AN ACT FURTHER REGULATING FLOOD INSURANCE
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same as follows:
SECTION 1. Chapter 183 of the General Laws is hereby amended by adding the following section:-
Section 69. No creditor or creditor’s representative, as defined in section 35B of chapter 244, shall require in a mortgage, note or otherwise a purchaser or owner of residential property with 1 to 4 units to purchase or pay for flood insurance on the property that: (i) is at a coverage amount exceeding the outstanding principal mortgage balance at the beginning of the year for which the policy shall be in effect and, in the case of a home equity line of credit, home equity loan or second and subsequent mortgage the full value of the credit line, outstanding principal on the equity loan or second or subsequent mortgage on that property at the beginning of the year for which the flood insurance policy shall be in effect; (ii) includes coverage for contents; or (iii) includes a deductible of less than $5,000. If a creditor or creditor’s representative requires in a mortgage, note or otherwise a purchaser or owner of a residential property to purchase or pay for flood insurance on the property, the creditor or creditor’s representative and the insurance producer, as defined in section 162H of chapter 175, shall provide a notice to the purchaser or owner of the residential property at the time the purchaser or owner of the residential property is notified of the need to purchase or pay for flood insurance that states the following in clear and conspicuous print: “Please note that the flood insurance we are requiring you to purchase will only protect your creditor’s or lender’s interest in your property. Massachusetts law prohibits a creditor or lender from requiring you to purchase flood insurance in excess of the amount of your principal mortgage and, in the case of a home equity line of credit, home equity loan or second and subsequent mortgage, the full value of the credit line, outstanding principal on the equity loan or second or subsequent mortgage on that property at the beginning of the year for which the policy will be in effect. The insurance may not be sufficient to pay for many needed repairs after a flood and may not compensate you for your losses in the property due to the flood. If you wish to protect your home or investment, you may want to purchase more flood insurance than the amount we are requiring you to buy.”
SECTION 2. The commissioner of banks shall promulgate regulations to implement section 69 of chapter 183 of the General Laws.
SECTION 3. This act shall take effect in 120 days.
Approved, July 23, 2014.