Dear Readers,

We are keeping a close eye on Hurricane Matthew in the Atlantic Ocean and are keeping all in harm’s way in our thoughts.

While the Flood Law Blog may not be relevant to those who are in Matthew’s path, we believe that information, press releases, and articles similar to those we were able to gather here for the Louisiana floods will serve the people of Florida, Georgia, South Carolina, and North Carolina.

After Hurricanes Katrina and Rita in 2005, McGlinchey Stafford launched the Hurricane Law Blog as a resource for businesses during their recovery process. We are working diligently to reinvigorate that endeavor, so be on the lookout for the newly updated Hurricane Law Blog. We hope that it can be a resource to those affected by Hurricane Matthew in the same way the people of Louisiana were able to use the Flood Law Blog.

Stay safe. We will have more information as it becomes available.

Sincerely,

The Flood Law Blog Editorial Team

How does a company that lost books and records to the Louisiana flooding reconstruct financial and other business records?

Members of the McGlinchey Stafford Flood Law Blog team, Angie Christina, Managing Editor/Content Editor, and Rudy Aguilar III, Editor-in-Chief, provided answers to this question and others, as well as tips for business owners, in a guest piece for Biz New Orleans.

Read the full article here.

As announced today by Congressman Garret Graves, the United States Department of Housing and Urban Development (HUD) will allocate $13 million of “sanction funds” to aid recovery in Baton Rouge and Lafayette.

Sanction funds are previously unused fund recuperated from grantees and may be used for infrastructure needs, small business and economic development needs, and even individual homeowner needs.

Due to the State of Emergency declared on August 12, 2016 by Governor John Bel Edwards in response to the historic flooding in parts of Louisiana, and the inability of many insurance policy holders to repair their property within normal time frames because of a shortage of building materials, contractors, and construction workers, the Commissioner of Insurance has promulgated Emergency Rule 28, which retroactively suspends statutory provisions of the Insurance Code concerning cancellations, terminations, nonrenewals, and nonreinstatements of insurance policies due to a material change in the insured risk, and also gives insureds additional to comply with other policy provisions.

The emergency rule applies to all lines of insurance and all regulated entities.

On Friday, September 9, 2016, Louisiana Economic Development (LED) issued a flood damages assessment estimating that the historic August 2016 flood caused Louisiana businesses $2 billion in damages.

At peak, LED estimates that 278,500 Louisiana residents were unable to work due to temporary closures, suspension of operations, transportation impasses, and residential flooding.

LED commissioned the study to evaluate federal appropriations needed from Congress. The assessment calculated that approximately 20,000 Louisiana businesses were interrupted by the flood, which began August 11.

The federal government has been authorized to cover a larger percentage of the costs for repairing damage to public infrastructure caused by the recent flooding in South Louisiana.

According to a letter dated September 8, 2016, from President Obama to Louisiana Governor John Bel Edwards, the federal cost share for public assistance projects has been increased to 90% of eligible costs.

Read the president’s letter (PDF).

The Federal Emergency Management Agency (FEMA) and the City of New Orleans will host a September 15 workshop providing information on FEMA’s new Flood Insurance Rate Maps (FIRMs) that become effective on September 30, 2016.

Many New Orleans residents and businesses are expected to see decreases in their flood insurance costs due to improvements in flood protection and drainage in the city. According to a press release from New Orleans Mayor Mitch Landrieu, the new FIRMs will affect approximately 85,000 policies in New Orleans.

Event Details

Thursday, September 15, 2016, at 10:00 a.m. Central

City Hall, New Orleans City Council Chambers

1300 Perdido Street, New Orleans, Louisiana 70112

The LSU Agricultural Center has compiled an interactive map showing Louisiana Flood Zones.

The interactive tool allows users to view estimated flood risk and estimate 100-year flood depth in a building, among other features. Notably, for any point on the map, you can see whether an area has been identified as a special flood hazard area, which has a 1% chance per year of being inundated. Those areas are shaded in light blue.

The Louisiana flood disaster unfortunately brings to the fore a unique set of issues for banks and financial institutions, both those located in south Louisiana and those who have customers impacted by the flooding. Many financial institutions have branches, offices, and operation centers that sustained flood damage. Many more have customers whose homes were flooded and who may not yet have returned to work.

While there likely will be a significant amount of legislative and regulatory guidance in the weeks and months to come, there are a number of topics and issues that banks and other financial institutions should consider in the interim. We expect to provide more detailed analyses on these topics as the regulatory guidance is issued.

The Louisiana flood disaster unfortunately brings to the fore a unique set of issues for financial service businesses, including banks, mortgage servicers, mortgage lenders, and loan companies. These issues would impact both those financial service providers located in south Louisiana and those who have customers impacted by the flooding. Many banks and loan companies have branches, offices, and operation centers that sustained flood damage. Also, many financial service companies have customers whose homes were flooded and who may not yet have returned to work.

While there likely will be a significant amount of legislative and regulatory guidance in the weeks and months to come, there are a number of topics and issues that financial service providers should consider in the interim. We expect to provide more detailed analyses on these topics as the regulatory guidance is issued.

Loan Payment Assistance to Impacted Borrowers

Many lenders are already putting into place various payment assistance programs to help borrowers whose homes or cars have sustained flood damage or who have an interruption in their employment. Lenders and servicers will of course need to consult and consider guidance issued by the appropriate regulators, as well as any requirements or guidance of the investors who own the loans.

Branch/Office Closures Due to Flooding

Given that many banks and other financial service providers have sustained flood damage to branches and other offices, those companies will need to consider regulatory requirements for the closure and/or relocation of branch offices. Those institutions will also have to consider any damage to safety deposit boxes as well as loan collateral documents. Indeed, the Louisiana Office of Financial Institutions recently reminded those banks regulated by the OFI of its Emergency Preparedness Guide & Script.

In-Process Loan Modifications, Loss Mitigation Efforts, and Foreclosure Moratoriums

Many borrowers impacted by the flooding may have already been undergoing the process for a loan modification or other loss mitigation option for their loan. Lenders and servicers will need to consider investor guidelines and regulatory guidance as to how long those loss mitigation efforts can be delayed in light of the flood impact. Financial service providers will also have to consult the executive and judicial orders issued in the wake of the flooding to determine the impact of any deadlines associated with foreclosures.

Insurance Proceeds Held in Escrow

Over the next several weeks and months, borrowers and servicers will likely start receiving insurance proceeds for the losses sustained by the flood. Legislation enacted after Hurricanes Katrina and Rita imposed certain requirements with respect to insurance proceeds held in escrow. Lenders and servicers will likely want to revisit those requirements as well as monitor any similar legislation or regulatory guidance that may be issued in connection with this disaster.

Vendor Management

In addition to flooding in their own branches and offices, many institutions will have contracts and relationships with third-party vendors who themselves sustained some degree of flood damage. Banks and other financial service providers will have to analyze the impact of force majeure and disaster recovery clauses in those vendor contracts with respect to services from those vendors. These companies should also consider whether the flood damage sustained by any vendor has the potential to impact the integrity of any customer data maintained by those outside vendors.

 

Attorneys in McGlinchey Stafford’s consumer financial services group and banking regulatory practice areas have a wealth of experience in all of these topics. For any questions or further information, please contact Lauren Campisi, Laura Brown, or Gabe Crowson.

A recent article from HousingWire examines the impact of the 2016 Louisiana floods on the housing market of the city of Baton Rouge and surrounding areas.

The article notes that prior to the flooding, the supply of available housing in Louisiana’s capital city was already low.

Now, after thousands have been displaced from their homes due to the unexpected flooding, that market is experiencing even more demand. The market is not only being swamped by home buyers, but also renters, all seeking temporary refuge from home displacement.

Read the full article here.