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The National Flood Insurance Reform Act of 1994

The National Flood Insurance Reform Act of 1994 was signed by President Bill Clinton on September 23, 1994. This legislation places flood insurance regulations on mortgages or loans held by federal agencies on properties located in flood hazard areas.

  1. Federal Agencies Impacted

    • The federal government agencies included in the Flood Insurance Reform Act include the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, Office of Thrift Supervision, National Credit Union Association, and the Farm Credit Administration, which includes Fannie Mae, Freddie Mac and Ginnie Mae.

    Flood Insurance Requirements

    • This act disallows federal agencies from making or extending loans for properties located in specific flood hazard zones, unless the loan holders have flood insurance that covers damages equal to the amount owed on the loan. Any property owners with insufficient flood insurance will be notified by their lenders and advised to purchase adequate coverage.

    Exceptions and Penalties

    • Loans of $5,000 or less, or loans that have a repayment schedule of one year or less, are exempt from the National Flood Insurance Reform Act of 1994. If a landholder does not have sufficient flood insurance and fails to purchase the required amount within 45 days of being notified by the lender, the lender will purchase the insurance and adjust the mortgage or loan amount accordingly.

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