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Five federal regulators released a joint final rule yesterday that modifies regulations that apply to loans secured by properties located in special flood hazard areas.

NCUA's board gave its approval to the interagency final rule last Thursday. The final rule requires the escrow of flood insurance payments on residential improved real estate securing a loan.

The final rule has provisions that take effect this Oct. 1 and on Jan. 1, 2016. The final rule implements 2014 revisions to the 2012 Biggert-Waters flood insurance reform law.

While requiring escrows, the final rule also incorporates an exemption from the mandatory flood insurance purchase requirement for small lenders, defined as lenders under $1 billion, and certain detached structures. It also addresses forced- placed flood insurance. The private flood insurance provisions in Biggert-Waters will be addressed in a future rulemaking.

NAFCU shared concerns with NCUA over the costs of the escrow provision but welcomes the rule's clear exemption for lenders with less than $1 billion in assets.