Flagstar Bank, FSB, of Troy, Mich., was hit with a $3.62 million civil money penalty (CMP) by its federal regulator in December, which identified a “pattern or practice” of violations of federal flood insurance requirements dating back three years.
The Office of the Comptroller of the Currency (OCC), in a consent order Dec. 28, said the bank’s violations of the Flood Disaster Protection Act (FDPA) and its implementing regulations occurred from February 2017 through February 2020. The OCC said it found in a December examination that the bank violated FDPA requirements to:
- make, increase, extend, or renew loans secured by properties in special flood hazard areas only after obtaining proof of adequate insurance;
- timely pay flood insurance premiums collected in escrow;
- provide timely and adequate notices to customers for loans secured by properties in special flood hazard areas, including if a change in servicer occurs; and
- provide borrowers with notice of inadequate Flood Act insurance and force place adequate insurance if not obtained by the borrower in 45 days.
“The OCC determined that the Bank’s Flood Act risk assessment, internal controls, and training, along with its inadequate third-party risk management program over its loan servicing, led to the various violations,” it said.
The order was one of six December enforcement orders the OCC announced Thursday. Besides the above, there were two other CMP orders, one removal and prohibition order, and two terminations of previous enforcement orders.