FRH2_20221026_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)
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 Part 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 generally requires state member banks to retain certain flood hazard
documentation and to notify borrowers and servicers regarding properties in flood hazard areas
and requirements related to flood insurance. State member banks also must 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 Board revised the FR H-2 information collection to account for a recordkeeping
requirement in section 208.25 of Regulation H that had not been previously cleared by the Board
under the Paperwork Reduction Act (PRA).
The current estimated total annual burden for the FR H-2 is 30,755 hours, and would
increase to 33,212 hours. The revisions would result in an increase of 2,457 hours.
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
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 statu tes 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 regulations 1 to require lenders to:2
• use the standard form created by FEMA to determine whether property securing a loan is
in a special flood hazard area,3
• 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 premiu ms
(referred to as “force-placed insurance”), 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. The agencies also were required to issue
1

The 1994 Reform Act was implemented through a joint final rule by the Board, Office of the Comptroller of the
Currency, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union
Administration, and Farm Credit Administration.
2
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.
3
Section 528 of the 1994 Reform Act directed FEMA to develop a standard f orm 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. 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.

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regulations providing for escrow of all premiums and fees for required flood insurance, but
certain small lenders were excepted 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.
HFIAA also required that the federal financial regulatory agencies by regulation direct lenders to
provide borrowers with the option to escrow. Additionally, HFIAA broadened the exemptions to
the escrow requirement to include several types of loans.
In 2019, the agencies amended their regulations 4 regarding loans in areas having special
flood hazards to implement the private flood insurance provisions of the Biggert-Waters Act.
Specifically, the agencies required regulated lending institutions to accept policies that meet the
statutory definition of “private flood insurance” in the Biggert-Waters Act and permit 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 tha t do not
meet the statutory definition of “private flood insurance,” subject to certain restrictions.
Description of Information Collection
The information collection requirements under the Regulation H flood insurance are as
follows:
Recordkeeping Requirement – Sections 208.25(c)(3)(iii) and 208.25(c)(3)(iv)
Private flood insurance
Under Regulation H, institutions have the discretion to accept a flood insurance policy
issued by a private insurer or mutual aid society 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.
Recordkeeping Requirement – Section 208.25(f)(2)
Retention of standard FEMA form
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. The form
is used by lenders to document their determination of whether improved property securin g a loan
is in a special flood hazard area.
4

84 FR 4953, February 20, 2019.

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Disclosure Requirement – Section 208.25(e)
Escrow requirement
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 len der
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.
Regulation H 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 Requirement – Section 208.25(i)
Notice of special flood hazards and availability of federal disaster relief assistance
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
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 as 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

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•

a statement indicating 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.
Disclosure Requirement – Section 208.25(j)(1) and (2)
Notices to FEMA of servicer and change in servicer
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 – Section 208.25(g)
Force placement of flood insurance
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
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 in surance purchased by
the bank or servicer that overlaps with the borrower’s insurance coverage.
Respondent Panel
The FR H-2 panel comprises state member banks or servicers acting on their behalf.
Small lenders are provided an exception as described in the “Disclosure Requirement – Section
208.25(e) Escrow requirement” section above.

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Revisions to the FR H-2
The Board revised the FR H-2 information collection to account for the recordkeeping
provision in section 208.25(i) of Regulation H that had not been previously cleared by the Board
under the PRA. 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 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. The state member bank must 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.
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.
Public Availability of Data
There is no data related to this information collection available to the public.
Legal Status
Section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. § 4012a), as
amended, and section 1364 of the National Flood Insurance Act (42 U.S.C. § 4104a), as
amended, authorize the Board to impose the recordkeeping and disclosure requirements in
section 208.25 of Regulation H. The Board also has the authority to require reports from state
member banks. (12 U.S.C. §§ 248(a) and 324). The obligation to comply is mandatory.
Because the Federal Reserve does not collect information from the FR H-2,
confidentiality issues generally would not arise. In the event the records are obtained by the
Board as part of the examination or supervision of a financial institution, this information may be
considered confidential pursuant to exemption 8 of the Freedom of Information Act, which
protects information contained in “examination, operating, or condition reports” obtained in the
bank supervisory process (5 U.S.C. § 552(b)(8)).
Consultation Outside the Agency
There has been no consultation outside the Federal Reserve System.
Public Comments
On November 4, 2021, the Board published an initial notice in the Federal Register (86
FR 60818) 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 3, 2022. The Board did not
receive any comments. The Board adopted the extension, with revision, of the FR H-2 as

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originally proposed. On July 25, 2022, the Board published a final notice in the Federal Register
(87 FR 44118).
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for the FR H-2 is 30,755
hours, and would increase to 33,212 hours with the revisions. These recordkeeping and
disclosure requirements represent less than 1 percent of total Board’s paperwork burden.

FR H-2
Current
Recordkeeping
Sections 208.25(c)(3)(iii) and (iv)
Private flood insurance 6
Section 208.25(f)(2)
Retention of standard FEMA form
Disclosure
Sections 208.25(i) and (e), as
applicable
Notice of special flood hazards and
availability of federal disaster relief
assistance with escrow notice, as
applicable
Section 208.25(j)(1)
Notice to FEMA of servicer
Section 208.25(j)(2)
Notice to FEMA of change of servicer
Section 208.25(g)
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

Estimated
number of
respondents5

Estimated
annual
frequency

Estimated
average time
per response

Estimated
annual burden
hours

11,171

1

15 minutes

2,793

728

404

2.5 minutes

12,255

728

81

5 minutes

4,914

728

81

5 minutes

4,914

728

41

5 minutes

2,487

728

16

5 minutes

971

728

4

15 minutes

728

728

8

5 minutes

485

728

4

15 minutes

728

5

Of these respondents, 452 are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $600 million in total assets), https://www.sba.gov/document/support-table-size-standards.
There are no special accommodations given to mitigate the burden on small institutions.
6
Of 728 respondents, the Board is estimating approximately 11,171 responses.

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Section 208.25(e)(4)
One-time notice for any designated
loan outstanding on July 1 of the year
SMB no longer qualifies for small
lender exception 7
Current Total
Proposed
Recordkeeping
Sections 208.25(c)(3)(iii) and (iv)
Private flood insurance 6
Section 208.25(f)(2)
Retention of standard FEMA form
Section 208.25(i)
Notice of special flood insurance
Disclosure
Sections 208.25(i) and (e), as
applicable
Notice of special flood hazards and
availability of federal disaster relief
assistance with escrow notice, as
applicable
Section 208.25(j)(1)
Notice to FEMA of servicer
Section 208.25(j)(2)
Notice to FEMA of change of servicer
Section 208.25(g)
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(e)(4)
One-time notice for any designated
loan outstanding on July 1 of the year

12

1

40 hours

480
30,755

11,171

1

15 minutes

2,793

728

404

2.5 minutes

12,255

728

81

2.5 minutes

2,457

728

81

5 minutes

4,914

728

81

5 minutes

4,914

728

41

5 minutes

2,487

728

16

5 minutes

971

728

4

15 minutes

728

728

8

5 minutes

485

728

4

15 minutes

728

12

1

40 hours

480

7

There are 12 respondents with assets between $900 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).

8

SMB no longer qualifies for small
lender exception 7
Proposed Total

33,212

Change

2,457

The estimated total annual cost to the public for the FR H-2 is $1,859,140, and would
increase to $2,007,665 with the revisions.8
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.

8

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 $21, 45% Financial Managers at
$74, 15% Lawyers at $71, and 10% Chief Executives at $102). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor Statistics (BLS), Occupational Employment and Wages,
May 2021, published March 31, 2022, https://www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined
using the BLS Standard Occupational Classification System, https://www.bls.gov/soc/.

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