FRH2_20190618_omb

Supporting Statement for the
Recordkeeping and Disclosure Requirements Associated with
Loans Secured by Real Estate Located in Flood Hazard Areas
Pursuant to Section 208.25 of Regulation H (FR H-2; OMB No. 7100-0280)
Loans in Areas Having Special Flood Hazards
(Docket No. R-1498) (RIN 7100 AE22)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended for three years, with
revision, the Recordkeeping and Disclosure Requirements Associated with Loans Secured by
Real Estate Located in Flood Hazard Areas Pursuant to Section 208.25 of Regulation H (FR H-2;
OMB 7100-0280). In general, the federal flood insurance statutes and Regulation H Membership of State Banking Institutions in the Federal Reserve System (12 CFR 208) provide
that a lender shall not make, increase, extend, or renew a loan secured by a building or mobile
home located in a special flood hazard area unless the secured property is covered by flood
insurance for the term of the loan. With respect to the recordkeeping and disclosure provisions,
the regulation requires state member banks to:
 retain a completed copy of the Standard Flood Hazard Determination Form developed by
the Federal Emergency Management Agency (standard FEMA form). The form is used
by lenders to document their determination of whether improved property securing a loan
is in a special flood hazard area,
 notify a borrower and servicer when loans secured by improved property are determined
to be in a special flood hazard area and retain a record of receipt of the notice,
 notify a borrower of a loan secured by residential improved property or a mobile home
that the state member bank is required to escrow all premiums and fees for required flood
insurance when the bank makes, increases, extends, or renews the loan. For loans
secured by residential improved property or a mobile home that were outstanding on
January 1, 2016, or July 1 of the first year in which the bank loses its exception from the
escrow requirement, the state member bank must mail or deliver information on the
option to escrow flood premiums and fees,
 notify a borrower of the borrower’s obligation to obtain flood insurance if the lender
determines at any time during the term of the loan that the improved property securing
the loan is not covered by adequate flood insurance. If the borrower fails to obtain the
flood insurance within 45 days of this notification, the state member bank or its servicer
must purchase insurance and may charge the borrower for the cost of the premiums. If
the state member bank receives confirmation of a borrower’s existing flood insurance
coverage after it has force placed insurance on behalf of the borrower, the bank or its
servicer shall notify the insurance provider to terminate any insurance purchased by the
bank or its servicer, and
 notify the Federal Emergency Management Agency (FEMA) of the identity of, and any
change in, the servicer of a loan secured by improved property in a special flood hazard
area.

The information collection requirements under the flood hazard provisions of
Regulation H are triggered by specific events in the lending process.
The Office of the Comptroller of the Currency (OCC), the Board, the Federal Deposit
Insurance Corporation (FDIC), the Farm Credit Administration (FCA), and the National Credit
Union Administration (NCUA) (collectively, the agencies) have amended their regulations
regarding loans in areas having special flood hazards to implement the private flood insurance
provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act).
Specifically, the final rule1 requires regulated lending institutions to accept policies that meet the
statutory definition of “private flood insurance” in the Biggert-Waters Act and permits regulated
lending institutions to exercise their discretion to accept flood insurance policies issued by
private insurers and plans providing flood coverage issued by mutual aid societies that do not
meet the statutory definition of “private flood insurance,” subject to certain restrictions. The
FR H-2 has been revised to add new recordkeeping requirements for the private flood insurance.
The final rule is effective on July 1, 2019.
The estimated total annual burden for the FR H-2 is 30,575 hours. The proposed
revisions would result in a net increase in burden of 3,976 hours.2
Background and Justification
Section 208.25 of Regulation H implements provisions of the National Flood Insurance
Act of 1968 (1968 Act) and the Flood Disaster Protection Act of 1973 (FDPA), as amended by
the National Flood Insurance Reform Act of 1994 (1994 Reform Act), the Biggert-Waters Flood
Insurance Reform Act of 2012 (Biggert-Waters Act), and the Homeowner Flood Insurance
Affordability Act of 2014 (HFIAA).
The 1968 Act made federally subsidized flood insurance available to owners of improved
real estate or mobile homes located in special flood hazard areas if their community participates
in the National Flood Insurance Program (NFIP). A special flood hazard area is an area within a
floodplain having a 1 percent or greater chance of flooding in any given year. These areas are
delineated on maps FEMA issues for individual communities. A community establishes its
eligibility to participate in the NFIP by adopting and enforcing floodplain management measures
to regulate new construction and by making substantial improvements within its special flood
hazard areas to eliminate or minimize future flood damage.
The FDPA amended the 1968 Act by requiring each federal agency responsible for the
supervision, approval, regulation, or insuring of banks, savings and loan associations, or similar
institutions to issue regulations to implement its provisions. Under these regulations, lenders
must require flood insurance on improved real estate or mobile homes serving as collateral for a
loan if the property is located in a special flood hazard area in a participating community. To
implement statutory amendments enacted in 1974, the regulations required lenders to notify
1

84 FR 4953, February 20, 2019.
While FEMA is responsible for accounting for the paperwork burden associated with lenders’ completion of the
standard FEMA form, the Federal Reserve and other depository institution supervisory agencies account for the
paperwork burden associated with the disclosure and recordkeeping requirements.
2

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borrowers when loans are secured by property located in a special flood hazard area and whether
federal disaster assistance is available in the event of a flood.
The 1994 Reform Act comprehensively revised the federal flood insurance statutes with
the intention of increasing compliance with the flood insurance requirements and increasing
participation in the NFIP. The revisions were designed to provide additional income to the
National Flood Insurance Fund and to decrease the financial burden of flooding on the federal
government, taxpayers, and flood victims. The 1994 Reform Act specifically required the
federal financial regulatory agencies to amend their regulations3 and require lenders to:4
 use the standard form created by FEMA to determine whether property securing a loan is
in a special flood hazard area,5
 notify a borrower of the borrower’s obligation to obtain flood insurance if the lender
determines at any time during the term of the loan that the improved property securing
the loan is not covered by adequate flood insurance. If the borrower fails to obtain the
flood insurance within 45 days of this notification, the state member bank or its servicer
must purchase insurance and may charge the borrower for the cost of the premiums, and
 notify FEMA of the identity of, and any change in, the servicer of a loan.
Under the Biggert-Waters Act, the federal financial regulatory agencies were required to
issue regulations requiring regulated lenders to accept private flood insurance satisfying the
definition of “private flood insurance” in the statute.6 The agencies also were required to issue
regulations providing for escrow of all premiums and fees for required flood insurance, but
excepted certain small lenders from the escrow requirement.
The Biggert-Waters Act also directly amended the force placement provisions of the
1994 Reform Act by requiring lenders to terminate any force-placed insurance and refund to the
borrower any force-placed insurance premiums and fees that were paid by the borrower while the
borrower had their own flood insurance coverage in place within 30 days of receipt by the lender
or servicer of confirmation of a borrower’s existing flood insurance coverage.
HFIAA provided that the Biggert-Waters Act escrow provisions would apply to any loan
that was originated, refinanced, increased, extended, or renewed on or after January 1, 2016.
3

The 1994 Reform Act was implemented through a joint final rule by the Board, OCC, FDIC, Office of Thrift
Supervision (OTS), NCUA, and FCA.
4
Pursuant to Section 208.25(d) of Regulation H, the flood insurance requirement does not apply to (1) any stateowned property covered under a policy of self-insurance satisfactory to the director of FEMA, who publishes and
periodically revises the list of states falling within this exemption, (2) property securing any loan with an original
principal balance of $5,000 or less and a repayment term of one year or less, and (3) any structure that is part of any
residential property but is detached from the primary residential structure of such property and does not serve as a
residence.
5
Section 528 of the 1994 Reform Act directed FEMA to develop a standard form for determining whether a
property is located in an area that FEMA has identified as one having special flood hazards and in which flood
insurance under 44 CFR 65 is available. Section 528 also requires the Board and other regulatory agencies to
require, by regulation, the use of the standard FEMA form. The Board adopted paragraph 208.25(f) of Regulation H
to require state member banks to use and retain the standard form developed by FEMA when making their flood
hazard area determination.
6
The federal financial regulatory agencies issued a proposal to implement the private flood insurance provisions of
the Biggert-Waters Act in November 2016, but as of November 2018, a final rule had not yet been issued.

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HFIAA also required that the federal financial regulatory agencies by regulation direct lenders to
provide borrowers with the option to escrow. Finally, Congress broadened the exemptions to the
escrow requirement to include several types of loans.
Description of Information Collection
The information collection requirements under the Regulation H flood insurance are as
follows:
Recordkeeping Requirement - Standard flood hazard determination form
(Section 208.25(f)(2))
Regulation H requires a state member bank to retain a copy of the completed FEMA
standard flood hazard determination form. The records, which may be retained in hard copy or
electronic form, must be kept for the entire period of time that the bank owns the loan.
Disclosure Requirement – Escrow requirement (Section 208.25(e))
When a state member bank makes, increases, extends, or renews a loan secured by
residential improved real estate or a mobile home located or to be located in a special flood
hazard area on or after January 1, 2016, Regulation H requires that the bank, or a servicer acting
on its behalf, to escrow all premiums and fees for any required flood insurance, unless the lender
or the loan is excepted from the escrow requirement. Except as may be required under
applicable state law, a state member bank would not be required to escrow if it has total assets of
less than $1 billion and, as of July 6, 2012, was not required by Federal or State law to escrow
taxes or insurance for the term of the loan and did not have a policy of uniformly and
consistently escrowing taxes and insurance (the small lender exception). For any loan for which
a state member bank is or may be required to escrow during the term of the loan, the state
member bank, or its servicer, shall mail or deliver a written notice informing the borrower that
the state member bank is required to escrow all premiums and fees for required flood insurance.
State member banks not excepted from the escrow requirement were also required to
offer and make available to a borrower the option to escrow flood insurance premiums and fees
for loans that were outstanding as of January 1, 2016. State member banks were required to mail
or deliver information to borrowers about the option to escrow by June 30, 2016. Regulation H
also requires state member banks that no longer qualify for the small lender exception to offer
and make available to a borrower the option to escrow flood insurance premiums and fees for
loans outstanding on July 1 of the first calendar year in which they lose the exception by
September 30 of that year. The option to escrow notice must be provided in writing, or if the
borrower agrees, electronically.
Disclosure and Recordkeeping Requirement - Notice of special flood hazards and
availability of federal disaster relief assistance (Section 208.25(i))
When a state member bank makes, increases, extends, or renews a loan secured by a
building or a mobile home located or to be located in a special flood hazard area, Regulation H

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requires that the bank mail or deliver a written notice to the borrower and to the servicer in all
cases, indicating whether flood insurance is available under the NFIP for the collateral securing
the loan. Specifically, the contents of the notice must include:
 a warning that the building or mobile home is or will be located in a special flood hazard
area,
 a description of the flood insurance purchase requirements,
 a statement, where applicable, that flood insurance coverage is available from private
insurance companies that issues standard flood insurance policies on behalf of the NFIP
or directly from the NFIP,
 a statement that flood insurance that provides the same level of coverage a standard flood
insurance policy under the NFIP also may be available from a private insurance company
that issues policies on behalf of the company,
 a statement that the borrower is encouraged to compare the flood insurance coverage,
deductibles, exclusions, conditions, and premiums associated with flood insurance
policies issued on behalf of the NFIP and policies issued on behalf of private insurance
companies and that the borrower should direct inquiries regarding the availability, cost,
and comparisons of flood insurance coverage to an insurance agent, and
 a statement whether federal disaster relief assistance may be available in the event of
damage to the building or mobile home caused by flooding in a federally declared
disaster.
Notice to the servicer may be made electronically or may take the form of a copy of the
notice to the borrower. The state member bank shall retain a record of the receipt of the notices
by the borrower and the servicer for the period of time the bank owns the loan.
Disclosure Requirement - Notices to FEMA of servicer and change in servicer
(Section 208.25(j)(1) and (2))
When a state member bank makes, increases, extends, renews, sells, or transfers a loan
secured by a building or mobile home located or to be located in a special flood hazard area,
Regulation H requires the bank to notify the Administrator of FEMA (or the Administrator’s
designee) in writing of the identity of the servicer of the loan. The regulation also requires a
state member bank to notify the Administrator of FEMA (or the Administrator’s designee) of any
change in the servicer of a loan. (The Administrator of FEMA has designated the insurance
provider to receive the member bank’s notice of servicer’s identity.) These notices may be
provided electronically if electronic transmission is satisfactory to the Administrator of FEMA’s
designee.
Disclosure Requirement – Forced placement of flood insurance (Section 208.25(g))
When a state member bank determines, during the term of a loan secured by property
located in a special flood hazard area, that the property is not adequately covered by flood
insurance, the bank is required to notify the borrower that the borrower should obtain flood
insurance at the borrower’s expense. If the borrower fails to obtain flood insurance within 45
days after this notification, then the bank must purchase insurance on the borrower’s behalf and

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may charge the borrower for flood insurance coverage commencing on the date on which the
borrower’s coverage lapsed or became insufficient.
Within 30 days of receipt by a state member bank, or a servicer acting on its behalf, of a
confirmation of a borrower’s existing flood insurance coverage, the bank or its servicer shall
notify the insurance provider to terminate any insurance purchased by the bank or its servicer
and refund to the borrower all premiums paid by the borrower for any insurance purchased by
the bank or servicer that overlaps with the borrower’s insurance coverage.
Adopted Revisions
The agencies have amended their regulations regarding loans in areas having special
flood hazards to implement the private flood insurance provisions of the Biggert-Waters Act.
Specifically, the final rule requires regulated lending institutions to accept policies that meet the
statutory definition of “private flood insurance” in the Biggert-Waters Act and permits regulated
lending institutions to exercise their discretion to accept flood insurance policies issued by
private insurers and plans providing flood coverage issued by mutual aid societies that do not
meet the statutory definition of “private flood insurance,” subject to certain restrictions. The
final rule is effective on July 1, 2019.
Under section 208.25(c)(3)(iii), institutions have the discretion to accept a flood
insurance policy issued by a private insurer that does not meet the definition of “private flood
insurance” if, among other things, the policy provides sufficient protection of the designated
loan, consistent with general safety and soundness principles, and the institution has documented
its conclusion regarding sufficiency of the protection of the loan in writing.
Under section 208.25(c)(3)(iv), institutions may accept a private policy issued by a
mutual aid society if, among other things, the coverage provides sufficient protection of the
designated loan, consistent with general safety and soundness principles, and the institution has
documented its conclusion regarding sufficiency of the protection of the loan in writing.
Time Schedule for Information Collection
The recordkeeping and disclosure requirements of Regulation H that are imposed on state
member banks are triggered by specific events in the lending process. The records are
maintained at the state member banks and are not provided to the Federal Reserve.
Legal Status
The FR H-2 is authorized pursuant to section 1364 of the 1968 Act (42 U.S.C. 4104a),
section 102 of the FDPA (42 U.S.C. 4012a), as amended by the 1994 Reform Act, and sections 9
and 11 of the Federal Reserve Act (12 U.S.C. 321 and 248(i)). The recordkeeping and disclosure
requirements of FR H-2 are mandatory.
Because the Federal Reserve will not collect this information, confidentiality issues
would normally not arise. Because the records will be retained at banking organizations, the

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Freedom of Information Act (FOIA) will only be implicated if the Board’s examiners retain a
copy of the record as part of an examination or supervision of a banking institution. In that case,
the records would be exempt from disclosure under exemption 8 to FOIA, which protects
examination materials from disclosure (5 U.S.C. 552(b)(8)). Exemption 4 to FOIA, which
protects confidential financial information, may also be applicable (5 U.S.C. § 552(b)(4)).
Consultation Outside the Agency
There has been no consultation outside the agency.
Public Comments
On November 7, 2016, the agencies published a joint notice of proposed rulemaking in
the Federal Register (81 FR 78063) requesting public comment for 60 days on the extension,
with revision, of the FR H-2. The comment period for this notice expired on January 6, 2017.
The agencies received no comments on the Paperwork Reduction Act (PRA). On February 20,
2019, the agencies published a final rule in the Federal Register (84 FR 4953). The final rule is
effective on July 1, 2019.
Estimate of Respondent Burden
The amounts in the following table reflect the burden estimated by the Federal Reserve
System for the state member banks under its supervision. The estimated total annual burden for
the FR H-2 is 30,575 hours. The proposed revisions would result in a net increase in burden of
3,976 hours. These recordkeeping and disclosure requirements represent less than 1 percent of
total Federal Reserve System paperwork burden.

FR H-2
Current
Recordkeeping
Retention of standard FEMA form
(Section 208.25(f)(2))
Disclosure
Notice of special flood hazards and
availability of federal disaster relief
assistance with escrow notice, as
applicable
(Sections 208.25(i) and (e), as
applicable)
Notice to FEMA of servicer
(Section 208.25(j)(1))

Estimated
number of
respondents7

Annual
frequency

Estimated
average time
per response

Estimated
annual burden
hours

794

404

2.5 minutes

13,366

794

81

5 minutes

5,360

794

81

5 minutes

5,360

7

Of these respondents, 526 are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $550 million in total assets), www.sba.gov/document/support--table-size-standards.

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Notice to FEMA of change of servicer
(Section 208.25(j)(2))
Notice to borrowers of lapsed
mandated flood insurance
(Section 208.25(g))
Purchase of flood insurance on the
borrower’s behalf
(Section 208.25(g))
Notice to borrowers of lapsed
mandated flood insurance due to
remapping
(Section 208.25(g))
Purchase of flood insurance on the
borrower’s behalf due to remapping
(Section 208.25(g))
One-time notice for any designated
loan outstanding on July 1 of the year
SMB no longer qualifies for small
lender exception
(Section 208.25(e)(4))
Total
Proposed
Recordkeeping
Private flood insurance
(Sections 208.25(c)(3)(iii) and (iv))8
Retention of standard FEMA form
(Section 208.25(f)(2))
Disclosure
Notice of special flood hazards and
availability of federal disaster relief
assistance with escrow notice, as
applicable
(Sections 208.25(i) and (e), as
applicable)
Notice to FEMA of servicer
(Section 208.25(j)(1))
Notice to FEMA of change of servicer
(Section 208.25(j)(2))
Notice to borrowers of lapsed
mandated flood insurance
(Section 208.25(g))
Purchase of flood insurance on the
borrower’s behalf
8

794

41

5 minutes

2,713

794

16

5 minutes

1,059

794

4

15 minutes

794

794

8

5 minutes

529

794

4

15 minutes

794

15

1

40 hours

600
30,575

15,904

1

15 minutes

3,976

794

404

2.5 minutes

13,366

794

81

5 minutes

5,360

794

81

5 minutes

5,360

794

41

5 minutes

2,713

794

16

5 minutes

1,059

794

4

15 minutes

794

Of 791 respondents, the Board is estimating 15,904 responses.

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(Section 208.25(g))
Notice to borrowers of lapsed
mandated flood insurance due to
remapping
(Section 208.25(g))
Purchase of flood insurance on the
borrower’s behalf due to remapping
(Section 208.25(g))
One-time notice for any designated
loan outstanding on July 1 of the year
SMB no longer qualifies for small
lender exception
(Section 208.25(e)(4))9
Total

794

8

5 minutes

529

794

4

15 minutes

794

15

1

40 hours

600
34,551
3,976

Change
The estimated total annual cost to the public for this information collection is $1,761,120 and
would increase to 1,990,138 with the proposed revisions.10
Sensitive Questions

This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
Since the Federal Reserve does not collect any information, the cost to the Federal
Reserve System is negligible.

9

There are 15 respondents with assets between $90 million and $1 billion that may potentially no longer qualify for
the small lender exception from the escrow requirement within the next three years and would then be required to
provide the one-time option to escrow notice required by section 208.25(e)(4).
10
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $19, 45% Financial Managers at
$71, 15% Lawyers at $69, and 10% Chief Executives at $96). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2018, published March 29, 2019, www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

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