New York Legislature Proposes Changes to Flood Requirements
On December 13, 2024, the New York Governor signed Assembly Bill A5073, which limited the amount of flood insurance mortgagees can require mortgagors to purchase to the outstanding loan balance at the start of the policy year. The Governor’s Approval Memorandum indicated that the Governor reached an agreement with the Legislature to revise the proposed coverage requirement cap to the lesser of the outstanding loan amount or the replacement value of the property.
In response, the New York State Legislature introduced A2056 and S2670. Both bills amend Section 283 of the real property law to include a reference to the replacement value of the property. The proposed language provides that the coverage requirement cannot exceed “the lesser of the replacement value of the residential real property or the outstanding principal mortgage balance.”
Both bills also make minor revisions to the written notice that mortgagees must provide to borrowers when borrowers are required by the mortgagee to purchase or pay for flood insurance. The updated language no longer includes a statement that the required coverage only protects the mortgagee’s interest in the property. Please refer to the bills linked above to view the full text of the required notice.
The bills still need to move through the NY legislative process and would become effective ninety days after becoming law.
Proctor will continue to closely monitor for updates from New York and, if Proctor provides tracking services for your entity, your relationship manager will reach out to discuss any changes that may be needed to your business rules.