1. Evidence of NFIP Flood Insurance and Documenting Grandfathering
Agenda
Introductions
Overview
Lender Perspective
GSE Perspective
Agency Perspective
WYO Perspective
FEMA Perspective
Future Possibilities
Summary
Questions
NFC 2010 Workshop | Apr. 12, | San Diego, CA

2. Our Panelists Lauri Lydecker – People’s United Bank
Introductions
Our Panelists
Lauri Lydecker – People’s United Bank
Bob Cope – Freddie Mac
Debbie Freeman – Gambrell & Sturges LLC
Patricia Latshaw – American Bankers Insurance Company of FL
Barry Thomas – State Farm Insurance
Tuula Young – FEMA/NFIP
Linda Mackey – IIABA 2

3. Overview
Evidence of NFIP Flood Insurance and Documenting NFIP Grandfathering Eligibility
The necessary evidence of NFIP flood insurance raises many questions.
We’ll be discussing the current options, plus some possibilities for the future.

4. What defines acceptable evidence for lenders?
Lender Perspective
What defines acceptable evidence for lenders?
Mandatory Purchase of Flood Insurance Guidelines (pg 26),
Flood Insurance Application and premium payment, or
Declarations Page
Specifically excludes Binders and Certificates of Insurance
Very few lenders or regulators are familiar with the Flood Insurance Manual or its 2008 amendment regarding Certificates.
Interagency Q&As Regarding Flood Insurance
Grandfather Rule eligibility must be substantiated (Question #71)

5. Lender Challenges Regulator scrutiny and fines
Lender Perspective
Lender Challenges
Regulator scrutiny and fines
Over $4,900,000 in regulator penalties since Katrina*
Loan officer knowledge of the flood law and NFIP
Program complexities
Requests for RCBAP to reflect lender, in error
Balance between a customer service focus and regulatory compliance
* Per BankersOnline.com “Flood Penalties Watch” 5

6. Lender Challenges Agent knowledge of the flood law and NFIP
Lender Perspective
Lender Challenges
Agent knowledge of the flood law and NFIP
434,800 insurance agents*
Unfamiliarity with FEMA’s April 2008 letter W-08021
Claims of Grandfather Rule eligibility without support
Certificates of Insurance with unreliable information
* Per the Bureau of Labor Statistics – 2008 6

7. Freddie Mac Best Practices
Government Sponsored Entity Perspective
Freddie Mac Best Practices
Current evidence of flood insurance via a copy of the insurance declaration page.  The declaration page should include the following key data elements:
Address of the property insured
Name of borrower insured (if not a condominium policy)
Effective dates of the policy coverage period
Amount of coverage on the structure
Deductible amount on the structure
Replacement cost would be nice, but is
typically not a data element provided 7

8. Freddie Mac Best Practices - Condos
Government Sponsored Entity Perspective
Freddie Mac Best Practices - Condos
Number of units in the complex (or each building if buildings are insured separately)
Amount of coverage per building if coverage is so structured
Replacement cost value (by building or complex) based on how coverage is structured
The original flood zone determination form used at origination to determine the plotting of the property and if insurance is required.  If a subsequent FZD was performed, that determination will be needed as well.
Evidence of the current unpaid principal balance (UPB) of the loan.  This is normally provided as a "screen
shot" from the Lender's servicing system. 8

9. Freddie Mac Remediation of Noncompliance Issues
Government Sponsored Entity Perspective
Freddie Mac Remediation of Noncompliance Issues
If the noncompliance issue results from the testing of individual loans and results in inadequate coverage, lapsed, or non-existing coverage, the Servicer will be required to obtain and provide evidence that insurance has been obtained (either by the borrower or the Servicer) to bring the coverage in line with our requirements. 9

10. Agency Lender - Coordination
Insurance Agency Perspective
Agency Lender - Coordination
Basic Premise
Majority of agents want to provide correct info 1st time.
Most lenders want to resolve documentation 1st time.
Property Insurance Appraisal Information
 Often Available. Ask agency for copies.
Lenders need to centralize information gathering
At least 3 have different processing centers for Flood & Hazard
Currently require borrowers/agents to provide 2 COIs
Need to share information not ask for duplicate COIs 10

11. Agency Lender - Coordination
Insurance Agency Perspective
Agency Lender - Coordination
Lender/Agency Liaison needed at processing centers
Resolve issues when COIs have been sent 3+ times
Technology system updates
Need ability to identify & update all condo unit owners at one time.
Large commercial properties often have multiple carriers; need ability to document multiple property/flood carriers. 11

12. The WYO Company – How can they help?
WYO Perspective
The WYO Company – How can they help?
Acceptable Evidence of Flood Insurance
Declarations Page
Grandfathering
New Business: Provided on Declarations Page – Yes/No
Existing Business: Update declarations page to show Grandfathering if supporting documentation is in file for “built in compliance” or “continuous coverage” 12

13. FEMA Concerns Incorrect forms used
FEMA Perspective
FEMA Concerns
Incorrect forms used
Unit owner’s lender insisting to be added as a mortgagee on the RCBAP

14. FEMA Perspective
FEMA Concerns
Incorrect information on Certificates of Property Insurance inadvertently misrepresenting the NFIP coverage.
Misleading because a Certificate of Property Insurance is only information about the coverage at that point in time and is not binding.
Information on a Certificate of Property Insurance must mirror the information on the declarations page, but often does not.

15. Given these problems, FEMA is considering
FEMA Perspective
Given these problems, FEMA is considering
Removal of the optional use of Certificates at NFIP policy renewal and accept only the use of copies of the Declarations Page or copies of the SFIP application and proof of payment; or
Keeping Certificates available “at renewal” with conditions to assist all the stakeholders. 15

16. FEMA Perspective
Possible Conditions
Certificates of Property Insurance, mirroring the information on the applicable NFIP Declarations Page
Must include:
Insured’s name and address;
Location;
Mortgagee;
Policy Number;
Policy Form (PRP, GP, DP, RCBAP, GFIP);
Policy Term;
Coverage A &/or B Limits;
Deductibles;
Flood Hazard Zone;
NFIP Grandfathering – Yes/No (documentation required);
Annual Premium
If an RCBAP:
the number of units; and
Building RCV 16

17. Future Possibilities
ACORD Workgroup
Drafting an Evidence of Flood Insurance form – ACORD 29
Why?
When? 17

18. Future Possibilities
Optional Use
Certificates of Property Insurance “at NFIP policy renewal” as a matter of information (a snapshot) of what the coverage is on the date the Certificate is completed. 
The insured or mortgagee may require a copy of the policy Declaration Page at policy renewal since Certificates of Property Insurance do not bind coverage under the NFIP. 
The Certificate of Liability is not acceptable for the NFIP policies. 18

19. Summary
Evidence of NFIP Flood Insurance and Documenting NFIP Grandfathering Eligibility
Properly documenting evidence of flood insurance is a key component of a lender’s compliance obligations.
Our discussion has reviewed the current options available to lenders, plus some possibilities for the future.

20. Questions
Open Forum 20