Regions Bank Faces a Hefty Fine Over Flood Insurance Oversights

Regions Bank, headquartered in Birmingham, Alabama, has been slapped with a fine nearing $3 million by the Federal Reserve Board. This penalty stems from the bank's oversight in ensuring that borrowers upheld flood insurance for their properties.

While the board refrained from elaborating on the specific breaches, an agreement reached this month unveils that each breach led to fines up to $2,000. This suggests there could have been a lapse in monitoring as many as 1,400 loans. Furthermore, the bank’s monitoring of a considerable amount of home equity lines of credit regarding flood insurance safeguards was lacking, an issue that was addressed in 2017.

For over a year, due to modifications in the loan servicing systems and alterations with third-party service providers, Regions Bank had a shortfall in monitoring a substantial portion of home equity loans and credit lines that were under the purview of the Flood Act, aligning with Regulation H, as per the agreement signed on August 14th.

According to federal banking guidelines, borrowers possessing buildings in FEMA's designated flood risk areas must procure flood insurance either via the National Flood Insurance Program or a private insurer. Data from the Fed Board indicates that in the past decade, approximately 70 enforcement actions tied to flood insurance have been taken nationwide.

Regions' Senior Vice President, Jeremy King, indicated that the staggering $2.95 million in fines relates to discrepancies the bank itself pinpointed years ago. He added, "The consent order reflects an issue that Regions identified and addressed proactively a few years back. By 2017, we had initiated corrective measures. Importantly, customers remained unaffected since this was strictly about our internal flood insurance tracking on specific properties."

With its footprint across 15 states in the South and Midwest, Regions Bank is relieved to see this longstanding issue come to a close, as expressed by King.

Of the total fine, $58,000 will contribute to the National Flood Insurance Program, and a whopping $2.88 million will be channeled to the Federal Reserve System and the U.S. Treasury as delineated in the agreement.

Notably, this isn’t the first time Regions has been in the spotlight for flood insurance lapses. Back in 2009, the Fed Board pinpointed similar violations.

In the wake of increasing flooding and predicted weather anomalies nationwide, it remains uncertain whether the Federal Reserve will amplify its insurance-focused enforcement actions. This sentiment echoes US Treasury Secretary Janet Yellen's remarks last month about the evident insurance void for a plethora of homeowners, magnified by recent extreme weather events.