[Federal Register Volume 60, Number 167 (Tuesday, August 29, 1995)]
[Notices]
[Pages 44881-44890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21400]
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FEDERAL EMERGENCY MANAGEMENT AGENCY
Mortgage Portfolio Protection Program
AGENCY: Federal Insurance Administration, FEMA.
ACTION: Notice.
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SUMMARY: The Federal Insurance Administration (FIA), the Directorate
within the Federal Emergency Management Agency (FEMA) responsible for
the administration of the National Flood Insurance Program (NFIP), is
announcing changes to the Mortgage Portfolio Protection Program (MPPP)
and its response to comments and suggestions received regarding the
MPPP. Changes have also been made to the MPPP Guidelines (and
Appendices), where applicable, to comply with requirements mandated by
the National Flood Insurance Reform Act of 1994 which was enacted on
September 23, 1994.
EFFECTIVE DATE: October 1, 1994.
FOR FURTHER INFORMATION CONTACT: Tere Martin or Ed Connor, Federal
Emergency Management Agency, Federal Insurance Administration, 500 C
Street, SW., Washington, DC 20472. Mrs. Martin's telephone number is
(202) 646-3430; and Mr. Connor's telephone number is (202) 646-3429.
SUPPLEMENTARY INFORMATION: In 1991, the Federal Insurance
Administration (FIA) developed the Mortgage Portfolio Protection
Program (MPPP) as a mechanism to be used as a last resort and at the
option of a lending institution for securing flood insurance coverage
for properties which are part of the lending institution's mortgage
portfolio. The goals of the MPPP were and are, through the MPPP
notification process, to encourage property owners whose structures are
potentially susceptible to flood damage to purchase a conventional
National Flood Insurance Program (NFIP) flood insurance policy, or,
failing that, have the lending institution obtain an MPPP policy on the
structure.
After two years' experience with the MPPP, on March 24, 1993, the
FIA published a Notice in the Federal Register (58 FR 15874-15875)
requesting public comments on the MPPP as outlined in the Federal
Register of March 1, 1991 (56 FR 8882-8891).
Four questions were included in the 1993 Notice which were to be
the subject of any responses.
A total of eight responses were received: two from different
corporate parts of an insurance company participating in FIA's Write
Your Own (WYO) Program that also participate in the MPPP, two from two
other WYO companies participating in the MPPP, one from a WYO company
not participating in the MPPP, two from vendor companies that service
WYO companies, and one from a local government.
Regarding the questions, comments received, and FIA's response,
they are as follows:
(1) Does the MPPP Work as Designed?
Five responses were received on this question. One WYO company
stated that there was interest in the Program and that it was working
for those lenders that used it but that there will be no serious
participation until the threat of some type of financial penalty
(against lenders that don't comply with the law) becomes reality
through passage of pending legislation. It should be pointed out that
the National Flood Insurance Reform Act of 1994 (the Reform Act)
enacted September 23, 1994, contains provisions requiring increased
compliance with the flood insurance purchase requirement mandated by
the Flood Disaster Protection Act of 1973. The reform legislation
clarifies the flood insurance purchase requirement, gives lenders more
tools to comply, and applies financial penalties for noncompliance.
Another WYO company indicated that it believed that the Program as
designed will not be used a lot in view of the high rates it
contemplates. It believed, however, that the Program helped convince
lenders of the need for compliance, and helped them design a method to
review the portfolios and obtain the information needed to issue
conventionally underwritten flood policies. One WYO company that does
NOT participate in the MPPP stated that the Program apparently is not
working as it was intended because not many policies have been issued
through the Program; that company also commented that there was some
apparent misuse, such as a mortgagee using the Program at loan
origination, and commented that the Program has apparently not improved
compliance with the mandatory purchase provision. A WYO vendor stated
that, when utilized, the MPPP seemed to work well as a compliance tool
at the borrower's level and that the problem lies in persuading the
lending community to utilize the MPPP, the thought being that the cost
and coordination of conducting the portfolio audit and obtaining zone
determination services is a deterrent. The respondent from the local
government stated that such a program is worthwhile and one which would
save much post-purchase agony and confusion resulting from either the
lack of investigation or ignorance of the system. That respondent felt
that a Program like the MPPP would especially help the first time home
[[Page 44882]]
buyers who, in all likelihood, would have no concept of flood insurance
requirements or even its existence.
The FIA believes that the MPPP is working as it was intended. The
MPPP was intended to be a tool to assist lenders who were interested in
bringing their portfolios into compliance with flood insurance
requirements. It was never the intent to have a large number of
policies sold under the MPPP but simply to provide the necessary
administrative vehicle for interested lenders to encourage borrowers to
purchase flood insurance when required and, when there was no positive
response from the borrower, to allow the lender to obtain the required
coverage to either bring its mortgage loan portfolio into compliance
with Federal requirements or to allow it to remain in compliance.
(2) What Improvements Should be Made to the Program?
Five responses were received on this question. One WYO company
suggested that the stated intended use of the MPPP be clarified to
state that it is intended to be used when the lender has reviewed one
or more loans in its portfolio and determined such loan or loans to be
on a building(s) located in a special flood hazard area (SFHA). That
company commented that the existing language appears to state that the
MPPP may only be used in conjunction with a mortgage portfolio review.
The company believes that such a clarification would make the entire
Program much more accessible to the lender. The FIA agrees and such a
change is included in this Notice. Although the existing language was
intended to limit the use of the MPPP to correcting flood insurance
deficiencies of mortgage loan portfolios, it was not intended to limit
such use to flood insurance needs derived from portfolio reviews only.
This same WYO company also suggested that the requirement that WYO
companies using the program maintain copies of the notification letters
required to be sent by the lender to the borrower, when the lender,
instead of the WYO company, actually assumes the responsibility of
notifying the borrower, be changed. It reasoned that such lenders often
will not provide copies of such letters to the WYO company. It
therefore suggested that, under such circumstances, the WYO company,
instead, be required to obtain a letter from an officer of the lending
institution using the MPPP stating that it is complying with the
mandatory letter notification requirements of the MPPP, and also to
obtain samples of the letter notifications such a lender uses in this
regard. The FIA believes that there is sufficient flexibility in the
language contained in the answer to Question #21 of Addendum #4,
National Flood Insurance Program Mortgage Portfolio Protection Program
(MPPP) Questions and Answers, to allow WYO companies to address such
circumstances, particularly because such circumstances were
contemplated and addressed in the answer that appears in the 1991
Notice to Question #20 of Addendum #4. This same WYO company also
suggested that coverage be provided against losses that might occur on
loans during the 45 day letter cycle and to deduct the premium from the
loss payment. Similarly, a WYO vendor suggested that the time frame of
the letter notification cycle correspond to the 30 day protection
period for the mortgagee in the mortgage clause to prevent any lapse of
coverage. This vendor also suggested that the program allow for the
acceleration of the issuance of the MPPP application prior to the end
of the notification cycle so as to avoid any lapse of coverage for the
lender. The FIA does not agree with the first three of these four
suggestions. The FIA believes that the borrower must be given
sufficient time to respond to the lender's notice. Coverage can then
only begin following receipt of premium and after the appropriate
waiting period. The MPPP was designed to be used by a lender when it
discovers that flood insurance is missing from a loan on which it is
required. It was not designed to be used to bring about flood coverage
on a loan which currently has coverage but the lender believes the
borrower may not renew. The existing mortgage clause and renewal
provisions of the NFIP are sufficient to allow a lender that monitors
the renewal of existing policies on loans in its portfolio to renew
that policy on behalf of the mortgagor within a limited period of time
after the policy expires to avoid any lapse of coverage to protect the
interests of the lender. Also, there is no need for an MPPP, nor can it
be used when there is an existing policy and the underwriting
information is therefore available to write (or renew) that policy.
Regarding the last of these suggestions, a WYO company may prepare an
MPPP application in advance of the completion of the notification cycle
so that the coverage is effective upon the completion of the cycle. Of
course the WYO company must receive payment for that coverage far
enough in advance of that date to comply with the waiting period
requirement. Under the NFIP's waiting period rules, the payment must be
received at least 30 days in advance of the completion of the
notification cycle to comply with the new waiting period requirement
established by the Reform Act. However, under the provisions of
paragraph (e)(2) in section 524 of the Reform Act, the borrower should
not be billed in his escrow account or otherwise for the premium until
45 days after receiving notification that flood insurance is required.
This means that, initially, the premium must come from a source other
than the borrower. Another WYO company suggested that FIA obtain the
assistance of the different Federal entities who require this insurance
in performing regular audits on compliance and notifying lenders who
fail to comply of their failure to comply and the requirement of flood
insurance on these properties. A second WYO vendor suggested that
strict enforcement measures should be incorporated into regulations and
a way be provided of verifying that insurance has been placed and
provide stiff penalties if it has not. The FIA works directly with both
the Federal financial institution regulatory and non-regulatory
agencies on an ongoing basis to bring about the compliance intended by
the Flood Disaster Protection Act of 1973. Great progress has been made
in the past several years regarding the increased focus on flood
insurance compliance in compliance reviews by these agencies. The
Reform Act contains provisions to strengthen the mandatory flood
insurance purchase requirements and FIA is now working with the federal
entities for lending regulation in implementing the various mandatory
provisions of the Reform Act. A WYO vendor suggested that if the goal
(of the MPPP) is to sell policies as opposed to forcing the purchase of
Standard Flood Insurance Policies, the MPPP rates are prohibitive, and
should be reduced. As previously stated, the principal goal of the MPPP
is to provide a voluntary, administrative tool to the mortgage lending
and servicing industries that will assist them with their efforts to
comply with mandatory flood insurance requirements. Its use is intended
to allow flood insurance coverage to be obtained on any loan
discovered, following loan origination, to be in need of such coverage
when the borrower, having been notified of the need of and requirement
for such coverage, refuses to obtain the coverage. The sale of
additional policies, either conventionally underwritten or MPPP rated,
although not the primary goal of the MPPP, is a logical secondary goal
that will result from the use of the MPPP by the lending and servicing
industries. The reason the rates are high
[[Page 44883]]
is the lack of underwriting information available on that property due
to the non-responsiveness of the borrower. Without such data the FIA
must assume that the flood risk to which that property is exposed is
high and charge rates that reflect such high risk. A WYO vendor
suggested that WYO companies be given more leeway in customizing the
letter verbiage. The FIA believes that such leeway already exists. The
beginning of the Initial Portfolio Review Letter Notification Process
portion of Addendum #1 of the MPPP Guidelines and Requirements states
that ``The lender/servicer [or their authorized representative] may add
their own messages, make minor editorial modifications to the messages
to conform to the style and practice of the WYO company or lender and
structure the letter to their liking, but they may not alter the
meaning or intent of the messages listed here for any of the letters.''
A WYO vendor suggested that the MPPP policy renewal process be
simplified. It was suggested that the three letter renewal cycle be
replaced with a single letter indicating that coverage can be obtained
at standard rates. The issue of modifying the MPPP renewal process has
also been raised by others outside of this process. The FIA agrees that
some simplification to this process would be in the best interest of
the MPPP without compromising the safeguards designed to protect the
borrower. The FIA believes, however, that such simplification should be
limited to reducing the number of renewal letters required to two
instead of the currently required three or suggested one. This change
is reflected in this Notice. A WYO vendor suggested that lenders be
allowed to sign a generic vendor MPPP cancellation request form instead
of the borrower (insured), since they must sign the application for the
issuance of an MPPP policy. FIA agrees that a change in this
requirement is needed, since it is reasonable to assume that the
borrower will be as unlikely to respond to the lender's request for the
borrower's signature on a cancellation request as the borrower was on
the request to purchase the conventionally underwritten policy. This
change is reflected in this Notice.
(3) Should the MPPP Become a Permanent Part of the National Flood
Insurance Program?
Five comments were received on this question. Two WYO companies,
one WYO vendor, and a local government believed that the MPPP should be
made a permanent part of the NFIP. One WYO company that does not
participate in the MPPP believes that the MPPP should be discontinued
until there is more stringent enforcement of the mandatory purchase
provisions of the NFIP, due to the lack of apparent use of the MPPP.
The FIA believes that there is a continuing need for the MPPP
capability to be available to the mortgage lending and servicing
industries and will therefore make the MPPP available on a permanent
basis as part of the NFIP. There is also little additional cost
incurred in continuing the MPPP since it is already developed.
(4) What Data and Indicators are Available for Determining How Many
Conventionally Underwritten Flood Insurance Policies Have Been Written
as a Result of the MPPP Pilot?
Three comments were received on this question. These comments
indicated that most of the policies written as a result of the use of
the MPPP have been written initially either as a conventionally
underwritten policy or were cancelled and converted to a conventionally
underwritten policy shortly after being written as an MPPP policy. Most
felt that there was no way to measure this, however. One WYO company
vendor indicated that, utilizing property address tracking mechanisms,
a system could be developed to provide such data. The FIA believes that
any benefits that might be realized from undertaking the effort to
explore the feasibility of developing such a capability would not be
worth the time and expense to the NFIP, in light of its limited
resources, and higher priorities for those resources.
WYO companies wishing to participate in the MPPP must sign an
agreement to adhere to the MPPP Guidelines and Requirements for each
new Arrangement year. After we have processed all Arrangements for each
year, we will publish after each October 1, in the Federal Register, an
updated list with the address and name of the contact person for each
WYO company that has signed up for that Arrangement year.
The revised Mortgage Portfolio Protection Program Write Your Own
Company Guidelines and Requirements, as referenced in this document, is
reproduced in its entirety as Appendix A to this notice.
Dated: August 17, 1995.
Elaine A. McReynolds,
Administrator, Federal Insurance Administration.
Appendix A--Federal Emergency Management Agency, Federal Insurance
Administration, National Flood Insurance Program; Mortgage Portfolio
Protection Program, Write Your Own Company Guidelines and Requirements
Background
The Mortgage Portfolio Protection Program (MPPP) was introduced on
January 1, 1991, as an additional tool, provided by the Federal
Insurance Administration (FIA), to assist the mortgage lending and
servicing industries, in response to their requests of the past few
years, in bringing their mortgage portfolios into compliance with the
flood insurance requirements of the Flood Disaster Protection Act of
1973.
The MPPP is not intended to act as a substitute for the need for
mortgagees to review all mortgage loan applications at the time of loan
origination and comply with flood insurance requirements as
appropriate.
It is expected that the proper implementation of the various
requirements of this MPPP will result in mortgagors, following their
notification of the need for flood insurance, to either show evidence
of such a policy, or to contact their local insurance agent or
appropriate Write Your Own (WYO) company to purchase the necessary
coverage. It is also intended that flood insurance policies be written
under the MPPP only as a last resort, and only on mortgages whose
mortgagors have failed to respond to the various notifications required
by this MPPP.
The following represents the criteria and requirements that must be
followed by all parties engaged in the sale of flood insurance under
the National Flood Insurance Program's Mortgage Portfolio Protection
Program:
Requirements for Participating in the MPPP
1. General
a. All mortgagors notified, in conjunction with this Program, of
their need to purchase flood insurance must be encouraged to obtain a
Standard Flood Insurance Policy (SFIP) from their local agent.
b. When a mortgagee or a mortgage servicing company discovers, at
any time following loan origination, that one or more of the loans in
its portfolio is determined to be located in a Special Flood Hazard
Area (SFHA), and that
[[Page 44884]]
there is no evidence of flood insurance on such property (ies), then
the MPPP may be used by such lender/servicer to obtain (force place)
the required flood insurance coverage. The MPPP process can be
accomplished with limited underwriting information and with special
flat flood insurance rates.
c. In the event of a loss, the policy will have to be reformed if
the wrong rate has been applied for the zone in which the property is
located. Also, the amount of coverage may have to be changed if the
building occupancy does not support that amount.
d. It will be the WYO company's responsibility to notify the
mortgagor of all coverage limitations at the inception of coverage and
to impose those limitations that are applicable at the time of loss
adjustment.
2. WYO Arrangement Article III--Fees
With the implementation of the MPPP, there is no change in the
method of WYO company allowance from that which is provided in the
Financial Assistance/Subsidy Arrangement for all flood insurance
written.
3. Use of WYO Company Fees for Lenders/Servicers or Others
a. No portion of the allowance that a WYO company retains under the
WYO Financial Assistance/Subsidy Arrangement for the MPPP may be used
to pay, reimburse or otherwise remunerate a lending institution,
mortgage servicing company, or other similar type of company that the
WYO company may work with to assist in its flood insurance compliance
efforts.
b. The only exception to this is a situation where the lender/
servicer may be actually due a commission on any flood insurance
policies written on any portion of the institution's portfolio because
it was written through a licensed property insurance agent on their
staff or through a licensed insurance agency owned by the institution
or servicing company.
4. Notification
a. WYO Company/Mortgagee--Any WYO company participating in the MPPP
must notify the lender or servicer, for which it is providing the MPPP
capability, of the requirements of the MPPP. The WYO company must
obtain signed evidence from each such lender or servicer indicating
their receipt of this information, and keep a copy in its files. An
example of such evidence of receipt follows as Addendum #5.
b. Mortgagee to Mortgagor--In order to participate in the MPPP, the
lender (or its authorized representative, which will typically be the
WYO company providing the coverage through the MPPP) must notify the
borrower of the following, at a minimum:
(1) The requirements of the Flood Disaster Protection Act of 1973,
(2) The flood zone location of the borrower's property,
(3) The requirement for flood insurance,
(4) The fact that the lender has no evidence of the borrower's
having flood insurance,
(5) The amount of coverage being required and its cost under the
MPPP, and
(6) The options of the borrower for obtaining conventionally
underwritten flood insurance coverage and the potential cost benefits
of doing so.
A more detailed discussion of the notification requirements is made
a part of this program document in both Section 15 and as Addendums 1
and 2.
5. Eligibility
a. Type of Use--The MPPP will be allowed only in conjunction with
mortgage portfolio reviews and the servicing of those portfolios by
lenders and mortgage servicing companies. The MPPP is not allowed to be
used in conjunction with any form of loan origination.
b. Type of Property--The standard NFIP rules apply, and all types
of property eligible for coverage under the NFIP will be eligible for
coverage under the MPPP.
6. Source of Offering
The force placement capability will be offered by the WYO companies
only and not by the NFIP Servicing Agent (National Con-Serv [NCSI]).
7. Dual Interest
The policy will be written covering the interest of both the
mortgagee and the mortgagor. The name of the mortgagor must be included
on the Application Form. It is not, however, necessary to include the
mortgagee as a named insured because the Mortgage Clause (Article 9.P
of the Dwelling Form and Article 8.L of the General Property Form)
affords building coverage to any mortgagee named as mortgagee on the
Flood Insurance Application. If contents coverage for the mortgagee is
desired, the mortgagee should be included as a named insured.
8. Term of Policy
NFIP policies written under the MPPP will be for a term of one year
only (subject to the renewal notification process).
9. Coverage Offered
Both building and contents coverage will be available under the
MPPP. The coverage limits available under the Regular Program will be
$250,000 for building coverage and $100,000 for contents. If the WYO
company wishes to provide higher limits that are available to other
occupancy types such as other residential or non-residential, it may do
so only if it can indicate that occupancy type as appropriate. If the
mortgaged property is in an Emergency Program Community, then the
coverage limits available will be $35,000 for building coverage and
$10,000 for contents. Again, if the higher limits are desired for other
types of property, then the building occupancy type must be provided at
the inception of the policy or when that information may become
available, but it must be prior to any loss.
10. Policy Form
The current SFIP Dwelling Form and General Property Form will be
used, depending upon the type of structure insured. In the absence of
building occupancy information, the Dwelling Form should be used.
11. Waiting Period
The NFIP rules for the waiting period and effective dates apply to
the MPPP.
12. Premium Payment
The current rules applicable to the NFIP will apply. The lender or
servicer (or Payor) has the option to follow its usual business
practices regarding premium payment, so long as the NFIP rules are
followed.
13. Underwriting--Application
a. The MPPP will require less underwriting data than is normally
required under the standard NFIP rules and regulations. The MPPP data
requirements for rating, processing and reporting are, at a minimum:
(1) Name and mailing address of insured (mortgagor--also see Dual
Interest),
(2) Address of insured (mortgaged) property,
(3) Community information (complete NFIP map panel number and date;
program type, Emergency or Regular) countywide maps,
(4) Occupancy type (so statutory coverage limits are not exceeded.
This data may be difficult to obtain. Also see Coverage Offered.),
(5) NFIP flood zone where property is located (lender must
determine, in order to determine if flood insurance requirements are
necessary and to use the MPPP),
[[Page 44885]]
(6) Amount of coverage,
(7) Name and address of mortgagee,
(8) Mortgage loan number,
(9) Policy number.
b. No elevation certificates will be required as there will be no
elevation rating.
c. For more detailed information regarding reporting requirements,
see the WYO Transaction Record Reporting and Processing (TRRP) Plan.
14. Rates (per $100 of insurance)
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Zone Building Contents
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A Zone--All building/occupancy types................ $1.25 $1.25
V Zone--All building/occupancy types................ $3.00 $3.00
A99 Zone--All building/occupancy types.............. .35 .35
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15. Policy Declaration Page Notification Requirements
In addition to the routine information, such as amounts of
coverage, deductibles and premiums, that a WYO company may place on the
Policy declarations page issued to each insured under the NFIP, the
following messages are required:
a. This policy is being provided for you as it is required by
Federal law as has been mentioned in the previous notices sent to you
on this issue. Since your mortgage company has not received proof of
flood insurance coverage on your property in response to those notices,
we provide this policy at their request.
b. The rates charged for this policy may be considerably higher
than those that may be available to you if you contact your local
insurance agent (or the WYO company at ...).
c. The amounts of insurance coverage provided in this policy may
not be sufficient to protect your full equity in the property in the
event of a loss.
d. You may contact your local insurance agent (or WYO company at
...) to replace this policy with a conventionally underwritten Standard
Flood Insurance Policy, at any time, and typically at a significant
savings in premium.
The WYO company may add other messages to the declarations page and
make minor editorial modifications to the language of these messages if
it believes any are necessary to conform to the style or practices of
that WYO company, but any such additional messages or modifications may
not change the meaning or intent of the above messages.
Since the amount of underwriting data obtained at the time of
policy inception will typically be limited, the extent of any coverage
limitations (such as, when replacement coverage is not available or
coverage is limited because the building has a basement or is
considered an elevated building with an enclosure) will be difficult to
determine. It is, therefore, the responsibility of the WYO company to
notify the mortgagor/insured of all coverage limitations at the
inception of coverage and impose any that are applicable at the time of
the loss adjustment.
16. Policy Reformation--Policy Correction
Article 9.F.2. of the Dwelling Policy and Article 8.E.2. of the
General Property Policy will apply as appropriate.
Examples of circumstances under which reformation or correction
might be needed would be:
Policy Reformation--The wrong flat rate was applied for the zone in
which the property was actually located.
Policy Correction--The amount of coverage exceeds the amount
available under the NFIP for the type of building occupancy that
represents the building insured. In such cases, the amount of coverage
would have to be adjusted to the amount available and any appropriate
premium adjustments made.
17. Coverage Basis--Actual Cash Value or Replacement Cost
There are no changes from the standard practices of the NFIP for
these provisions. The coverage basis will depend on the type of
occupancy of the building covered and the amount of coverage carried.
18. Deductible
A $500 Deductible is applicable for policies written under the
MPPP.
19. Expense Constant and Federal Policy Fee
There is no change from the standard practice. The Expense Constant
and Federal Policy Fee in effect at the time the MPPP policy is written
must be used.
20. Renewability
The MPPP policy is a one-year policy. Any renewal of that policy
can occur only following the full notification process spelled out in
addendum #2 that must take place between the lender (or its authorized
representative) and the insured/mortgagor, when the insured/mortgagor
has failed to provide evidence of obtaining a substitute flood
insurance policy.
21. Cancellations
a. Existing Policy--When the mortgagor provides evidence of a flood
insurance policy, from any source, that is currently in effect and has
been in effect prior to the effective date of the MPPP policy, the MPPP
policy may be cancelled flat with a full refund of premium, provided
that the policy in effect is acceptable to the mortgagee. If the
existing policy is an NFIP policy (WYO or direct business), the NFIP
rules require that one of the NFIP policies must be cancelled. The full
premium, including the expense constant and Federal policy fee, will be
returned to the payor. The WYO servicing allowance is not earned by the
WYO company.
b. New Flood Insurance Policy--When the mortgagor/borrower
purchases a flood insurance policy, from any source, following
notification of the need for the policy, the MPPP policy may be
cancelled but on a pro-rata basis. Any premium refund may be calculated
with or without the pro rata share of the expense constant and Federal
policy fee, depending on the company's normal business practice.
c. Other--The NFIP Insurance Manual rules for Cancellation/
Nullification Notices are to be followed, when applicable.
d. Signature Requirement--The signature required on the
Cancellation/Nullification Request Form is that of an authorized
representative of the mortgage lender whose name appears on the NFIP
flood insurance application form that resulted in the MPPP policy being
purchased or the signature of an authorized representative of a
subsequent owner of that loan.
22. Endorsement
An MPPP policy may not be endorsed to convert it directly to a
conventionally underwritten SFIP. Rather, a new policy application,
with a new policy number, must be completed according to the
underwriting requirements of the SFIP, as contained in the NFIP
Insurance Manual. The MPPP policy may be endorsed to assign it under
rules of the NFIP. It may also be endorsed for other reasons such as
increasing coverage.
23. Assignment to a Third Party
Current NFIP rules remain unchanged; therefore, an MPPP policy may
be assigned to another mortgagor or mortgagee. Any such assignment must
be through an endorsement, however.
24. Article XIII--Restrictions Other Flood Insurance
ARTICLE XIII of the Arrangement is also applicable to the MPPP and,
as
[[Page 44886]]
such, does not allow a company to sell other flood insurance that may
be in competition with NFIP coverage. This restriction, however,
applies solely to policies providing flood insurance. It also does not
apply to insurance policies provided by a WYO company in which flood is
only one of several perils provided, or when the flood insurance
coverage amounts are in excess of the statutory limits provided under
the NFIP or when the coverage itself is of such a nature that it is
unavailable under the NFIP, such as blanket portfolio coverage.
Mortgage Portfolio Protection Program (MPPP) Guidelines and
Requirements--Addendum #1
Initial Portfolio Review Letter Notification Process
Once it has been determined by the lender/servicer or its
representative that flood insurance is needed on mortgages in the
lender's portfolio, and there is no evidence of flood insurance, and it
decides to use FIA's MPPP to assist in bringing the lender's portfolio
into compliance with flood insurance, then the following notification
process must be used.
This process will consist of three initial notification letters.
Each letter will contain certain messages, at a minimum, in the body of
the letter. The lender/servicer (or their authorized representative)
may add their own messages, make minor editorial modifications to the
messages to conform to the style and practice of the WYO company or
lender and structure the letter to their liking, but they may not alter
the meaning or intent of the messages listed here for any of the
letters.
Each letter will contain mandatory messages on one or more of the
following items: (1) The requirements of the Flood Disaster Protection
Act of 1973, (2) reminding the insured of the previous letters sent
that resulted in the current flood insurance policy, (3) the high
premiums on the current policy, (4) potentially inadequate coverage
limits, (5) coverage limitations, and (6) the options available to the
insured.
Initial Notification Letter to Mortgagor
The first letter is to be issued after the review of the lender's
portfolio reveals the need for the flood insurance coverage and the
absence of it. This letter must contain, at a minimum, the following
messages:
1. ``The Flood Disaster Protection Act of 1973, a Federal law,
requires that flood insurance be purchased and maintained on mortgage
loans for buildings (and their contents, if appropriate) for the life
of the loan for buildings located in a Special Flood Hazard Area shown
on a map published by FEMA. This applies to such loans from lending
institutions that are under the jurisdiction of a Federal regulatory
agency or instrumentality.''
2. ``We have determined that your property (building), on which we
hold the mortgage loan, is located in a SFHA and, therefore, you are
required by law to have a policy of flood insurance on that property.''
This letter must then include language advising the
mortgagor that in the event they wish to challenge the zone
determination, they should provide written factual evidence supporting
their challenge obtained from a community official, registered
engineer, architect or surveyor, stating the specifics of the location
of the building and the reason for their challenge. The letter must
include reference to the appeal process required in Section 524 of the
National Flood Insurance Reform Act of 1994, after regulations are
promulgated to establish the procedures and process for such review.
FEMA expects to issue the regulations by late October 1995.
The lender/servicer is reminded that since the Act places
the responsibility of determining the flood zone location of each
mortgaged property on the lender/servicer, he cannot discharge that
responsibility by simply obtaining some form of self certification from
the mortgagor. If the lender wishes to change its original
determination on the location of the mortgagor's property based upon
information submitted by the mortgagor, the lender/servicer must
convince itself, after reviewing that submission, that its original
determination was in error and make any such change based on that
review. He should not simply accept unsubstantiated allegations, from
whatever source, as to the building's flood zone location. The ultimate
responsibility for making such determinations under the statute rests
with the mortgagee, not the mortgagor.
3. ``There is no evidence in your mortgage loan file of your having
a flood insurance policy on your property. In case this information is
in error, please contact us at ____________________.''
4. ``If you do not have a flood insurance policy on this property,
you may wish to contact your local insurance agent (or WYO company at
____________________).''
5. ``If you do not respond within 45 days of this letter, either
providing evidence of a flood insurance policy in effect on this
property, or requesting that we provide you with such coverage, the
necessary flood insurance coverage will be provided for you. In that
event, since certain insurance underwriting information about your
property that is necessary to determine the appropriate flood insurance
rate for your policy would not have been obtained, due to your not
responding, the Federal government's Mortgage Portfolio Protection
Program's flood insurance rates will have to be used. These rates may
be considerably higher than those that could be obtained for you if you
respond to this notice.''
This letter, or an attachment, must also include such other
information as: (1) the name of the lender/servicer, (2) the mortgage
loan number, (3) the address of the property in question, (4) the flood
zone in which the property has been determined to be located, (5) the
amount of flood insurance being required, and (6) coverage limitations.
The Second Initial Notification Letter
This letter will be sent 30 days following the first initial
notification letter if no response has been received from the
mortgagor. It will contain, at a minimum, the following messages:
1. ``About a month ago you were notified that Federal law requires
all mortgages, such as yours, on properties determined to be located in
a Special Flood Hazard Area, to be covered by a policy of flood
insurance.''
2. ``That letter mentioned that if you did not respond positively
within 45 days from that letter, it would be necessary to obtain a
policy of flood insurance for you.''
3. ``This is to remind you that since you have not responded to the
earlier notice as yet, and if you do not respond within the next
fifteen days (or the actual expiration date), flood insurance, as
mentioned previously, will be obtained on your property, on your
behalf.''
4. ``In the event that you do not respond and the coverage must be
obtained as mentioned, the cost of that coverage may be significantly
higher than the premium that you could obtain if you were to contact
your local insurance agent (or WYO company at ...).''
Third and Final Initial Notification Letter
This letter must be sent to the mortgagor accompanying the flood
insurance policy declarations page.
This letter must be sent as soon after the end of the 45 day
notification period as possible, if no positive response has been
received to the two previous
[[Page 44887]]
notification letters. It must contain the following messages, at a
minimum:
1. ``This letter is to inform you that a policy of flood insurance
has been obtained on your behalf, to cover the mortgage on your
property, as required by the Flood Disaster Protection Act of 1973.''
2. ``You have been notified on two previous occasions explaining
the circumstances surrounding your need to have flood insurance
coverage and explaining your options, but to date no response has been
received.''
3. ``Attached is the flood insurance policy purchased on your
behalf and its accompanying declarations page that explains: the amount
of coverage purchased on your behalf, its cost, some limitations to
that coverage, and the options you may still wish to exercise to obtain
similar coverage, but typically at a significantly lower cost.''
4. ``If you purchase another flood insurance policy and notify us,
or contact us to request that we purchase a substitute policy under the
NFIP for you, we will cancel this policy and issue you a refund for the
unearned portion of the premium, if we deem that the other policy is
acceptable to satisfy the requirements.''
Mortgage Portfolio Protection Program (MPPP) Guidelines and
Requirements--Addendum #2
MPPP Renewal/Expiration Notification Process
When an MPPP policy has been purchased and the expiration date of
that policy is approaching the end of its one year term, and the
insured has not requested or produced a substitute policy of flood
insurance, the following notification process will be followed.
This process will consist of a total of three (or, at the lender's
option, two) renewal MPPP letters. Each letter will contain certain
required messages within the body of the letter. The lender/servicer
(or their authorized representative) may add their own messages, make
minor editorial modifications to the messages to conform to the style
and practice of the WYO company or lender and structure the letter to
their liking, but they may not alter the meaning or intent of the
messages listed here for any of the letters.
Each letter will contain mandatory messages on one or more of the
following items: (1) reminding the insured of the previous letters sent
that resulted in the current flood insurance policy that is about to
expire; (2) the requirements of the Flood Disaster Protection Act of
1973; (3) the high premiums on the current policy; (4) potentially
inadequate coverage limits; (5) coverage limitations, and (6) the
options available to the insured.
First MPPP Renewal/Expiration Notice (Letter)
The first MPPP renewal letter will be sent to the insured/mortgagor
at least 45 days prior to the renewal/expiration of the MPPP policy. It
will, at a minimum, contain the following messages:
1. ``This letter is to notify you that the flood insurance policy
that was required to be purchased on your property about a year ago is
about to expire.''
2. ``When you were originally notified of the need for this
coverage, it was explained that the Flood Disaster Protection Act of
1973, a Federal law, requires that flood insurance be purchased and
maintained for the life of the loan, on mortgage loans for buildings
(and their contents, if appropriate) located in a Special Flood Hazard
Area shown on a map produced by the Federal Emergency Management
Agency.''
3. ``The premium on the flood insurance policy currently in effect
and written on your behalf, and due to expire, may be considerably
higher than would be the case if you had responded to the suggestions
contained in the previous notices sent you, recommending that you
contact your local insurance agent (or the WYO company) to obtain a
conventionally underwritten Standard Flood Insurance Policy.''
4. ``As has been mentioned in previous notices, you may wish to
replace this policy with a conventionally underwritten Standard Flood
Insurance Policy now, and benefit from rates that potentially are
significantly lower than the rates being used with this policy.''
5. ``Failure to respond to this notice within 45 days (or by
[date]) will result in this policy being renewed, and at rates that are
most likely to be much higher than are otherwise available.''
Second MPPP Renewal/Expiration Notice (Letter)
The requirement for the Second MPPP Renewal/Expiration Notice
(Letter) is optional on the part of the participating WYO company. If
such a company decides not to issue the second of the three notices
(letters), then the Third MPPP Renewal/Expiration Notice (Letter)
required in the March 1, 1991, Federal Register will serve as the
second and final notice required. The language of such a letter may be
modified, if needed, to reflect the fact that only two such letters
were sent.
Third MPPP Renewal/Expiration Notice (Letter)
The third and final notice will be sent out as part of the renewed
MPPP policy. The notice containing the following required messages may
be sent as a cover letter or an attachment to the Policy declarations
page and policy itself, or the required messages may be included on the
declarations page that accompanies the renewal policy. It must contain
the following messages:
1. ``Since you have not responded to our previous notices that your
flood insurance policy, which is required by Federal law, was about to
expire, we have renewed that policy for the next year.''
2. ``As has been previously explained, the Flood Disaster
Protection Act of 1973, a Federal law, requires that flood insurance be
purchased and maintained on mortgage loans for buildings (and their
contents, if appropriate) for the life of the loan, for property
located in a Special Flood Hazard Area shown on a map produced by the
Federal Emergency Management Agency.''
3. ``The premium on this flood insurance policy just renewed may be
considerably higher than would be the case if you had contacted your
local insurance agent (or WYO company at ...), which you may still do,
to obtain a conventionally underwritten Standard Flood Insurance
Policy.''
4. ``If you purchase another flood insurance policy and notify us,
or contact us to request that we purchase a substitute policy under the
NFIP for you, we will cancel this policy and issue you a refund for the
unearned portion of the premium, if we deem that the other policy is
acceptable to satisfy the requirements.''
National Flood Insurance Program Mortgage Portfolio Protection Program
(MPPP)--Addendum #3
Portfolio Review Considerations for Lenders/Servicers Prior to
Participating in the MPPP--Questions and Answers
1. Q. What is the MPPP and who is this Q & A aimed at?
A. The MPPP is a tool for providing flood insurance coverage to
properties which are part of a lending institution's mortgage portfolio
when such properties have been determined to be in a Special Flood
Hazard Area and therefore subject to the flood insurance purchase
requirement mandated by Federal law. The MPPP is aimed at WYO
companies, lenders/servicers participating in the MPPP, Federal
regulatory agencies and other interested parties.
2. Q. What is the first step in using the MPPP?
[[Page 44888]]
A. The MPPP is only intended to be utilized when the lender (or its
representative) has reviewed its portfolio and determined which of the
loans are on buildings located in a Special Flood Hazard Area (SFHA),
and, therefore, in need of flood insurance.
3. Q. What source of information should the MPPP participant, or
their authorized representative, be using in reviewing a loan
portfolio, to determine flood zone location of the properties in
question?
A. The flood insurance maps published by the Federal Emergency
Management Agency (FEMA), augmented by other official documentation
available from local officials or other sources, as may be deemed
necessary.
The Flood Disaster Protection Act of 1973, which imposes the flood
insurance requirement, makes specific reference to ``areas identified
by the Secretary (since changed to Director [of FEMA]) as an area
having special flood hazards''. The National Flood Insurance Act of
1968, as amended, charged FEMA with the responsibility of identifying
areas which have special flood hazards. Therefore, the official source
of information that serves as the basis for identifying such areas is
the maps published by FEMA.
4. Q. What if a source of information other than the FEMA maps is
used as the basis for determining the flood zone location of
properties?
A. The lender may be risking erroneous determinations, thereby
potentially placing the lender in a position of a liability exposure,
bad customer relations and/or problems with its Federal regulatory
agency or worse.
5. Q. Does it mean that if the system used to make these flood zone
determinations is not based on the FEMA maps that it should not be
used?
A. Due to the potential for problems as mentioned above, the lender
must be careful as to the basis behind the system it uses to make these
flood zone determinations. Also, since the lender must keep evidence of
the determination in every mortgage file, if that evidence doesn't
reflect the map panel used to make the determination, the lender may
have difficulty proving to its Federal regulatory agency, or in court
if the need arose, that the lender is complying with the law.
6. Q. What flood zone determination information should the lenders
keep in each mortgagor's file to indicate evidence of compliance?
A. Pursuant to Section 528 of the National Flood Insurance Reform
Act of 1994, FEMA is developing a Standard Flood Hazard Determination
Form (SFHDF) for use by lenders when determining, in the case of a loan
secured by improved real estate or a mobile home, whether the building
or mobile home is located in a special flood hazard area. The SFHDF
contains a section for recording flood zone determination information.
FEMA expects to issue the regulation establishing the SFHDF by late
June 1995. All lenders subject to the Reform Act will have to place a
copy of the SFHDF in each mortgagor's file to indicate evidence of
compliance.
7. Q. What version of the flood map should be used in conjunction
with the MPPP portfolio review?
A. The FEMA map in effect at the time of the portfolio review is
the map that must be used. The provisions of the Flood Disaster
Protection Act of 1973 as amended by the Reform Act (1) require the
lender to notify the borrower that the borrower should obtain flood
insurance, at the borrower's expense, if, at any time during the term
of the loan, the lender determines the improved real estate or mobile
home securing the loan is located in an area identified by FEMA as an
area having special flood hazards and in which flood insurance is
available but the property is not covered by flood insurance; and (2)
require the lender to purchase coverage on behalf of the borrower if
the borrower fails to purchase such flood insurance within 45 days
after notification by the lender.
8. Q. Doesn't the fact that the MPPP was designed to assist
lenders/servicers in bringing their portfolios into compliance with
flood insurance requirements mean that they will be dealing with loans
that can range from being very new to being many years old, and that
the maps that may have been in effect at the time of the loan
origination might not be readily available now?
A. Yes. This does not present a problem since, as mentioned in no.
7 above, compliance with the requirements of the Reform Act requires
use of the map in effect at the time of the review rather than the map
in effect at the time of the loan origination.
9. Q. Once the lender/servicer's portfolio has been reviewed and
determinations have been made as to which properties need flood
insurance, is there anything critical that the lender (or its
representative) should consider before beginning the process of mailing
the initial notices to their mortgagors?
A. Yes, how the mailing will be handled and the results of that
mailing. There is a strong likelihood that, once the mailings begin, a
certain percentage of the mortgagor recipients of those notices will
challenge the notices. Some of those challenges will be directed, in
one way or another, to the lender/servicer, regardless of any
instructions in the notices. The lender should therefore determine at
the outset whether it wants the notices to be sent all at once, or
metered out so many at a time. The larger the volume, the more
consideration to the metering approach that should be given.
Also, the lender needs to consider how it wants the review of its
portfolio carried out. If the results of the review are provided to the
lender all at the same time and the lender decides to send the notices
to the mortgagors so many at a time, it may be exposing itself to
additional liability. This could occur since the lender was aware of
all the mortgages in its portfolio that needed flood insurance, but
acted on only a certain number at a time. The lender, therefore, needs
to consider having the portfolio review carried out in such a fashion
that the results of each portion of that review are made available to
the lender as soon as they are available from the party conducting the
review, and are acted upon as soon as possible thereafter.
National Flood Insurance Program Mortgage Portfolio Protection Program
(MPPP) Questions and Answers--Addendum #4
1. Q. What is the MPPP and what is it designed to do?
A. The MPPP is a tool made available to the lending and mortgage
servicing industries that provides them with the capability to write
flood insurance policies quicker and easier that will assist them with
their efforts to bring their portfolios into compliance with flood
insurance requirements.
2. Q. Is this available to lenders for all their loans?
A. No! It may only be used in conjunction with loan portfolios. It
may not be used as a compliance vehicle for loan originations.
3. Q. Is the MPPP mandatory for lenders/servicers?
A. No! It is voluntary, but lenders/servicers that believe their
loan portfolios may not be in compliance with flood insurance
requirements are strongly encouraged to use it if they believe it could
be helpful.
4. Q. What are the benefits of the MPPP?
A. The specific benefits will vary with the category of participant
as follows:
For lenders/servicers.
Portfolios can be brought into compliance satisfying the
law and regulators.
[[Page 44889]]
Reduce, limit or eliminate certain potential liability.
Protect equity (lender/servicer, borrower).
For WYO companies.
Increased policy sales/fees.
Increased lender/servicer client base.
For insurance agents.
Increased policy sales.
5. Q. Is it possible for WYO companies and insurance agents to
benefit from the MPPP even if they don't directly participate in it?
A. Yes! Property insurance (fire and auto) is already being sold by
insurance agents to many of these same borrowers because lenders
require it in conjunction with home mortgages and auto loans. As a
result, many agents already have established business relationships
with their local lenders. These agents could alert these lenders to the
availability of the MPPP and advise them as to how to proceed even if
the agent was not going to directly participate.
At the same time the agent could offer to assist the lender with
determining the flood zone location of the addresses of all new
mortgage loan applications for that lender and ask, in return, for the
opportunity to write all the flood insurance policies on those
properties that are determined to need it. The notices that will be
sent to the borrowers will generate inquiries and sales.
6. Q. How will flood policies actually be sold under the MPPP?
A. Policies will be written through the insurance companies
participating in FIA's Write Your Own (WYO) Program.
7. Q. Will all the insurance companies participating in the WYO
Program be writing policies under the MPPP?
A. Any WYO company may write policies under the MPPP, but only
those that traditionally have dealt with the lending industry are
expected to participate in this Program. Any such company that does
wish to participate must agree in writing to comply with the
requirements of the MPPP.
8. Q. Will FIA maintain and publish a list of the WYO companies
that participate in the MPPP?
A. Yes! Such a list will be developed and both modified and
republished as needed.
9. Q. What is the first thing a lender/servicer should do if it
wishes to utilize the MPPP?
A. The lender must review its loan portfolio and determine which of
the properties are located in Special Flood Hazard Areas (SFHA).
10. Q. When a lender/servicer decides to utilize the MPPP, must
they use the MPPP to service their portfolio all at the same time?
A. No! Lenders/servicers should carefully analyze the pros and cons
of phasing in their portfolio compliance effort. (See the Q & A that
FIA has developed on ``Portfolio Review Considerations'').
11. Q. Is use of the MPPP limited to only those properties located
in SFHAs?
A. Yes!
12. Q. What will happen if a policy is written through the MPPP,
but the property is not located in an SFHA?
A. If no loss has occurred at the time the situation is discovered
but the mortgagee wants the borrower to have flood insurance even
though the property is not in an SFHA, the situation can be corrected
by cancelling the MPPP policy and rewriting the coverage under a
conventional Standard Flood Insurance Policy (SFIP) with a refund of
any premium overpayment. If such a situation is discovered after a
flood loss has occurred, the claim will be honored. However, the MPPP
policy would have to be cancelled and the coverage rewritten under a
conventional SFIP with a refund of any premium overpayment. The loss
should then be reported under the new policy number. Under both
scenarios, the effective date of the conventional SFIP would be the
same as that of the cancelled MPPP policy.
13. Q. What differences are there between a flood policy sold under
the traditional flood insurance program and one under the MPPP?
A. The actual policy and coverage are the same, but there are
differences primarily in the areas of:
Rates,
A letter notification process to the borrowers,
The underwriting information necessary.
14. Q. What are the rate differences?
A. The rates under the MPPP are, on the average, several times
those used under the traditional flood insurance program.
15. Q. Why are the MPPP rates so high?
A. Due to the fact that the borrower did not respond to the notices
sent, key information necessary to underwrite the risk is not
available. Therefore, it is necessary to assume that those properties
have a very high risk and the rates charged reflect that risk.
16. Q. Does the borrower have any option in avoiding the MPPP
policy with its higher cost?
A. Yes! They can simply contact their local insurance agent, obtain
a conventionally underwritten flood insurance policy and present it to
their lender/servicer.
17. Q. If a borrower pays off the mortgage loan, can the MPPP then
be cancelled?
A. Yes, but any refund due the borrower will be paid on a pro-rata
basis.
18. Q. If the borrower or lender/servicer sells or assigns the
mortgage to another borrower or lender/servicer, can the MPPP policy be
assigned?
A. Yes! The Standard Flood Insurance Policy language allows for the
assignment of all NFIP policies. Any such assignment of an NFIP policy
must be done by way of an endorsement.
19. Q. Must a WYO company participating in the MPPP maintain copies
of all its MPPP documents?
A. The companies are responsible for the data on each Application
Form, in keeping with its normal practices. Although some of the data
beyond that required does not have to be reported, the companies are
still responsible for it. The WYO companies may use their normal
business practices in determining which form they will use to retain
data, forms or other required information.
20. Q. Who initiates the letter notification process required by
the MPPP?
A. The letter notification process is one of the requirements of
the MPPP. The FIA requires any WYO company that wishes to participate
in the MPPP to agree to comply with all those requirements. However,
lenders/servicers differ on how their force placed hazard insurance
notices are sent to their borrowers. Some lenders insist on sending
such notices directly. Others let the insurance company, with whom the
force placed policies are written, send out the notices. Since the MPPP
is a part of the NFIP, then any policies written through the MPPP must
have been written in compliance with all of its requirements,
regardless of the entity that actually sends the notices.
21. Q. Must the lender or WYO company maintain copies of the
notification letters?
A. The WYO company is responsible for assuring that the letters are
sent regardless of whether they or the lender actually sends them. The
WYO company must maintain some form of evidence that the letters are
being sent. It will be the WYO company's decision as to the form the
evidence takes, such as paper copies, micro fiche, computer images or a
record of the mortgagor addresses to whom the letters were sent with an
indication as to the date when those mortgagors were notified.
22. Q. What does a WYO company do if all of the information FIA
requires on
[[Page 44890]]
the declarations (DEC) page won't fit on that page?
A. The company may wish to include some of that information on the
DEC page and some on an ``endorsement.'' In such a case, it should
indicate an endorsement number on the DEC page.
23. Q. Does a policy DEC page have to be issued each time an MPPP
policy is renewed?
A. Yes, and it must accompany the final renewal notification
letter.
24. Q. When an MPPP is renewed, can the same policy number that was
assigned to the original MPPP policy be used?
A. Yes!
25. Q. Will the rating credits that will be available in a
community participating in the Community Rating System (CRS) apply to a
policy written under the MPPP?
A. No!
26. Q. The MPPP requirements call for the full map panel number and
date to be obtained. What does the WYO company do with that information
since the NFIP Application Form in use today doesn't contain enough
space to even capture all this information?
A. The WYO companies have never been required to use NFIP forms in
the WYO program, but have been free to develop their own forms. They
are, however, responsible for all required data, some of which must be
reported and some of which isn't, but must be kept in the company
files. The data requirements for the MPPP follow the same conditions.
The full map panel number for that panel used to determine flood zone
location and rate the policy is the one that must be captured and
maintained. The majority of the maps FIA has published for many years
have the ten digit number, suffix and date for each panel. Some of the
maps still in use have only the six digit community number and date.
The six digit community number cannot be used when the ten digit number
exists.
27. Q. Is contents coverage under the MPPP optional?
A. Yes! The lender must decide whether or not it will require it as
part of the MPPP policy.
28. Q. What is meant by the term ``coverage limitations'' that is
mentioned in the MPPP materials?
A. Primarily Actual Cash Value coverage instead of Replacement Cost
coverage, when appropriate. It could also apply, however, to the
situation where only an amount to cover the loan balance is purchased
which may be insufficient to cover the full insurable value of the
property. The WYO company will have to determine what limitations may
apply depending on the decisions of the lender/servicer as to how it
wants to use the MPPP and the amount of underwriting information
obtained.
29. Q. The notification process contains standards for the letters
being mailed and the MPPP policy being written such as 45, 30, and 15
days. Must these standards be strictly adhered to?
A. There are a number of standards similar to this in the NFIP and
some limited flexibility has been built into the actual implementation
process through the underwriting review process that FIA uses with the
companies. FIA is preparing modifications of that review process to
incorporate the MPPP criteria and will attempt to incorporate such
flexibility into these changes.
30. Q. May WYO companies, under the requirements of the MPPP, use
any portion of the MPPP fee they retain, for any purpose other than as
a commission to an insurance agent or agency for their writing the
policy, such as for flood zone determinations or the tracking of loans?
A. No!
The National Flood Insurance Program's Mortgage Portfolio Protection
Program Implementation Package; Addendum #5
Receipt for Materials and Agreement to Adhere to Criteria and
Requirements
The Federal Insurance Administration (FIA) has published a package
of materials for implementing their Mortgage Portfolio Protection
Program (MPPP). This package contains the Criteria and Requirements
that the insurance companies participating in FIA's MPPP through FIA's
Write Your Own (WYO) program and any lending institutions and/or
mortgage servicing or similar companies must adhere to when
participating in the MPPP.
The Implementation Package contains the following:
A cover letter from the FIA Administrator to the WYO
companies and other users of the MPPP.
A Guide for WYO Companies, Lending Institutions, Mortgage
Servicers and Other Potential Users
Addendum #1--Initial Portfolio Review Letter Notification
Process
Addendum #2--Portfolio Review Renewal Letter Notification
Process
Addendum #3--Portfolio Considerations Q & A
Addendum #4--MPPP Q & A
Addendum #5--Receipt for Materials and Agreement to Adhere to
Criteria and Requirements (this document)
This ``Receipt and Agreement,'' together with the Package
referenced above, must be presented by any WYO company that offers the
MPPP to a lender/servicer; and the lender/servicer that agrees to
participate in the MPPP to assist in bringing its portfolio into
compliance with flood insurance requirements must sign this ``Receipt
and Agreement'' as evidence of having actually received the Package and
agreeing to comply with the criteria and requirements contained
therein.
This acknowledges that the package of implementation materials for
the Federal Insurance Administration's (FIA) Mortgage Portfolio
Protection Program (MPPP) has been received.
----------------------------------------------------------------------
(Name of WYO company representative providing the Package)
----------------------------------------------------------------------
(Name of the WYO company being represented)
----------------------------------------------------------------------
(Date of receipt)
----------------------------------------------------------------------
(Name of lender/mortgage representative receiving the Package)
----------------------------------------------------------------------
(Name of lender/mortgage servicer being represented)
----------------------------------------------------------------------
(Date of receipt)
Note: WYO companies are required to keep a copy of this Receipt
in their files for each lender/mortgage servicer to which they
provide services under the MPPP. Lenders/mortgage servicers may wish
to do the same.
[FR Doc. 95-21400 Filed 8-28-95; 8:45 am]
BILLING CODE 6718-03-P
