November 9, 2022 - Today the LSTA circulated an Exposure Draft of the revised LSTA Market Standards for Flood Insurance Processes in Syndicated Lending (“Flood Standards”).  These latest changes to the Flood Standards relate, for the most part, to the New Interagency Questions and Answers Regarding Flood Insurance that were issued on May 11, 2022. The 2022 Interagency Q&A consolidate the Questions and Answers proposed by certain federal agencies in July 2020 and the Questions and Answers proposed by such agencies in March 2021 into one set of Interagency Questions and Answers Regarding Flood Insurance.  Earlier this year, the LSTA published revised Flood Standards which, for the most part, reflected the implementation of the final regulations under the Biggert-Waters Act.   

As members may recall, the LSTA first drafted the Flood Standards about 8 years ago to establish standard procedures in the loan market, for the administrative agent of a syndicated real estate secured loan facility, with respect to (i) obtaining documents which evidence compliance with the provisions of federal laws and regulations regarding flood insurance and (ii) adequate ongoing monitoring of such compliance by the agent. Because the flood laws mandate that lenders obtain certain flood documents and impose a requirement for force placement of flood insurance (if needed), it was important to establish these market standards.

When the LSTA circulates an exposure draft to its entire membership, it is rare for substantive issues to arise at that time because the drafts will have already been vetted by either one or both of the Primary Market Committee and Trade Practices and Forms Committee. This revised draft of the Flood Standards has been vetted by both committees as it relates both to primary market practices and when lenders acquire an interest in the secondary market.  Depending on the nature of the modifications, an exposure draft will then typically be published in final form about 3-6 weeks after its circulation to all members.   

Members have been asked to submit any comments or questions on the Exposure Draft by Friday, December 2nd. If you are interested in joining one or both of those committees, please simply send an email to Bridget Marsh

Finally, I would highlight that we have been working with Malcolm Montgomery of Shearman Sterling on this update and thank him for his excellent work.

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