Pub. 10 2015-2016 Issue 3

www.nebankers.org 26 Extraordinary Service for Extraordinary Members. I N OUR FAST-PACED INDUSTRY, IT CAN BE EASY TO MISS important day-to-day updates. In the last few months, some important and interesting developments have occurred that could affect your bank. A few of the top “need-to-know” updates include preparing for the Flood Escrow Rule in 2016; the Citizens Enforcement Action; and what the USA Freedom Act means for banks. Will banks be required to escrow flood insurance? Are there any exceptions? What about existing loans? The final flood regulations released this past June imple- mented the requirement that lenders escrow flood insurance premiums and fees for all loans secured by residential real property (or mobile homes) beginning Jan. 1, 2016. In addi- tion, lenders will be required to deliver new notices notify- ing borrowers of the escrow requirement. Following these changes, themodel forms in the appendices have been revised and updated to include the escrow language. Those newmodel forms (or substantially similar language) also will need to be used beginning Jan. 1, 2016. The good news is that there are some exemptions, including: the small creditor exemption; subordinate liens on a covered property; loans on property covered by an association’s flood coverage (e.g., Residential CondominiumBuilding Association Policy, or RCBAP, cover- age); business and agricultural-purpose loans; home equity lines of credit (HELOCs); non-performing loans and short- term loans (12 months or less). Existing loans are not wholly exempt from the escrow re- quirement. Lenders are required to offer borrowers the option to escrowflood insurance premiums and fees on covered loans that are outstanding as of Jan. 1, 2016. However, that change in flood procedures does not have to be rolled out at the same time as the escrow requirement on new transactions. The Compliance Hot Topics Silvia Garcia Maggio, Compliance Alliance