or useful life of the project,'' before ``covered 
by flood insurance'' and inserted at end ``The requirement of 
maintaining flood insurance shall apply during the life of the property, 
regardless of transfer of ownership of such property.''
    Subsec. (b). Pub. L. 103-325, Sec. 522(a), amended subsec. (b) 
generally. Prior to amendment, subsec. (b) read as follows: ``Each 
Federal instrumentality responsible for the supervision, approval, 
regulation, or insuring of banks, savings and loan associations, or 
similar institutions shall by regulation direct such institutions not to 
make, increase, extend, or renew after the expiration of sixty days 
following December 31, 1973, 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 to the maximum limit of coverage made 
available with respect to the particular type of property under the Act, 
whichever is less.''
    Subsec. (c). Pub. L. 103-325, Sec. 522(b), inserted heading, 
designated existing provisions as par. (1), inserted par. (1) heading, 
and added par. (2).
    Subsecs. (d) to (h). Pub. L. 103-325, Secs. 523-526, added subsecs. 
(d) to (h).
    1983--Pub. L. 98-181 substituted ``Director'' for ``Secretary'' 
wherever appearing.


                    Effective Date of 1994 Amendment

    Amendment by section 582(c) of Pub. L. 103-325 applicable to 
disasters declared after Sept. 23, 1994, see section 5154a(e) of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 4104a, 4104d of this title; 
title 12 section 4521.
