44 CFR Part 62.23(l)

§ 62.21

44 CFR Ch. 1 (10-1-04 E'dition)

its servicing agent, but not with respect to policies of flood insurance
issued pursuant t o Subpart C of this
part, shall not be less than $10 and is
computed as follows:
(1) In the case of a new or renewal
policy, the following commissions shall
apply based on the total premiums paid
for the policy term:
Commissions (percent)

Premium amount
firs: $2.000 of Premium ....................................
Excess of $2,000 ...............................................

15
5

1

(2) In the case of mid-term increases
in amounts of insurance added by endorsements, the following commissions
shall apply based on the total p r e miums paid for the increased amounts
of insurance:
Premium amount

Cornmissions (percent)

first $2,000 of Premium ....................................
Excess of 52.000

...............................................

(b) Any refunds of premiums aurhorized under this subchapter shall not affect a previously earned commission:
and no agent shall be required to return t h a t earned commission, unless
the refund is made t o establish a common policy term anniversary date with
other insurance providing coverage
against loss by other perils in which
case a return of commission will be required by the agent on a pro r a t a basis.
In such cases, the policy shall be immediately rewritten for a new term with
the same amount(s) of coverage and
with premium calculated at the then
current rate and, as ro return premiurn. rerurned. Dro rata. t o the insured based on t'hi former policy's premium r a w .
146 FR 13515. Feb. 23. 1981, as amended at 53
FR 15221. Apr. 28. 1988; 57 FR 19541, May 7,

from policies of insurance issued under
t h e program. Investigation of such
claims may be made through the facilities of its subcontractors or insurance
adjustment organizations, t o the extent required and appropriate for the
expeditious processing of such claims.
(b) All adjustment of losses and settlements of claims shall be made in accordance with the terms and conditions
of the policy and parrs 61 and 62 of this
subchapter.

6 62.22 Judicial review.
(a) Upon the disallowance by the Federal Insurance Administration, a participating Write-Your-Own Company,
or the servicing agent of any claim on
grounds other than failure t o file a
proof of loss, or upon che refusal of the
claimant to accept the amount allowed
upon any claim after appraisal pursuant t o policy provisions, the claimant
withinone year after the date of mailing by the Federal Insurance Administration, the participating Write-YourOwn Companv, or the servicing agent
of the notice >f disallowance orUpa;tial
disallowance of the claim may, pursuant t o 42 U.S.C. 4072, institute an action on such claim against the insurer
only in the U.S. District Court for the
district in which the insured property
or rhe major portion thereof shall have
been situated, without regard to the
amount in controversy.
(b) Service of process for all judicial
proceedings where a claimant is suing
Director pursuant to 42 U.S.C. 4071
shall be made upon the appropriate
United States Attorney. the Attorney
General of the United States. and the
Federal Insurance ~ d m i n i s t r a i o rof the
Federal Emergency Management Agen-~

~

-

-

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Ly'

[33 FR 2573. Jan. 17, 1978. Redesignated at 44
F R 31177, .May 31, 1979, as amended at 47 FR
43061 Sept. 30. 1982: 49 FR 33879. Aug. 27. 1984:
69 FR 45610, July 30, 20041

19921

Subpart B-Claims Adjustment
and Judicial Review
9 62.21 Claims adjustment.
(a) In accordance with t h e Agreement, the servicing agent shall arrange
for the prompt adjustment and setrlement and payment of all claims arising

Subpart C-Write-Your-Own
(WYO) Companies
5 62.23 M'YO Companies authorized.
(a) Pursuanr to section 1345 of the
Act, the Administrator may enrer into
arrangements with individual private
sector property insurance companies or
other insurers, such as public entity

Federal Emergency Management Agency, DHS
risk sharing organizations. Under rhese
arrangements, such companies or other
insurers may offer flood insurance coverage under the program t o eligible applicants. Such WYO companies may
offer flood coverage t o policyholders
insured by them under their own prope r t y business lines of insurance, pursua n t t o , their customary business practices, including their usual arrangements with agents and producers. WYO
companies may sell flood insurance
coverage in any S t a t e in which the
WYO company is authorized t o engage
in t h e business of property insurance.
Other WYO insurers may offer flood insurance coverage t o their pool members insured by t h e m under their own
property business lines of coverage,
pursuant t o their customary business
practices. These other WYO insurers
may provide flood coverage in any
S t a t e t h a t has authorized the other insurer t o provide property coverage to
i t s members. Arrangements enrered
into by WYO Companies or other insurers under this subpart must be in t h e
form and substance of t h e standard arrangement, titled "Financial Assistancelsubsidy Arrangement." a copy of
which is included in appendix A of this
part and made a part of these regulations.
(b) Any duly authorized insurer so
engaged in t h e Program shall be a WYO
Company. (The term "WYO Company"
shall include the following kinds of insurers: Public entity risk-sharing organizations, an association of local governments, a S t a t e association of political subdivisions, a State-sponsored
municipal league, and other intergovernmental risk-sharing pool for coxfering public entity structures.)
(c) A WYO Company is authorized t o
arrange for the issuance of flood insurance in any amount within the m a imum limits of coverage specified in
561.6 of this subchapter, as Insurer, t o
any person qualifying for such colrerage under parts 61 and 64 of this subchapter who submits an application t o
:he VVY
' O Company; coverage shall be
issued under the Standard Flood Insurance Policy.
(d) A WYO Company issuing flood insurance coverage shall arrange for the
adjusrment, settlement, payment and
defense of all claims arising from poli-

g 62.23

cies of flood ins-urance i t issues under
the Program, based upon t h e terms and
conditions of the Standard Flood Insurance Policy.
(e) In carrying out i t s functions
under this subpart, a WYO Company
shall use i t s own customary standards.
staff and independent contractor resources, as i t would in t h e ordinary and
necessary conduct of i t s own business
affairs, subject t o the Act and regulations prescribed by t h e Administrator
under the Act.
(0 To facilitate the marketing of
flood insurance coverage under the
Program t o policyholders of WYO Companies, the Administrator will enter
into arrangements with such companies whereby the Federal Government
will be a guarantor in which t h e primary relationship between the WYO
Company and the Federal Government
will be one of a fiduciary nature, i.e..
t o assure t h a t any taxpayer funds are
accounted for and appropriately expended. In furtherance of this end, the
Administrator has established "A Plan
t o Maintain Financial Control for Business Written Under t h e Write Your
Own Program", a copy of which is included in appendix B of this part and
made a part of these regulations.
(g) A WYO Company shall a c t as a
fiscal agent of the Federal Government, but not a s i t s general agent.
WYO Companies are solely responsible
for their obligations t o their insured
under any flccd i"surance policies
issued under agreements entered into
with the Administrator, such t h a t t h e
Federal Government is not a proper
party defendant in any lawsuit arising
out of such policies.
(h) To facilitate the underwriting of
flood insurance coverage by WYO Companies, the following procedures will be
used by WYO Companies:
(1) To expedite business growth, t h e
WYO Company will encourage i t s
present property insurance policyholders t o purchase flood insurance
rhrough the NFIP 'AVO Program.
(2) To coilforin irs uaderwriting pracrices t o the underwriting rules and
rates in effect as t o the NFIP, t h e WYO
Company will establish procedures KO
carry out the NFIP rating system and
provide i t s policyholders wirh t h e same
coverage as is afforded under the NFIP.

44 CFR Ch.1 (10-1-04 Edition)
(3) The WYO Company may follow its
customary billing practices to meet
the Federal rules on the presentment
of premium and net premium deposits
to a Letter of Credit bank account authorized by the Administrator and reduction of coverage when an underpayment is discovered.
(4) The WYO Company is expected to
meet the recording and reporting requirements of the WYO Transaction
Record Reporting and Processing Plan.
Transactions reported by the WYO
Company under the WYO Transaction
Record Reporting and Processing Plan
will be analyzed by the NFIP Bureau 8Statistical Agent. A monthly report
will be submitted to the WYO Company
and the FIA. The analvsis will cover
~
~
~ sub~
the timeliness of ~
missions, t h e disposition of transactions that have not passed
edits and the reconciliation of the totals generated from transaction reports
with those submitted on the WYO corn.
pany's reconciliation reports.
(5) If a WYO Company rejects an application from an agent or a producer,
the agent or producer shall be notified
so t h a t t h e business can be placed
through the NFIP Servicing Agent, or
another WYO Company.
(6) Flood insurance coverage will be
issued
WYO
On a separate policy form and will net be added,
by
the
other property insurance forms.
(7) Premium Payment plans can be
offered by the WYO Company So 10%
as the net premium depository requiremerits specified under the h'FIPMvO
Program accounting procedures are
met. A cancellation by the WYO CornPanY for non-PaYment of premium will
not produce a Pro rata return of the net
premium deposit t o the WYO Company.
(8) NFIP business will not be assumed
by the WYO Companies a t any time
other than a t renewal time, a t which
time the insurance producer may submit the business t o the WYO Company
as nev: business. Eewever, i t is permissible t o cancel and rewrite flood policies to obtain concurrent expiration
dates with other policies covering t h e
property.
(i) To facilitate the adjusrment of
flood insurance claims by WYO Compa-

nies, the following procedures will be
used by WYO Companies.
(1) Under the terms of the Arrangement set forth a t appendix A of this
part, WYO Companies will adjust
claims in accordance with general
Company standards, guided by NFIP
Claims manuals. The Arrangement also
provides t h a t claim adjustments shall
be binding upon the FIA. For example,
the entire responsibility for providing
a proper adjustment for both combined
wind and water claims and flood-alone
claims is the responsibility of the IVY0
Company. The responsibility for providing a proper adjustment for combined wind'and water claims is t o be
conducted by listing in concert with
the Single Adjuster provisions listed in
A. a
o
m
~
n
~
The WYO
may use its
staff adjusters, independent adjusters,
or both. I t is importani- t h a t the Company'~
verifies the
correctness of the coverage interpretations and reasonableness of the payments recommended by the adjusters.
(3) An established loss adjustment
Fee
is part of the krangemerit and cannot be changed during an
Arrangement year' This is the expense
allowance t o cover costs of independent
or WYO Company adjusters.
(4) ~h~ normal catastrophe claims
procedure currently operated by a MJYO
in the
Company should be
event of a claim catastrophe situation.
Flood claims wi!l he !~zrd!ed along
with other catastrophe claims.
( 5 ) I t will be the WYO Company's responsibility t o t r y to detect fraud (as it
does in the case of property insurance)
and coordinate its findings with FIA.
(6) Pursuant t o the Arrangement, the
responsibility for defending claims will
be upon the Write Your Own Company
and defense costs will be part of the
unallocated or allocated claim expense
allowance, depending on whether a
staff counsel or an outside attorney
handles the defense of the matter.
Claims in litigation will be reported by
V,,"fn
bvLL,pa.~ie~
r----t a FIA apon joinder of
issue and FIA may inquire and be advised of the disposition of such litigation.
(7) The claim reserving procedures of
i-he individual WYO Company can be
used.

320

Federal Emergency Management Agency, DHS
(8) Regarding t h e handling of subrogation, if a WYO Company prefers t o
forego pursuit of subrogation recovery,
i t m a y do so by referring t h e m a t t e r .
with a complete Copy of t h e claim file,
t o FIA. Subrogation initiatives may be
truncated a t any t i m e before s u i t is
commenced (after commencing a n action,
arrangement
must
bemade). FIA. after consultation with
FEMA's Office of t h e General Counsel
(OGC), will forward t h e cause of action
to OGC Or to the NFIP Bureau and
Agent for prosecution.
funds received will be deposited, less
expenses, in the National Flood Insurance Fund.
(9) Special allocated loss adjustment
expenses will include such items as:
nonstaff attorney fees, engineering fees
and special invesLigation fees over and
above normal adjustment practices.
(10) The customary content of claim
files will include coverage verification,
normal adjuster investigations, including statements where necessary, police
reports, building reports and investigations, damage verification and other
documentation relevant t o t h e adjustm e n t of claims under t h e NFIP's and
t h e WYO Company's traditional claim
adjustment -pracrices and procedures.
The WYO Company's claim examiners
and managers will supervise t h e adjustmerit of flood insurance claims by staff
and independent ciaims adjusters.
(11) The WYO Company will extend
reasonable cooperation t o FEMA's Office of t h e General Counsel on m a t t e r s
pertaining t o litigation and subrogation, under paragraph (i)(8) of this Settion.
6) To facilitate establishment of financial controls under t h e WYO Prog r a m , t h e WYO Company will:
(1) Have a biennial agdit of t h e flood
insurance financial s t a t e m e n t s conducted by a n independent Certified
Public Accountant (CPA) firm a t t h e
Company's expense t o ensure t h a t t h e
financial data reported t o us accur a t e l y represents t h e flood insurance
aczivities c i che C o m p a ~ y .The CPP.
firm must conduct i t s audits i n accordance with t h e generally accepted auditing standards (GAAS) and Government
Auditing Standards issued by t h e
Comptroller General of t h e United
S t a t e s (commonly known a s "yellow

g 62.23

book" requirements). The Company
must file with us (the Federal Insurance Administration) a report of t h e
CPA firm's detailed biennial audit,
and, after our review of t h e audit report, we will convey our determination
t o t h e Standards Committee,
(2) ~ z r t i c i p a t ein
;\rye Ccmpzny/
FIA Operation review. We will conduct
a
of the, W Y ~
flood
insurance claims, underwriting, customer service, marketing, and litiga.
tion activities a t least once every three
(3) years, As part of these reviews, we
will reconcile specific files with a listing of transactions submitted by t h e
under
the
Record
and
(TRPP) 'Ian
(Part 5). We
a report of t h e Operation Review with the
Standards
(3) Meet t h e recording and reporting
requirements of t h e W O Transaction
Record Reporting and Processing Plan
and t h e WYO Accounting Procedures
Manual. Transactions reported t o t h e
National Flood Insurance Program's
(NFIP's) Bureau and Statistical Agent
by t h e WYO Company under the WYO
Transaction Record Reporting and
Processing P l a n and t h e WYO Accounting Procedures Manual will be analyzed
by t h e Bureau and Statistical Agent
and a monthly report will be submitted
t o t h e WYO Company and t h e FIA. The
analysis will cover t h e timeliness of
:he
C=n;pany submissi3ns, t h e
disposition of transactions which do
not pass systems edits and t h e rec.
onciliation of t h e t o t a l s generated
from transaction reports with those
submitted on WYO Company reconciliation reports.
(4) Cooperate with FEMA's Office of
Financial Management o n Letter of
Credit matters.
(5) Cooperate with FIA in t h e implementation of a claims reinspection program.
(6) Cooperate with FIA in t h e
verification of r i s k r a t i n g information.
(7) Cooperate with FEMA's Office of
t h e Inspector General on m a t t e r s perraining t o fraud.
(k) To facilitate the operation of t h e
W O Program and In order t h a t a WYO
Company c a n use i t s own customary

5 62.23
standards, staff and independent contractor resources, as i t would in the ordinary and necessary conduct o f , its
own business affairs, subject t o the
Act, t h e Administrator, for good cause
shown, may grant exceptions t o and
waivers of the regulations contained in
this title relative t o the administration of the NFIP.
(1)(1) WYO Companies may, on a voluntary basis, elect to participate in the
Mortgage Portfolio Protection Program (MPPP), under which they can
offer, as a last resort, flood insurance
a t special high rates, sufficient to recover the full cost of this program in
recognition of the uncertainty as t o
the degree of risk a given building presents due t o t h e limited underwriting
data required, t o properties in a lending institution's mortgage portfolio t o
achieve compliance with the flood insurance purchase requirements of the
Flood Disaster Protection Act of 1973.
Flood insurance policies under the
MPPP may only be issued for those
,
properties that:
(i) Are determined to be located within special flood hazard areas of comnlunities t h a t are participating in the
NFIP, and
(ii) Are not covered by a flood insurarice policy even after a required series
of notices have been given to the property owner (mortgagor) by the lending
institution of t h e requirement for obtaining and maintaining such coverage,
but the mortgagor has fai!ed to respond.
(2) W Y O Companies participating in
the MPPP must provide a detailed implementation package t o any lending
institution t h a t , on a voluntary basis,
chooses t o participate in the MPPP to
ensure the lending institution has full
knou.ledge of the criteria in that program and must obtain a signed receipt
for t h a t package from t h e lending institution. Participating W Y O Companies must also maintain evidence of
compliance with paragraph (1) (3) of this
section for review during the audits
azd reviews reqzired hy the 7:,,l.'V0 Financial Control Plan contained in appendix B of this part.
(3) The mortgagor must be protected
against t h e lending institution's arbitrary placing of flood insurance for
which the mortgagor will be billed by

44 CFR Ch. 1 (10-1-04 Edition)
being sent three notification letters as
described i n paragraphs (1)(4) through
(6) of this section.
(4) The initial notification letter
must:
(i) State the requirements of' the
Flood Disaster Protection Act of 1973.
as amended;
(ii) Announce the determination t h a t
the mortgagor's property is in an identified special flood hazard area as delineated on the appropriate FEMA
map, necessitating flood insurance coverage for t h e duration of the loan;
(iii) Describe the procedure t o follow
should the mortgagor wish to challenge
the determination;
(iv) Request evidence of a valid flood
insurance policy or, if there is none,
encourage the mortgagor to obtain a
Standard Flood Insurance Policy
(SFIP) promptly from a local insurance
agent (or WYO Company):
(v) Advise t h a t the premium for a
MPPP policy is significantly higher
than a conventional SFIP policy and
advise as t o the option for obtaining
less costly flood insurance: and
(vi) Advise t h a t a MPPP policy wiil
be purchased by the lender if evidence
of flood insurance coverage is not received by a date certain.
( 5 ) The second notification letter
must remind the mortgagor of the previous notice and provide essentiaiiy
the same information.
(6) The final notification letter must:
(i) Enclose a copy of the flood insurance policy purchased under the MPPP
on the mortgagor's (insured's) behalf.
together with the Declarations Page,
(ii) Advise t h a t the policy was purchased because of the failure to respond to t h e previous notices, and
(iii) Remind the insured t h a t similar
coverage may be available a t significantly lower cost and advise t h a t the
policy can be cancelled a t any time
during the policy year and a pro rata
refund provided for the unearned portion of the premium in the event the
insured purchases another policy t h a t
is acceptable to satisfy the requirements of t h e 1973 Act.
(Approved by the Office of Management an3
Budget under OMB control number 3067-0229)
[61 FR 51219. Oct. 1, 1996, as amended a t 64 F R
56176, Oct. 18. 1999: 67 FR 13549, Mar. 22. 2002;
69 FR 45610. July 30, 20041

1J.S. Departnlent of Homeland Security
Washington, DC 20528

GAR%%

'"-Homeland
$@$
security
_a*_el

March 26,2007

MEMORANDUM FOR:

Nathan Lesser
OMB DHS Desk Officer

THROUGH:

John Sharrets-Sullivant
Chief, IT-IR-RM

FROM:

Scott Charbo
Chief Information Officer, Department of Homeland Security

SUBJECT:

Request for Emergency Clearance the National Flood Insurance
Program - Mortgage Portfolio Protection Program (MPPP)

The Federal Emergency Management Agency (FEMA) is seeking emergency processing of this
information collection request of 1660-0086, National Flood Insurance Program-Mortgage
Portfolio Protection Program.
The MPPP is a mechanism used by lending institutions mortgage servicing companies, and others
servicing mortgage loan portfolios to bring the mortgage loan portfolios into compliance with the
flood insurance purchase requirements of the Flood Disaster Protection Act of 1973 as amended.
The program is essential to ensuring that implementation of various regulatory requirements of the
MPPP result in mortgagors, following their failure to respond to notification of the need for flood
insurance, are properly insured against the risk of flood. While, it is intended that National Flood
Insurance Program (NFIP) policies be written under the NIPPP only as a last resort, and only on
mortgages whose mortgagors have failed to respond to the various notifications required by the
Program, it is crucial that these policies be placed. The requirements of the MPPP are contained in
44 CFR 62.23(1).
The FEMA Mitigation Division, Risk Insurance Branch is presently working on multiple facets of
the Flood Insurance Reform Act of 2004. These include the development of a new insurance claims
appeals process that ensures that NFIP policyholders are apprised of their rights and responsibilities
pertaining to flood insurance claim and various issues related to the training and education of
insurance agents to ensure the correct and speedy adjudication of all flood related insurance claims.
The individual charged with this collection and with related reports is involved in those and other
flood insurance related activities.

While FEMA is seeking emergency clearance of this request, we will immediately proceed to follow
the normal clearance process, which includes publishing the required Federal Register notices
soliciting public comment. Your expedited action on this request is appreciated.